ANDORRA Law and Practice Contributed by: Miguel Cases and Laura Nieto, Cases & Lacambra
The requirements of honour, adequate knowl - edge and experience must also be met by the managing directors, and by those responsible for internal control functions (ie, those in charge of the compliance function, the risk manage - ment function and the internal audit depart - ment, as stated in 4.1 Corporate Governance Requirements ). Prior authorisation by the AFA and subsequent registration is required for every appointment and replacement of directors and those respon - sible for the internal control functions. Likewise, banking entities must periodically assess (at least once a year) the continued suit - ability of their board of directors and of each of its members, and of the relevant committees. 4.3 Remuneration Requirements Remuneration requirements applicable to Andor - ran banking entities are aligned with European provisions and the guidelines on sound remu - neration policies issued by the European Bank - ing Authority and the European Securities and Markets Authority. Pursuant to Law 7/2024, banking entities at the group level, parent companies and subsidiar - ies – including subsidiaries established in third countries (with the exception of foreign subsidi - aries located in jurisdictions considered by the AFA to be equivalent for regulatory and super - visory purposes) – are obliged to comply with the remuneration requirements set forth in the applicable laws, regulations and technical com - munications issued by the AFA.
The principles that are applicable to remunera - tion policies are as follows: • the remuneration policy should be compatible with a prudent risk management and long- term business strategy; • the remuneration policy must be compatible with the business strategy and long-term interests of the banking entity, including measures to avoid conflicts of interest; • the board of directors must adopt and peri - odically monitor the general principles of the remuneration policy; • an internal and independent assessment of the implementation of the policy must be car - ried out at least once a year; • staff performing control functions must be independent and must have the necessary authority and be remunerated, regardless of the results of the business departments they monitor; • the remuneration of the general management or those responsible for the risk management and compliance functions should be super - vised directly by the remuneration committee or, if this committee is not created, by the board of directors; and • a clear distinction should be made between fixed and variable remuneration criteria. In this line, Law 7/2024 also establishes the fol - lowing ratios between the fixed and variable components of total remuneration: • the variable component shall not exceed 100% of the fixed component of the total remuneration for each individual; and • financial entities may allow shareholders to approve a higher maximum level of the ratio between the fixed and variable components of remuneration, provided that the overall level of the variable component does not
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