Dutch Banking Code

In September 2009, the Dutch Banking Association published a Banking Code in response to an advisory committee's report on the future of banking. That report, entitled 'Restoring Trust', called for banks to initiate improvements to the way they work and so restore the public trust damaged by the financial crisis.

The Banking Code laid out the principles for good conduct and initially took the form of self-regulation. These principles have since been enshrined in legislation by the Dutch Ministry of Finance. The Banking Code took effect on 1 January 2010. 

The Banking Code is divided into the following sections:

  1. Compliance with the Code;
  2. Supervisory Board;
  3. Executive Board;
  4. Risk Management;
  5. Audit;
  6. Remuneration Policy.

In December 2009, our Supervisory Board approved revisions to NIBC's charters, those of our committees, the Supervisory Board and the Managing Board, to ensure our governance was fully aligned with the Banking Code. 

We have implemented all the procedural and operational measures required under the Banking Code. As from 2011, banks must specify how they are applying the Banking Code in a 'comply or explain' statement in their financial report for the previous year. For a detailed overview of NIBC's compliance with the Banking Code, per article, see our overview: NIBC Bank N.V. compliance with the Dutch Banking Code

The Minister of Finance and the Dutch Banking Association set up a monitoring committee that reports annually on compliance with the Banking Code. For more information on the monitoring committee Dutch Banking Code please refer to: www.commissiecodebanken.nl.

The Managing Board members signed a moral and ethical conduct declaration as worded in the Banking Code and this is published on NIBC's website. On 1 January 2013, new Dutch legislation came into force, including the obligation to swear an oath for all staff of financial institutions that are assessed on suitability by the Netherlands Authority for the Financial Markets and the Dutch Central Bank. Within NIBC this new law is therefore applicable to the members of the Managing Board and the Supervisory Board. The main reason for introducing this oath is re-establishing confidence and reaching the desired culture change in the financial sector. On 5 March 2013 the members of the Managing Board and Supervisory Board took the Bankers’ oath.

Internal Audit and role of the external auditor

Internal Audit reports directly to the CEO and, at the request of the Managing Board, pays increasing attention to new initiatives, products and related projects within the bank. Following the Banking Code, the Managing Board aims for closer cooperation and coordination between the control functions such as internal audit, compliance and (operational) risk management. There is increasing focus on themes such as integrity, conflicts of interest, information security and fraud control.

The head of the internal audit function also has a direct reporting line to the chairman of the ACC of the Supervisory Board. The internal audit function assesses the quality and effectiveness of the system of governance, risk management and the bank's control procedures and reports its findings to both the Managing Board and to the ACC.

Consultations between the internal audit function and the external auditor have intensified. Internal Audit and the external auditors regularly review audit results, risk analysis and planning. The information exchange with the ACC of the Supervisory Board has remained unchanged. At its own initiative, Internal Audit has periodic discussions with the DNB and the external auditor, where the risk analysis, planning and audit results are shared and discussed.

Remuneration (as of 1 January 2012)

Taking into account all relevant regulations and guidelines, most notably the Banking Code and European and DNB regulations, the Supervisory Board has determined NIBC's  remuneration policy in such a way, that this policy is sustainable, balanced and in line with the chosen strategy and risk appetite. It recognises the following key principles: (i) alignment with business strategy; (ii) differentiated and determined by performance results; (iii) externally competitive and internally fair and (iv) managed in an integrated, total compensation manner.

To generate an objective comparison measure for remuneration purposes there is a peer group, consisting of all listed companies in the AEX and AMX indices. Total compensation of Chairman and Members of the Managing Board is targeted just below the median of their peers in the aforementioned group, and based on benchmark data provided by external compensation consultants.

Any variable remuneration of the Managing Board is capped, well below the maximum levels agreed upon in the reigning Banking Code. In response to public opinion and further changes in regulation, the remuneration policy for the Managing Board as from 2012 no longer includes short term variable compensation.

Each Managing Board member annually agrees to 4 - 6 financial and non-financial targets for the year as well as for three years ahead. The long-term incentive for the Managing Board is subject to a three-year performance period and the achievement of the financial and non-financial targets, followed by a pro-rated 3-year deferral period before pay-out.

However, it is foreseen that the Supervisory Board will not be able to grant any variable payment to MB members as long as NIBC is in receipt of government support.

In addition, any unvested amounts of variable compensation are subject to Malus (in exceptional cases where as a result of the financial situation of NIBC it would be impropriate or unreasonable to allow the deferred compensation to vest in full) and/or Claw Back (recovering of variable pay awarded on the basis of incorrect (financial) data), not withstanding the discretionary right of the Supervisory Board to adjust any or all variable pay downwards if it considers that this would lead to unfair or unintended effects.

All in all, the combination of restraint and moderation on the one hand, and strict governance around the remuneration process on the other, makes for a sustainable remuneration policy.