Fit and proper assessments

Anyone who intends to serve as a member of the management board or of the administrative or supervisory board of a supervised institution or undertaking in Germany must have the necessary professional qualifications or expertise and demonstrate trustworthiness. In addition, they must dedicate sufficient time to performing their tasks.

These specific and extensive suitability requirements are also collectively referred to as “fit and proper” (FAP) requirements. Compliance with these requirements is assessed by the competent supervisory authority both upon initial appointment and on an ongoing basis.

This is in recognition of the particular importance of members of the management board and of the administrative or supervisory board for the governance and control of institutions and undertakings.

FAP requirements must be met by institutions including but not limited to:

credit institutions and financial services institutions supervised under the German Banking Act (Kreditwesengesetz – KWG);
payment and electronic money institutions supervised under the Payment Services Oversight Act (Zahlungsdiensteaufsichtsgesetz – ZAG);
investment institutions supervised under the Investment Institutions Act (Gesetz zur Beaufsichtigung von Wertpapierinstituten – WpIG).

Notifications about individuals under the German Banking Act (KWG)

Institutions and (mixed) financial holding companies are required in particular to notify the competent supervisory authority under section 1(5) KWG and the Bundesbank of their intention to appoint new members of their management board, of their intention to appoint new members of their administrative or supervisory board and of the retirement of any members of those boards (see section 24(1) numbers 1, 2, 15 and 15a as well as subsection (3a) sentence 1 numbers 1, 2, 4 and 5 KWG).

Large undertakings within the meaning of section 1(1c) KWG are required to notify the competent authority of their intention to appoint a:

member of the management board;
chair of the administrative or supervisory board;

no later than 30 working days prior to the relevant person taking up their position (see section 24(1) number 1 and number 15 KWG).

Pursuant to section 24(2a) KWG, undertakings are required to notify the competent authority of new facts that have a significant impact on the original assessment of management board members’ and members of administrative and supervisory boards’ trustworthiness, their professional qualifications or their ability to dedicate sufficient time to their tasks without undue delay upon becoming aware of such facts. The management board members and members of administrative and supervisory boards in question are obliged to cooperate in this regard.

Filling key functions at institutions

Institutions supervised under the KWG are required to ensure that they have adequate staffing resources. This also includes the suitability of key function holders (KFHs) with significant influence on the management of the institution. KFHs are neither members of the management board nor members of the administrative or supervisory board.

It is the responsibility of institutions to ensure that KFHs meet FAP requirements at all times.

Since the German Banking Directive Implementation and Bureaucracy Relief Act (Bankenrichtlinienumsetzungs- und Bürokratieentlastungsgesetz – BRUBEG) entered into force, holders of special key positions (the heads of internal control functions and the chief financial officer) in large undertakings within the meaning of section 1(1c) KWG are now also subject to prudential suitability assessments. The competent authority must be notified of their appointment and dismissal (including the required approval by the administrative or supervisory board pursuant to section 25c(4a) number 3(i) KWG) without undue delay as well as of any new facts that have a significant impact on the original assessment of their trustworthiness, professional qualifications or their ability to dedicate sufficient time to their tasks (see section 24(2a) KWG).