Fit and proper assessments

Anyone who in Germany intends to serve as a member of the management board or of the administrative or supervisory board of a supervised institution or undertaking must have the necessary professional qualifications, expertise and a good reputation. That person must also commit sufficient time to the performance of their tasks.

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

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

Fit and proper requirements must be met, inter alia, by:

credit institutions and financial services institutions supervised under the 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 on persons under the Banking Act

Institutions and (mixed) financial holding companies are required, under Section 24(1) number 1 and number 15 as well as subsection (3a) sentence 1 number 1 and number 4 of the Banking Act, respectively, to notify, without undue delay, the supervisory authorities and the Bundesbank of the intention to appoint new members of the management board, of the appointment of members of the administrative or supervisory board as well as of any relevant changes in their suitability and time commitment and the retirement of those persons.

Notifications of the intention to appoint a person shall be submitted by undertakings under BaFin supervision using the templates provided under the Reports Regulation to BaFin and the Bundesbank or via BaFin’s MVP portal, and by institutions under direct ECB supervision to the ECB via the ECB’s IMAS portal. Where either the MVP or IMAS portal is used, notifications do not need to be submitted in parallel to the supervisory authority and the Bundesbank using the Reports Regulation templates.
Notifications of realisation, changes, secondary activities and retirement shall continue to be submitted to BaFin or the ECB and the Bundesbank as hitherto using the Reports Regulation templates.
Notifications of extensions of existing mandates resulting from the re-election of members of the administrative or supervisory board are not required. Notifications of extensions to the temporary appointments of management board members can be submitted in any form.

Filling key functions at institutions

Institutions supervised under the Banking Act are required to ensure that they have adequate staffing resources. This requirement also covers the suitability of key function holders who have significant influence over the direction of the institution but are members of neither the management board nor the administrative or supervisory board.

It is the responsibility of institutions to ensure that key function holders are fit and proper at all times. Following implementation of new European requirements under the banking package (Directive (EU) 2024/1619), certain key functions holders (the heads of internal control functions and the chief financial officer) at large institutions and undertakings will also fall within the scope of prudential fit and proper assessments in the future.