By Huw Jones
LONDON (Reuters) - Top executives at European banks would have to be screened before they take office under the latest batch of industry regulations designed to improve the sector's management in the wake of the financial crisis.
Since the 2007-09 meltdown, watchdogs have been attempting to tighten their grip on banks, insurers and fund managers in order to prevent a repeat of the excessive risk taking which led to a spate of multi-billion dollar taxpayer bailouts.
The latest proposal from the European Union's banking and markets watchdogs is that regulators in member countries check in advance the suitability of key management to improve the quality of staff.
The measure, due to go out for public discussion, goes beyond current rules introduced in 2012, under which national regulators are free to make suitability checks before or after a senior person starts a new job - risking the appointment of someone unsuitable who is then hard to fire.
Draft guidelines on Friday from the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) also set out common criteria for watchdogs to assess the knowledge, skills and experience of financial sector executives, as well as their good repute, honesty and integrity.
Top staff outside the boardroom, such as the heads of internal control functions, would also have to be scrutinized.
A key flashpoint for the sector is likely to be the new requirement for regulators to make all suitability checks in advance.
"The draft guidelines require that an ... assessment by competent authorities is performed and that a decision is taken before the appointment of members of the management body," the draft guidance said, noting other top executives should also be checked.
"An ex-post assessment by competent authorities may result in the need to remove member individuals, which could be difficult to implement."
An assessment should be done three to four months before a person is due to start a new job, the draft guidelines say.
(Editing by David Holmes)