1. Internal governance for institutions [Institutions referred to in these guidelines are credit institutions and investment firms as per Article 22 of the Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions (recast) applies; for investment firms see also Article 34 of Directive 2006/49/EC of the European Parliament and of the Council of 14 June 2006 on the capital adequacy of investment firms and credit institutions (recast), hereafter both directives are referred to as the Capital Requirements Directive (CRD).] in the European Community is covered by Article 22 of Directive 2006/48/EC, which requires 'that every credit institution has robust governance arrangements, which include a clear organisational structure with well defined, transparent and consistent lines of responsibility, effective processes to identify, manage, monitor and report the risks it is or might be exposed to, adequate internal control mechanisms, including sound administrative and accounting procedures, and remuneration policies and practices that are consistent with and promote sound and effective risk management'. Article 73(3) of Directive 2006/48/EC requires that Article 22 also applies to parent undertakings and subsidiaries on a consolidated or sub-consolidated basis.