Abstract
Authorities responsible for prudential supervision and Supervisory Boards as internal supervisor are both in the business of supervising financial institutions. But the roles, objectives, methods and positions are different. This chapter discusses why and how they are different and how each supervisor can best fulfil its role, using DNB as an example. The argument is made that prudential supervisors may take on too big a role, as they are essentially disadvantaged relative to internal supervisors in terms of information and expertise. In order to ensure proper reviews of the functioning of Supervisory Boards, an external, experienced and independent party should be involved in such performance reviews regularly.
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Notes
- 1.
Art. 3: 8 and 9 Wft and art. 5 and further Decree Prudential Rules Wft.
- 2.
Art. 3: 10 Wft and art. 10 and further Decree Prudential Rules Wft.
- 3.
Art. 3: 17 Wft and art. 17 and further Decree Prudential Rules Wft.
- 4.
Art. 3: 19 Wft.
- 5.
Art. 1: 75 and further Wft.
- 6.
In the Netherlands traditionally a two-tier board model is applied. In a one-tier system executive and non-executive directors are member of the same board. In a two-tier system the executive directors are member of the MB and the non-executive directors form a separate legal body, the SB. As of January 1, 2013, a new law is effective, which clarifies certain rules when a one-tier board is applied. Under the Wft banks and insurance companies are required to apply a two-tier structure and cannot apply the one-tier board.
- 7.
Art. 2: 140 Dutch Civil Code (DCC).
- 8.
See chapter II.2 of the Code on executive remuneration and III.1.7 for the review of the performance of the SB and its members.
- 9.
The Dutch so-called ‘structuur regime’ applies to large companies (net assets in excess of EUR 16 million, 100 employees or more and a works council installed) with a view to providing employees co-determination rights. Companies subject to the structure regime must have a SB. For one third of the members of the SB the works council has a special nomination right.
- 10.
Art. 2: 344 and further, in particular art. 357 DCC.
- 11.
Art. 2: 9 and art. 2: 138 (248) DCC are the basis for such claims by the company itself to SB members, which in case of bankruptcy can be exercised by the trustee. Individual creditors may sue SB members on the basis of tort, art. 6: 162 DCC.
- 12.
Art. 2: 150 (260) DCC.
- 13.
- 14.
Based on the report of the Scheltema committee, in 2010 the Dutch Minister of Finance commanded DNB to adapt their organization, operating model, governance and culture. Although soon after measures have been announced and implemented, there is no external evidence as to what the current status and level at DNB on these four dimensions actually is.
- 15.
- 16.
See article 3: 8 Wft and Beleidsregel geschiktheid 2012.
- 17.
- 18.
Art. 1: 25d par 1. Wft.
- 19.
On one occasion, which was not even an official board evaluation, we interviewed executives and non-executives from various boards to identify typical issues that boards are faced with. We then summarised the interviews in the form of nearly literal, but anonymous, quotes and presented those to the group. Little shocks and some outrage went through the room, ‘’this is not at all what we said”, said some of the persons being quoted. The mirror provided an anonymous yet all too clear image, and was thus rejected.
- 20.
These are all real life examples we have witnessed in various board reviews. A well-known example of a global bank with severe (board) performance issues – as became clear later on - where an external board review was performed that did not reveal any serious issues was ABN Amro (see Smit 2009).
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Cools, K., Cools, K., Winter, J., Winter, J., Winter, J. (2013). External and Internal Supervision: How to Make It Work?. In: Kellermann, A., de Haan, J., de Vries, F. (eds) Financial Supervision in the 21st Century. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-36733-5_9
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