EXTENSION OF SUITAbILITY AND INTEGRITY SCREENING FROM 1 APRIL 2015

Board members and supervisory board members of Dutch banks and insurance companies should be screened on suitability and integrity prior to their appointment. From 1 April 2015, the scope of the individuals who are subject to screening on suitability and integrity has been extended to cover second-tier officers. As a result, individuals who hold or will hold a second-tier officer position will, from 1 April onwards, be subject to suitability and integrity screening.

Prior to 1 April 2015, the Dutch Financial Supervision Act had already included provisions regarding suitability (geschiktheid) and integrity (betrouwbaarheid) screening of policymakers (i.e. statutory directors and other policymakers) and members of an internal supervisory body of regulated financial institutions.

For banks and insurance companies with their statutory seat in the Netherlands (or Dutch branch offices of banks, or insurance companies with their statutory seat outside of the EEA), these provisions entail that a policymaker or member of an internal supervisory body must be screened on suitability and integrity by the Dutch Central Bank (DNB) prior to being appointed.

Effective from 1 April 2015, the existing provisions regarding suitability and integrity screening have been extended to also cover second-tier officers of banks and insurance companies with their statutory seat in the Netherlands (or Dutch branch offices of banks, or insurance companies with their statutory seat outside of the EEA). This entails that such individuals should be screened on suitability and integrity prior to their appointment.

The new target group: second-tier officers

The new target group of second-tier officers includes officers who work under the responsibility of a bank or insurance company in a management position directly below the level of policymakers, and who are responsible for individuals whose activities may have a material impact on the institution’s risk profile.

As a minimum, it includes officers who (i) supervise staff conducting financial transactions, (ii) are responsible for recruitment policies with respect to high-risk positions, (iii) head the compliance, risk, audit or actuarial function, or (iv) are responsible for legal affairs.

Furthermore, the target group includes officers who have the authority to decide on fraud prevention measures, and managers with decision-making authority on the size of risks that investment managers are allowed to take. For insurance companies, managers occupying Solvency II-key positions are also part of the new target group that should be screened on suitability and integrity prior to their appointment.

Screening of second-tier officers: the process

The screening process of second-tier officers differs from the process which applies to policymakers and members of an internal supervisory body.

Integrity screening of second-tier officers

Integrity screening of second-tier officers is conducted by the bank or insurance company and DNB jointly.

Firstly, the bank or insurance company must examine the integrity of the second-tier officer on the basis of public information and information obtained from the individual in question. On the basis of this research, the bank or insurance company, together with the second-tier officer, complete a standard form (Formulier Betrouwbaarheidsonderzoek tweede echelon) as available on the website of DNB.

Secondly, DNB initiates its own integrity screening procedure, on the basis of the standard form as submitted to DNB by the bank or insurance company. DNB forwards the information regarding the second-tier officer to the Tax and Customs Administration (belastingdienst) and the national public prosecutor (landelijk officier van jusititie). Furthermore, DNB may request additional information concerning the second-tier officer from other supervisory authorities. In addition, DNB may request an interview with the second-tier officer.

DNB will subsequently inform the bank or insurance company in writing of its decision regarding the integrity of the second-tier officer. The second-tier officer will receive a copy of the decision made by DNB. He may only be appointed if DNB’s decision on the integrity of the second-tier officer is positive.

Suitability screening of second-tier officers

The suitability screening of second-tier officers is solely performed by the bank or insurance company. DNB is therefore, in principle, not involved in the suitability screening of second-tier officers.

The bank or insurance company should perform the suitability screening on the basis of the job profile for the relevant position as a second-tier officer. The bank or insurance company should subsequently substantiate in writing (one page maximum) why the relevant individual is suitable for the position. The substantiation should demonstrate that the individual has the competence, knowledge and experience, as described in the job profile. The substantiation is for internal administration only and does not have to be submitted to DNB.

DNB may monitor how the suitability screening process is organised by the bank or insurance company. In addition, DNB may, by way of random checks, monitor the quality of the suitability screening process of the bank or insurance company. Notably, DNB may, on a case-by-case basis, decide to perform the suitability screening itself.