In response to the financial crisis, the Netherlands Bankers Association (NVB) drew up the Banking Code in 2009. The aim of the code is to restore damaged consumer confidence in the financial sector. It consists of a number of recommendations and principles aimed at ensuring the very best performance by banks. The code came into effect on 1 January 2010. Triodos Bank, as a financial institution based in the Netherlands, has signed up to the code, and since then has focused considerable attention on implementing it. We will monitor, identify and address any occasions when we do not comply with the code on an ongoing basis.
The code’s primary focus is on governance and puts the interests of the customer at the heart of a bank’s activity which ties in fully with Triodos Bank’s vision and Business Principles. The customer was and remains a key stakeholder in all our activity.
The Dutch Banking Code (Banking Code) came into force as of January 1, 2010. Triodos Bank subscribes to the Banking Code and implemented it during 2010. The full comply-or-explain statement, as required under the Banking Code, can be accessed at Triodos Bank’s website. Below please find a summary of the main themes of the Banking Code and the way they are addressed by Triodos Bank.
Risk management is a key priority for Triodos Bank. As such the policy, procedures and tasks and responsibilities of the Executive Board and the various departments in this field comply with the recommendations contained in the code. Wherever desirable, the regulations were further tightened up in 2009 and 2010.
For example, in 2010, the Audit Committee of the Supervisory Board was expanded to become an Audit and Risk Committee. This committee will meet four times a year from 2011. The CFO was given final responsibility for the development and implementation of risk policy. The regulations of the Audit and Risk Committee are an integral part of the regulations of the Supervisory Board and can be found on Triodos Bank’s main website.
The Head of Internal Audit reports directly to the Executive Board. The first point of contact is the CFO. The Head of Internal Audit has direct access to the chair of the Audit and Risk Committee and the CEO.
In 2010, the Product Approval Process was described in accordance with the recommendations of the code. This process not only guarantees that careful consideration is given to the risks for Triodos Bank from the products in question but also that the interests of, and risks for customers, are explicitly considered. The risk management function within Triodos Bank is the object of permanent evaluation, improvement and innovation. A start was made in 2010 on the establishment of an integrated Enterprise Risk Management system that is due to be completed during 2011.
Triodos Bank operates a remuneration policy that ties in well with the principles of the code, with a bonus policy that goes one step further than it.
The salary system at Triodos Bank is based on the conviction that the results of the bank are dependent on the combined effort of everyone working in it. Partly against that background, Triodos Bank does not operate a system of variable remuneration. This helps to prevent Triodos Bank’s co-workers working more for their own gains than in the interests of the bank and its customers. This in turn means that people are recruited who deliberately opt for Triodos Bank and its objectives. Exceptional performances do receive additional remuneration, in individual cases. These rewards are never announced in advance on condition that specific targets are achieved, but in individual cases, are determined after the event, and are limited to a maximum of two monthly salaries. The remuneration of the Executive Board and managing directors is well below the median as required by the code.
If Triodos Bank has achieved good results, all co-workers receive an identical end-of-year bonus. Each co-worker received EUR 300 in 2010. Finally, Triodos Bank restricts the differences in remuneration between the highest and lowest-earned salary.
There is no share option scheme at Triodos Bank for co-workers, members of the Executive Board, the Supervisory Board or the Board of SAAT, as a matter of principle. Given its values, Triodos Bank considers that a share option scheme is not an appropriate instrument for rewarding performance.
The funds entrusted to Triodos Bank by its customers are lent to businesses and organisations whose aim is to create a more sustainable society. We ensure full transparency in respect of this policy. We believe that the key to successful banking lies in maintaining long-term relationships with the individuals and businesses borrowing or saving money from us. And we have embedded this principle within the organisation, in the following way:
- Triodos Bank specifically ensures that only those products are offered that favour Triodos Bank’s customers, and are provided with balanced and clear product information.
- Triodos Bank does not operate a system of variable remuneration. This prevents financial incentives being linked to the attraction and investment of funds of our customers.
- Triodos Bank provides full transparency about where our customers’ savings are used. This offers customers the opportunity to call Triodos Bank to account for its policy. A comprehensive list of the projects and businesses in which the customers’ savings are invested, is available via the Triodos Bank website, allowing customers to see exactly how their money has been used.
The code highlights the importance of permanent education for Executive Board members and Supervisory Board members of banks to ensure that they remain permanently informed about the latest developments in the financial sector, and recommends a programme of permanent education.
Triodos Bank has focused considerable attention on this. In 2009 and early 2010, Triodos Bank developed a structural programme of permanent education comprising multi-day meetings supervised by external experts. These meetings help provide in-depth training on the subjects referred to in the code, including duty of risk management, business model, governance and sector development. A deliberate choice was made to run a combined programme for the Supervisory Board and the Executive Board, with a view to promoting communication and understanding between both bodies.
The Chair of the Supervisory Board is responsible for implementation of the education programme.
We believe that handling money brings special responsibilities for all co-workers with it, not just its management. So Triodos Bank fully supports the code’s recommendation to explicitly formulate these responsibilities.
In 2010, all managing directors and Executive Board members signed the Triodos Bank bankers’ declaration, confirming their undertaking to exercise their role in the spirit of the text of the declaration.
Our Business Principles are an important framework for the way in which we do business, and serve as the guiding principles for our co-workers in their day-to-day decision-making processes. The Triodos Bank bankers’ declaration therefore ties in fully with these Principles. Following the introduction of the Banking Code, we once again assessed and further tightened up the Business Principles in 2010. The Business Principles are an integral part of the contracts of employment of all Triodos Bank co-workers. In addition, the Business Principles are included in the introduction programme for new co-workers.