The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) on Tuesday published joint guidance for banks and investment firms on ensuring that top management is properly qualified to evaluate and manage risk.

The joint guidelines aim to enhance, and harmonize, their requirements for firms to assess the suitability of top managers and executives. They form part of an effort to address issues revealed during the financial crisis with the composition and functioning of top management at both lenders and investment firms.

The guidelines are intended to ensure sound governance arrangements within financial institutions, highlighting “the importance for institutions to consider whether candidates have the knowledge, qualification and skills necessary to safeguard proper and prudent management of the institution. The guidelines also foster more diverse management bodies and, therefore, contribute to improved risk oversight and resilience of institutions,” the EFA and ESMA say in their announcement.

Among other things, the regulators call on top managers to establish sound business and risk management strategies; and to ensure that executives have the knowledge, skills and experience to assess the institution’s activities, including its main risks.

They also provide additional guidance on the scope of the assessment process for institutions and regulators.

The joint guidelines are to take effect as of June 30, 2018.