Fit and Proper: avoiding a black swan or is there an elephant in the room?

Strengthening Governance

In 2013, the European Parliament and Council approved a directive introducing significant qualitative changes to the evaluation process(Fit and Proper) required to qualify members of the corporate bodies of financial institutions. These rules and guidelines establish the co-responsibility of financial institutions and proposed individuals - and, to a certain extent, of supervisors, as they are the ones that make the final decision - in the process of choosing them for financial institutions. They establish principles and evaluation criteria called Fit and Proper. The word Fit relates to the assessment of technical competence - academic and professional - and the capacity to fulfil the responsibilities of their positions as members of the governing bodies. The word Proper relates to the assessment of integrity and suitability for the function.

The F&P assessment resulted from the need to correct deficiencies in management, identified in the governance of banks that led management to excessive risk-taking and allowed for inappropriate remuneration practices [1]. They were focused on immediate results, which allowed them to qualify for bonuses -variable remuneration- without considering the long-term risks they decided.

Those guidelines aim to improve financial literacy and develop managers capable of taking decisions that result in 'good profit' and sustainable organisations. In particular, with the capacity and resilience to avoid avoid avoidable excesses and losses resulting from decisions leading to financial instability.

This objective has, in a way, an underlying component of 'mission spirit' that safeguards a collective good - the Financial Institutions. Safeguarding, in particular, the main stakeholders - the depositors -, as they jointly hold a higher liquidity than shareholders hold in capital and bondholders in loans. The evolution of the complexity of financial activity, namely its globalisation, reinforces the need and consequent requirement for better prepared people, personally and professionally, both in financial institutions and supervisory authorities, to have the ability to make informed decisions. The concept of F&P [2] is closely linked to corporate governance in Directive 2013/36/EU of 26 June 2013, which revises the access to and prudential supervision of the activity of credit institutions and investment firms.

This Directive is complementary to guidelines from EBA - European Banking Authority [3] and ESMA - European Securities and Markets Authority, as well as NCA [4] - National Competent Authorities. In Portugal it is materialised with amendments introduced, namely, to the General Regime of Credit Institutions and Financial Companies ('RGICSF') and by the Instruction no. 12/2015, of the Bank of Portugal (national NCA) regarding the P&L of the holders of positions with management (executive directors) and supervisory functions (non-executive directors and members of supervisory boards), in order to ensure the sound and prudent management of institutions. The new RGICSF establishes that the assessment of the suitability of the members of the management and supervisory bodies, as well as of those who perform essential functions, which the Bank of England calls SMR - The Senior Managers Regime - is primarily the responsibility of the institution, which must establish a strict policy for selecting and assessing the suitability of the members of its bodies, as well as the composition of the same as a whole.

This assessment considers relevant facts, namely, how the person manages their business and exercises their profession, and is not limited to situations of conviction in legal proceedings, as it should also cover pending cases. As a result of this change, institutions must justify to Banco de Portugal the persons chosen to exercise functions.

The cumulative verification of standards of suitability, independence, availability and professional qualifications is required, with the aim of ensuring that the members of the corporate bodies carry out prudent management and the non-executive directors, who have supervisory responsibilities on the boards, as well as the supervision, carry it out rigorously and robustly.

The methodology of the requirement is not yet consistent in the European Union, with some countries (e.g. England, Sweden, Romania) where the best practices are more advanced, requiring the presentation of the selection process that led to the choice of people from a range of potential candidates, with interviews by supervisors to evaluate not only the technical capacity of the candidates, but also their psychological profile.

Supervisors should approve a person only when they are satisfied of the aptitude and suitability to perform the controlled functions they are applying for. The F&P test is a benchmark used to assess whether a person has the appropriate profile to perform a controlled function and is not an examination. This process is ongoing and at a point of reassessment of such persons, these criteria continue to apply and if evidence of non-compliance with the requirements is identified, action is taken.

The evaluation has to be carried out at the time of appointment, but the directive requires that the evaluation be continuous during the exercise of each mandate.

From Bretton Woods to Fit and Proper

After Bretton Woods, we have evolved to an international financial system, where financial actors are networked, capital, liquidity and risk circulate between different origins and destinations, and technology, by dematerialising financial activity, has made it complex and intangible, which enhances systemic risk.

The science of corporate management, has been developing the most rational decision-making process possible - often automated and using artificial intelligence - aiming to provoke rational reactions from the organisations' stakeholders, in order to reduce subjectivity, uncertainty, latent dangers and underlying conflicts.

The financial crisis and the corresponding financial instability emerged as a 'black swan', as there was no awareness of the interconnectedness of economies and financial systems, namely in terms of liquidity, capital and risk. Its correction led to the revision of several mechanisms to ensure financial stability - of which a relevant milestone was the creation of the Banking Union - with the aim of contributing to the financial sustainability of banks and economies.

This latest financial crisis had its main origin in scandals about bad management practices in unsuspecting countries and banks, with bankruptcies and bailouts of financial actors. The risk of systemic contagion emerged, causing financial, economic and social instability.

It emerged from the crisis that leaders were often not Fit (nor Proper) to manage organizations interacting in an international network, in a puzzle-superstructure paradigm [5] and that, despite the recognition of globalization, they rarely considered in the decision process issues related to geostrategic, geoeconomic, geopolitical and mainly geofinancial movements [6], which are still not taught in management schools and are essential in the current global world. The need for a mitigating solution to the situation is reinforced, with the emergence of a demanding corporate governance, based on 'fit' and 'proper' leaders to manage transnational institutions, technologically in rapid evolution, seemingly more intangible by geographical dispersion.

In the 21st century, the most media cases - both in the financial and non-financial sector - have generated the need for reflection on the F&P assessment to be more demanding and robust across the board, in order to be effective. The financial sector serves society as a whole and cannot change, alone, the cause of crises by having F&P managers, when the governance of the State at the level of political actors and other economic agents does not also adopt a demanding practice. In fact, science is pacific in accepting that governance, in order to be effective in the private sector, must firstly comply, namely, with the requirements and principles emanating from the public sector. The governance of the public sector includes stability and predictability (e.g. rule of law, fight against corruption), quality of rules and inspection, transparency in disclosures, active regulators, protection of minority shareholders and market discipline.

Deficiencies were also identified in the supervision and oversight by members of the corporate bodies with that specific responsibility - non-executive directors and supervisory boards - as well as the not very robust quality of assessment by internal and external auditors [7]. The former had a primarily transactional focus and did not take into consideration in their internal audit plans the risks that were accumulating on the balance sheet, as well as capacity and risk appetite, capital and liquidity levels, and some external auditors did not exhibit standards of demand in their reports that would lead to their qualification.

On the other hand, supervisors of the markets and their players - with physical presence in major banks - had a 'remote control' or light touch [8] type methodological approach, using the expression of Mark Carney, Governor of the Bank of England, based on a paradigm of trust in the institutions supervised. The evolution of the technological and financial environment generated a complexity that was not adequately monitored by supervisors ensuring that they themselves were F&P in the new paradigm.

Since 2015, financial institutions have been required to adopt a more rigorous and robust policy for the selection and evaluation of those members, which includes the creation of a Nomination Committee, as well as the co-accountability of the financial institution that appoints those members regarding their F&P.

Additionally, the constitution of each and every corporate body must obey diversity criteria [9] which include, namely, gender, professional experience, area of expertise, independence, which allow the evaluation of the P&L of the body as a whole.

The financial culture and the decision-making process

The financial sector has its own financial culture, transversal to national and international actors, constituting an ecosystem [10], so it is relevant to understand how the F&P process fits into the financial culture and decision-making process.

Interdependencies and network interconnections are based on a common financial culture, characterised by a financial imagination that creates the notion of an imagined community, based on concepts [11] such as run together, follow the leader, herd behaviour and tacit bargain, behaviours that promote contagion of good and bad practices. This 'community' has the capacity to regulate without representation (self-regulation - Soft Law) and has the perception of risk control by acting under the same models, rules and operating and technical standards that standardise and automate action.

It also has the ability to fictionalise realities with the power of the information it manages, projecting perceptions of risk or opportunity in society, aided by the narratives of an integrated media meta-network that disseminates information dynamically and instantaneously.

This financial culture determines the character of the actors in the system, shaped by rules and technology that overcome barriers - linguistic, physical and cultural -, creating a community and collective identity that mirrors the importance given by other powers - supranational and transnational economic - which dictate the governance guidelines of the system. Hence, it is not only the financial players who lead the governance of their activity, although they influence it through their technical capacity and control over the implementation and day-to-day action.

This culture is conditioned in its financial thinking delimited in the origin of the law and in the decentralisation of the competence in the decision-making process that frames its local or regional activity, but, internationally, it operates under the Anglo-Saxon law. The refuge in the law becomes the paradigm that dominates the financial thinking that it operationalises, including in the execution of the international Hard Law of combating money laundering, terrorism financing, tax evasion, among other tangible political and economic sanctions in financial means.

On the other hand, how supervisors can assess, in the F&P continuous assessment process, seems to be particularly challenging, especially with regard to awareness about cognitive pitfalls in decision-making by board members. Fergusson [12] found that managers succumb to cognition traps such as the 'availability bias' bases the decision on immediately available information, which is not an informed decision, and the 'hindsight bias', which leads to assigning higher probability to events that have already occurred, than to events that have not.

Also, heuristic disposition, through which preconceived value judgements interfere with cost-benefit assessment, or contamination effects, through which we allow irrelevant but immediate information to contaminate a decision, or induction, which leads to formulating general rules based on insufficient information, constitute cognitive trap factors. Other factors include negligence of scope, which prevents proportional adjustment to what one is predisposed to sacrifice, avoiding evils of different orders of magnitude, or overconfidence in calibration, which leads to underestimating the confidence intervals of the robustness of the decision maker's calculations, and also 'passer-by apathy', which inclines to abdicate individual responsibility when inserted into a group.

The culture surrounding "running together" is based on shared expectations, but escalation is created from the incremental decisions incorporated in each successive negotiation, enhanced by the aforementioned cognitive traps. As Clark advocates [13] unforeseen events change market expectations, and can add up over time to previously favoured capital (and liquidity) flight and risk export.

Single Supervisory Mechanism (SSM)

The Single Supervisory Mechanism (SSM) is the banking supervision system that integrates the European Central Bank (ECB) and the NCA - National Competent Authorities -, which includes the Banco de Portugal. The ECB ensures the effective functioning of the SSM, with the NCA assisting it in prudential supervision. The SSM supervision model distinguishes between significant credit institutions (SSEs - Significant Supervised Entities) - directly supervised by the ECB - and less significant institutions (LSIs - Less Significant Institutions) under direct supervision by the NCA, which liaises with the ECB for the Eurozone, which has indirect supervision, adopting quantitative and qualitative criteria.

The range of institutions subject to the SSM regime is wide, including those qualified as systemic, but also less significant - where concerns emerge regarding the prudential supervision of capital and liquidity ratios, business models, profit drivers, credit risk control, NPE - Non Performing Exposures and internal governance - and are being subject to greater harmonization of supervision, requiring governing bodies that meet the same standards of rigor and robustness, despite their smaller size, thus applying the 'proportionality principle' [14]. This aims to ensure that the internal governance arrangements should be compatible with the risk profile and business model so that the regulatory objectives are effectively achieved. It takes into account, inter alia, the size, internal organisation, complexity of the activities. Significant institutions should have more sophisticated governance arrangements.

The F&P guidelines issued by the EBA - European Banking Authority - for the Euro Zone by the European Central Bank -, is aligned with other regulatory and supervisory bodies of the international financial system, aiming to reduce different perceptions and interpretations resulting from the common sense that individuals and society in particular develop within their cultural environment. These guidelines are structured in six principles that contextualise the evaluation criteria for individuals to exercise management, supervision (assigned to non-executives) and oversight functions in financial institutions.

Principles of evaluation [15] of Fit and Proper

Six guiding principles have been developed to conduct the evaluation process of potential and current members of corporate bodies of financial institutions.

1. The first principle relates to the Primary Responsibility that supervised credit institutions have in the selection and appointment of persons to governing bodies, ensuring that they meet theFit andProper requirements. This process involves conducting due diligence prior to appointment, but also on an ongoing basis to ensure that if there is a material change regarding the person, the institution evaluates the person. This process involves transparent cooperation in the relationship with the ECB and/or the NCA.

2. The second principle refers to the concept of Gatekeeperwhich resides in the ECB and the NCA, which can be translated into Portuguese as 'guardian' or 'vigilant'. It aims to prevent persons with the potential to pose a risk to the proper functioning of the management (and executive supervision) or supervisory body from entering or remaining in office, where a question arises as to their suitability and fitness. The ECB or the NCA act as Gatekeepers to ensure that supervised entities comply with the requirements, and that robust governance structures are in place to carry out the timely and ongoing assessment process.

3. The third principle concerns Harmonisation, which has been a challenge not only in the Eurozone, but mainly at the European Union level, where the goal of maintaining financial stability is a permanent concern, but where there is a lack of harmonisation on critical issues. These derive from different interpretations and the influence that different cultures may have on this process, impacting the levels of demand now required. The ECB's supervision of theFit andProper of members of governing bodies should ensure a high level of harmonisation, both within and outside the Eurozone. Greater consistency and convergence seems to be needed, as numerous divergences occur in supervisory policies, processes and practices, resulting from different interpretations of the applicable assessment criteria.

4. The fourth principle concerns Proportionality, a criterion related to the assessment made on a case by case basis, as it implies that the application of the suitability criteria may be proportional to the size of the entity and complexity of activities, as well as to the specific function to be performed. However, the application of the proportionality principle, explained before, should not lead to lower standards, but may result in a differentiated approach depending on the level and areas of knowledge and experience. It may be considered that, in all cases, the assessment involves the individual analysis and judgment - Proper - of the ECB and/or the NCA, which may introduce too subjective factors.

5. The fifth principle deals with process - due process - and fairness - appeal mechanisms - founded on the fact that suitability and fitness supervision is strongly procedure-driven. The supervised entity is the applicant in the F&P procedure, yet the rights of the supervised and the appointee may be affected by the supervisor's decision - judgement - on the applicant's fitness and suitability. In such situations, both enjoy procedural safeguards set out in the SSM Regulation and the SSM Framework Regulation. The ECB has a duty to decide on the basis of information that can be considered material and relevant for the fit and proper balanced assessment, weighing the factors for and against the nominee. The fit and proper assessments are confidential and the appraisee may appeal against them as the decision must fall within the principles of European Union administrative law as well as its recent EU data protection law.

6. The sixth principle takes care of the continuous Interaction with supervision, considering that the assessment of suitability and appropriateness, feeds into the continuous supervision of the governance of an institution, especially with regard to the composition and functioning of the governing bodies. A proper and appropriate assessment may lead to decisions that need to be followed up in ongoing supervision. On the other hand, ongoing supervision can also provide input for assessment, especially with regard to suitability criteria and independence in the performance of functions.

Fit and Properevaluation criteria

Five evaluation criteria have been established which complement the six principles addressed above. They include the practical and theoretical experience of the members of the governing bodies, the word "experience" being in a broad sense, i.e. covering practical and professional experience acquired, as well as theoretical experience through academic education and professional training. The principle of proportionality is inherently applicable, as the level of experience required depends on the characteristics of the specific function and the institution. The more complex it is the more experience is required, namely in financial markets, regulatory framework, strategic planning, risk management, auditing, capable of ensuring effective governance, supervision and controls. Another criterion concerns reputation analysed under the proportionality principle, which is linked to the guarantees given in a paradigm of sound and prudent management.

Another criterion, relevant in the evaluation of the profile, concerns potential conflicts of interest and independence of mind, which require members of the corporate bodies to make pragmatic, informed and realistic comments, be objective and take autonomous decisions, acting with independence of mind.

Non-executive directors are also required to have the capacity to challenge executive directors in the decisions they take and propose in the governing bodies. The financial institution must have governance policies in place in order to identify, disclose, mitigate, manage and prevent conflicts of interest, whether real and potential or perceived by the public. A conflict of interest occurs if the attainment of a member's interests may affect the interests of the supervised entity and pose material risk. However, having a conflict of interest does not necessarily mean that a nominee cannot be considered suitable, if that conflict can be adequately eliminated or mitigated.

The commitment of time availability for the exercise of functions is also considered indispensable and, consequently, must be assessed in the process. The time that a member of the corporate bodies can dedicate to functions can be affected by multiple factors. These include the number of positions held in other entities, the hours consumed in these functions, the size of the entities, the nature, scale and complexity of the activities, and the country in which they are located. Other professional or personal commitments and circumstances are also considered. Finally, the collective suitability of the governing bodies involves self-assessment and ongoing supervision of corporate governance, with the supervised entity having primary responsibility for identifying potential gaps in collective suitability.

In recent decades, the governing bodies of several banks have been characterised by having executive and non-executive directors (supervisors of executives) and supervisory bodies that did not manage the potential (and real) loss of value, because their F&P profile was not robust, particularly in three of the criteria required today. The first relates to the non-adoption of rules to avoid conflicts of interest and independence of mind, with conflicts between direct public and private interests, cross-interest in economic groups with evident conflicts of interest, as well as (often negative) interaction with politicians having been observed. The second was related to the lack of commitment of available time, namely of non-executive directors and supervisory bodies, dedicated to their supervisory and oversight functions. Finally, the issue involving the dubious reputation - Proper - of members of corporate bodies, often public and notorious, without the supervision having the means to act in an intrusive, immediate and effective manner.

Frequently, failures occurred in the first criterion relating to the practical and academic-theoretical experience of the appointed directors. This was common in non-executive directors - whose main responsibility is the supervision of executive directors -, without having the necessary knowledge, in addition to the incapacity and independence they revealed, not questioning either the asymmetry of information or the decisions and proposals presented to them on the board.

The requirement for detailed and specific minutes of the corporate bodies and committees, issued by them, including the names of the members and their specific interventions on the board are now required and assessed by supervisors as part of the continuous assessment process they have to make of them and of the body as a whole, representing a tool to assess the effective contribution that the members of the corporate bodies make to financial institutions.

Challenges and opportunities

However, by reducing threats, the new F&P guidelines create opportunities that constitute relevant challenges for three of the actors in the financial system: financial institutions, supervisors and members of corporate bodies.

The F&P process dimension:

The SSM and the NCAs that supervise financial institutions are faced with the challenge of their limited and skilled resources, as well as the costs of taking on the ongoing Fit and Proper approval and assessment process. The European Union had in 2017 [16] about 6,600 banks, of which 120 are banks classified as systemic, being supervised by the SSM, the rest - about 6,480 banks - supervised by the NCA. It is estimated that the SSM has to approve and monitor hundreds of people per year in each of the 28 EU countries.

Currently, the approval of new governing bodies by these entities takes months, which can affect the management of banks, jeopardising their activity and failing to achieve stability and predictability.

The challenges are also more demanding for financial institutions, which are jointly responsible for ensuring that the profile of the people who make up the appointed governing bodies remains as expected of an F&P profile.

The F&P talent required:

- Executive directors should receive adequate compensation in terms of fixed and variable remuneration, which should be commensurate with the responsibility, commitment, performance, activity and size of the institution they manage, avoiding benchmarks with institutions whose size and complexity are not comparable.

- On the other hand, the remuneration of non-executive directors and members of supervisory bodies must be appropriate to the fiduciary responsibilities that these functions involve. This criterion is related to factors that motivate the acceptance of these responsibilities with a reduced monetary consideration, given the degree of responsibility and commitment required. It is not credible that people who take on a high fiduciary responsibility for protecting stakeholders' interests are inadequately remunerated when compared, for example, to executive directors -who have to supervise and monitor- and to best practice.

- The non-financial sector has numerous regulated and supervised industries, but mostly with a strictly technical focus (e.g. telecommunications, energy, pharmaceuticals, consumer products). Rules and guidelines, including the F&P assessment, on corporate governance could be beneficially applied to these industries and government organisations, creating a more widespread culture on management practices that aim to ensure the sustainability of organisations. Thus, preventing contagion to the financial system of bad governance practices of some of its stakeholders.

Alignment for sustainable management:

- Management should have as its ultimate goal the defence of the value created for future generations, i.e., to ensure the sustainable growth of organisations. Sound management requires that the two dimensions - strategic (non-executive) and tactical/operational (executive) - of functions and decisions-informed be aligned, despite requiring different and complementary F&P profiles. In recent decades, it has emerged that the tactical dimension has overridden the strategic dimension and the vision embedded in the business model. The immediate result has been subjugated to conjunctural interests, overriding the defence of the sustainability of financial institutions, with a positive impact on society.

- Managing an increasingly international and virtual reality requires avoiding the temptation of gaming, i.e. managing the activity as a computer game. The greater the intangibility generated by digital technological evolution, the greater the difficulty in evaluation.

- Preventing 'black swan' events, as in the 2007 financial crisis, but also preventing the 'elephantin the room ' is one of the greatest challenges of the supervisory and oversight functions. The 2007 crisis revealed that managers succumbed to cognitive traps in decision making. Ferguson [19] found that the financial system is heavily conditioned by human behaviour - its professionals and society - advocating the causes of such behaviour as a result of the system being a mirror of society. The potential cognitive pitfalls force the refinement of cognition, especially about the future immateriality and intangibility of financial activity, the level of self-regulation and legislation that may contain in themselves supra-sectoral international political interests. Additionally, the lack of control and technological asymmetries that expose to cyber-attacks and/or instantaneous financial instability, the asymmetry of information propagated with the intention of projecting unverifiable perceptions, as well as the cultural diversity [20] of stakeholders (especially depositors with different interpretations of reality and multiple needs in distinct geographical points), and, finally the diversity of national interests that generate risk perceptions with self-defence intentions. Does the complexity of this process lead to an Elephant in the Room? How will cognitive traps be assessed in the continuous F&P assessment process?

- Managing simultaneous contexts of local and international realities, as well as managing diversity in order to promote healthy financial integration, requires new business models and, with them, new risks derived from a still unknown context.

To conclude, in companies, in general, good governance requires an adjustment of culture, recognition of the importance of good governance, a basic governance structure and processes aligned with the creation of value [21] for shareholders, stakeholders and society.

‍

Article originally published in InforBanca

Notes:

1. Pitta Ferraz, D.; Lopes, I. T.; Nannicini, A. (2018) "Relationship between top-executive compensation and corporate governance: Evidence from large Italian listed companies", International Journal of Disclosure and Governance (Forthcoming).

2. Instruction no. 12/2015, BO no. 8, of 17-08-2015, of Banco de Portugal

3. EBA/Guidelines/2012/06, 22 November

4. NCA - National Competent Authority are the entities in each country responsible for the regulation and supervision of financial institutions. In Portugal, according to Article 40 of the Benchmarks Regulation, ESMA indicates the Bank of Portugal, the Securities Market Commission (CMVM) and the Insurance and Pension Funds Supervisory Authority (ASF). At https://www.esma.europa.eu/designated-national-competent-authorities-under-benchmarks-regulation

5. Pitta Ferraz, D. (2011). Document 4 - Structured and Quantitative Research - Financial Stability. Nottingham: Nottingham Business School.

6. Castro, Teodora de (2017). Geofinancial Power - International Financial Strategy and Governance. Ph.D Thesis. University of Lisbon - ISCSP

7. Pitta Ferraz, D.; Lopes, I. T.; Kopliku, A. (2018). "Can board diversity and choice of auditor enhance profitability?", Int. J. Business Performance Management, Vol. 19, No. 3, pp. 2018 289-303.

8. Carney, Mark (2018). Global Markets - Markets - Development - Economy. IMF/World Bank Edition, Saturday, 13 October 2018

9. Lopes, I.T., Pitta Ferraz, D., and M. M. Martins (2016). "The Influence of Boards' Diversity on Profitability: An Overview Across Iberian Non-financial listed companies", Corporate Ownership & Control, Vol. 13, Issue 2-C2, pp. 455-461.

10. Castro, Teodora de (2017). Geofinancial Power - International Financial Strategy and Governance. Lisbon: University of Lisbon - ISCSP

11. Beck, U. (2006). Living in the world risk society. U.K.: Routledge; Castells, M. (2011). A Network Theory of power. USA: International Journal of Communication, no. 5. Clark, G. L. (2004). Money flows like mercury: the geography of global finance. Available at: http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.194.9981&rep=rep1&type=pdf. Cohen, B. J. (2003). The geopolitics of currencies and the future of the international system. Conference on The Geopolitics of Currencies and Oil, Real Instituto Elcano, Madrid, 7 November 2003. Available at: http://polsci.ucsb.edu/faculty/cohen/recent/pdfs/Madrid_paper.pdf.Lawler, E. and Ford, R. (1995). Bargaining and Influence in Conflict Situations. USA: Cornell University ILR School DigitalCommons@ILR. Available at:http://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?article=1783&context=articles. Flohr, A. (2014). Self Regulation and Legalization - Making Global rules for banks and corporations. UK: Palgrave Macmillan. Giovanoli, M. (2013). The Reform of the International Financial Architecture after the Global Crisis. Available at:http://nyujilp.org/wp-content/uploads/2013/02/42.1-Giovanoli.pdf; Goldfinger, C.(1996). Géofinance, Nouvelle Finance Planétaire les Vertus du Chaos. Switzerland: Le Temps Stratégique, No. 69 - Avril 1996. La Porta, R. et al (2008). The Economic Consequences of Legal Origins. Journal of economic literature 46. Available at:http://www.harvardiglp.org/wp-content/uploads/2014/10/La-Porta-et-al-Legal-Orgins.pdf; Maurer, B. (2006). The Anthropology of Money. California, USA: The Annual Review of Anthropology. Available at: arjournals.annualreviews.org

12. Ferguson, N. (2008). The rise of money- A financial history of the world. Portugal: Civilização Editora

13. Clark, G. L. (2004). Money flows like mercury: the geography of global finance. Available at: http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.194.9981&rep=rep1&type=pdf

14. Directive 2013/36/EU, Article 74(2) and EBA (2017) and EBA/GL/2017/11 - Guidelines on Internal Governance. EBA - European Banking Authority

15. European Central Bank (2017). Guide to Fit and Proper Assessments. May 2017

16. The European Banking Federation (2018) "Banking in Europe: EBF 2017 Facts & Figures", and "List of supervised entities on 1 January 2018", European Central Bank - Banking Supervision

17. Taleb, Nassim Nicholas (2010) #2007], The Black Swan: The Impact of the Highly Improbable (2nd ed.). London: Penguin, ISBN 978-0-14103459-1, retrieved 26 February 2017

18. Oxford Advanced Learners Dictionary (OALD), Word of the Month: Elephant in the room

19. Ferguson, N. (2008). The Rise of Money - A Financial History of the World. Portugal: Civilização Editora

20. Lopes, I.T. and Pitta Ferraz, D. (2016) "The value of intangibles and diversity on boards looking towards economic future returns: evidence from non-financial Iberian business organisations", Int. J. Business Excellence. 392 Int. J. Business Excellence, Vol. 10, No. 3, 2016 [http://www.inderscience.com/jhome.php?jcode=IJBEX]

21. Pitta Ferraz, D.; Lopes, I. T.; Hitzelberger, S. P. (2018). "The Use of Poison Pills by American Firms over the Period 1997-2015: Its Impact on Shareholders' Value", International Journal of Business Excellence (Forthcoming).