Banks Should Seek ECB Nod Before Naming Executives, Enria Says
(Bloomberg) -- The European Central Bank said lenders should ask for feedback before naming senior executives, as the region’s top regulator takes a tougher tack on how banks are run.
The ECB will recommend that banks provide suitability assessments before making appointments, even if rules in their respective countries allow them to do so after the fact, said Andrea Enria, who leads the central bank’s supervisory board. The move is intended to avoid embarrassment for the ECB and banks alike in case executives are later found to be unsuitable for their roles.
The ECB is pushing banks to tackle the risk they face from loans going sour in the pandemic both by setting aside financial reserves and have sound management in place. While it is rare for executives or directors to be pushed out shortly after joining big banks, such appointments can have major implications.
“Internal governance is a key factor of banks’ ability to overcome the challenges ahead,” Enria told European lawmakers on Tuesday. It is also the area which turned up the most negative findings in the ECB’s annual evaluation of banks’ risk controls, he said. “Remediation is proceeding at slow pace, also due to current circumstances.”
The ECB will also pay greater attention to supervisory findings related to previous positions of candidates “as well as the specific needs of the banks” when assessing appointments and reappointments for boards, Enria said. The watchdog will clarify how it reassesses sitting board members if facts emerge which could affect their suitability, he said.
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