So, again, welcome everybody. Thanks for coming on this weather-wise a bit difficult day to Frankfurt, to our hearing here on the draft ECB guide on fit and proper assessments. And yeah, and also thanks for your patience. Before we start, I just wanted to introduce the panel here with me. Next to me is Giuseppe Siani, Deputy Director General, Microprudential Supervision 4 here in the house. On the far right is Roberto Urrena. He's Deputy Director General Legal Services. And in the middle, Sophia Toscano-Rico, he's the Head of Division in MS3. So without further ado, I'd say we start with a short presentation. And afterwards, we are here for your questions. Thank you very much, Rolf and thank you for coming. I also myself need to apologize for this delay. I was delayed with my flight from Brussels this morning. The flight was delayed by two hours due to bad weather condition. I am aware that also other participants have not been able to reach Frankfurt. I'm also looking for one of the participants who was on my flight. I do not see him. So of course, this is something that we cannot control. And I hope that you will apologize me. But I think that you already said that we can receive questions by email. But we are also open to have maybe bilateral contacts after today in order to help people that have not been able to reach Frankfurt today. OK, so let's start. So like Rolf said, I will start with a presentation. And then we will open the floor with questions. Yes. OK, so first slide. So the objectives of this consultation are twofold. First, we wanted to present and share with you and the public the policy and the practices that we have developed within the SSM over the past two years, maybe more than two years as a matter of fact, and also to collect your feedback. Because of course, it's really a daily experience that we try to improve as we speak. And the aim of the presentation today is needed to explain very briefly what we have done and go through the guide. It goes without saying that the object of the consultation is not the presentation, but the guide itself. So let's go quickly. But maybe I would like to start by some background information. So first question also that I've been asked a couple of times, not more than a couple of times, why do you look at fit and proper? So aren't you created a bureaucratic type of things? For the fit and proper assessment, it's important, but not only for us, but for banks. Because these helps have effective management of banks. Also, help banks to develop and take a balanced decision and also to contribute to strengthen the trust of the wider public in the banking sector as a whole. And for the avoidance of any doubt, the first, let's say, responsible stakeholder is the bank itself. So it's the bank that also increases its reputation by appointing people that are fit and proper for their role. We act rather like a gatekeeper, like we put in a slide. Because our trust is also to ensure that banks have got a stronger, robust governance arrangement. And within these contexts, of course, the fit and proper assessment plays a very important role. We apply, our responsibility applies to all banking groups, significant banking groups, including the subsidiaries. And that's why the number of proposals that we have received is very, very high. So we have received, so far, more than 5,000 proposals for individuals. Because we cover all the banking groups and the subsidiaries, the parent company and subsidiaries. But we will come back to this later. So let's talk about the legal framework again. Why? Because why are we looking at this also from a legal perspective? So the single rulebook provides and explains the suitability requirements regarding the banners of the management bodies of banks. And we conduct the suitability assessment for significant institution, as I said before. Our competence is rooted in the union law, in the relevant national law that transposes the directive, and also in the SSM regulation and some framework regulation. One important key feature of our work is that indeed the union law that is relevant is the directive that has been transposed into national laws. And so our effort is always to try to strike the right balance between the need to ensure consistency across SSM countries and, on the other hand, to comply with the national regime. So we look at how the directive has been transposed into 19 legal different regimes. And we will come back to this again. So this is really a very, very quick description of the legal sources. But then, as I said before, it's also important that we agree on the principles because we indeed, we do not work in a vacuum and we do not need to start from scratch because we always rely on experience also with the 19 NCA's. But it's important that at least we understand the key principles that we have developed together with our colleagues. The first one indeed is we strive for harmonization, maybe for consistency across the 19 countries. It's fair to say that there are differences in the policy and practices that NCA's have developed over time because also they very much depend on the national regime. But also we are not here to develop a tick box approach. So we are fully aware of specificities in some countries, specificities in some banks, and also specificities for some individuals. So we always consider the need to apply the proportionality principle and also we try to have a case-by-case assessment. So this is something that also the supervisory board has told us very clearly many times and we do our best to avoid having a very mechanistic approach. We always try to look at the specific situation at hand. And we also try to ensure that there is a due and fair process. What do I mean with this? So it's not just that we work in an ivory tower and then we come out at the end of the process by saying you are fit, you are not fit. We always, with the team, with NCA, we try to ensure a very open dialogue with the interested stakeholders. We share our concerns during the process so that we remind the people of the information that they need to deliver. So it's a very open dialogue. Nothing happens out of the blue and then we are surprised for the stakeholders. The interaction with DBA is also another question that I'm usually asked. And as I always say in this situation, there is no dichotomy between DBA and NSM. We are part of DBA. We work with them, we help them and they help us. So DBA has developed the guidelines together with us because we have tried to help. DBA looks at how to harmonize the implementation of the European law. We need to go a little bit beyond because we are the supervisors. So we need to be maybe more detailed. We need to explain also the process that we need to follow. We need also to explain the type of information that we need. But it's really an iterative process like we put in the chart, right? Because also during our experience, concrete experience, we have raised some concrete issues that maybe DBA didn't think of or maybe they didn't consider material. And then the other way around, we didn't think of some possible explanation that we could consider because DBA raised that. So it's really an iterative process and there is no difference in terms of objective. Also in terms of process, if I may, we have really tried to develop this parallel consultation process in order to give the public the opportunity to have the broad and complete pictures of the two work streams so that we would not have DBA or DSM closing the process before the other one so that we can interact also during the consultation and also during the review of the comments. And also we waited for DBA to set up on the hearing last week, I guess. So that's why we have the hearing today.  So we work together on a daily basis. Now, the objective of the guide, as I said at the beginning, let's go maybe more in detail. Two main objectives. First, to ensure consistency by implement and assess the criteria including in the law in a consistent way. Sorry for this repetition. And second, also to increase the transparency of what we do. Also in terms of process, in terms of information that we expect. So we believe that by being even more transparent that this will help also the banks and individuals to get ready to our request and maybe also to adjust their choice and their self-assessment of compliance with the criteria. The guide includes four main parts. The first one describes the legal framework. The second one goes in more detailed on the five assessment criteria. The third one describes the assessment procedure. And the fourth one, the possible outcome. It goes without saying that the first two parts are not subject to consultation because we cannot change the legal framework. Let's go with the first objective, the aim of romanization. So you see that we have these five criteria. And then we have tried really to clarify beyond what DBA has done, what we mean when we assess those criteria. For example, for the aspect to assess pending legal proceedings, we have identified some criteria that also look at the different phases, the different stage of the proceedings of the individual involved, if any. The degree of the involvement of that individual when those facts have happened in the past. So it's again, we try really to go in detail when we have a situation like that. On the counting of directorship for time commitment, we have also clarified how we count them. There are also different practices within the SSM we try to find a compromise on this. The types of conflict of interest, we identified four different types of conflict of interest, personal, professional, financial, political. So, and we have also tried to identify when a conflict of interest is material and the possible mitigating measure. As you see, there is no automatic assessment. We always try to have a two-step type of assessment. This is really how we implement the proportionality in proportionality principle. The case by case assessment is also something that helps me to say that we do not only look at people with experience in the financial sector per se. So we have set some criteria for us, minimum criteria that we consider as a proxy for having experience, for complying with experience criteria. But this does not mean that we do not properly consider experience, professional experience and technical expertise in non-financial sectors. And we also have a legal look that we can use which is the collective suitability of the board. We have concrete cases where we have together, we have proposals to advisory board, a positive decision, even though some individuals didn't have a lot of experience in the financial sector, maybe they had experience in IT sector. And this is very important because not only because the expertise in IT sector is crucial also for banks, but also it's important to assure that there is a collective suitability of the board, that there is a diversified experience so that the board can indeed act as a pool of experience and expertise that can help. The banks take the most effective division. The second objective of the guide is the transparency, as I said, as I said before. Again, we try to clarify a lot. Again, on substance, I have already mentioned this presumption of experience. There are some criteria, for example, the minimum number of years of experience for the CEO, for the executive director that we consider automatically a good sign. But because this is really just to speed up the process. So if we consider there is a minimum number of years spent in the financial sector, it's good. But if they do not comply with this minimum number of years, that we go ahead, we go beyond that, so we do not say just no, that's not fit. We also clarify the information that is necessary for this. We clarify when additional information is required. And also on process, again, let me say a few things, also on the interviews. As I said at the beginning, we have been lucky enough as DSSM also other topics that we do not start from scratch. So we are a system with 19 NCA's. And we benefit a lot from the NCA's work, experience, expertise. Sometimes for us, it's very easy to identify the best practice across DSSM on many different topics. In this case, we also have the tool of the interview. So we can use the interviews. But maybe one important clarification worth making is that for us, the interview is not the tool to take a final decision. Interviews are very helpful to complement the type of information, to check a few specific features of the individual, to update the information that we have. And when you have the bilateral contact, you can understand a lot of things. It's not a type of interview that some people ever before getting the job, just to be clear. For us, it's one of the tools that we have at our disposal. We also have, we give a lot of consideration to the fair process, as I said. Not only bilateral contact, a very transparent approach, but also we give the people the right to be heard, the legal right to be heard in case of food. So we follow the legal provisions. On the assessment procedure, I think that we are almost close to the end. We, and I'm sure that most of you are familiar with how we have organized ourselves. So our point of contact are against the AIDS, as a matter of fact. But we work together with them from day one on when we receive the notification. But the credit institution is always informed at the very least stage of any concern that the NCA and us have got. So the credit institution has the opportunity to reconsider the appointment, or maybe to complement the type of information. But still, even though it's not possible to tackle our concern, it's not a black or white decision, as we put here. So the decision can be positive. It can be positive with supervisory measures that still can be a recommendation or a condition, and then can be negative. But what is important for us is that we always ask the supervisory board to take a decision, always. Even though there are some countries within DSSM where a final decision is not always needed. And this might have also some knock-on effect in the process and also the length of the process. So there are some countries where there is no explicit legal deadline. But we ask the supervisory board and the governing council to take always a legal decision for transparency reason, for consistency reason, also because it helps us a lot to have always a comprehensive overview of all the appointments that have appointment or reappointments that have taken place in 19 countries. So maybe a few words just to conclude. You know that the consultation ends next week. We expect to publish the final guide by the end of the second quarter. It very much depends on how many comments we will receive, for sure. And then even though this has been a quite long journey, it's not just really the end of the end. I always say it's the end of the beginning, in sense that we plan to review this document based on experience, based also on any other interesting and material input that we can get by working on this file. So I think that it's, so maybe I've been a little bit longer than expected, but before I open. Thank you very much. Good. So we are now open to your questions. I'd say we do it a bit like the president's press conference. Please indicate if you have a question, state your name and affiliation. We take two questions each, and if you have more questions, we do another round so that everybody gets a fair chance to ask questions. And we have microphones in the room. So please wait until you have one in your hand so that everybody understands your question. Thank you very much. I'm Orwellin. I'm from the RAR Bank. They are working with the RAR Bank. They are in the board office and be responsible for the supervisory board, executive board members, and their suitability. I would like to raise a point and lead your attention to one thing. I don't really know if it is a question or maybe I only want to drop, in my opinion, what the problem is. You said that you consider, in particular, the experience of members when they, when you assess the suitability of them. And in this case, you wrote it on page eight of the presentation, case-by-case assessment. You also assess diversity as an important aspect of factors. Diversity, in general, this is a problem because it's not related to the question of qualifications. But also, we see that the increasing point is that the authorities want us to have diversity in professional backgrounds. By regarding the auditor directive, there is written that all members of the audit committee has to have experience out from the financial sector, the sector where they are working, where the supervised entity is in. And in Germany, we have transposed this directive law for the audit committee members and even for the whole supervisory board, which means that the majority of the members has to come from the financial sector if you are a bank. This narrows the possibility for diversity in professional backgrounds, I guess. So I will drop this point. This is very complicated to, even if you remind that in Germany, we have the representation of employees, which maybe if they are coming from subsidiaries, not from institutions. And to then have the majority of the members experienced gaining their experience from the financial sector, this could lead to the situation where every representative of the shareholders in the supervisory board has to come from the financial sector. This is a point I didn't read in one of the papers and I want to raise sometimes. And I would be glad to hear your opinion on this. Thank you for your question, because it helps us to go now more concrete terms on the situation of one specific country. I will start, and then, of course, Roberto and Sofia can compliment. This is our policy stance from a supervisory perspective. However, first thing that I should have maybe stressed further, we cannot develop any division which is against the national law. So of course, we develop stances that will try to ensure consistency, but there is always a limit of national law. Indeed, when we have a national law that requires the audit committed to be formed in one specific way, then we have a very specific provisions that requires that the representative of the employees to sit in a specific board. Of course, we need and we do consider that, so which does not mean that maybe we would like to kill completely the possibility of oil in some diversity, but subject to the legal constraints that we find in each and every different situation. That's why I said during my presentation, one of our key challenge is indeed to square the circle of ensuring consistency and then apply 19 different legal regime. And you know that also the FSM at the highest level has asked also the European Commission to consider potential changes to the union law to help us to have maybe less fragmented national regimes on some specific topics, including in particular, but not limited to the fit and proper cases. But Roberto and Sofia, you can first compliment. Hello, everybody. Odile Renier, I'm a big advisor at Quedimituel, which is a French cooperative group. I have three questions. First one is, at the level of our central body, I'd like to know if after the entry into force of the EBA guidelines and your guide, could we continue to assess the suitability of the member of our board? Could we still do an expost assessment? And could the supervisor still do an expost assessment? Because our appointees are proposed by regional groups and nominated by our general assembly. This was my first question. Second question, why do you have introduced the notion of perceived the conflict of interest in your draft guide? And because we feel that it's not the, there's no room for mere impression in governance arrangements. And the last question, it's about, do you consider that the power granted to the supervisor to question the facts and the lining proceeding, even if the outcome is in favor of the appointee, is in line with the West Jewry Dica principle, which is common in all member states? Okay, I will start. On the first point on this expost-exante assessment, I think that this is quite, and again, it's quite an important point, also that affects our pending procedures. Again, we follow the national law on this. So if there is an expost assessment allowed on the national law, we will follow that. But also from, let me say from a supervisory perspective, having an ex-ante or expost assessment has some material impact also on how we work, unfortunately. I said that we have received more than 5,000 proposal and that we have the supervisory board has approved more than 4,300. That we have some backlogs, of course. Even though, again, let me stress that in 98% of the cases where we have a legal deadline, we are able to comply with that. Which means indeed that if you have a national law that helps us to keep up the incentive for banks and individuals to provide us with information, the process will be even easier. Because if I look at the backlogs that we have, might be a coincidence, a quite majority of the backlogs are present in those countries where we have an expost assessment. Because once we have been appointed, maybe there is not such an incentive to provide all the information. So to answer your question, indeed, I think that we are not going to change the law, at least as the same. So if you have an ex-ante or expost, we will follow that. On your second point of perceived conflict of interest, again, perceived conflict of interest for us helps to avoid some mechanistic interpretation. As I said before, we have identified different types of conflict of interest. But we would not say that each and every conflict of interest is a trigger for a negative assessment. We need to have, first, the assessment of the potential conflict of interest. And then even though there is there, then we consider possible mitigating measure. On your last point, again, we cannot change those key principles that are rooted in many countries. But we can have our view. We can have a supervisory view of that. That, of course, again, finds its limit in the national law. But I would really like to, Roberto and Sofia, to compare them. On the first two questions, I don't have much to add. DBA consultation paper is under consultation. This is one of the issues that is raised in the new guidelines that are under consultation. And then there will be the complying or explain process for member states to decide what to do. We will, as Giuseppe said, need to follow what is in the national legal framework. But from our side, in fact, we see these kind of correlations. We also see that it would be much difficult, much more difficult to remove someone from the board that is already there than to, together with the bank, to consider that that is not the right person to be in the board. So that's also one of the arguments that we consider is in favor of ex ante. But we will apply what is in the national law. On the last question, on the last item, we need to look at the facts. And the facts that are considered to be proved by the court are the facts that we look at when we already have a decision. Sometimes the final decision may be linked more to a procedural, formal issue. And we still need to look at the underlying facts. That's why we have it in here, because even the reputation, it could even have a reputational risk for the bank. And if it's a very high reputational risk for the bank, then the supervisor needs to take it into account. I don't know if you want to add something. May I? Grégoire Kruse from the Crédéricale Group in France. I'd like to get back to the notion of material conflicts of interest and to the independence of mine. I understand from the EBA guidelines that they distinguish on the first hand the conflicts of interest and the dependence of mine on the other hand. Whereas in your draft guide, you combine both notions. In addition to that, there is, I would say the statutory independence of mines criteria which has been added in the EBA guidelines. And to be honest, if you take the three notions they overlap partly. So that from my point of view, this is a source of confusion at this stage which needs to be clarified. What is your point of view on this matter? Even this has already been raised I leave the floor directly to Sophia, given that she has already replied to this. Thank you Giuseppe. Well, we totally agree with you that the concepts need to be clarified and clear. So if there will be a need to clarify even to make it more in line with what will be in the EBA guidelines, we will for sure do it. And in our view, the independence of mine is a criteria, it's a CRD4 criteria, and it's linked to the way the board member acts in his function. And he needs to protect always the best interest of the institution. And that's how we can assess in practice if he's acting with independence of mind or not. But then there are some situations that in our view may raise some potential or current conflicts of interest and that are situations that should be first disclosed to the supervised entity and also to the supervisor and should be taken into account to ensure that the board member is always in a position to act in the best interest of the institution. And those are the situations that we tried some examples to identify some examples in the guide. What we would expect is the supervised entity to immediately tell us how they will ensure that this potential conflict will in any way hamper the decision making process in the institution. And we give also some criteria, some guidance on how to assess the materiality of these potential conflicts. But this was a question already raised in the EBA hearing. So I do think that there might be a room for clarification, maybe for changing some wording and for some alignment. So that's something that we are open to do. It's working, yes. Federico Cornelli, head of our advocacy of the Italian Banking Association, I represent all the Italian banks. We really welcome your efforts of our monetization. We even ask as Italian Banking Association to the European Commission to provide an effort of convergence of civil and criminal laws in order to help us to have a, let's say, playing field. And a few technical questions. The first one is related to principle one, which is the primary responsibility of the credit institution. Normally it's the general assembly that nominates the board members. We might have some examples that two lists, two different shareholders are fighting for taking the board member. So the bank itself cannot make an excellent evaluation in advance. They just can do it exposed after they know which shareholders has won. So this is a limitation which I have to address to yourself for the right calibration of the rule. But the bank itself cannot be always responsible for an excellent, let's say, check. And second point is on principle four, proportionality. We have seen and we thank the principle, but we would like to have some practical limit on proportionality, especially for smaller bank or let's say less complex bank, less risky bank. Then third one on experience. We understand even from your words that the experience is an overall principle for the entire board, not for every single board member so that we might have some board members that come from the banking sector, but others that do not come. They can be IT as Mr. Ciannis said or from agricultural or others. But is the board as a whole that has the point? And then we have a very big problem for right calibration in principle five, reputation. You already said very good comments, but we have to stress that in our Costituzione, in the Italian Constitution Law, I believe always in other European Grundgesetz or other constitutions, there is a principle which is unless the trial and the court has finished this job, you are not guilty. So this is foreseen under article seven of the Italian Constitution, but even under article six of the European Convention on Human Rights. So there is a conflict which I have to stress and to have the right calibration of the rules, otherwise we could have a fighting between your guidelines and the principles. And for example, in Italy, we have a criminal law regarding tax osura when you give money out at a very high tax rate, which almost automatically provides some problems. So this would create a relevant problem in our case. And this again is a problem. Second is conflict of interest. We do not understand, you want, let's say, a separation between the shareholders and the board members, but in some case, the bank belong to the family. So it's quite natural that the shareholder which owns the bank or whichever relevant ownership do nominate himself or his son, his brother, into the board. And we would like to keep it out of the question and to, because this is not a conflict of interest, this is a convergence of interest, of course. Thank you. Again, I will start and then I will leave the floor to Sofia and Roberto. We know the specificities of the Italian law on many respects we see when we receive the proposal. On the AGM point taken, but it's also fair to say that our work is really to help share what our expectations are. So it's also fair to say that the banks can also, I'm not saying influence, but at least can help the different groups of shareholder to choose the most appropriate candidates based on the understands that the SSM has developed. So this really part of our overall objective of being so transparent on what we do. On the proportion for small banks, I can tell you that we have discussed this until we came here. It's really on the top of our mind. We positively assess individuals based on the nature of the bank, of the type of business model, of the size of, we really look at the details. Also, in particular, cooperatives. We have a representative of the corporate sector. We do acknowledge the need to be proportional. And so we propose a positive decision in case that we would not have done for larger banks, I can tell you. So I think that it's difficult to give you concrete examples because it's really, we try not to have said a checklist an automatic checklist. We really want to go together with the JST. We want to understand the situation of the bank, the situation of the person. How that person has behaved so far? Because of course, if one individual has behaved properly despite the high number of directorship, people might argue that there is no need to change. Even though when you see 25 search directorship, maybe you might argue that it might need to have some time buffer in case of crisis at risk. But we properly consider that. So I can tell you that even Daniel Nui has been and the board are very, very clear on the need to ensure a proportionality. On the experience, maybe I was not clear, I think that we look at both. We look at the experience requirement for each individual and then we look also at the collective suitability. When we look at the experience requirement for the individuals, we look at the minimum automatic criteria to speed up the process, but we can also be more flexible and we look at both. On the reputation, I think that I speak under Roberto's control, then I will tell him, I hope that he will compliment, but let me just say one thing. Our role is not to declare one person guilty or not guilty. So we look at the fit and propriety of a person from a supervisory perspective. So we might develop our view, so which is a different concept from declaring a person guilty or not guilty. On the conflict of interest, again, we also have those cases, of course, that if we have a majority she-hold as a one-for-point someone, you cannot avoid that. But I would not consider this that for granted because we want to see how the overall board work. But Robert, first. Thank you. For this question of reputation, of course, as Yusef said, it is not our task to find a person guilty or not guilty. It is for the criminal courts to decide, of course, but the issue that the proceedings could be ongoing does not preclude us from taking facts from the proceedings that could be of relevance for the assessment of the suitability of the candidate. That means that, for instance, there could be facts under these proceedings that could be uncontroversial, for instance, and could be even accepted for the candidates. And then, of course, we cannot be blind to these facts and also we have to take into account the mere existence of the proceedings and the impact of these proceedings for the reputation of the bank, for the reputation of the candidate in the first place and also the impact for the bank. So, in the end, it's not that we have to declare the person guilty or not guilty, but we cannot be blind to the existence of the proceedings and the potential impact of the proceedings on the bank in the end. Sorry, I have a problem. If the bank is listed and if a rumor spread that a person which is under trial is seen by the ECB as not proper, it means that the share and the bond will be beaten with minus 10, minus 20% on the stock market. So, this is a risk we cannot share and we must have clarity. The constitution, almost all European constitution says if a person is not guilty, it's not guilty until the end of the criminal procedures. So, we cannot accept to have any ideas of someone else taking into account different views. We must have clarity and the market must have clarity on this issue. Should a rumor comes out, this would create a relevant problem on bond and stock prices. I want to clarify one issue. My answer was general one, referred to the 19 jurisdictions, but of course, I forgot to reiterate that to mention again that we are bound by national law in first place. So, in the specific case of Italy, of course, we know that the transposition of these CRD4 provisions in Italy requires that the core proceedings are final to be considered in the fit and proper process. So, for the case of Italy in particular, we have to wait for the final ruling of the cart before taking this into account because this is a national constraint that we have, of course, to apply. But as a general rule and as the EVA guidance clearly states, we cannot be blind to the existence of the proceedings. But of course, the potential outcome of these proceedings will depend very much on the national law. So if national law, as it is the case for Italy, doesn't allow us to consider this until the final ruling is there, of course, we have to comply with national law in first place. But this is not the case for all the 19 jurisdictions. May I say that one of, just as a general comment, the objective of the consultation is get feedback. And then, of course, we will look at any unintended issue. And so, just the point is taken and we will go back and we'll review that together with our colleagues. So that's why we consult. So we have a few questions lined up. So over there. Olivier, boom. Fédération nationale des cases d'épargne, Paris. I have a question about the independence of shareholder. How can they be independent with half share? Shares. In fact, they have a business, Russian ships. It's two questions. I'm not going to the first one. Can you switch on the microphone please again? Yes. For the independence of shareholder. How can they be independent where they have shares? It's the first question. And reflection, in fact, they have a business, Russian ship or no? Well, the question of shareholder being considered independent or not is something that is not in our fit and proper guide. I learned from practice that it depends, again, on national law. In some national laws, it's clearly one of the criteria that would make the board member considered as not independent, but in other member states that's not the case. But this is something that we are not covering in our guide. What we say in our guide is that we will, if there are formal independence criteria in national law that need to be assessed when a board member is appointed, we need to look at that. As you know, in some member states, there are rules like the majority of the supervisory board members need to be independent. And in some NCA's, even what is considered to be independent is in the national law, the criteria. And the criteria vary from member state to member state. So we are not up to now touching this issue in our guide. What we say is we include this shareholding relationship in the overall naming of the potential conflict of interests. And what we say is that this information needs to be disclosed. So the supervisor needs to know which members of the board are representing the shareholders. But we also state very clearly that shareholders in the boards are acceptable because it's clear for us that the line, if it's a majority shareholder, that there should be some alignment. We would still like to see people that are not shareholder representatives in that board. But we are not saying that if you are a shareholder representative, then you cannot be in the board. That's clear message.  That works. Everybody gets a fair chance. Let's see where's in front. Jens Riel Egon Sender from a maybe practical perspective on appointments. Of course, the quality of the assessment is crucial. But so is the process and the speed of it. And I understood from your presentation that there are of course many factors that play a role in making sure that a decision can be found in a timely manner. You mentioned the issue of receiving the information you need from the bank or from the appointee. So their responsiveness, there may be an issue of internal resources. But then there's maybe also a question of the simple process you set up. And if I look at your process that you line out here, it's clear that you want to have the NCAAs as the entry point. And there may be even national law requirements that it has to be this way. But I'm just wondering again on a very practical perspective, wouldn't it make sense to have a parallel application to the NCAA and to you which could surely take out a few weeks of forwarding the documents from the NCAA to you? We already have a parallel process if any. Maybe I can be more detailed. By the time that the NCAAs receive the proposal, they immediately notify to us. And then we start the interaction between JSTs here in Frankfurt, the competent JST sub-coordinator, the horizontal function here in Frankfurt, the horizontal function in the NCAAs. So as you said, we also, for other situations, we always have the NCAA as a single point of contact because there are also some national specificities. But I can assure you that we are really in daily contact from day one with the NCAAs. Also, and now at the beginning I knowledge that there was maybe some delay also because the machine had to be tested. But we have introduced a lot of improvement and standardization in the process. As I said, 98% of the proposal in those countries with legal deadlines comply with the legal deadline. We have some backlogs and sometimes in a two-third of the cases we still need to have the information that we have asked the banks slash the individuals. So maybe in many cases the ball is not in our camp. So you might argue that we should enforce these deliverables more strongly, which is an option that we are considering. Indeed, we have never considered a function if an individual does not deliver the requested information in two months or three months, which is something that may now, after almost three years, we should consider. But there are a lot of factors. Overall, we believe that by the time that we have the information here, it would not take more than seven, eight weeks until we finalize everything. But you should also consider some minimum number of working days in order to have the approval of the supervisory board and of the non-objection by the governing counts. On this web, I think that we can also say something about delegation, can we say something about that? So I think that also on this, we plan, we, so the governing council, the supervisory board, are considering the possibility of delegating some decisions on a fit and proper, which I would say is quite a key achievement also from a legal perspective. And then this work is also part of the delegation framework. That's why we really want to finalize this work, because then it would be possible also to disclose the criteria on the basis of which the delegation can be exercised. And this would shorten the process a little bit further. So we are working really every day to try to simplify it. Now we have also developed a standardized questionnaire so that the individuals know in advance what the formations are. Now the work with the team, a lot of our colleagues in the NCAAs are looking at this now on the internet, because we are really working together with our network of experts in the NCAAs. So I wouldn't say that now one of the key issues is the delay by the NCAAs. On the contrary, I think that with the NCAAs we work very, very well. I think that we should maybe ensure that the proper incentives to be in time are there. But of course, we keep on looking at internally on how we can improve that further. Maybe just to also give a bit more information in detail on the process. We really try to have a risk-based approach in the assessment process. So when we identify that cases are without issues, really plain vanilla cases, we put them through very quickly. As Giuseppe said, the NCAAs, there is a specific workflow in place, IT workflow. So as soon as the NCAAs receive the notifications, we are automatically almost also notified informed. And the first thing that we try to ensure with the JSTs and NCAAs is this plain vanilla case where we wouldn't find issues or is it a case that we need to go deeper in the assessment. And the assessing time varies significantly if it's one case or the other. So when we give the average, these two of course are taken into account, but there are cases where we need an interview. There are some cases where we need a second interview, a specific interview. So there are cases that really take longer. In our risk-based approach, that also depends on the type of entity. Is it a top entity of a significant group where if it's for a CEO or chairman position, we would always require an interview unless it is someone that is already very well-known by the supervisor. I don't know if it's the vice chairman that becomes chairman, maybe we don't need that interview. But if it's someone new coming to the bank, we would do it. So we are really trying to, not to have a ticking box exercise, but differentiating and having a risk-based approach process. So we have quite a few questions lined up. So there was one in the back, that's gone. So then we have some question over there. Hello, Mariano Lazarte from KPMG Spain. My question is very related with what Mr. Scano just clarified. It's about the interviews, about when the interviews are to be celebrated. The guideline specifies that it's only mandatory in the case of the CEO and of the president, and for the rest will be in those case where clarifications are needed. Shall we understand that in the case where thresholds exist, if the thresholds are not accomplished and the detail assessment is started, it will be automatically, there will be automatically won the interview or this is not automatic in the second cases. There are some countries where these interviews are not a tradition, and are you considering to be intensive in these interviews or you pretend just to minimize them only for those cases where the threshold is not reached or where there is specific relevant issues. Thank you. Thank you. Yes, well, we try to distinguish between mandatory and what we call internally discretionary interviews. So mandatory would be for CEO and chairman positions in the top institutions of significant groups or standalone banks, material subsidiaries of significant groups. And the others would be deemed necessary on a case by case basis. So there is no automatism between not fulfilling a threshold and then becoming immediately the need for an interview. But what we do if a member does not meet that threshold is that we look further into what is the input that that member brings to the board, what is the experience, what are there gaps that were identified before in the board that is going now to cover. So we go into a bit more detail. We discuss a lot with the JSTs on how is the governance of that bank. We go into more detail. Sometimes from the written documentation that we receive it's already easy to see what is the added value, what is the contribution, that there are no issues here. Sometimes also we see, well, there is probably some need for some training and then we discuss that with the bank and there is no need for an interview. Interviews are really too, when we have still some doubts, when we need some clarifications and independently of the country. So we do know that there are some countries that have not so much tradition on this but we are ensuring that all NCA's and also all JSTs, members that will be participating in interviews are having adequate training to be able to sit in the panels. So we really want to make it, we consider it to be a very good practice for these cases and we are really trying to ensure that we have the capacity and the ability to be able to conduct these interviews properly. Let me stress what Sophia said about the involvement of all the stakeholders also on our side. We always, when we decide to conduct interviews we always have a representative from the NCA either the JST or the horizontal function and also the same for us. And also, if I can give you my personal experiences they are extremely helpful. When we have doubt and also not only for us but I think also for the individual. I think that my personal experience is that also the individuals are pleased also to clarify a few points, to share their views also to talk about the strengths and weaknesses of the bank maybe and also I think that the experience so far has been very, very positive but we are knowledge that is really something very new for some countries but still we want to force the best practice developed in a few countries within the SM to other countries because the experience is very positive for both sides but we try to be very inclusive also on the SM side. We always want to have the NCA perspective during the interview as well. Well, we have many questions in the minds. I understand that the form of approval files will be substantially changed in its content and harmonized as from the publication of the EBA guidelines. Can you tell us more about the changes expected in its content? Sorry, why do you consider that the file will be substantially changed? Well, we understood from our NCA that there are going to be some changes in relation to the time commitment and to the collective suitability of the board. That's my understanding but I don't know anything else. I just want to clarify because I didn't understand the beginning of the question. You asked about the forms. The form of the standard form of approval files for I would say the directors and also the top management. Yes, well as Giuseppe already mentioned, we developed together with the NCA's what we call the SSM harmonized questionnaire. NCA's will have now some time to adapt their own forms to this questionnaire. Our main purpose, well, the idea is content over form. So what we really want to ensure is that we receive all the information that we need. If the NCA's already have that requests in their own forms, they don't need to change it just to be exactly in the same wording. So it's content over form but we need to ensure that from all member states, from all banks in all member states, we receive the same bulk of minimum information. So that might be the case that in France there will be the need for some changes in the form. But only if the substance is different. And again, it's another example of how we could benefit from the best practices across the 19 countries, right? So we look at different practices we developed together with our colleagues this standardized questionnaire which we have already tested also internally. And it's now it's already published and it's also developed to people also to understand what type of information is needed. So, but you have a follow-up, right? I had two additional remarks in relation to the Exante assessment procedure. You were saying that, well, that the files themselves are dealt with within the deadlines. I would say that this depends on the time periods in each jurisdiction. For instance, in Germany, I mean, the national supervisor can get back once to the credit institution by asking further information on a specific file. Whereas in France, I mean, they have a three months period. And to be honest, I mean, if they are overwhelmed with work, at the end of such period, they can relaunch another additional time period of three months just to make sure that they're gonna make it on time. So that's with my first remark. The second remark would refer to the Exante assessment as well. And with the ExPost, I would say system, you just send one approval file for a board member just elected within a period of 15 days after its election. With the Exante assessment, and given the sovereign rights of the general assembly, you would need to send three approval files. Why? You would need to anticipate a refusal of approval by the, I would say, the supervisors. That's the first thing. You would need to keep, I would say, two applicants on board just to make sure that the general assembly at the end would have the choice between two applicants to maintain the sovereign rights given by corporate national laws to the general assembly on this subject matter. First, I would like to also say that this question on Exante ExPost assessments, it's not driven by our guide. It's a discussion that's, and I think a very useful discussion, but it's driven by the EBA guidelines and the consultation. I can give you my personal view, but we favor the Exante. But the Exante process could be, and we have different examples in different member states. In some cases, the Exante means that the member cannot be appointed before assessment, but in some cases means that the member cannot start his position before assessment, which can make some difference, no? So this is, I think, a very useful discussion that is being taken, and let's see what will be the conclusions, but I would like to stress this, that the second thing is that for significant institutions, there is also a very important role for the nomination committee. And we never discussed that, or I don't see this element coming in the discussions. The nomination committee needs to conduct some assessments even before the general assembly meeting. So what is exactly the role of these nomination committee that should ensure that the candidates are compliant with the suitability requirements? So I think this would be also something that needs to be taken into account. On the timelines, well, I see your point, but from an ECB perspective, we really don't favor that approach that we just ask questions to delay, to have more time to assess. So that's something that we really don't favor. We don't see that much happening in practice. We see that in some member states, there is no tradition to have a date when the additional requests are asked to the entities. Sometimes the letter from the supervisors don't have a date until when information should be delivered. So that's something that we are also trying to ensure that that always happens, even to also protect the institution that these kind of practices are not used. But that's not what we see, but I understand you're concerned. I mean, one question. You said that if there is an ex post, there is only one package because then, because you take it for granted that everybody will be approved. Right? And this is also part of the issue, because when it's exposed, in case there are listed banks, it will be quite disruptive if indeed someone that has been appointed by the AGM does not comply with the rule. And that's why we want to be absolutely transparent from an ex-ante. So from our perspective, at least again, from a personal perspective, ex-ante could be a better process. With some shortcomings, I do not, but once it's an ex post, people have been appointed notified also to the public, then it's very difficult. You see also you assumed, and you took for granted, everybody would be approved. But still, let's not forget that we do not have a black and white situation. So you can have a condition, recommendation, and that's what we do. So it's, I'd not like to consider this assessment of black and white type of things. We are not here to punish people. So we are really trying to increase in the end the reputation and the governance of the banks, right? We are not here to have fun because we want to reject appointees. So we really try to strike the right balance between all these different drivers underpinning our assessment. We are talking about between 40 and 70 proposals per week, just to give you an idea of what we are talking about. I already have the microphone. I want to ask three questions and I apologize in advance because I think I need about one or two minutes to explain my thoughts. First question is shortly. A short, it's only a comment on what you say about the ex-under process. You say, yeah, there's a reputation risk if your assessment is not suitable. But I want to raise, this is our risk. And we would like to stay in charge to decide if we would take the risk or not to take the risk. If there is somebody coming originally from the banking sector, there is a very less risk but maybe it's very complicated. If you assume that you need six or maybe more months, the assessment can take time. Maybe this candidate say, okay, no, six months is too long. I don't want to wait so long. So only I think this is our problem and especially the problem of the nomination committee. So the second question, a little bit longer. You see the third question will be very long. You say one of the triggers for the fit and proper assessment is if, for example, an ordinary member of the risk committee, for example, will become the chairperson. And we thought about why? Because if you have a look at the EBA guidelines on the eternal governance, there are only suitable requirements for all members. All members have to have to have knowledge, this word expertise, which is not known everywhere else and experience about risk management and risk issues, so in general. And we thought about, okay, what does the chairperson of the risk committee has to need more than any other ordinary member because all of them have to decide on risk issues and they vote equally. So the weight of the vote is equally. We understood this, we understand this approach in the case of the chairperson of the audit committee chairperson because there are law requirements, especially regarding this person in evil when the chairperson of the whole supervisor board because it has to have a very special relationship to the chairperson or the CEO or something and has to evaluate every attack situation shortly. And the third question is a little bit, it's a little bit complex because this is in regard of this point, what the colleague here in front of me has said. We should submit a short description how the individual member fits on the needs of the collective suitability, which, so a prerequisite of this is to develop and target image what collective suitability needs you have. So we have to say, okay, this are our requirements to be collectively suitability, suitable. And we have the problem that we don't really know what is the gap between the minimum requirements for each individual member and the collective suitability because, and it's even very, this is very coming from the German company law because there is no difference between individual and collective suitability. What is something, and maybe you can give us an example where you say, okay, this is a competence or knowledge or experience or something which is not required from every member, which means that it's not necessary to decide on typically supervisory board issues but which maybe have only one or two persons. Maybe your example is legal competence, but I have to say, in our opinion, we say that the digital competence is something every member has to possess because you need digital competence to decide on IT risks, risks which everybody, which every each member has to do and even to assess the new challenges of digital transformation. But this is not something only one or two members can have, every member has to possess this special competence. So, thank you. Let me follow up on your, particularly your first point. As I said, indeed, the reputation risk should be taken by the bank because that's the primary responsible for the decision. But also we are supervisors and try also to develop our views. But again, you reiterated your concerns on the length of the process, right? And again, Germany is one of those countries where there is no legal deadline. And at the beginning, indeed, we had some backlogs for German individuals. And I think that we had an excellent cooperation exchange of views with the NCA's. And then now I have really a very, I have very detailed statistics that I have in front of me every week that the team prepared. And I can tell you that as of today, we have indeed a very few cases related to German individuals with a period that is outstanding for more than six months. Significantly lower than it was the case six months ago. So I cannot exclude that at the beginning, but also for other countries, the period might have looked longer than before. Also because all NCA is not only German. And NCA had to adapt to the new framework. We also had to develop our own process. And as I said, we have simplified that. But I don't think that one of the drivers for choosing between ex-ante and ex-posted, or come on, if we have ex-ante, then we need to wait for nine months in the ECB. I don't think that this would be a proper argument. Also because again, if we look into the details, then in many cases, the delay was also due to the further individuals was not so fast in delivering the information that we asked for. Because they also took for granted that they already have been appointed. So I say that there are different factors. I think that we acknowledge that at the beginning we had to improve. We have been always open also in the annual report. We have said that. So but I think that now we have managed to reduce these cases together with the NCA, together with the banks, because of course also the banks now understand us and the NCA is much better. I think that the ex-ante, the division between ex-ante and ex-posted depends on a broader set of drivers, including the legal one. Of course we cannot change it. But I think that overall my personal view would be indeed to have an ex-ante, but it's quite not very material in some sense. We need to follow what's already there. We want to go with more concrete examples on the other two questions, given that rightly so we would like to have some concrete feedback on the trigger, so for ordinary member, and also to the collective ability so that you don't listen to the same boys. On your second question, I totally understand coming from a German legal background, your views, because in fact all the board is responsible for the decisions, is a collective decision. But when we assess the suitability, the fitness of a board member, we need to take into account what is the role. So we need to take into account all things, even to be able to apply proportionality principle. We need to be able to take into account the nature, scale, complexity of the institution, of the business model, but we need to take into account the role, the specific role of the person. And if someone is being appointed as a supervisory board member, that will be the chair of one of the committees, namely the risk committee, we would expect that person to have experience on risk management, for instance, which doesn't need to be the case of all the other board members, even if in the end the decision of the supervisory board is a collective one. But if you want to think about also getting some diversity in the board, it will be very difficult to require the same level of risk management expertise for all supervisory board members. So we try to assess, also taking into account the specific role that the board member will perform in the board. And on your last... Thank you for your answer, but sorry, I have to clarify my question. My question was if one was already member of a risk committee and then becomes chair, not if he is an ordinary member of the whole supervisory board and then also become a member of the risk committee or even the chairperson of that. Only if he already is within this committee. Thank you for clarifying. It's in fact a different question. We, as a general rule, when there are changes in role, so again we are under the need to apply national law, in some member states, if there is a change in role, there is the need to reassess. In other national legal frameworks, that's not the case. When that is not the case, what we look at is, is the new role requiring additional expertise? If yes, so if it's what we consider a significant change, so it would be a new fact, it would be considered as a new fact and then we would also reassess. If we don't see that the new position would require different skills or different experience, relevant experience, then we don't even start a new assessment. Is this clear? In some member states, the mere fact that you change the role requires a reassessment and then we need to do it because according to national law, that requires a decision in the end. When that's not the case, we look at the content and not just formally. Is the new position something that would require different expertise than the one? So if replying to you very, if it's a member of the risk committee already that would become the chair, on the specific skills of risk management, we wouldn't need to assess. If we need expertise for being the chair, like being able to lead a committee, if we think that that's not there, we might ask the bank, why do you consider this person is the right one? But here we would have the support, we, I say we because I'm in the horizontal function, but the JST would be in a much better position to assess with us if that would be needed or not, but not automatically. This question confirms that there is a need to clarify the text in the final version. And again, that's part of, maybe your question confirms the need maybe to reconsider some clarification in the final text, yes. The guide applies to 19 countries, right? As Sophia said, then we have a national specificities. We cannot list all the national specificities and the triggers in the guide. Yeah, we will do that for sure. We don't have that specific case covered in the guide, but if there is the need to clarify, we could do that. We have that if you are appointed for a specific position like chair of the risk committee that we need to look at specific expertise, but not to generally, but I will cross-check for sure. Sorry, I really apologize. There's only one thing because you said that's not written in the guide, but it is. You have to, this is an example becoming the chair of a risk committee out from the risk committee on page. We said, sorry, what is not written is the fact that there are the different countries where there is an automatic trigger. So we try not to be generic, but to give some concrete examples. Thank you very much for that. And what, only say they are 19 different countries, but what the sufficient knowledge, experience, and skills are is determined on a European level. So I guess there's not so much variety on this point. Yes, but that's what I was saying. Those are examples of cases where we could consider and I explained one example of where we could consider, which is if we consider that that person does not have the skills to be a chair in a committee, we could discuss that at least with the bank. As I said, we can also follow up. If you want to have additional clarification, so we are open also to follow up. Good. And do we have any, any more questions? Yeah, no. Yeah, short, I mean. Yeah, in respect of conflict of interest statements, in each, well, I guess in each jurisdiction you have mitigating measures and compliance policies whereby you can avoid the occurrence of such conflicts of interest. I understand from the draft guide of the ECB that anyway you have to inform in advance the potentiality of any conflict of interest, although there might be, I would say, prevention mechanism whereby, well, an identified board member would, in any circumstances, while preventing from voting, would be invited to leave the meeting room. You would have in the statutory auditor's reports, well, references of any of agreement which could be subject to a potential conflict of interest. Do you think that in addition for any individual case there is a need for information to the supervisor of any potential conflict of interest or would it be relevant to restrict the scope to any conflict of interest already occurred for which there would have been a failure and for, I would say, any material conflict of interest at the end of the day? Well, what we would like always to have is disclosure of the potential conflict in the specific situation. So the disclosure we would expect to receive always. If then the supervisor is already informed, for instance, I can give you the example of French corporatives where we received and even discussed with the NCA the conflict of interest policy of the group. So if the conflict is disclosed and we see that it's already covered and adequately mitigated by the policy that we have, we don't ask for additional information on every case. But the disclosure, yes, we would expect to know from the candidate what are the conflicts or the potential conflicts. Yeah, this is really, I couldn't agree more. The disclosure is really key. So I think that would speed up the process, would help also align with the NCA on additional information that also the JST might have not only on the specific bank policy, but also we know that we have more general agreement or more general policy that in some countries can be developed. The self-disclosure of the potential conflict of interest would help a lot. We had some cases where some potential conflict of interest were not disclosed and then we had to really go into greater detail to understand better. Also why that potential conflict had not been disclosed. We also had interviews to understand that better. I think that disclosure is really the best approach on this. And in some cases would speed up the process because maybe these are information is already available to the JST, to the NCA because that's part of some more general specificities. Good. I would like to, there's a new question in the room. Hello, Mike. On behalf of the European Banking Federation, first of all, thank you for your presentation. I just have one short question left with regards to the experience you require for people appointed. We were already very reassured to see that you are not going to apply this experience requirement in financial services in a mechanistic way, but you make a difference between somebody appointed within the management function of the management body and the supervisory function of the management body. And I would just like to know how you will tackle this problem in countries in Europe that have a unitary board system, which is often the case. Well, also in unitary, in the tier one system, we would expect to see members with executive functions and members with non-executive functions. So that would apply in both systems. When the banks submit to us the applications with the candidates, they clarify if the member will have executive functions or non-executive functions. Okay, so we got a few questions from participants who couldn't come today because of the weather, right? And most of them were covered during the last one and a half hours or so. There's one that I wanted to ask on behalf of the German Association of Savings Banks and they combine assessment criteria, time commitment, so chapter 5.4 with the principle of proportionality. And it reads, according to the draft, detailed information on a daily and hourly basis as well as detailed informations shall be mandatory. This could lead to overly bureaucratic processes in the end and the question is, how's the ECB planning to apply the principle of proportionality in this context? So I read this as, how do you deal, do you treat smaller banks differently from bigger banks? How I read it? No, I've read something like this. Well, as in for almost all criteria in an assessment view, we have a two-step approach. We don't ask for all that detailed information in all cases, only when from the first assessment we identify time commitment issues. So if it's a board member that complies with the CRD for counting of directorships without privileged counting, we don't go into that detail even from an information requirement. We only ask, and we expect that to be clear in the guide, but if not, we made it more clear, we make it more clear. We only ask if there are time commitments concerns. And we explain how we distinguish it. So if the banks want to anticipate, because they anticipate that there might be any time commitment issue, then they could send already all the detailed information. Fair to say that when we receive this self-assessment, that also helps the individual to understand that maybe there is something to improve on their side as well, because when we read the list of tasks and the number of days and hours that he or she dedicates to all the tasks, I think that he or she herself, herself, understand that maybe is maybe too busy. And that I think that it's quite an interesting, development and interesting reading that sometimes quite clear that he or she might have reached the limit of time commitment. Okay. Good. So yeah, thank you very much for all your questions and for coming here to Frankfurt. If you're here in the room or somebody outside of the room on the webcast feels that there is more need to ask questions, please approach us either bilaterally or even more importantly, there's this consultation process going on in through which you can submit comments and wishes, questions for changes to the draft and you find the instructions how to take part in the consultation period, in the comment period, on our website, even a forum is there so that makes life probably much easier for you and for us. So thank you very much and have a great weekend.


QuickBooks Desktop 2023. Write checks for expenses and prepaid assets. Let's do it within 2-its, QuickBooks Desktop 2023. Here we are in QuickBooks Desktop. Get great guitar's practice file. We started up in a prior presentation going through the setup process. We do every time, maximizing the home page to the gray area of view drop-down. We have the hide icon bar and open windows list checked off. Open windows open on the left side. Reports drop-down company and financial P&L profit and loss. Changing the range 010123 to 123123. Customizing the report to increase the size a bit in the fonts. The numbers changing it. Let's bring it up to 14. 14 is our new standard. Yes please. Okay. Let's open up the reports again. This time company financial and the balance sheet standard report customization. Rangings they are a changing 010123 to 123123. And then we'll customize that one too and make it 14 and okay. Yes please and okay. Let's open up the trial balance as well just to get used to that in our startup process. It's under an accounting and taxes trial balance. Very useful report. The range in they are a changing. So this is from 010123 to 123123. Customize it and we'll crank that one up a notch to 1616. How about that? That's how crazy we are around here. There we go. Wild and crazy. Okay. So there it is. So that's our normal setup process that we do every time. Let's jump back over to the home page. We're now going to be thinking about cash outflows. Typical cash outflows that we would think happen on a reoccurring nature at the end of the month. Things like the utility bill, the phone bill, for example, and so on and so forth. Couple ways we can enter these items into our system. One is with a check form. The check form decreasing the checking account. The other side going to an expense or possibly to a prepaid asset type of account as we will see. We can then enter the bill form, which would increase the accounts payable. Allow us then to sort the bills and then pay the bills as they become due. We're going to do this method in the second month of operations in the first month. At this point, we're just going to be writing the check forms. The third way that we can enter this into the system is with the use of the bank feeds. Now we're going to have a whole other section or course on the bank feeds, but we just want to mention them as they might fit into the system and when they might fit into the system. So with the bank feeds, you might wait till something actually clears the bank before you record it, which is a little bit backwards because in a full service accounting system, we would record the item first. Then when it clears the bank, we match it out with the bank reconciliation, which we can use the bank feeds to help us out with that. If we're waiting for it to clear the bank before we record it, we're doing a step further than a cash based system, making things a little bit easier than they otherwise would be, but that would only work in certain situations. For example, one, we're not having accounts payable. We don't need to enter the bill and track the accounts payable. And two, we have electronic transfers. That's typically when it's going to work best. And many small businesses do at this point, paying things like their utility bill and paying things like their phone bill and so on with an electronic transfer coming directly out of the bank or possibly with a credit card, both of which are going to be electronic transactions. And because the timeframe for them to go through the bank is so short and you can verify that they have cleared quite quickly, then it becomes more and more doable and advantageous to kind of wait for those transactions to clear the bank and use the bank feeds to actually record the check or to record the credit card rather than recording it first when we enter the transaction and then using the bank feeds or reconciliations to verify that we've recorded the transaction. The electronic transfers also have the advantage of when they go through the bank feeds having a memo which usually gives you the vendor information allowing you to kind of be able to set up your bank feeds in terms of who the vendor is and then possibly have memorized transactions as well. Note that many small businesses will often, if they have sufficient cash flow or if they're using the credit cards, for example, be on more of a cash-based system or reliant on the bank feeds to record the cash outflows for goods and services they are using within the business. But on the customer side of things, the revenue cycle might be on an accrual basis or not being reliant on the bank feeds because of the industry they are in, they have to enter an invoice or possibly use a sales receipt and then make the deposit due to that industry that they are in. So just to mention that and keep that in mind. Now, if you're writing physical checks, then it becomes a lot advantageous to actually enter the checks into the system when you write them because then there's going to be a significant lag between when you write the check and when the check clears the bank because you've got to mail the check, they have to receive it, and then they have to clear the bank. And so if there's any questions about whether they got the check, did it get lost in the mail, we have to then enter the check in our system. So if they ask us about it, we can see that we wrote the check. So in that system, you don't want to be waiting until the check clears the bank to put it into the system because the whole point is to note that you've recorded the check when you wrote it and then you can track whether the check is outstanding. Again, electronic transfers, not as big a problem because those things clear in like one to three days. They can clear almost automatically these days. And so that lag time is not becoming as big of an issue and therefore waiting for it to clear the bank and then recording it is more and more doable. Although, so that means that we're going to write a check form this time and the second month we're going to write bill forms. So the check form would be used when either physically writing a check, possibly you're buying checks and then you're entering them into the printer and printing on the checks out of QuickBooks or you're handwriting checks and just entering the check into the system in QuickBooks or you're doing an electronic transfer but still doing a full service bookkeeping system where you record the transaction as you make the transaction and then reconcile it to the bank using the bank feeds or using the bank reconciliation process. Okay, so when we enter these items into the system we could use a check form or we could use the register. Now note oftentimes if I'm my default would generally be to use the register in other words. Remember the process, the thought process you want to go through when entering any transaction is first is there a form that should be used for the transaction. If so, I would use that particular form. If there's not a form then is cash affected? If the cash is affected I would typically use the register. So in this case there's a form, it's a check form but that's usually a form that I would use the register for in practice because it's a little bit faster to enter but here I kind of want to emphasize the checks so I'm actually going to write the checks using the check form. Remember that the check form is the form that's going to be a reduction to the checking account so if it's an actual physical check that's being represented or will be made from QuickBooks handwriting the check and then you're matching it up to the QuickBooks system it will then have a check number related to it. If it's going to be a decrease to the checking account for an electronic payment then you want to delete the check number because it's still going to be decreasing the checking account but it's not an actual check even though this is still the form used to decrease the checking account. We're going to make this as of 012622 I'm going to say this is going to go for insurance I'm going to make up a new vendor safe insurance company which is obviously a very generic name I'm going to say tab note when we set up the vendors typically I don't need a whole lot of detail I don't need to know their phone number their address and so on and so forth unless I'm going to mail it to them in which case I might want that but typically we just want a quick add and we're going to add them as a vendor note that if you're using bank feeds then sometimes you can enter the bank feeds without the vendor field and people skip that sometimes you want to add a vendor which you can usually get from the memo because the vendor allows you to sort your data by vendor so you get another sort field if you don't have the vendor you'll still record it to the correct account hopefully your financial statements will still be correct but you won't have the added detail of sorting who you pay by vendor so then we're going to say this is $12,000 here and then we might want to memo down here in terms of what we paid for I might say this is for a let's say a year of insurance now the one we first started out with and notice we're on the expense side not the item side items are if we were to purchase inventory expenses are going to go directly to an account we started out with one which is a little bit unusual because the insurance if we pay all the insurance for a 6 month time period or a year time period at one time for example it's often cheaper to do so but if I expense it when I pay for it then if I imagine my income statement here and if I was to compare January to December and I paid for a whole year's worth of insurance in January then it would look like January was worse than December because I'd have this big expense that's similar to the concept of basically the same as the concept of the fixed asset the property planting equipment where if I bought a building and I paid cash for it that would clearly majorly distort the income statement from one month to the next one year to the next that's why we use the accrual concept putting it on the books as an asset so we can do the same thing with insurance it's not as extreme of an issue as the fixed assets but it's still something that if I pay for a whole year's worth of insurance wanted to put it on the books as an asset so I'm going to do that here note that insurance is one of those places where you say well it's not that big a deal so I'm just going to expense it as I pay for it you may be able to do that you might want to talk to your accountant to determine whether or not it would be applicable or whether or not you want to do an accrual kind of component there you have to do it for equipment because it's such a huge deviation insurance maybe you don't need to it would be the easiest thing to do would be just to expense it although it's not as comparable but I'm going to show the example of the prepaid insurance normally you want to put it into prepaid insurance and then allocate it using period and adjustments which we'll see in future presentations so I don't think we have an account for it yet so I'm going to add an account I'm going to call it an asset account which is in the drop down it's going to be another current asset account I'm going to say okay I'm going to call it prepaid insurance prepaid insurance so insurance that we have that we have bought that we haven't consumed when do we consume insurance as the policy expires by definition you've got to pay for the insurance before they give you the coverage so we're going to say okay and that's different by the way that looks good than than any other most other things you pay the utility bill after you used the utilities for insurance you pay for the insurance before you get the coverage that's why you get into this prepayment problem or issue so let's say save it and close it this is going to decrease the checking account the other side is going to go into an asset rather than an expense let's do it let's say go to the balance sheet and check it out double clicking on the checking account and I can say okay now I entered it in the wrong date didn't I let me change the date to 2022 and let's see there it is fix the date pay attention man crying out loud this needs to be 23 you're at your world I'm working in the future I don't usually work in the future so give me a break but notice how you can change it you can double click and change it quite useful when you're working a practice problem saving it boom there it is there it is I fixed it I fixed it okay the other side is going to go to prepaid insurance there it is it's a balance sheet account so we put it here when is it going to be expensed we're going to expense it at expense it at the end of the month or year in accordance with how much of the insurance we have consumed so we'll talk more about that when we get to the adjusting entries similar kind of concept though as with the fixed assets basically the same kind of concept although we won't be using a separate account like accumulated depreciation we'll just decrease the insurance directly why because it's not an estimate down here it's like kind of an estimate up here we know how much was covered so we can hit it directly with a ratio and determine how much was used and how much was not used we'll talk more about that later let's do another one so if I go back to the home page now note if I enter another check here well I went to the register you could enter that notice how it see you see it in the register so you could enter that directly into the register if you're doing a whole year's worth of data input for example the register would probably be the faster way to go I'm going to close this back out I'm going to go back into the check form so we can see the full form though notice if I type in again the the same vendor which was safe insurance it's now populating here and it will now populate down here now how it populates down below will be a little bit different depending on your settings look up in a prior presentation if I go to the edit preferences and I look at my settings I think I changed it from this one in general automatically remember account or transaction information automatically recall last transaction so that means it's pulling in the number and everything but it also pulls into the account which can be quite useful alright now we're going to do a different one though we're going to say this is going to be from staples staples I'm going to type in this is a new vendor so I'll type it in tab this is like a department or a store for supplies store I'm going to quick add it I'm going to add it quick add as a vendor because it's something someone were paying now it's still keeping the data from that last vendor so that's okay I'm going to say alright this is for $500 same date but this time it's going to go to office supplies and I'm going to put it in as an expense now note I didn't have to add a new account for office supplies because they already had that office supplies account as the account in the general ledger from the default general ledger that was set up the normal process if I'm starting a new company file is that I'm going to use the default general ledger accounts that were set up when I started the company I'm going to try to find one that fits every time I knew a new transaction if I can't find one that I like I'm going to say is there one that's close and possibly then change the name to the name that I prefer so that I don't have multiple accounts that are in essence doing the same thing and if it's not there at all as we saw with the prior one we can then add the account as necessary and then possibly in a few months we can go back in and delete any accounts that we are not using which will hopefully clean things up and make it a little bit easier when we hit the drop down and kind of look through all of the accounts so that's going to be that we might want to put a memo here also note that supplies is another area where you might do the same concept so if I'm buying large supplies let's say you're buying medical supplies for example then you might be tracking it if I go back to the balance sheet in a similar way as you would with inventory because they're a significant dollar amount and therefore you want to track the supplies like you would inventory kind of or at least on a perpetual inventory system putting it on the books as an asset rather than but if you're buying small supplies like staples and things like that and you're not as concerned with tracking it and doing a periodic adjustment which takes longer to do then you could just expense it so we're going to use the method here of just expensing will show the concept of the prepaid item and allocation of it with the prepaid insurance but again the same concept can be done with supplies often times accounting textbooks will use supplies as an introduction into inventory and tracking inventory because it's a similar process if you have substantial supplies but it's easiest to just expense it if that would be applicable so save it and close it do I have the right date notice this is 2023 everything looks good okay got it so let's go ahead and say double click on the checking account there's the supplies if I double click on it back to the check that looks good the other side this time is going to go to the profit and loss PNL so there it is on the PNL and so it's an increase in the expense which it decreases the net income let's do another one let's go back to the home page and say we're going to say another one now notice if it was the second month I'm going to say tab tab that looks good if it was the second month of operations and if I was to then enter the same transactions in again remember it would memorize that it would help me to record the transaction helping me to be consistent with the expense accounts we want to be consistent with our allocation of the expense accounts so this one's going to be a utility bill which is Edison I'm going to type in a new vendor say tab it's going to help us to add the vendor I'm just going to do a quick add as we have done before it will be a vendor because we're going to be paying them and I'm going to say this is for 620 620 we might want to put in the memo what month we're paying for and so on and so forth but I'll keep it as is now when we choose the expense account the idea would be I'm going to see if there's an expense account that's going to be applicable if there's not one is there one that's closed that I can change if there's one that's not close at all I'll choose something else it's it's also useful to note that really there's no something it's nothing cut in stone in terms of which accounts you need to be assigning to on especially on the expenses because different companies are going to have different things that are going to be more or less useful to them so for example it used to be the standard would be that the phone bill the gas bill and the electric bill would be grouped together under utilities however the standard for most companies these days is that the phone bill is becoming its own expense why because it's becoming large enough that you want to break it out into its own expense and often times the electric bill and utility bill still seem for a lot of companies to be put together or grouped together so what you want to do and I've seen people go on two extremes of grouping their expenses one is to have too few expenses so you like you could imagine putting all your expenses into one account called business expenses but that wouldn't give you much detail on what you're spending money in so you want to give more detail than that the other extreme is to have a different expense account for every little thing your over categorizing your expense accounts which gives you a lot of detail but if you have expense accounts that only have like ten dollars in it for a larger company or even a small company with ten dollars then you're probably going to have a very long income statement with unnecessary detail it would be you'd be better off making decisions to group that stuff together so for here for example we could put it into utilities we might make another account if we spend a lot of electricity so if our guitar shop is plugged in we're amped all the time we got the amplifiers blaring and so then what I want to track my electric bill separately from my gas bill then I might do that right because that would be applicable that would be something I want to know about if not I'll group them together all right so this is going to decrease the checking account the other side is going to go to utilities I'll say save it and close it let's go to the profit and loss and so there's utilities expense another way people might group their utilities is you might see it grouped as utilities and then sub accounts of say gas electric and the phone bill and in that way you can then it'll have a carrot kind of like this that you can you can group up other people that really like sub accounts but again you can go over the top with sub accounts sub accounts can give you a lot more control because you might you might want the phone bill to be next to the the electric bill but if you put them in separate accounts and you don't have account numbers it's going to be ordered by alphabetical order in the expenses area so one way you can have controlling of the grouping of different accounts that you want in separate accounts will still be next to each other is the use of sub accounts but that makes your income statement a lot larger well we might touch in on sub accounts in the future you know as we go here if I go up to the balance sheet we can see the checking account here checking account we've got the Edison bill so there it is the other side going to utilities indicated here let's do one more I'm going to go back to the homepage at least one more we're going to go now that's a typical month in bill now if you set up bank feeds and you make these electronic transfers you can try to memorize these transactions and you can get them to be you know somewhat automatic but even if you're just entering them manually into the system it'll at least help you to memorize the account to make the data input as easy as possible I'm going to say this is Verizon is our phone company tab quick add for the vendor and then the amount I'm going to say is 410 tab tab we might want to memo telling us which month we're paying for and then down here we're going to say this is a telephone account so I'm typing in telephone I haven't never posted the telephone before but the system already has a telephone account because it's fairly standard these days to break out the phone bill from the utility bill so I'll put it there if I wanted the phone bill to be next to the to the electric bill I might then make it again as a sub or of utilities for example so let's go ahead and record this I'll say save it and close it let's check it out profit and loss now there's the telephone telephone and if I go back to the balance sheet we've got the checking account here's the checking account for the 410 now these were imagining we wrote physical checks for so when we actually do the bank reconciliation comparing our books to the bank we're going to have the check numbers and the amounts to help us tie it out if we were imagining electronic transfers then again we might wait for it to clear the bank before we record the transaction then because the transaction doesn't have as big of a time interval here we want to see make sure that these outstanding checks are outstanding right that's part of the point or we might still enter the electronic transfers as we make them in a full service accounting system but when they come through the bank then the bank is not going to have a check number anymore however it often has more detail in the memo like who we paid the memo often includes the vendor that's going to be included in it which helps us then to label the account that we wanted to go to as well as set the vendor name so just to touch on the different components again we have a whole other course or section on the bank feeds we can talk about later but just to give an idea of how different companies might be putting those into place or making their normal month in payments ok so now if I go back to the homepage here in the vendor section if I can search by vendor up top now I can go to the vendor center let's do it that way and because I added the vendors now I've got of course my vendor information here and if I look at all transactions and all dates then I've got a check and I can sort my data by vendor which is a nice capacity if you're using bank feeds remember you could possibly enter the data without adding a vendor and your financial statements may still be populated properly because you're still recording it to the proper account but you're not going to have that added detail of being able to sort and look through your vendor information if there's a question a vendor is a question a payment then you want to be able to go to the vendor center and be able to see the payment that has been processed or if it's a check the payment that's going to be basically outstanding you can say oh yeah well I wrote the check here I sent it out of this state maybe it got lost in the mail would be you know the general process so there is that let's go back up to the let's go to the trial balance now and here's what we have thus far on the trial balance now in the next month we're going to enter the same checks at the end or the same payments or the same kind of payments but we'll do it with a bill and then a pay bill and then we'll have a whole another section on bank feeds or course on bank feeds okay so let's go back to the trial balance here's where we stand at this point in time you can check your numbers if everything ties out great if not try changing the date range it's off to the date issue if there's an issue with the issue then you can double click zoom in and possibly change anything that you need to change which you want to be careful of in practice but it's a great tool for this practice problem