Order on the Basic Course for Board Members of Credit Institutions, Mortgage Credit Institutions and Insurance Undertakings

Order on the Basic Course for Board Members of Credit Institutions, Mortgage Credit Institutions and Insurance Undertakings

Pursuant to Section 64b, subsection 5, of the Act on Financial Business, cf. Act No. 1013 of 21 August 2024, and Section 109, subsection 5, of Act No. 718 of 13 June 2023 on Insurance Business in Cross-Border Pension Funds, Life Insurance Undertakings and Non-Life Insurance Undertakings etc. (the Insurance Act), it is hereby prescribed:

Section 1. This Order applies to persons who enter the board of a credit institution, a mortgage credit institution or an insurance undertaking on 1 January 2025 or later, as well as to course providers who apply for approval as providers of the basic course pursuant to Section 8.

Implementation of the Basic Course

Section 2. A member of the board of a credit institution or a mortgage credit institution must, as soon as possible and no later than 12 months after entering the board, complete a basic course, cf. Section 64b, subsection 1, of the Act on Financial Business, which includes training in the following competence areas:

1. The framework for the board's work.
2. The framework for the organization of the business.
3. Operational risk.
4. Anti-money laundering.
5. IT and cybersecurity.
6. ESG.
7. Financial reporting and audit.
8. Credit.
9. Market risk.
10. Capital, NEP and debt buffer requirements.
11. Liquidity.
12. The Supervisory Diamond for credit institutions.
13. The Supervisory Diamond and the special framework for mortgage credit institutions.

Subsection 2. The requirement in subsection 1, item 12, does not apply to a member of the board of a mortgage credit institution.

Subsection 3. The requirement in subsection 1, item 13, does not apply to a member of the board of a credit institution.

Section 3. A member of the board of an insurance undertaking must, as soon as possible and no later than 12 months after entering the board, complete a basic course, cf. Section 109, subsection 1, of the Insurance Act, which includes training in the following competence areas:

1. The framework for the board's work.
2. The framework for the organization of the business.
3. Operational risk.
4. Anti-money laundering.
5. IT and cybersecurity.
6. ESG.
7. Financial reporting and audit.
8. The investment area and the prudent person principle.
9. Sound actuarial basis and fair treatment of policyholders.
10. Capital base.
11. Solvency capital requirement and minimum capital requirement.
12. Assessment of own risk and solvency.
13. Provisions for life insurance undertakings.
14. Provisions for non-life insurance undertakings.
15. The special framework for group 2 insurance undertakings.

Subsection 2. The requirements in subsection 1, items 4, 9 and 13, do not apply to a member of the board of a non-life insurance undertaking.

Subsection 3. The requirement in subsection 1, item 14, does not apply to a member of the board of a life insurance undertaking.

Subsection 4. The requirements in subsection 1, items 10-14, do not apply to a member of the board of a group 2 insurance undertaking. A member of the board of a group 2 insurance undertaking may choose to receive training in subsection 1, items 10-14, instead of receiving training in item 14.

Subsection 5. The requirement in subsection 1, item 15, does not apply to a member of the board of a group 1 insurance undertaking.

Section 4. A board member must, upon request, send a copy of the course certificate, cf. Section 9, to the Danish Financial Supervisory Authority as documentation that the board member has completed the basic course, cf. Sections 2 and 3.

Arrangement of Training

Section 5. Training in the competence areas, cf. Sections 2 and 3, must include training on the topics described in Annexes 1-18.

Section 6. A provider of a basic course must arrange the training in the competence areas, cf. Sections 2 and 3, with the aim of ensuring that the board member achieves the learning objective levels, cf. Section 7, established in Annexes 1-19.

Subsection 2. Training in the competence areas, cf. Sections 2 and 3, must be arranged so that the training is based on the applicable legal framework at any given time.

Section 7. A learning objective for a competence area, cf. Sections 2 and 3, consists of three levels, where achievement of

1. learning objective level 1 presupposes that the board member, after completing the training, has an overall knowledge of the topics and concepts included in the competence area, as well as the legal framework that forms the framework for the competence area, including understanding of the considerations the legal framework seeks to ensure,
2. learning objective level 2 presupposes that the board member, in addition to achieving learning objective level 1, has acquired sufficient knowledge of the competence area to be able to contribute to the execution of board tasks within the competence area, including being able to ask questions to the management and respond to the answers, and
3. learning objective level 3 presupposes that the board member has acquired further knowledge, cf. item 2, of the competence area and will be able to independently execute a board task within the competence area.

Provision of Basic Course

Section 8. A course provider wishing to offer a basic course must apply to the Danish Financial Supervisory Authority for approval of a course program as a basic course before it is offered.

Subsection 2. The application must include a description of the basic course, including a description of

1. the training content for the competence areas, cf. Sections 2 and 3, that must be included in the provider's basic course,
2. the training format for the competence areas, cf. Sections 2 and 3, that must be included in the provider's basic course, including how the training format supports the achievement of the established learning objectives, cf. Annexes 1-19, and
3. the professional competencies of the teachers within the competence area or areas in which they are to teach.

Subsection 3. A provider of a basic course must apply to the Danish Financial Supervisory Authority for new approval, cf. subsection 2, if the Danish Financial Supervisory Authority makes changes to the competence areas listed in Sections 2 and 3, insofar as the competence areas have been changed.

Section 9. A provider of a basic course must issue a course certificate to the board member after completion of the basic course. The course certificate may be limited to cover one or more competence areas, cf. Section 12, subsection 1, second sentence.

Section 10. A provider of a basic course must give the board member the opportunity to evaluate the provider's basic course after the board member has completed it. As part of the evaluation, the board member must take a position on the extent to which the established learning objectives, cf. Annexes 1-19, have been achieved.

Subsection 2. An evaluation, cf. subsection 1, must be kept by the provider for at least 5 years from the board member's completion of the basic course or completion of training in the competence area. The evaluation must be sent to the Danish Financial Supervisory Authority upon request.

Section 11. The Danish Financial Supervisory Authority may withdraw approval of a provider's basic course if the basic course no longer meets the framework for approval of basic courses, or if it must be assumed on the basis of the board members' evaluations, cf. Section 10, that the board members do not achieve the established learning objectives after completing the provider's basic course.

Exemption

Section 12. A member of the board of a credit institution, a mortgage credit institution or an insurance undertaking may apply to the Danish Financial Supervisory Authority for exemption from the requirement to complete a basic course, cf. Section 64b, subsection 2, of the Act on Financial Business and Section 109, subsection 2, of the Insurance Act. The Danish Financial Supervisory Authority may, after a specific assessment, condition the exemption on the board member completing other training approved by the Danish Financial Supervisory Authority or otherwise acquiring knowledge of selected competence areas.

Subsection 2. An application for exemption must include a description of the board member's knowledge, professional competencies and experience, as well as the justification for why the person's knowledge, professional competencies and experience must be considered sufficient to perform the duties as a member of the board of a credit institution, mortgage credit institution or insurance undertaking.

Entry into Force

Section 13. This Order enters into force on 1 January 2025.

Subsection 2. Order No. 1424 of 29 November 2016 on the basic course for board members of credit institutions, mortgage credit institutions and insurance undertakings is repealed on 31 December 2025.

Subsection 3. This Order does not apply to persons who entered the board of a credit institution, a mortgage credit institution or an insurance undertaking before 1 January 2025. For such persons, the previously applicable rules in Order No. 1424 of 29 November 2016 on the basic course for board members of credit institutions, mortgage credit institutions and insurance undertakings apply.

Danish Financial Supervisory Authority, 1 December 2024 Louise Mogensen / Tobias Thygesen

Annex 1 The Framework for the Board's Work

1. The basic course in the competence area, cf. Section 2, subsection 1, item 1, and Section 3, subsection 1, item 1, must include training on: a) The board's tasks. b) The board's execution of its supervisory function, including the division of work between the board and the management. c) Requirements for management reporting. d) Requirements for the evaluation of the board's composition. e) Requirements for the arrangement of the work in the board.
2. Training in the competence area must additionally focus on collective board responsibility and the individual responsibility of board members. The training must also set the framework for the board's work by describing the relevant external actors and the legislative framework in the form of Danish and EU-based regulation.
3. After completing the basic course in the competence area, a board member is expected to have achieved learning objective level 2, cf. Section 7, item 2, on topics covered by this Annex item 1. A board member is expected to have achieved learning objective level 1, cf. Section 7, item 1, on topics covered by this Annex item 2.

Annex 2 The Framework for the Organization of the Business

1. The basic course in the competence area, cf. Section 2, subsection 1, item 2, must include training on: a) The structure of the Order on Management and Control of Credit Institutions etc., including the principle of proportionality. b) The management's tasks and responsibilities. c) Requirements for organization and division of responsibilities. d) Risk management. e) Compliance. f) Internal audit. g) Internal reporting.
2. The basic course in the competence area, cf. Section 3, subsection 1, item 2, must include training on: a) The structure of the Order on Management and Control of Insurance Undertakings and Pension Funds, including the principle of proportionality and the interaction with Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II). b) The management's tasks and responsibilities. c) Insurance risks. d) Requirements for organization and division of responsibilities. e) Key functions and the responsible actuary. f) Internal audit. g) Internal reporting. Insofar as the basic course in the competence area only covers board members in group 2 insurance undertakings, Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) is not expected to be included in the training.
3. After completing the basic course in the competence area, a board member is expected to have achieved learning objective level 2, cf. Section 7, item 2, on topics covered by either this Annex item 1 or item 2.

Annex 3 Operational Risk

1. The basic course in the competence area, cf. Section 2, subsection 1, item 3, and Section 3, subsection 1, item 3, must include training on: a) The board's tasks in the area of operational risk. b) The board's execution of its supervisory function in the area of operational risk. c) The board's tasks regarding requirements for reporting in the area of operational risk.
2. After completing the basic course in the competence area, a board member is expected to have achieved learning objective level 2, cf. Section 7, item 2, on topics covered by this Annex item 1.

Annex 4 Anti-Money Laundering

1. The basic course in the competence area, cf. Section 2, subsection 1, item 4, and Section 3, subsection 1, item 4, must include training on: a) The board's tasks in connection with a company's risk assessment and risk management. b) Review of the most significant requirements in the Act on Preventive Measures against Money Laundering and Financing of Terrorism regarding a company's measures in the area, including – risk assessment and risk management, – training and instruction programs for employees, – know your customer procedures, – duty of vigilance, – monitoring of customer transactions, – duty to investigate and register suspicious transactions, – duty to report, and – EU regulations on financial sanctions.
2. After completing the basic course in the competence area, a board member is expected to have achieved learning objective level 2, cf. Section 7, item 2, on topics covered by this Annex item 1, letter a. A board member is expected to have achieved learning objective level 1, cf. Section 7, item 1, on topics covered by this Annex item 1, letter b.

Annex 5 IT and Cybersecurity

1. The basic course in the competence area, cf. Section 2, subsection 1, item 5, and Section 3, subsection 1, item 5, must include training on digital operational resilience in accordance with Regulation (EU) 2022/2554 of the European Parliament and of the Council of 14 December 2022 on digital operational resilience for the financial sector, including a) management and organization of digital operational resilience, b) risk management within information and communication technology (ICT), c) reporting of major ICT or payment-related incidents and notification of significant cyber threats to competent authorities, d) testing of digital operational resilience, e) exchange of information and intelligence on cyber threats and vulnerabilities and cooperation thereon, f) measures for proper management of ICT third-party risk, and g) requirements regarding the contractual arrangements entered into between third-party providers of ICT services and financial entities.
2. After completing the basic course in the competence area, a board member is expected to have achieved learning objective level 2, cf. Section 7, item 2, on topics covered by this Annex item 1, letters a-g.

Annex 6 ESG

1. The basic course in the competence area, cf. Section 2, subsection 1, item 6, must include training on: a) Purpose, core concepts and issues within ESG and sustainable finance, including i. environmental, social and governance topics, ii. the double materiality principle (impact and risk), iii. the role of the financial sector in the transition to a sustainable economy in banking, insurance and investment, and iv. financial companies' ESG risks (market, credit and insurance risks as well as reputational risks and operational risks). b) The board's and management's tasks and responsibilities in relation to ESG, including due diligence and targets for sustainable business models. c) Financial regulation and principles within ESG, including requirements for integration and management of ESG risks, sustainability information and reporting, and prohibition of misleading marketing. d) International and national laws, agreements and initiatives in the field of sustainability.
2. After completing the basic course in the competence area, a board member is expected to have achieved learning objective level 2, cf. Section 7, item 2, on topics covered by this Annex item 1.

Annex 7 Financial Reporting and Audit

1. The basic course in the competence area, cf. Section 2, subsection 1, item 7, and Section 3, subsection 1, item 7, must include training on: a) The board's tasks regarding annual and interim reports. b) The board's tasks in relation to any audit committee. c) The board's tasks and responsibilities in relation to external audit. d) The board's tasks in relation to internal audit. After completing the basic course in the competence area, a board member is expected to have achieved learning objective level 2, cf. Section 7, item 2, on topics covered by this Annex item 1.

Annex 8 Credit

1. The basic course in the competence area, cf. Section 2, subsection 1, item 8, must include training on: a) The board's responsibility for and tasks regarding credit policy. b) The board's guidelines to the management in the credit area. c) The board's tasks in connection with applications that must be approved by the board. d) The board's annual review of the most significant exposures. e) Impairment rules. f) Supervisory function/reporting to the board in the credit area.
2. After completing the basic course in the competence area, a board member is expected to have achieved learning objective level 2, cf. Section 7, item 2, on topics covered by this Annex item 1, letters a-b and e-f. A board member is expected to have achieved learning objective level 3, cf. Section 7, item 3, on topics covered by this Annex item 1, letters c-d.

Annex 9 Market Risk

1. The basic course in the competence area, cf. Section 2, subsection 1, item 9, must include training on: a) The board's tasks in the area of market risk. b) The board's execution of its supervisory function in the area of market risk. c) The board's tasks regarding requirements for reporting in the area of market risk.
2. After completing the basic course in the competence area, a board member is expected to have achieved learning objective level 2, cf. Section 7, item 2, on topics covered by this Annex item 1.

Annex 10 Capital, NEP and Debt Buffer Requirements

1. The basic course in the competence area, cf. Section 2, subsection 1, item 10, must include training on: a) Capital needs, including risk areas (credit risk, market risk and operational risk), exposure classes within credit risk and calculation methods (IRB and SA methods). b) Pillar I requirement, including the capital base requirement and the Basel I floor. c) Other capital requirements, including the Pillar II requirement and the three buffer requirements. d) Requirements for non-performing liabilities (NEP requirement) for credit institutions. e) Debt buffer for mortgage credit institutions. f) The capital base, including definition of different types of capital, deduction rules and rules in connection with redemptions and buybacks. g) Leverage risk and excessive leverage.
2. After completing the basic course in the competence area, a board member is expected to have achieved learning objective level 1, cf. Section 7, item 1, on all topics covered by this Annex.

Annex 11 Liquidity

1. The basic course in the competence area, cf. Section 2, subsection 1, item 11, must include training on: a) Liquidity requirements. b) Management of liquidity and funding risks on a daily basis, including – requirements for liquidity in the Order on Management and Control of Credit Institutions etc., with focus on the areas for which the board is responsible, and – guidance on risk management in the liquidity area for credit and mortgage credit institutions, including the principle of proportionality. c) Requirements for reporting and calculation and assessment of liquidity position and liquidity risks.
2. After completing the basic course in the competence area, a board member is expected to have achieved learning objective level 2, cf. Section 7, item 2, on topics covered by this Annex item 1.

Annex 12 The Supervisory Diamond for Credit Institutions The Supervisory Diamond and the Special Framework for Mortgage Credit Institutions

1. The basic course in the competence area, cf. Section 2, subsection 1, items 12 and 13, must include training on: a) The interaction between a company's overall strategy/business model and the five landmarks of the Supervisory Diamond. b) Overall description of possible supervisory reactions as a result of exceeding the Supervisory Diamond's threshold values and the company's ongoing disclosure obligation.
2. The basic course in the competence area, cf. Section 2, subsection 1, item 13, must additionally include training on: a) Liquidity risk in the balance sheet principles and refinancing. b) Valuation of real estate. c) The special capital requirements for mortgage credit institutions. Training in letters a-c is expected to be included as part of the training in other competence areas, cf. Section 2, subsection 1, items 8, 10 and 11.
3. After completing the basic course in the competence area, a board member is expected to have achieved learning objective level 2, cf. Section 7, item 2, on topics covered by this Annex item 1, letter a. A board member is expected to have achieved learning objective level 1, cf. Section 7, item 1, on topics covered by this Annex item 1, letter b. A board member in a mortgage credit institution is additionally expected to have achieved learning objective level 2, cf. Section 7, item 2, on topics covered by this Annex item 2. The latter may be achieved in connection with completion of the basic course in other competence areas, cf. Section 2, subsection 1, items 8, 10 and 11.

Annex 13 The Investment Area and the Prudent Person Principle

1. The basic course in the competence area, cf. Section 3, subsection 1, item 8, must include training on: a) The investment area and the prudent person principle. b) The connection between an insurance undertaking's products and investment strategy. c) The board's responsibility for and tasks in connection with establishing policies for the investment area (market, counterparty and credit risks). d) The board's responsibility for and tasks in connection with establishing guidelines in the investment area. e) Asset-liability management and market risk. f) The board's execution of its supervisory function in the investment area. g) Requirements for reporting in the investment area.
2. After completing the basic course in the competence area, a board member is expected to have achieved learning objective level 2, cf. Section 7, item 2, on topics covered by this Annex item 1.

Annex 14 Sound Actuarial Basis and Fair Treatment of Policyholders

1. The basic course in the competence area, cf. Section 3, subsection 1, item 9, must include training on: a) Technical basis and notification system. b) Sound actuarial basis. c) Fair treatment and contribution principle. d) The role of the responsible actuary.
2. After completing the basic course in the competence area, a board member is expected to have achieved learning objective level 1, cf. Section 7, item 1, on topics covered by this Annex item 1, letters a-c. A board member is expected to have achieved learning objective level 2, cf. Section 7, item 2, on topics covered by this Annex item 1, letter d.

Annex 15 Capital Base

1. The basic course in the competence area, cf. Section 3, subsection 1, item 10, must include training on: a) Review of the concepts of capital base, basic capital base and supplementary capital base. b) The criteria for the classification of capital base elements into the three tiers. c) The limitations for the individual tiers in relation to the capital that can be used to cover the solvency capital requirement and the minimum capital requirement, respectively. d) The approval process for the use of supplementary capital base and capital elements not mentioned in the regulation.
2. After completing the basic course in the competence area, a board member is expected to have achieved learning objective level 2, cf. Section 7, item 2, on topics covered by this Annex item 1.