EBA · 2022_6474 Rejected question

Independence of the internal control functions

Regulation
Directive 2013/36/EU (CRD)
Article
88
Topic
Internal governance
Submitted by
Competent authority
Submitted
2022-06-03
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Question

We would like to clarify if the organizational set-up of the control functions can be considered as fully compliant within the applicable regulatory framework to ensure independence of the control functions if the Chief Compliance Officer (CCO) is structurally allocated and subordinated to the Chief Executive Officer (CEO) in a two-tier governance structure model?

Background

According to the definition provided in Paragraph 13 of the EBA GL/2021/05, CEO means the person who is responsible for managing and steering the overall business activities of an institution. This also is in line with globally accepted descriptions [1] of the role of CEO. With regard to ensuring independence of compliance function according to EBA/GL/2021/05 regulatory requirements laid down in Article 175, the business lines as the first line of defence take risks and are responsible for their operational management directly and on a permanent basis. The compliance function as the second line of defence, including the Head of the Compliance (often referred as Chief Compliance Officer (CCO)), should be independent from the business lines and internal units it controls and have sufficient authority, stature and resources. [1] https://corporatefinanceinstitute.com/resources/careers/jobs/what-is-a-c...
No answer published yet.

Original source: European Banking Authority, Q&A ID 2022_6474

This Q&A is published by European Banking Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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