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On March 2024, the Danish Financial Supervisory Authority (FSA) has released its first-ever report detailing its practices for evaluating the suitability of senior executives within the financial sector. This report meets a recently introduced obligation for the FSA to publish a report annually. It follows the previous practice note on fit and proper assessments of the Danish FSA from April 2022 dealing with the propriety of the candidates, whereas the recent report addresses the suitability of the candidates in the financial sector.
Key Points of the Report
The assessments apply to senior executives, meaning members of the management board and members of the actual management, heads of the compliance function, heads of credit, and heads of risk management:
Scope: The report focuses exclusively on suitability assessments, a core component of the "fit & proper" evaluations that determine the overall appropriateness of financial sector executives. Suitability refers to a candidate's knowledge, skills, and relevant experience.
Holistic Approach: The FSA's suitability assessments emphasise a comprehensive view of a candidate's background as it aligns with the specific requirements of a position. This approach prioritises flexibility and avoids rigid checklists.
Illustrative Examples: The report provides anonymised case studies outlining positive suitability assessments. These offer insights into how the FSA weighs factors like overall experience, sector-adjacent knowledge, and specific functional expertise within different executive roles.
Conditional Approvals: In limited circumstances, where a candidate possesses most necessary qualifications, the FSA may grant conditional approval. This allows the candidate to proceed while completing supplementary training or education to address minor gaps in their skillset.
Overall, the report has to be read in conjunction with the previous guidance on propriety of senior executives in the financial sector. We have addresse the report in an earlier briefing which is available below. Collectively, the two guidances provide an overall picture of the priorities of the FSA.
Analysis and Implications
The Danish FSA's release marks a step towards greater transparency in the regulation of financial sector leadership. Key takeaways for stakeholders include:
Understanding FSA Priorities: Companies seeking to make strategic hires in the financial sector can better align their searches with the competencies and experiences the FSA values most.
Expanding the Recruitment Base: Insight into the FSA's practice for positive suitability assessments can also help financial services organisations broaden their recruitment base.
Career Development Insights: Professionals in the financial sector gain valuable insights into potential pathways toward senior leadership positions, including situations where cross-industry or transferable skills are recognised.
Promoting Accountability: Enhanced transparency in suitability assessments fosters greater accountability and reinforces high standards for leadership in the Danish financial sector.
Further Information
The full report is available on the Danish FSA's website and is included below in the Danish original and an automated English translation for reading purposes only.
Danish Original
English Translation (automated)
For further information on financial regulation in Denmark, please reach out to Andreas Tamasauskas or Michael Rosenberg at Carsted Rosenberg.