(1) The members of the administrative or supervisory body of an institution, a financial holding company, or a mixed financial holding company must be reliable, possess the expertise required to perform the control function and to assess and monitor the business conducted by the respective undertaking, and devote sufficient time to performing their duties. In examining whether a person named in the first sentence possesses the required expertise, the Federal Institute takes into account the scale and complexity of the business conducted by the institution, the institutional group or financial holding group, the financial holding company, or the mixed financial holding company.
(1a) Where a person does not meet the conditions of subsection (1), first sentence, subsection (3), or subsection (3a), the institution must ensure without delay that 1. the person is not appointed as a member of the administrative or supervisory body, 2. the person is removed from their position as a member of the administrative or supervisory body, or 3. measures are taken so that the person meets the conditions.
(1b) Where an undertaking intends to appoint a person and facts exist showing that the person does not meet the conditions of subsection (1), first sentence, subsection (3), or subsection (3a), or where material information necessary to assess qualification, reliability, and time availability is missing from the notification under section 24 of the intention to appoint, the Federal Institute may order that the person not be appointed.
(2) The administrative or supervisory body must, collectively, have the knowledge, skills, and experience necessary to perform the control function and to assess and monitor the management of the institution, or of the institutional group or financial holding group, the financial holding company, or the mixed financial holding company. The provisions of the co-determination acts on the election and removal of employee representatives on the administrative or supervisory body remain unaffected. Likewise unaffected are the legal provisions on the appointment of members of the administrative or supervisory body by regional or local elected bodies, or on appointments in cases where no body of the institution is responsible for selecting and appointing the respective member. In the relevant cases under the third sentence, the institution takes suitable protective precautions to ensure the suitability of these members. The collective suitability under the first sentence must be ensured. The right of removal under section 36 remains unaffected by the second and third sentences.
(3) A person cannot be a member of the administrative or supervisory body of a CRR credit institution that is significant within the meaning of section 1(3c) where 1. that person is a manager in the same undertaking; in the case of a European Company (SE) with a monistic system, this applies on the basis that a managing director cannot at the same time be chair or an executive member of the administrative board; 2. that person was a manager in the undertaking concerned, where two former managers of the undertaking are already members of the administrative or supervisory body; 3. that person is a manager in an undertaking and, at the same time, is a member of the administrative or supervisory body in more than two undertakings, or 4. that person is a member of the administrative or supervisory body in more than four undertakings. The first sentence also applies, respectively, to members of the administrative or supervisory bodies of a financial holding company or mixed financial holding company authorised under section 2f that has a significant institution within the meaning of section 1(3c) in its group. For the purposes of the first sentence, points 3 and 4, several mandates count as one mandate where the mandates are held at undertakings 1. belonging to the same financial holding group or mixed financial holding group, or that are affiliated undertakings within the meaning of the Commercial Code or are connected in a group in a comparable manner, 2. belonging to the same institutional protection scheme, or 3. in which the institution holds a significant holding. Several mandates are likewise counted as one mandate within the meaning of the third sentence where they include both mandates as manager and mandates as a member of the administrative or supervisory body. In this case they count together as one manager mandate. Mandates at organisations and undertakings that do not predominantly pursue commercial objectives, in particular undertakings serving municipal public services, are not counted towards the maximum permitted number of mandates under the first sentence, points 3 and 4. The supervisory authority may, taking into account the circumstances of the individual case and the type, scale, and complexity of the activities of the institution, the institutional group or financial holding group, the financial holding company, or the mixed financial holding company, permit a member of the administrative or supervisory body to hold an additional mandate in an administrative or supervisory body beyond the maximum number of mandates permitted under the first sentence, points 3 and 4, where this does not prevent the member from devoting sufficient time to performing their duties at the undertaking concerned. The additional mandate may be accepted only after the supervisory authority has granted permission. Mandates as a representative of the Federation or of the Länder are not counted towards the maximum permitted number of mandates under the first sentence, points 3 and 4. The first sentence, point 4, does not apply to chief municipal administrative officers who are obliged, under municipal statute, to hold a mandate in a municipal undertaking or a municipal special-purpose association.
(3a) A person cannot be a member of the administrative or supervisory body of an institution that is not a CRR credit institution but is significant within the meaning of section 1(3c), or of a financial holding company, where 1. that person is a manager in the same undertaking; in the case of a European Company (SE) with a monistic system, this applies on the basis that a managing director cannot at the same time be chair or an executive member of the administrative board, 2. that person was a manager in the undertaking concerned, where two former managers of the undertaking are already members of the administrative or supervisory body, or 3. that person is a member of the administrative or supervisory body in more than five undertakings under the Federal Institute's supervision, unless these undertakings belong to the same institutional protection scheme.
(4) Institutions, financial holding companies, and mixed financial holding companies must deploy adequate personnel and financial resources to facilitate the induction of members of the administrative or supervisory body into their office and to enable the further training necessary to maintain the required expertise, including in relation to ICT risks within the meaning of Article 4(4), point 52c, of Regulation (EU) No 575/2013.
(5) The design of the remuneration systems for members of the administrative or supervisory body may not give rise to conflicts of interest with regard to the effective performance of the administrative or supervisory body's control function. Remuneration is gender-neutral. Pay discrimination on grounds of sex is impermissible. For their activity on the administrative or supervisory body, its members may not receive variable remuneration components. Article 450 of Regulation (EU) No 575/2013 also applies in relation to the remuneration of members of the administrative or supervisory body.
(6) The administrative or supervisory body must also monitor the managers with regard to compliance with the relevant banking supervisory provisions. It must devote sufficient time to discussing strategies, risks, and remuneration systems for managers and employees.
(7) The administrative or supervisory body of an institution, a financial holding company, or a mixed financial holding company should, depending on the undertaking's size, internal organisation, and the type, scale, complexity, and risk content of its business, appoint committees under subsections (8) to (12) from among its members — in the case of a European Company (SE) with a monistic system, from among the non-executive members of the administrative board — to advise and support it in performing its tasks. The administrative or supervisory body of a significant institution within the meaning of section 1(3c), and of an undertaking named in subsection (3), second sentence, must mandatorily appoint, from among its members — in the case of a European Company (SE) with a monistic system, from among the non-executive members of the administrative board — a risk committee, an audit committee, a nomination committee, and a remuneration control committee. Each committee should appoint one of its members as chair. The members of the committees must have the knowledge, skills, and experience necessary to perform the respective committee's tasks. To ensure cooperation and the exchange of expertise between the individual committees, at least one member of each committee should also belong to a further committee. The Federal Institute may require the formation of one or more committees where this appears necessary, in particular having regard to the criteria under the first sentence, or for the proper performance of the administrative or supervisory body's control function. Where the appointment of committees is dispensed with, the tasks assigned to the committees under subsections (8) to (12) fall to the administrative or supervisory body. Where there is no administrative or supervisory body, the committee tasks fall to the shareholders, owners, members, or sponsoring bodies of the institution.
(8) The risk committee advises the administrative or supervisory body on the undertaking's current and future overall risk appetite and risk strategy, and supports it in monitoring the implementation of this strategy by the employees of the management level immediately below the management body. The risk committee monitors that the terms and conditions in customer business are consistent with the undertaking's business model and risk structure. Insofar as this is not the case, the risk committee requires the management to propose how the terms and conditions in customer business can be brought into line with the business model and risk structure, and monitors their implementation. The risk committee examines whether the incentives set by the remuneration system take account of the undertaking's risk, capital, and liquidity structure, and the probability and timing of earnings. The tasks of the remuneration control committee under subsection (12) remain unaffected. The chair of the risk committee should be neither the chair of the administrative or supervisory body nor the chair of another committee. The chair of the risk committee, or, where a risk committee has not been established, the chair of the administrative or supervisory body, may obtain information directly from the head of internal audit and the head of risk control. The management must, as a rule, be informed of this. The risk committee may, insofar as necessary, obtain the advice of external experts. The risk committee, or, where none has been established, the administrative or supervisory body, determines the type, scope, format, and frequency of the information that the management must submit on the subject of strategy and risk.
(9) The audit committee supports the administrative or supervisory body in particular in monitoring 1. the financial reporting process; 2. the effectiveness of the risk management system, in particular the internal control system and the internal audit function; 3. the conduct of the statutory audits, in particular with regard to the independence of the auditor and the services provided by the auditor (scope, frequency, reporting). The audit committee should submit to the administrative or supervisory body proposals for the appointment of an auditor and for the amount of the auditor's remuneration, and advise the administrative or supervisory body on terminating or continuing the audit engagement, and 4. the prompt remediation, by the management through suitable measures, of deficiencies identified by the auditor. The chair of the audit committee must have expertise in the fields of accounting and auditing. The chair of the audit committee, or, where an audit committee has not been established, the chair of the administrative or supervisory body, may obtain information directly from the head of internal audit and the head of risk control. The management must, as a rule, be informed of this.
(10) The administrative or supervisory body of an undertaking named in subsection (3a), first sentence, may appoint a joint risk and audit committee, where this is appropriate having regard to the criteria under subsection (7), first sentence. This must be notified to the Federal Institute. The undertaking must document the reasons for a combination. Subsections (8) and (9) apply correspondingly to the joint audit and risk committee.
(11) The nomination committee supports the administrative or supervisory body in 1. identifying candidates to fill a position in the management body, and in preparing nominations for the election of members of the administrative or supervisory body; in doing so, the nomination committee takes into account the balance and diversity of the knowledge, skills, and experience of all members of the body concerned, and the objective and strategy under point 2, drafts a job description with a candidate profile, and states the time commitment associated with the role; 2. developing a proportionate target for promoting diversity, including promoting a balanced gender ratio on the administrative or supervisory body and in the management, and a strategy for achieving it; 3. an assessment, to be carried out regularly and at least once a year, of the structure, size, composition, and performance of the management and of the administrative or supervisory body, and issues recommendations to the administrative or supervisory body in this regard; 4. an assessment, to be carried out regularly and at least once a year, of the knowledge, skills, and experience of the individual managers and members of the administrative or supervisory body, and of the body concerned collectively, and 5. reviewing the management's principles for selecting and appointing employees of the management level immediately below the management body, including holders of key functions, and in making recommendations to the management in this regard. In performing its tasks under the first sentence, point 3, the nomination committee ensures that decision-making within the management is not influenced by individual persons or groups in a manner harmful to the undertaking. Being a member of a body of an affiliated undertaking or a connected organisation does not, in itself, constitute an obstacle to the impartial conduct required of the members of the management and of the administrative or supervisory body. In performing its tasks, the nomination committee may draw on all resources it considers appropriate, and may also engage external advisers. For this purpose it should receive adequate financial resources from the undertaking.
(12) The remuneration control committee 1. monitors the appropriate design of the remuneration systems of employees, and in particular of those employees who have a material influence on the institution's overall risk profile; 2. directly monitors the appropriate design of the remuneration systems of the managers and of the heads of the internal control functions, and supports the administrative or supervisory body in monitoring the appropriate design of the remuneration systems for the undertaking's employees; the effects of the remuneration systems on risk, capital, and liquidity management must be assessed; 3. prepares the resolutions of the administrative or supervisory body on the remuneration of managers, and in doing so takes particular account of the effects of the resolutions on the undertaking's risks and risk management; the long-term interests of shareholders, investors, other stakeholders, and the public interest must be taken into account; 4. supports the administrative or supervisory body in monitoring the proper involvement of the internal control functions and all other relevant areas in the design of the remuneration systems. The administrative or supervisory body must appoint at least one member to the remuneration control committee who has sufficient expertise and professional experience in the field of risk management and risk control, in particular with regard to mechanisms for aligning the remuneration systems with the undertaking's overall risk appetite and risk strategy and with its own funds position. Where employee representatives sit on the administrative or supervisory body in accordance with the co-determination acts, the administrative or supervisory body must appoint at least one employee representative to the remuneration control committee. The remuneration control committee should cooperate with the risk committee, and should obtain advice internally, in particular from the risk control function and the remuneration officer, and externally from persons who are independent of the management. Managers may not attend meetings of the remuneration control committee for the agenda items under which their own remuneration is discussed. The chair of the remuneration control committee, or, where a remuneration control committee has not been established, the chair of the administrative or supervisory body, may obtain information directly from the head of internal audit and from the heads of the organisational units responsible for the design of the remuneration systems. The management must, as a rule, be informed of this.
(13) (repealed)