Not everyone can be put in charge of a bank, and for good reason: banks and savings banks have an important role to play in an economy, and they work with money that has been entrusted to them. Institutions must therefore examine whether the candidates for the top executive posts have the required professional qualifications and reputation and are able to dedicate sufficient time to fulfil their responsibilities (see the info box “Legal requirements”). And no matter which candidate is finally appointed to an institution’s management board¹: be sure that BaFin will take a close look at them.

The criteria on which BaFin bases its examination are not etched in stone. BaFin adapts them to developments in the banking sector while at the same time making allowance for changes in business models. Digitalisation, in particular, is having repercussions for institutions: mobile banking is becoming more and more important, legacy IT systems are being checked over and crypto assets are moving to the fore. So the question is: what additional qualifications are needed in the top management of these institutions besides the professional training and previous job experience usually offered by graduates in business administration or economics?

Academic background is not the only criterion

Persons with an IT background that complements an institution’s particular business model may, for example, be suitable as managing directors of online banks, universal banks undergoing modernisation or crypto custodians. From BaFin’s point of view, they could just as well be graduates in computer science as long-term employees from a different academic background who have been managing the institution’s major IT projects for many years. However, for them to qualify as management board members, they must also have the required banking-specific knowledge, skills and experience, including the necessary insight into the institution’s business activities as a whole and the risks associated with them.

Every board member must have fundamental knowledge of how a bank ticks since they must be able to ensure a proper business organisation as part of their overall responsibility under section 25a (1) sentence 2 and section 25c (3) and (4a) of the KWG. Managing directors of credit institutions are subject to the relevant due diligence requirements and legal liability rules. They must also be able to monitor each other’s dealings and deputise for each other.

The fundamentals of lending

In line with the notion of collective suitability, the members of a bank’s management board as a whole must display a balanced combination of knowledge, skills and experience in keeping with the institution’s business model, risk appetite, strategy and relevant markets. Specialists complement this balanced combination by contributing their particular expertise. The key point is that the management team as a whole retains collective control of the institution and its main core areas. A specialist with less experience in the lending business, for example, can acquire these skills in a way that matches the specific needs of that institution.

The business model and associated risks play an important role in other respects, too: while the lending business is usually of less importance to asset managers and payment service providers, it is all the more important for specialist finance providers which cannot afford to place lower demands on the lending expertise of their managing directors. Take ship financing, for example: a managing director of a major shipping company knows their financed vessels inside out. But for that person to make a meaningful contribution to the management board of a specialist finance provider, he or she must also be able to assess the risks associated with financing such vessels. The necessary expertise in this case must therefore also include knowledge of the lending business.

Case-by-case assessment

The responsibility for assessing the suitability of board members and making decisions about who to appoint will remain the primary responsibility of the institutions. BaFin will continue to review these appointments, always taking into account the specific institution, as set out in its “Guidance Notice on management board members under the German Banking Act (Kreditwesengesetz – KWG), the German Payment Services Supervision Act (Zahlungsdiensteaufsichtsgesetz – ZAG) and the German Investment Code (Kapitalanlagegesetzbuch – KAGB)” (only available in German).

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