Governance

Sound and effective corporate governance arrangements are fundamental to the proper functioning of any financial market infrastructure (FMI) and for the financial system they serve. This is particularly important for the CSDs, taking into account their central role in the financial system.

A CSD’s management body shall have ultimate and overall responsibility for its entity and define, oversee and be accountable for the implementation of any governance arrangements within it, thereby ensuring its effective and prudent management.

Considering the fundamental role and responsibilities of the management body in a CSD and in view of ensuring a sound and prudent management of the entity, members of the management body shall be of sufficiently good repute with an appropriate mix of skills, experience and knowledge of both the entity and its market.

EU and national legislation require that CSDs have robust governance arrangements, which include a clear organisational structure with well-defined, transparent and consistent lines of responsibility, effective processes to identify, manage, monitor and report the risks to which they are or may be exposed, and adequate remuneration policies and internal control mechanisms, including sound administrative and accounting procedures.

Internal organisational requirements also encompass sound outsourcing arrangements.

For each securities settlement system that it operates, a CSD shall establish independent user committees with a specific mandate. These committees shall be composed of representatives of issuers and of participants in such securities settlement systems. In line with Articles 28(3) and (4) of Regulation (EU) No 909/2014 of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories (CSDR), user committees “shall advise the management body on key arrangements that impact on their members, including the criteria for accepting issuers or participants in their respective securities settlement systems and on service level” and “may submit a non-binding opinion to the management body containing detailed reasons regarding the pricing structures of the CSD.”

While implementing robust internal governance arrangements, CSDs shall comply with the legal provisions of the Law of 6 June 2018 on central securities depositories and the CSDR.

Article 27(1) and (4) of CSDR introduce specific requirements in relation to the senior management and management body, notably:

• The senior management of a CSD shall be of sufficiently good repute and experience so as to ensure the sound and prudent management of the CSD.
• The management body shall be composed of suitable members of sufficiently good repute with an appropriate mix of skills, experience and knowledge of the entity and of the market.

In order to assess the compliance with these specific requirements, based on Article 13(1) Commission Delegated Regulation (EU) 2017/392 of 11 November 2016 supplementing Regulation (EU) No 909/2014 with regard to regulatory technical standards on authorisation, supervisory and operational requirements for central securities depositories (RTS on CSD Requirements), the CSSF has established a dedicated form for the self-declaration of good repute.