Dutch rules to limit risk and pay at banks
DUTCH banks will see their remuneration structures curbed and be required to obtain regular approval of risk strategies under a new voluntary code of self-regulation to begin on 1 January.
The bank code follows a report in April on the future of the country’s banking system, after the collapse or near-collapse of a number of Dutch banks during the worst of the credit crisis last October.
The code comes as the G20 prepares to thrash out an international agreement on reining in the bonus culture that some have blamed for exacerbating the credit crunch.
Members of the management board will have severance payments restricted, generally to one year’s salary, while variable compensation will be capped at the same level.
The Dutch code repeatedly emphasises the responsibility of managers and directors to balance the interests of customers, shareholders and employees when making decisions.
It includes draft language for a code of moral conduct that top bankers will be required to sign.
The code addresses risk management in detail, calling for one management board member to oversee a bank’s risk profile and requiring annual supervisory board approval of management’s intended “risk appetite”.
Supervisory board members will need relevant financial sector experience and cultural familiarity with a bank’s markets. Their compensation, however, does not have to be linked to the bank’s performance.
The code also calls for an independent review of the supervisory board every three years.
The Dutch banking association said banks will have to explain in their annual report how they did in complying with the code, and if they have not, why.
The association said it will appoint, in consultation with the finance minister, an independent monitoring committee to review performance.
The Dutch code comes in advance of planned reforms by the G20, which could include capping bonuses as a percentage of revenue.