European Banking Authority Eases Governance Requirements for Banks Under Revised Guidelines

Key Takeaways

• Governance Requirements Simplified: The EBA published revised internal governance Guidelines on November 5, incorporating CRD VI requirements while reducing unnecessary compliance burdens.
• Less Detailed Accountability Documentation: The final Guidelines reduce the detail required for mapping management duties and preparing individual statements of responsibilities.
• Greater Proportionality for Third-Country Branches: The revised provisions take greater account of differences in institutions' size, nature and complexity.
• Conflicts of Interest and Diversity Monitoring: The EBA simplified conflict-of-interest provisions and reduced the granularity of diversity and inclusion monitoring requirements.
• Core Governance Standards Preserved: The revisions maintain expectations concerning management accountability, organizational arrangements and internal controls.

Deep Dive

The European Banking Authority has reduced the amount of detail banks will be expected to provide when documenting management responsibilities, retreating from parts of an earlier proposal as it seeks to make EU governance requirements less burdensome.

The changes are contained in revised Guidelines on internal governance under the Capital Requirements Directive. They follow a public consultation in which the EBA received feedback on its proposed requirements, including provisions governing management accountability, conflicts of interest and branches of banks headquartered outside the European Union.

The revisions come as banks contend with new governance obligations introduced by the sixth Capital Requirements Directive, or CRD VI. The legislation requires institutions to map the duties and responsibilities of management body members and key function holders and establishes a dedicated governance framework for third-country branches.

Those obligations remain. What the EBA has reconsidered is the level of detail required to meet some of the accompanying governance expectations. The final Guidelines place greater weight on proportionality, allowing requirements to reflect differences in institutions' size, nature and complexity while retaining the underlying standards for management oversight and internal controls.

The most direct change concerns the documentation of management responsibilities. Under CRD VI, institutions must establish a mapping of duties and responsibilities, providing a formal account of how functions are assigned within their governance structures. The EBA has reduced the detail required for that mapping and for individual statements of responsibilities compared with its consultation proposal.

The adjustment leaves the accountability framework intact while limiting some of the documentation associated with it. The EBA did not specify in its announcement how much administrative work institutions could expect to save.

Third-country branches receive similar treatment. CRD VI introduced a dedicated governance framework for these operations, and the EBA has revised the corresponding provisions to provide greater proportionality. The final Guidelines retain the framework while taking greater account of differences among the branches to which it applies.

The authority has also clarified and simplified provisions on conflicts of interest, including those concerning the combination of chairmanship and executive functions. The revised Guidelines continue to address the responsibilities of management bodies, organizational structures and key elements of internal control frameworks.

Another change concerns diversity and inclusion monitoring. The EBA has reduced the granularity of the relevant requirements from those proposed during consultation. The announcement identifies the reduction as a simplification of monitoring provisions, without describing it as a withdrawal of the underlying governance expectations.

All four adjustments were made following stakeholder feedback received through the public consultation and targeted outreach activities. They represent the principal differences the EBA identified between its consultation paper and the final Guidelines.

The revised framework is intended to make governance requirements more proportionate and risk-based. Institutions will still be expected to maintain sound governance arrangements, but the EBA has sought to avoid imposing the same degree of administrative detail regardless of their circumstances.

The Guidelines were developed under Article 74 of Directive 2013/36/EU, which provides the legal basis for the EBA's work to harmonize governance arrangements, processes and mechanisms across the European Union. They also reflect amendments introduced by Directive (EU) 2024/1619, which established CRD VI.

The publication forms part of the EBA's broader effort to simplify the EU banking regulatory framework. The authority has said it intends to reduce unnecessary operational and compliance burdens while maintaining robust governance standards.

The final Guidelines leave the legislative requirements introduced by CRD VI in place. Their principal changes concern the detail and proportionality of the governance provisions developed around those requirements, particularly where the consultation process persuaded the EBA that its original proposals could be simplified.

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