Assessment by AFM and/or DNB
Persons who determine the policy of an enterprise either solely or jointly or who supervise such policy must be proper and fit for the performance of their tasks. Persons nominated for these positions at a financial enterprise are assessed by the AFM and/or De Nederlandsche Bank (DNB) for propriety and fitness.
A large number of enterprises in the financial sector are subject to supervision by both the AFM and DNB, such as banks and insurance companies. This means that both supervisors have a responsibility for assessing these enterprises.
Division of roles between the AFM and DNB
The AFM is responsible for supervision of conduct in the financial markets. Good governance, fit (co-) policymakers and internal supervisors contribute to sustainable, fair and transparent financial markets. Conduct supervision includes ensuring that customers are treated with due care. Financial enterprises have a responsibility to give the interests of their customers central priority. DNB is the Dutch prudential supervisor, and focuses on the soundness of financial enterprises and contributes to the financial stability of the financial sector.
From these two different perspectives, DNB and the AFM work closely together when assessing management board members and supervisory board members of financial enterprises under their supervision.
The AFM will focus on the candidate's knowledge and experience of the duty of care with respect to consumers, and how customer interests are safeguarded in operational management.. Due to this difference in perspective, DNB and the AFM may have different opinions with respect to a candidate’s fitness. If one of the two supervisors comes to a negative conclusion, this will always prevail. If the AFM and DNB are not in mutual agreement, the supervisor in question can send a binding recommendation to the other supervisor to reject or dismiss the candidate to the other supervisor.
In the case of banks and insurance companies, the AFM will devote specific attention to the product approval and review process (PARP), the institution's vision on how to deal with unit-linked insurance policies or the risk of non-matching service provision. In the case of listed banks and insurance companies, the AFM will also look at how the institution deals with issues such as market abuse and inside information.
What do the AFM and DNB assess?
The Policy Rule on Fitness 2012 (Beleidsregel geschiktheid 2012, only available in Dutch) clarifies the aspects that the AFM and DNB consider when assessing a candidate’s fitness. There are four aspects for banks and insurance companies:
- governance, organisation and communication
- products, services and markets in which the enterprise is active
- controlled and ethical business conduct
- balanced and consistent decision-making
- Sufficient time commitment.
In principle, the assumption is that a single interview will be held at which both the AFM and DNB will be present. For complex assessments or assessments that may have significant impact, it may be that two separate interviews are held due to the number of issues to be discussed: one interview with DNB and one interview with the AFM. The candidate will be informed accordingly in good time.
A negative outcome from one of the supervisors will always prevail.
Fitness
Applications for fitness assessments regarding positions with banks and insurance companies are filed with DNB. DNB has a statutory obligation to request the AFM for its views when performing assessments for banks and insurance companies. In practice, the AFM sends any available written information regarding the candidate to DNB within five business days of such request and states whether it wishes to be involved in the assessment (for example, whether it wishes to participate in the assessment interview).
The AFM has a role in assessments for bank or insurance companies when it concerns an area that is important for the effective conduct of its supervision. For example, policymakers who have sole or joint responsibility for the retail services at a bank or for life, non-life and asset management at an insurance company.
The AFM will also be involved in conducting assessments if there is an important supervisory record. For instance, if the candidate has been involved in violations for which the AFM or another supervisor has imposed a measure.
Propiety
The AFM and DNB exchange information on all types of enterprises regarding propriety assessments.
A candidate who has previously been positively assessed by the AFM or DNB in principle does not have to be assessed again. The outcome of the previous assessment continues to apply unless there are reasonably grounds to carry out the propriety assessment again due to a change in relevant facts or circumstances.
Which enterprises does the AFM assess?
The AFM assesses candidates proposed for a position at the following enterprises:
- a provider of investment objects;
- a credit provider;
- advisers, intermediaries and intermediaries in reinsurance;
- an investment firm (including tied agents);
- a management company of an alternative investment fund;
- a holder of a qualified participation in a management company of an alternative investment fund;
- a management company of an EuSEF investment fund or an EuVECA investment fund;
- an investment company;
- a depositary for an alternative investment fund;
- a management company of an undertaking for collective investment in transferable securities (UCITS);
- a depositary of a UCITS;
- an authorized agents and sub agents in insurances;
- a holder of an exemption under Section 4:3 Wft (for instance, a crowdfunding platform);
- a central securities depository (CSD);
- a crowdfunding service provider;
- a data reporting services provider (DRSP);
- a market operator (a person or entity managing or operating a regulated market);
- an audit firm* (the AFM assesses only the propriety of (co-)policymakers in this case);
- an audit firm in a third country (the AFM assesses only the propriety of (co-)policymakers in this case).
DNB has a statutory obligation to request the AFM for its views when assessing for banks and insurance companies. The AFM and DNB therefore work together with respect to the assessment of banks and insurance companies. Both supervisors must approve the appointment of the candidate. Because the AFM supervises the infrastructure of central clearing counterparties, clearing institutions and settlement institutions it also participates in these assessment interviews.
* With effect from 1 July 2018, executive directors and internal supervisors (including supervisory board members) at PIE audit firms must be fit as well as proper for the exercise of their duties.
Which enterprises does DNB assess?
DNB assesses candidates proposed for a position at the following enterprises:
- a bank
- cryptoserviceproviders
- an insurance companies
- a financial holding company
- an insurance holding company
- an investment holding
- a mixed financial holding company
- a central counterparty
- a premium pension institution
- a payment institution
- a clearing institution
- a settlement firm
- an electronic money institution
- a special purpose reinsurance vehicle
- a credit union
- a foreign exchange institution
- a pension fund
- occupational pension fund
- a general pension fund
- a trust office.
When does the AFM participate in an assessment by DNB?
DNB has a statutory obligation to ask the AFM to state its views with respect to fitness assessment for banks and insurance companies. The AFM and DNB therefore work together with respect to the assessment of banks and insurance companies. Both supervisors must approve the appointment of the candidate. Because AFM supervises the infrastructure of central clearing counterparties, clearing institutions and settlement institutions it also participates in these assessment interviews.
The AFM participates in assessment interviews conducted by DNB:
- appointments involving important policymaker positions (e.g. CEO, CFO, COO) at large enterprises
- aspects with respect to the enterprise or the candidate that are relevant to the AFM's supervision for instance appropriate service provision or (for listed banks and insurance companies) dealing with insider trading
- significant events or past records in which the candidate may have been involved
- appointments to publicity-sensitive positions or enterprises
- in other situations where assessment is complex or demands extra attention
The candidate will be informed in advance if the AFM will be present at the interview. DNB and the AFM prepare for the interview together and agree on the division of their roles. Each supervisor will ask questions from their own perspective and area of responsibility.