What is the process for the fitness and propriety test when a bank appoints a new member of its executive board?
Every appointment to the management of a credit institution is subject to regulatory review. For major institutions, the ECB is responsible and directly applies Austrian regulations; for all other institutions, the FMA is responsible. Notifications are submitted via the FMA’s incoming platform.
The review goes beyond simply what is listed on the resume. Newly appointed board members are invited to a hearing where their theoretical knowledge is tested orally: expertise in banking operations, the Austrian Banking Act (BWG) and its regulations, European supervisory law, the FMA’s minimum standards and circulars, as well as the fundamentals of corporate law and a solid understanding of the company’s own corporate structure. Anyone who thinks this is just a formality is in for an unpleasant hour.
The point that is most often overlooked in our mandates is a different one. The collective suitability of the board is also evaluated. An excellent candidate may be rejected because the departing board member’s expertise – which no one else possesses – will be lost. That is why, before we create the search profile, we start with the suitability matrix: What does the board currently cover, what is missing, and what does the company’s risk profile require?
Two things need to be considered early on. A candidate must be qualified for the entire term of office, not just on the day they take office; ongoing professional development is mandatory. And anyone who wishes to move from the executive board to the chairmanship of the supervisory board of the same company is subject to a two-year cooling-off period. Both of these factors belong in succession planning and not in the final negotiations.
We are following the process closely because it is inseparable from the search process. Whether someone is qualified for the role and whether the supervisory board sees it that way are two separate questions. Both must be answered before the supervisory board makes a decision.
By Edin Karabeg
Executive Search Consultant for Financial Services
Edin Karabeg heads the Financial Services Competence Center at DELTACON Executive Search and serves clients in Germany, Austria, Switzerland, and Central and Eastern Europe from his base in Vienna and Frankfurt. As a former CEO and board member of several banks and leasing companies, he has extensive experience in retail and corporate banking, risk management, finance, payments, treasury, and digital transformation processes. His in-depth industry knowledge and understanding of regulatory requirements enable him to identify leaders who combine strategic clarity, change management skills, and operational excellence.