Our current views

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EBA clarifies internal audit’s position as third line of defence
February 2016

The European Banking Authority (EBA) has adopted important clarifications suggested by ECIIA over the role and position of internal audit in the governance structure of companies looking to adopt sound remuneration policies.

In particular, EBA has said in the final draft of its Guidelines on sound remuneration policies that internal audit should form an independent third line of defence reporting directly to the board so that it can audit the activities of the other control functions.

“We are pleased that EBA has taken our views on board and clarified this important issue,” Henrik Stein, ECIIA President, says. “Reinforcing our members’ role as the independent, third line of defence provides organisations with the confidence that they can rely on the work of internal audit when it comes to assessing the effectiveness of their remuneration policies.”

EBA also clarified the involvement of control functions in assessing the risk profile of organisations and how the control functions should be remunerated, which also drew upon ECIIA’s.

The EBA’s guidelines set out the governance process for implementing sound remuneration policies across the EU and clarify the process for identifying those categories of staff to whom the specific remuneration provisions of the Capital Requirements Directive (CRD IV) apply, including the so called bonus cap.

See ECIIA’s recommendations in full.

 

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