a.i.s.b.l. 10 rue Montoyer B- 1000 Brussels +32 (0)2 508 37 11 phone +32 (0)2 511 23 28 fax http://www.ebf-fbe.eu

D2309B

10.06.2011

Sound Corporate Governance for a Stable Economy _______________________________________________________________________

Measures in Place in Member States

The European banking industry shares the European Commission’s goal of promoting effective corporate governance for financial institutions and therefore supports the policy intent underlying the principles articulated in the Green Paper1.

Moreover, our members remain convinced that effective governance can make a meaningful difference in corporate performance and confirm that they are already rising to that challenge. In this environment boards are currently reviewing their practices and asking themselves relevant questions about opportunities to improve. The EBF concurs therefore with the Commission’s objective of improving corporate governance and risk governance through a focused approach as banks are subject to a range of corporate governance rules. Multiple workstreams are underway or have already been implemented in different international bodies (OECD, FSB, Basel Committee, EU Commission, and CEBS) and at national level. The comparative tables presented hereunder aim at showing that national rules/codes of conduct or arrangements already cover the vast majority of the issues addressed in the Commission’s Green Paper.

Given the differences in governance models and thereby inherent complexity as well as the many rules already existing at national, European and International level, the EBF continues to believe - as an overarching principle – that rules, regulations and guidance in the field of corporate governance should remain principle-based, balanced and adequately flexible (comply or explain principles) to reflect the different national structures and business models. In addition the principle of proportionality should be applied to enable banks (both large and small) to adapt the concrete application according to their legal form, size, nature, activities, markets, international or national focus, and complexity. Indeed given those differences and variations we fear that a one size fits all solution would just not be efficient or successful. We therefore support the acknowledgement by the Commission that the application of the various solutions should be proportionate and may vary according to the legal form, size, nature and complexity of the financial institution concerned

Adopting such an approach would ensure that the guidance is relevant to the widest range of banking institutions as banking institutions around the world have significant differences in size, structure and environment. It would also allow corporate governance principles to function in an optimal manner. Furthermore, the EBF believes that the banking industry should not be treated differently from other businesses regarding issues that are horizontal and not specific to the financial sector like the gender distribution in the board or other similar issues. Such differentiation would not be justifiable in our view. In particular, a cross-sector level playing field is required with regard to the provisions concerning:

1EBF response to the Green Paper on Corporate Governance in Financial Institutions: http://www.ebf-fbe.eu/uploads/documents/positions/CorpGov/6-%20September%202010-D1313D-2010-EBF%20response%20Corporate%20Governance%20GP%20-%20final%20version%20-%20clean.pdf

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1) Gender distribution in the board

: When appointing new directors to the board, different backgrounds, experiences and skills need to be considered. In this respect, companies should have as ambition to strive for balanced gender distribution with an equal level of skills at boards’ level. Indeed, many companies have already programmes to encourage women’s accession to executive roles or supervisory roles. In any case, the board’s efficiency should be the first principle to rely on in respect of the composition of the board.

2) Limitation on the number of boards on which a director may sit

: Such a limit would not necessarily improve corporate governance. Logically a director cannot undertake more tasks than he/she can afford. The guideline therefore should be that all directors should ensure that they can allocate sufficient time to the company to discharge their responsibilities effectively. This should be determined on a case-by-case basis based on the individual and on the directorship in question. In any case, subsidiary boards within group structures should be excluded from the calculation.

3) Prohibition of combining the functions of Chairman and Chief Executive Officer (CEO)

: There is no empirical evidence that banks, in which the functions of chairman and CEO were combined, performed less than the others. To the contrary, a recent study found that the banks that did not split both roles performed as good as the others during the crisis. This seems to demonstrate that this concept has no significant impact and as a consequence there should not be a one-size-fit all solution.

a.i.s.b.l. 10 rue Montoyer B- 1000 Brussels +32 (0)2 508 37 11 phone +32 (0)2 511 23 28 fax http://www.ebf-fbe.eu

Table 1: Composition and role of the board Limitation on the number of

boards on which a director may sit

Prohibition of combining the functions of Chairman and CEO

Specific provisions regarding women and/or foreign executives in the board

Evaluation of the role of the board

Austria

Austrian Stock Corporation Act: max. ten mandates in other capital companies (position of chairperson counts double). Exemption: up to ten further mandates are not counted if the director has been elected or dispatched in order to ensure the economic interests of the Federation, a province, a municipality or a business enterprise affiliated with the company or where the company holds a share. No interlocking directorates. Members of the supervisory board shall not have more than eight mandates (function of chairperson shall count double) as supervisory board members for listed companies.

Not necessary.

Austrian Business Code and Austrian Code of Corporate Governance: Report in the annual Corporate Governance Report of the Company on measures taken by the Company to promote women on the Management Board, on the Supervisory Board and in executive positions.

Austrian Code of Corporate Governance: The supervisory board shall discuss the efficiency of its activities annually, in particular, its organization and work procedures (self-evaluation).

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Austrian Code of Corporate Governance: Members of the management board shall not hold more than four supervisory board mandates (chairperson counts double) in stock corporations that do not belong to the group. Companies that are included in consolidated financial statements or in which the company has an investment with a business interest shall not be considered non-group companies. Supervisory board members serving on the management board of a listed company may not hold more than four positions on supervisory boards (position of chairperson counts double) of stock corporations not belonging to the group. Companies that are included in consolidated financial statements or in which the company has an investment with a business interest shall not be considered non-group companies.

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Belgium

There is no formal limitation of the number of mandates. The existing set of Belgian laws and regulations is sufficient for guaranteeing the required level of the directors’ availability and competence and for giving companies enough room, more particularly in the standing orders of the body concerned, to fix the number of mandates that is acceptable in those particular circumstances.

Yes. Clear separation between the function of Chairman and that of CEO in accordance with:

• the Belgian Code of Corporate Governance

• the Circular of the Banking, Finance and Insurance Commission on Corporate Governance in the financial institutions.

In regulation, a strict distinction is made between supervisory tasks/functions (competence of the Board of Directors) and the (daily) management/executive tasks/functions (competence of the management committee). The Belgian supervisor (currently still the “CBFA”, but in the near future the “NBB” (which will be responsible for

The need for diversity in the composition of the Board of Directors does not have to be put down in one or several specific ratios (such as the ratio between men and women). However, the Corporate Governance Commission issues a recommendation in order to ensure, within a reasonable time span, an increase of the number of women who are members of the management bodies of the listed companies, in accordance with the « comply or explain » principle. In addition, it is useful to note that there may be changes to the regulatory framework, as the Belgian Parliament is currently discussing several draft laws which may explicitly stipulate requirements in order to ensure equal rights as to gender representation in the Boards of Directors of listed companies. Febelfin is

Each year, the Board makes its own evaluation of its functioning (competence, composition and size) as well as that of the specialized committees in accordance with:

• the Belgian Code of Corporate Governance

• the Circular of the Banking, Finance and Insurance Commission on Corporate Governance in the financial institutions

The power to decide upon the nomination and/or discharging of Directors is a major part of the competence of the shareholders, who have the right to revoke a director’s mandate at any time (“ad nutum”).

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prudential supervision) together with the “FSMA” (which qualifies as the successor of the (old) CBFA, and which will deal with market supervision), as Belgium has adopted a Twin Peaks model, will closely see to it that in each institution a proper and due distinction is made between supervision and management functions.

monitoring this debate.

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Cyprus

No. There is a requirement that Board members are in a position to commit sufficient time and energy in fulfilling their responsibilities.

Yes. Both the Chairman and the Vice Chairman should be non executive members.

No provisions specified.

The Chairman must assess the performance of individual Board Members, the Board as a whole and its Committees at least once a year and prepare and submit the evaluation report to the Board of Directors; The Board has to periodically evaluate the effectiveness of its internal governance procedures.

Denmark

No, but it is recommended not to take on more board functions than the member can manage in a satisfactory way.

Yes, generally, but in case of the executive director's resignation, the board can appoint one of its members to act as executive director for a short period.

No, but it is recommended to consider the need for integration of new talents and the need for diversity in relation to education, gender, age, international business experience, etc.

Yes, an annual evaluation of the performance and achievements of the board and of the individual members.

Finland

There are no limitations on the number of boards on which a director may sit. However, it is recommended in the FSA Standard on Internal governance and organization of activities that the conflict of interest policy does not empower the supervised entity's CEO and other senior management members to act,

According to the Finnish Corporate Governance Code 2010 applicable to listed companies (CG Code) the election of the managing director as chairman of the board has been restricted, as it is the duty of the board to supervise the managing director.

There are no specific provisions in the law. However, according to the CG Code one element of a diverse composition of the board is to have both genders represented on the board.

To ensure the efficiency of board work, the board shall evaluate its operations and working methods annually. This may be done as internal self-evaluation or by using an external evaluator.

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without justifiable grounds, as a board or senior management member or auditor of a customer corporation not belonging to the supervised entity's group or other conglomerate, if such activity may give rise to a conflict of interest.

The company should clearly divide the areas of responsibility of the managing director and the chairman of the board to ensure that all the decision-making powers of the company are, in practice, not vested in a single individual. Generally, this means that the managing director cannot be elected board chairman. However, some special circumstances, such as the business area of the company, the extent or development phase of the operations or the ownership structure may justify the combination of these two roles. If the company decides to appoint the same person as managing director and board chairman, it must disclose and explain the departure from the recommendation.

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France

Yes, limitations are provided for by law (French commercial code). Members of the Board

Up to five mandates

(or Supervisory Board) :

No more than one mandate

Chief Executive Officer (CEO):

All such mandates Up to five mandates being understood that if the function of chief executive officer is exercised by a member of the Board, those two mandates account for one.

:

French law also provides for exceptions concerning mandates held within groups.

Neither French law nor the AFEP-MEDEF corporate governance code prohibits the combination of the functions of chairman and CEO. According to French law, the CEO may either be the chairman or another person. The board has to determine its choice between those two options.

A new law (January 2011) provides that a balanced representation of women and men must be sought in the composition of board of directors. The objective is to have a minimum of 40% of each sex in boards in 2017. Transition provisions are provided for until such date: one Director at least immediately and 20% in 2014 Prior to the adoption of this law, the French associations AFEP-MEDEF recommended, in the corporate governance code of listed corporations dated April 2010, to review the balance of the board and then to maintain a percentage of at least 20% of women in within a period of 3 years (2013) and at least 40% of women within a period of 6 years (2016).

There are no specific provisions in French law. However, the AFEP-MEDEF corporate governance code of listed corporations mentions that : “For sound corporate governance, the board of directors should evaluate its ability to meet the expectations of the shareholders having entrusted authority to it to direct the corporation, by reviewing from time to time its membership, organisation and operation (which implies a corresponding review of the Board’s committees). Accordingly, each board should think about the desirable balance in its membership and that of the committees created from among its members and consider from time to time the adequacy of its organisation and operation for the performance of its tasks. The evaluation should have three objectives: - assess the way in which the board operates; - check that the important issues

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are suitably prepared and discussed; - measure the actual contribution of each director to the board’s work through his competence and involvement in discussions. The evaluation, which should preferably be conducted on an annual basis, should be performed in the following manner: - once a year, the board should dedicate one of the points on its agenda to a debate concerning its operation. - there should be a formal evaluation at least once every three years. It could be implemented, possibly under the leadership of an independent director, with help from an external consultant. - the shareholders should be informed each year in the annual report of the evaluations carried out and, if applicable, of any steps taken as a result. - it is recommended that the directors who are external to the company (i.e. are neither executive managers nor employees) meet periodically

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without the “in-house” directors. The internal rules of operation of the board of directors could provide for such a meeting once a year, at which time the evaluation of the chairman’s, chief executive officer’s and deputy chief executive’s respective performance would be carried out, and the participants could reflect on the future of the company’s executive management.”

Germany

According to the German Banking Act (Kreditwesengesetz, KWG, section 36 (3), sentence 6), the number of boards on which a director may sit is limited to a maximum of 5 supervisory boards of supervised companies. There is an exception for companies which are members of the same institutional protection scheme. According to the German Corporate Governance Code (no. 5.4.5), the number of boards on which a director may sit is limited to a

Combining the two positions is prohibited by the German Stock Corporation Act (Aktiengesetz, AktG, section 105 (1)): dual management board/supervisory board system.

According to the German Banking Act (Kreditwesengesetz, KWG, section 36 (3), sentences 1 and 2), members must be reliable and have the necessary expertise to exercise the oversight function and evaluate and monitor the business activities the company is engaged in. When evaluating whether someone has the necessary expertise, the Federal Financial Supervisory Authority (BaFin) considers the scale and complexity of the activities the institution is engaged in.

Supervisors may, if necessary, exercise a comprehensive right of evaluation under Section 44 of the German Banking Act (Kreditwesengesetz, KWG). According to the German Corporate Governance Code (no 5.6), the supervisory board is recommended to regularly examine the efficiency of its activities.

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maximum of 3 boards of non-group listed or similar companies. According to the German Stock Corporation Act (Aktiengesetz, AktG, Section 110 (2)), the number of boards on which a director may sit is limited to a maximum of 10 boards, not including up to 5 boards of companies in the same group.

According to the German Corporate Governance Code (no. 5.4.1), the supervisory board has to be composed in such a way that its members as a group have the knowledge, ability and expertise necessary to properly carry out its tasks. The supervisory board has to specify concrete objectives with respect to its composition. These must take account of potential conflicts of interest, set an age limit for members and provide for diversity. In particular, the objectives should specify an appropriate level of female representation. Section 100 (5) of the German Stock Corporation Act (Aktiengesetz, AktG) stipulates that companies within the meaning of Section 264 d of the German Commercial Code (Handelsgesetzbuch, HGB) must have at least one independent member on their supervisory board with expertise in accounting or

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auditing matters. In addition, certain minimum requirements arise from the fact that, by assuming office, supervisory board members implicitly declare that they are in a position to make an adequate contribution to the oversight function. Each member is responsible for ensuring that he/she can understand and analyse independently the relevant economic background and the business activities the company normally engages in.

Greece

There is no limitation on the number of boards on which a director may sit.

According to the Act of the Governor of the Bank of Greece 2577/2006 (section IV article 1.l), in order to avoid situations where a conflict of interest might ensue, it is suggested that the competences of the Chairman of the board be separated from the executive competences of the CEO.

There are no specific provisions regarding women and/or foreign executives in the board.

There is no formal evaluation procedure regarding the role of the board.

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Hungary

No, but there is a requirement that Board members shall notify the Hungarian Financial Supervisory Authority when elected to serve in the board of directors or supervisory board of another financial institution or when terminating such office, or when acquiring a qualifying interest in a company.

There is no such prohibition.

There are no specific provisions regarding women. There is no specific provision regarding foreigners, but according to the Act on Credit Institutions and Financial Enterprises: the board of directors of a credit institution shall have at least two members recognized as residents according to foreign exchange regulations and having had a permanent residence in Hungary for at least one year.

The executive officers and

members of the executive board and of the supervisory board of a financial institution shall be liable to ascertain that the financial institution performs the authorized activities in accordance with the provisions set out in legislation. If the shares of a public limited company are admitted for trading on the Budapest Stock Exchange, the management board shall present to the annual general meeting the company governance and management report together with the annual report prepared pursuant to the Accounting Act. The report shall contain the management board's conclusions on the company's policy adopted with a view to sound governance and management in the previous financial year, and shall demonstrate any derogation from the Recommendations of the Budapest Stock Exchange for Sound Company Governance. The report shall be posted on the official website of the public limited company.

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The report shall be approved by a separate resolution of the general meeting. If the public limited company has a supervisory board, the report may not be presented to the general meeting without the consent of the supervisory board.

Ireland

Core banks: 5 financial directorships; 8 non-financial directorships. Major banks: 3 financial; 5 non financial

Definitely separate roles. Also CEO may not become Chairman for 5 years after leaving CEO post.

Not specifically mentioned but broadening of the director pool encouraged, especially to include new personnel who will provide independent challenge.

The board shall formally review its overall performance and that of individual directors, relative to the board’s objectives, at least annually. The review shall be documented.

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Italy

Bank of Italy Supervisory Provision on corporate governance: (par. 3, implementing guidelines, lett. b) The limits to the holding of multiple positions must be the subject of specific provisions of company bylaws or rules. Consolidated Law of Finance (art. 148-bis) Limits on the cumulation of positions (for control bodies) -Consob shall lay down in a regulation the limits to the cumulation of management and control positions that members of the internal control bodies of companies referred to in this chapter and of companies with financial instruments widely distributed among the public.

Bank of Italy Supervisory Provision on CG: (par. 2.1, implementing guidelines, lett. e) The chairman of the board of directors promotes the effective functioning of the system of corporate governance and ensures the balance of powers vis-à-vis the managing director and the other executive directors; he is the interlocutor for the internal control bodies and internal committees. In order to perform his function effectively, the chairman must have a non-executive role and not be involved de facto in the current business of he company, except for the possibility of standing in for executive directors in exceptional circumstances. These provisions also apply to the chairman of the management board when

N/A

Bank of Italy Supervisory Provision on CG: (par. 3, implementing guidelines, lett. b) On the occasion of the appointment of board members and continuing over time, the number of similar positions held must be verified and evaluated, with special attention to those requiring greater involvement in the current business of the company. Corporate governance Code (art. 2.C2) The directors shall know the duties and responsibilities relating to their office. The chairman of the Board of Directors shall use his best efforts for causing the directors to participate in initiatives aimed at increasing their knowledge of reality and business dynamics, also having regard to the relevant regulatory framework, so that they may carry out their role effectively.

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the supervisory board does not perform the strategic supervision function. Corporate Governance Code (art. 2.P.4) It is appropriate to avoid the concentration of corporate offices in one single individual. (art. 2.C.3) In the event that the chairman of the Board of Directors is the chief executive officer of the company, as well as in the event that the office of chairman is covered by the person controlling the issuer, the board shall designate a lead independent director, who represents a reference and coordination point for the requests and contributions of non-executive directors and, in particular, those who are independent.

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Latvia

According to the Commercial Law: The council The minimum number of council members shall be three, but if the stock of the company is in public turnover – the minimum number of council members shall be five. The maximum number of council members shall be twenty. The council shall be elected for a period which is not longer than five years. The board The board of directors may consist of one or several members of the board of directors. If the stock of a company is in public turnover, the minimum number of members of the board of directors shall be three members.

Yes. The following may not be members of a board of directors: 1) The members of the council of the company; 2) The auditor of the company; 3) The person who, by a judgment of a court, has been deprived of the right to conduct the relevant type or all types of commercial activities; and 4) The member of the council of the dominant undertaking of a group of companies.

There are no specific provisions regarding women and/or foreign executives in the board and in the council.

There are no specific provisions in the Latvian legislation.

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Netherlands

Not numerically The Dutch Corporate Governance Code contains the principle that the number of supervisory boards of Dutch listed companies of which an individual may be a member shall be limited to such an extent that the proper performance of his duties is assured. In addition the Banking Code: Principle 3.1.1 “The executive board shall be composed in such a way that it is able to perform its tasks properly.”

Although it is not necessary in a two-tier model to prohibit combining the functions of chairman and chief executive officer of the board of directors, as these functions are split, the Dutch Corporate Governance Code contains the principle that a member of the executive board cannot be appointed as chairman of the supervisory board of listed companies (II.1.8 Corporate Governance Code). In addition, the Dutch Corporate Governance Code provides that the chairman of the supervisory board may not also be or have been an executive director (III.8.1 Corporate Governance Code).

The Banking Code contains the principle that the executive board shall be composed in such a way that it is able to perform its tasks properly and that complementarily, a collegial board and diversity are preconditions for the executive board to perform its tasks properly (3.1.1. Banking Code).

According to the Dutch Corporate Governance Code (III.1.7 Corporate Governance Code) The supervisory board shall discuss at least once a year without the management board being present both the functioning of the management board as an organ of the company and the performance of its individual members, and the conclusions that must be drawn on the basis thereof.

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Poland

There is no quantitative limitation. Although the members of the board are obliged to avoid any conflicts of interests and therefore cannot be members of the boards of other entities which could considered competitive.

There is no such prohibition

There are no specific provisions regarding women nor foreigners. Although, according to the Banking Act two members of the management board have to be approved by the Financial Supervisory Authority.

The management board is obliged to manage the whole company and to represent the company to third persons – including signing contracts and other agreements. Except the cases mentioned in the provisions of law (i.e. selling the real estate owned by the company), the board does not have an obligation to obtain the permission of the supervisory board to make any legal actions

Portugal

Although there is not a general limitation on the number of boards on which a director may serve under Portuguese law, there are several relevant provisions in connection with this issue. Firstly, one of the components of the statutory duty of care to which directors are bound is the availability to the discharge of their functions - Article 64, 1 of the Portuguese Companies Code (hereinafter, the “PCC”).

There is no such prohibition. However, the Corporate Governance Code (the “Corporate Governance Code”) issued by the Portuguese Securities Authority (“CMVM”) recommends that when the chairman of the board performs executive functions, the board should design efficient mechanisms for

There are no specific provisions regarding women and/or foreign executives in the board.

The board is obliged to present a management report in the annual general shareholders’ meeting, together with the accounts and other documents required by law. The management report includes, broadly, a clear explanation of the progress of the company’s business and performance (Articles 65 and 66 of the PCC, for companies in general and Article 451 of the PCC for public companies (“sociedades anónimas”)). In relation to public companies

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Additionally, pursuant to article 398, 3 of the PCC, a director of a company may not perform duties in a competitor company unless authorised by the general meeting. As to credit institutions, article 30 of the Credit Institutions and Financial Companies’ General Regime (“CIFCGR”) provides that the board members of credit institutions must have the necessary availability to ensure the prudent management of the institution. Moreover, Banco de Portugal (hereinafter, the “BdP”) may oppose to the presence of directors of credit institutions in the board of other companies, if it considers that such accumulation of functions is capable of affecting the performance of the director’s duties in the credit institution, e.g. for reasons of conflict of interest or lack of availability (Article 33 of the CIFCGR).

the co-ordination of the work of the non-executive directors, and specify the mechanisms adopted in the corporate governance report. The Corporate Governance Code operates on a comply-or-explain basis and is applicable to companies with shares admitted to trading on a regulated market. Portuguese law allows public companies (sociedades anónimas) to choose between three management and monitoring models: the traditional model, with a board and a monitoring council; the Germanic model, consisting of a two-tier board structure, similar to that of German law; and an Anglo-American model, characterised by a single board structure with an audit committee vested

(sociedades anónimas), the annual general shareholders meeting evaluates the management of the company, and may resolve on the granting of a confidence vote to the board and to its members or on the substitution of some of them (Article 455 of the PCC). In addition to this, under Article 245-A of the Portuguese Securities Code (hereinafter, the “PSC”) companies with shares admitted to trading on a regulated market are required to present a detailed corporate governance report, along with the annual management report, disclosing a large amount of information, including a comply or explain statement relative to the Corporate Governance Code. The Corporate Governance Code recommends that the board itself assesses, in the corporate governance report, the adequacy of the governance model adopted by the company and a description of the non-executive directors’ activities and any constraints encountered.

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The preceding paragraph does not apply to the accumulation of functions in institutions subject to the same area of consolidated supervision.

with monitoring powers. For companies adopting the German model of governance, the roles of CEO and chairman shall never be performed by the same person.

Moreover, pursuant to Articles 246.º and 246.º-A of the PSC, issuers of debt securities that are admitted to trading on a regulated market and which have a nominal value of less than €50.000 at the time of the issuance must, (i) within two months counted as from the end of the first six months of the financial year, disclose an interim management report (which shall include an indication of important events that have occurred during the relevant period, and the impact on the respective financial statements, together with a description of the principal risks and uncertainties for the remaining six months), and, (i) during the first and second half-year of the financial year, disclose a statement with an explanatory description of relevant events and transactions carried out during the relevant period and its impact on the financial position of the issuer and companies controlled by the latter, as well as an overall description of the financial

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position and performance of the issuer and companies controlled by it during the relevant period. As for credit institutions in particular, pursuant to Article 32 of the CIFCGR, if the BdP finds that, for any reason, the statutory or contractual requirements for the regular functioning of the board are no longer fulfilled, it shall set a time limit for the alteration of its composition and, ultimately, if the problem persists, the authorisation of the institution in question may be revoked.

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Spain

According to the Law 31/1968, there is a general limitation of four boards in commercial companies for banks’ directors, although the number could reach eight in certain situations (subsidiaries...) and a prohibition of being appointed director in other bank. Besides, the Unified Governance Code of Listed Companies (hereinafter CUGC) recommends that companies should lay down rules about the number of directorships their board members can hold.

No, although the CUGC states that when a company’s Chairman is also its chief executive, an independent director (“lead independent director”) should be empowered to request the calling of board meetings or the inclusion of new issues on the agenda, to coordinate and give voice to the concerns of external directors and to lead the board’s evaluation of the Chairman.

The Organic Law 3/2007 lays down companies should do their best efforts to get a good balanced presence of women in their boards. So does the CUGC.

The CUGC recommends that in listed companies, the board in full should evaluate, on a yearly basis, the quality and efficiency of its operation, how well the Chairman and the chief executive have carried out their duties and the performance of its committees.

Sweden

No limitation in law. According to the regulations from the FSA a person has, within the fit and proper test, to inform the authority about the number of boards on which the person is engaged in. According to the Swedish Corporate Governance Code directors are to devote the

According to the Banking- and financing business Act a person is not able to combine the function of Chairman and CEO. The Swedish Corporate Governance Code and the Companies Act stipulates the same prohibition for a public limited company.

According to the Corporate Governance Code the board is to have a composition appropriate to the company´s operations, phase of development and other circumstances. The board members elected by the shareholders´ meeting are collectively to exhibit diversity and breadth of

According the Corporate Governance Code the board of directors is to evaluate its work annually, using a systemic and structured process, with the aim to developing the board´s working methods and efficiency. The results of this evaluation are to be made available to the nomination committee where relevant. According to the Code

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necessary time and care, and to ensure they have the competence required to effectively protect and promote the interests of the company and its owners.

qualifications, experience and background. The company is to strive for equal gender distribution on the board.

and the Annual Accounting Act the board of directors is to inform the shareholders and the capital market annually regarding corporate governance functions in the company and how the company complies with the Code.

UK

Not numerically. UK Corporate Governance Code principle that ‘all directors should be able to allocate sufficient time to the company to discharge their responsibilities effectively (B.3). This is supplemented for banks by the FSA making sure that NED’s can make an appropriate time commitment to a firm as part of its approval process within the significant influence controlled functions regime. [N.B. We refer throughout to the UK Corporate Governance Code which replaces the existing Combined Code for accounting periods beginning on or after 29 June 2010.]

Yes – UK Corporate Governance Code principle. (A.2). But as a code provision, this is on a ‘comply or explain’ basis and therefore the two could be combined if circumstances merited this e.g. for a transitional period.

Supporting principle to B.2 explains that ‘the search for board candidates should be conducted, and appointments made, on merit, against objective criteria and with due regard for the benefits of diversity on the board, including gender.’

The UK Corporate Governance Code explains that the board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors and that the chairman should act on the results of the performance evaluation when, e.g. seeking the appointment of new members or the resignation of some (B.6). It also provides for a statement in the annual report on performance evaluation (B.6.1). The evaluation of the board of FTSE 350 companies is to be externally facilitated at least every three years (B.6.2). The non-executive directors, led by the senior independent director, are responsible for performance evaluation of the chairman (B.6.3).

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Table 2: Functioning of the Board

Existence of an approval procedure

for new products

Obligation to inform supervisors

in the case of material risks

Approval of a report on the adequacy of

internal control systems

Interests of depositors and

other stakeholders

Accountability/liability of board members

Austria

Austrian Banking Act Sec. 39: (2) Credit institutions must have in place administrative, accounting and control mechanisms for the capture, assessment, management and monitoring of risks arising from banking transactions and banking operations. These mechanisms must be appropriate to the type, scope and complexity of the banking transactions conducted. Wherever possible, the administrative, accounting and control procedures must also capture risks arising from banking transactions and

Austrian Banking Act: State commissioners who act as functionaries of the Financial Market Authority participate in the meetings and are therefore informed, in detail: The Federal Minister of Finance must appoint a state commissioner and a deputy state commissioner for a maximum term of five years in the case of credit institutions whose total assets exceed EUR 1 billion. The state commissioners and their deputies are to act as functionaries

Austrian Stock Corporation Act and Austrian Banking Act: Monitoring of the efficiency of the internal control system is part of the tasks of the Audit Committee.

N/A

Austrian Stock Corporation Act: A prison sentence of up to one year or a fine of up to 360 day-fines shall be imposed by the court on any person who, in his capacity as a member of the Management Board or of the Supervisory Board, or as an agent or liquidator 1. in reports, statements

and summaries pertaining to the company or to its affiliated enterprises, that are addressed to the public or to the shareholders, such as the annual financial statements (consolidated annual financial statements) and the management

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banking operations which might possibly arise. The organisational structure must prevent conflicts of interest and of competences by establishing delineations in structural and process organisation which are appropriate to the credit institution's business operations. The adequacy of these procedures and their enforcement must be reviewed by the internal audit unit at least once per year. 2c) In the case of new transactions with which the credit institution has no experience regarding the risks involved, due consideration must be given to the security of third-party funds entrusted to the credit institution and to the preservation of the credit institution's own

of the FMA (Financial Market Authority) and, in this capacity, are exclusively subject to the instructions of the FMA. The state commissioner and deputy state commissioner must be invited by the credit institution in a timely manner to the general meetings and any other meetings of the members, to the meetings of the supervisory board and of executive committees of the supervisory board. Upon request, they must be allowed to speak at any time. All written records of the meetings of the bodies indicated above must be conveyed to the state commissioner and deputy state commissioner.

report (group management report),

2. in a public call for participation in the company,

3. in lectures or information provided at the shareholders’ meeting

4. in information to be provided to an auditor of the annual financial statements or to other auditors of the company pursuant to § 2727 Commercial Code or

5. in reports, statements and summaries to the Supervisory Board or its Chairman shall incorrectly present, obscure or conceal the circumstances , even if these shall only concern individual business cases.

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funds. The procedures pursuant to para. 2 must ensure that the risks arising from new transactions as well as concentration risks are captured and assessed to the fullest possible extent.

Belgium

Yes. This aspect is more of the operational kind and consequently, depends on the effective management of the operational entities rather than on the Board of Directors which is also competent for the strategic policy of the company (to be implemented by the operational management). Please also refer to the overview above “Table 1: Composition and role of the Board” (i.e. there is a strict regulatory difference

Yes. However, most likely this reporting obligation will (or better: should) be met by the management committee, as the operational tasks and daily management are part of the competence of the management committee. Of course, if the Board of Directors and/or an individual director acknowledge a risk (within their supervision function), they obviously could

Yes. The Board of Directors will approve: (i) report from the effective management on the evaluation of the internal supervision system and (ii) declaration from the effective management on the periodical prudential reporting

The action of the Board is based on the sole concern for the interest of the company vis-à-vis the shareholders, the customers and the staff.

The liabilities for members of the Board of Directors may arise among other things following breaches of the bye-laws of the company or the provisions of the Belgian Company Code (e.g. late approval and filing of the annual accounts with the National Bank of Belgium, no annual shareholders’ meeting, etc.) and/or following breaches of specific regulations and/or internal/external policies, contracts, etc. In some cases, there may be even an

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between supervisory functions and/or tasks which are the exclusive competence of the Board of Directors at the one hand and, management functions which are the exclusive competence of the management committee at the other hand.)

also have a reporting obligation vis-à-vis the competent Belgian supervisor. For more details, please refer to article 22 of the Law of 22 March 1993 on the legal status and supervision of credit institutions.

exposure to extra-contractual liabilities which may arise. As for the conflicts of interest, there are specific provisions (including penalties) as laid down in the Belgian Company Code. In addition, institutions may have adopted a specific policy for conflicts of interest. Policy aimed at avoiding conflicts of interest holding among other things provisions pertaining to transactions implying company financial instruments.

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Cyprus

The Board must approve written procedures for approving new products. Internal control, risk management and compliance units should be involved in the design of new products.

A non executive and independent member who disagrees with any decision of the Board of Directors may notify the Central Bank of Cyprus, if it considers this to be appropriate. For listed banks, the directors are responsible for informing the relevant authorities in case of any violation of stock market laws and regulations.

The Board’s Audit Committee is responsible for the monitoring and assessment, on an annual basis, of the adequacy and effectiveness of the Internal Control System. An annual report on the adequacy and effectiveness of the Internal Control System is prepared by the Head of the Internal Audit Unit, and it is submitted through the Audit Committee, to the Central Bank of Cyprus.

The Board has to set strategic goals and ethical standards that direct the ongoing activities of the bank, taking into account the interests of all stakeholders.

The Board is responsible for the correctness of published annual and other financial statements of the bank, as well as the correctness of prudential and other information submitted to supervisory authorities;

Denmark

Yes, as a part of the board's ongoing decision on the business and risk profile of the bank.

Yes, there is an obligation for the members of the board of directors and the executive directors to inform the Danish Financial Supervisory Authority immediately in the

Yes.

It is recommended that the board identifies the bank's key stakeholders and their main interests in relation to the bank. Furthermore, the board should adopt a policy on the bank's relationship

Yes, board members can be held accountable for acts conflicting with the law.

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case of material risks.

with the stakeholders and ensure that the interests of the stakeholders are respected in accordance with the policies of the bank on such issues.

Finland

According to the FSA Standard on internal control arrangements the duty of the board of directors as regards internal control is to approve the principles of risk management and ensure that they contain a procedure for the start-up of new business activities and for introducing new products.

Under the Accounting Act a management report must be attached to the financial statements, presenting information on significant matters relating to the development of the reporting entity's operations. According to the FSA Standard on disclosure of information the management report must include a balanced and complete assessment, with

The board of directors bears primary responsibility for internal control and its functioning.

According to the Act on Credit Institutions the credit institution shall be managed with professional skill and in compliance with sound and careful business principles on the basis of the reliability and suitability of the owners and the management personnel.

According to the Act on Credit Institutions a member of the board of directors shall be liable to compensate any damage he has caused to the credit institution either willfully or through negligence in his duties. The same shall apply to damage caused to a shareholder, member, holder of an investment participation or basic fund certificate or other person through a violation of the legislation, regulation of the Financial Supervisory Authority issued thereunder or the Articles of Association

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regard to the extent and structure of the operations, of significant risks and uncertainties and other conditions affecting the financial performance.

or the Bylaws of the credit institution.

France

According to French law, the role of the board is to determine the orientation of the company’s activity and to oversee its implementation. It is not the board’s responsibility to approve new financial products. Moreover, such an approval procedure would not be compatible with the deadline and responsiveness that characterizes commercial and financial activities. Nonetheless, it is the board’s responsibility to

Regulation 97-02 provides that : The board sets the significance criteria and thresholds in order to identify incidents that must be brought to its attention. Those criteria and thresholds are communicated to the banking regulator (“Autorité de contrôle prudentiel”), who checks their relevance with regard to the situation of the

According to French Law (Commercial code), the chairman of the board describes the preparation and organisation of the board's work and the internal audit procedures put in place by the company in a report attached to the annual report. This report is approved by the board.

Like for any other company the board of a financial institution is a panel representing all shareholders collectively. Its duty is not to take into account specifically the interests of the other stakeholders even if it must act under all circumstances within the overall framework of the social and long term interest of the company.

French law (commercial code) defines the basis of directors’ civil liability : “directors and the chief executive officer shall be liable individually or jointly and severally, depending on the case, toward the company or toward third parties, either for violations of legislative or regulatory provisions applicable to corporations, or for violations of the bylaws, or for wrongful acts committed in their management”. Based on this provision of law, precedents have

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ensure that an appropriate procedure is in place as required by French banking regulation (Regulation 97-02 relating to internal control in credit institutions and investment firms)

institution and the way in which they are applied. If the situation of the institution requires it, it may request an institution to review its criteria and thresholds as well as their implementation. Significant incidents with regard to the criteria and thresholds must without delay be brought to the attention of the executive management and of the board. Those incidents are communicated to the banking regulator.

built a system of liability of directors and recent judgements should make it easier for shareholders to hold the entire board accountable. They may also incur criminal liability and many bills base the criminal liability of the executive officers on labour law, corporate law, environmental law, and so on.

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Germany

According to the Minimum Requirements for Risk Management there are the following extended obligations regarding NPNM: prior planning, test phases etc. including the involved operational units, approval by the board.

Supervisors have a comprehensive right of evaluation under Section 44 of the German Banking Act (Kreditwesengesetz, KWG). In addition, Section 44 (4) of the German Banking Act (Kreditwesengesetz, KWG) gives supervisors the right to sit in on board meetings. Under Special Section 2.4, par. 5 of the German Minimum Requirements for Risk Management (MaRisk), auditors have to report to management immediately if they identify material risks. Management then has to pass this information on

Under General Section 4.3.2, par. 3 of the German Minimum Requirements for Risk Management (MaRisk), management has to require the submission at appropriate intervals of a report on the company’s risk situation. This report must describe and assess the risks and, if necessary, suggest corrective action. Under par. 2 of the Special Section of the German Minimum Requirements for Risk Management (MaRisk) relating to processes for identifying, assessing, treating, monitoring and communicating certain risks, the appropriateness and plausibility of methods and processes used by the company must be regularly checked.

The management and supervisory boards have to ensure the continued existence of the company and its sustainable creation of value in conformity with the principles of a social market economy (interest of the enterprise, Foreword). The interest of the enterprise comprises the interests of shareholders, employees and other stakeholders. This is not specifically spelled out in law. It is nevertheless beyond question in Germany that the supervisory board should focus on the health and interests of the company and should

Management board members who fail in their responsibilities are personally liable to the company for damages. They are also open to criminal prosecution (for breach of trust). However, in introducing the business judgement rule (Section 93 (1) of the German Stock Corporation Act (Aktiengesetz, AktG)), lawmakers recognised that a business misjudgement should not in itself trigger directors’ liability. Mistakes are part of business life. Act on the Appropriateness of Management Board Compensation (Gesetz zur Angemessenheit der Vorstandsvergütung, VorstAG): directors’ and officers’ (D&O)

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immediately to the supervisory board chairman and the supervisory authorities. If management fails to do so, the auditors have to inform the supervisory board direct.

consider not only the interests of the owners and the ability to maximise earnings but also the interests of staff, customers, creditors and the public in general.

insurance policies must provide for a deductible of at least 150% of the board member’s fixed annual remuneration.

Greece

According to Section II art. 19 of the Act of the Governor of the Bank of Greece 2577/2006, before a credit institution expands its activities in order to include the provision of new products or services, the following conditions have to be met: (a) Justified decisions that incorporate the new products into the credit institution’s growth strategy need to be taken, (b) Relevant risks, including operational risk, must be precisely defined, (c)

The evaluation of the risk management carried out by the CRO is submitted annually to the Bank of Greece along with the internal control system (Section VI art. 1.2 Act of the Governor of the Bank of Greece 2577/2006). Apart from that, pursuant to Section II art 20.3 of that same Act, recommendations of the risk management unit in issues relating to business decision-making to assume major risks,

The adequacy and efficiency of the internal control systems is subject to a yearly evaluation by the internal audit committee, a committee manned by at least three non- executive board members (section IV B of the Act of the Governor of the Bank of Greece 2577/2006). Every three years an evaluation is carried out by external auditors and this report is submitted to the Bank of Greece within six months after its completion.

Interests of depositors and other stakeholders are taken into account, within the context of operational risk, and are an integral part of the Internal Control System. Within this context, the provision of adequate customer service and legislation pertaining to consumer protection, money laundering, terrorist financing and data protection is taken into account (Section II art. 13 of

a. The Bank of Greece can impose sanctions on the credit institution for any breach of the Act of the Governor of the Bank of Greece 2577/2006. b. The responsibility for consistent enactment of the Act of the Governor of the Bank of Greece 2577/2006 rests with the board of directors (Section IV part A art.2 of said act).

c. Board members can be held liable towards the credit institution for any breach of their

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the incorporation of relevant control procedures into the existing risk management system and the internal controls must already be completed. Furthermore pursuant to Section II art 20.1 of that same Act, in issues relating to business decision-making to assume major risks, or risks that are not subject to predefined factors and to set relevant risk exposure limits, the participation of at least the competent unit and the Risk Management Unit should be ensured. The documented internal procedures approved by the Board of Directors shall fully determine the extent to which final decisions (see above par. 20.1.) take into account the recommendations of the Risk Management Unit. The Bank of Greece

or risks that are not subject to predefined factors and set relevant risk exposure limits, recorded in the minutes of board meetings shall be provided upon request to Bank of Greece’s competent controllers, as provided for by law (article 4 of Law Decree 588/1948).

the Act of the Governor of the Bank of Greece 2577/2006). The provisions of general company law 2190/1920 also apply.

executive duties pursuant to art. 22a of Law 2190/1920 (general company law).

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shall appreciate it if the importance attached to such recommendations escalates according to the height and the complexity of the undertaken risks (veto power, increased weight, simple participation in majorities etc.)

Hungary

The credit institution’s board of directors shall approve and periodically review the strategies and policies for the segregation of duties in the organization and the prevention of conflicts of interest, for taking up, managing, monitoring and mitigating the risks the credit institution is or might be exposed to, including those posed by the macroeconomic environment in which it operates in relation to the status of the

The board of directors of a credit institution shall immediately notify the Authority and the Hungarian National Bank in writing:

a) in the event where any danger of financial failure (illiquidity) is imminent;

b) if there is any emergency arising in the credit institution’s everyday operations, such as insolvency;

c) if its own funds

Public limited companies shall set up an audit board consisting of three members elected by the general meeting from the board of directors, or from the independent members of the supervisory board, where applicable. The competence of the audit board shall cover the following:

a) to opinionate on the annual report prepared according to the Accounting Act;

b) making a recommendation

Interest of

depositors and other stakeholders are taken into account as integral part of the internal control system.

The Authority

shall have powers to withdraw the authorization for operation where: under the prevailing circumstances the credit institution’s activities pose substantial hazard or injury in respect of the interests of

According to the Act

on Business Associations: executive officers shall bear joint and several liability toward the business association for any damage resulting from the incorrectness of the data, rights or facts notified, or from any delay in filing or failure to file the notification, including where the annual report prescribed in the Accounting Act and the relating business report is drawn up and published not in compliance with the

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business cycle. Credit-granting shall be based on sound and well-defined criteria fixed in the internal policies. Administration and monitoring of the credit institution’s various credit risk-bearing portfolios and exposures, including for identifying and managing problem credits for which adequate value adjustments and provisions are necessary, and such value adjustments and provisions shall be operated through effective systems. Diversification of credit portfolios shall be adequate given the credit institution’s target markets and overall credit strategy.

has diminished by twenty five percent or more;

d) if it has suspended payments; or

e) if it has ceased its operations, financial service activities. The board of directors of a credit institution shall notify the Authority within two business days in writing: concerning any increase or reduction of the subscribed capital; where any financial service is suspended, restricted, or terminated.

concerning the person and remuneration of the auditor;

c) preparation of the contract to be concluded with the auditor, and signing the contract on the company's behalf by authorization conferred under the articles of association;

d) monitoring compliance with the qualification requirements and with the regulations on conflict of interest on the part of the auditor, discharging the duties relating to cooperation with the auditor and - where necessary - tabling recommendations to the board of directors or the supervisory board for taking measures;

e) analysis of the financial reporting system and making recommendations when any action is deemed necessary; and

f) assisting the board

account-holders, depositors, and other customers, obstructs the free circulation of money or the proper functioning of the money and capital market. The Authority may appoint a supervisory commissioner particularly if: the credit institution’s board of directors is unable to perform its functions, hence endangering the interests of the deposit-holders.

relevant provisions of the Accounting Act. Executive officers shall conduct the management of the business association with due care and diligence as generally expected from persons in such positions and - unless otherwise provided in this Act - give priority to the interests of the business association. Executive officers shall be liable to the business association in accordance with the general rules of civil law for damages caused by any infringement of the law or any breach of the memorandum of association, the resolutions of the business association's supreme body, or their management obligations. The responsibility for

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Credit institutions shall have written policies and procedures for:

a) the management of the risk that the recognized credit risk mitigation techniques the credit institution uses prove less effective than expected;

b) the management of concentration risk arising from exposures to counterparties, groups of connected counterparties, and counterparties in the same economic sector, geographic region or from the same activity, and from the application of credit risk mitigation techniques;

c) the measurement and management of all material sources and effects of market risks;

d) the evaluation, measurement and management of the risk arising from potential changes in interest rates as they affect a credit

of directors and the supervisory board so as to exercise proper control of the financial reporting system.

According to the Act

on Credit Institution the articles of association of a credit institution that operates in the form of a public limited company may contain provisions to prescribe that setting up an audit board is not mandatory, provided that the provisions governing the composition and jurisdiction of the supervisory board and the conflicts of interests of its members are in compliance with the provisions of the Companies Act prescribed for the audit board.

presenting the annual report of the private limited company prepared pursuant to the Accounting Act to the general meeting lies with the management board. The management board shall prepare a report on the management, the financial situation and the business policy of the company at the intervals set out in the articles of association, or at least once every year for the general meeting, and at least once every three months for the supervisory board. The management board shall ascertain that the books of the company are kept according to the rules.(Act on Business Association)

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institution’s non-trading activities;

e) the evaluation and management of the exposure to operational risk, including contingency and business continuity plans to ensure a credit institution’s ability to operate on an ongoing basis and limit losses in the event of severe business disruption;

f) the measurement and management of their liquidity position.

Ireland

Not specifically mentioned. However Board is responsible for setting business strategy.

If a material deviation from the defined risk appetite measure arises, the details of the deviation and of the appropriate action to remedy the deviation shall be communicated to the Central Bank by the board in writing no later than 5 business days after the Board becoming aware of

Not directly mentioned. However the board shall ensure that the risk management framework and internal controls reflect the risk appetite and that there are adequate arrangements in place to ensure that there is regular reporting to the board on compliance with the risk appetite.

Not specifically mentioned.

The board shall be able to explain its decisions to the Central Bank (CB). A recent CB Enforcement Strategy attaches considerable significance to the role of persons concerned in the management of regulated entities. Where such a person contributes to a breach of any aspect of financial services law

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the deviation. through below standard behaviour, that person can be expected to be subject to enforcement action.

Italy

Bank of Italy Supervisory Instruction for Banks (Tit. IV, Cap 11, par 2) Banks have to carefully evaluate the implications of entering into new markets or business areas, or involving the supply of new products. In particular, it is necessary to preventively identify the risks and the establishment of adequate control procedures. These procedures shall be subject to the approval by the Board of Directors.

Consolidated Banking law (not for the Board of Directors, but on Board of Auditors) (art. 52 - Notifications by boards of statutory auditors and persons appointed to audit the accounts) 1. Boards of statutory auditors shall inform the Bank of Italy without delay of every act or fact they come to know of in the performance of their duties that may constitute an irregularity in the management of banks or a violation of the provisions governing banking. 2. Persons appointed

Bank of Italy Supervisory Instruction for Banks (Tit. IV, Cap 11, par 1.1) The Board of Directors ensures that the functioning, the effectiveness and the efficiency of the internal control system is periodically reviewed. Corporate Governance Code (art. 8.P.3, 8.C.1.) The Board of Directors shall evaluate, at least on annual basis, the adequacy of the internal control system with respect to the characteristics of the company.

N/A

Civil Code: - Liability versus company, shareholders and any other stakeholders suffering a direct damage (art. 2392-2395 c.c.) - Criminal Responsibility (art. 2621-2641 c.c.) Consolidated Banking Law – specific provisions art. 130 and following (criminal and administrative liability) Consolidated Law on Finance: - art. 166 and following: specific provisions on criminal and administrative liability

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to audit or check the accounts of banks shall notify the Bank of Italy without delay of acts or facts found in the performance of the engagement that may constitute a serious violation of the provisions governing banking, jeopardize the continued existence of the undertaking or result in an adverse or a qualified opinion on the annual accounts or a disclaimer. Such persons shall send the Bank of Italy any other information or documents requested.

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Latvia

Provisions are provided in the FSA Regulation on the establishment of the internal control system.

Provisions are provided in the FSA Regulation on the establishment of the internal control system.

Provisions are provided in the FSA Regulation on the establishment of the internal control system.

A council is the supervisory institution of a company, which represents the interests of stockholders during the time periods between the meetings of stockholders and supervises the activities of the board of directors within the scope specified in Commercial Law and the articles of association.

Liability of the Members of the Board of Directors and Council (1) Members of the board of directors and council shall perform their duties as an honest and careful manager. (2) Members of the board of directors and council shall be jointly liable for losses that they have caused to the company. (3) Members of the board of directors and council shall not be liable in accordance with Paragraph two of this Section if they prove that they have acted, as would an honest and careful manager. (4) A member of the board of directors and council shall not be liable for losses caused to the company if he or she has acted in good faith within the

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framework of a lawful decision of the meeting of shareholders. The fact that the council has approved the actions of the board of directors shall not release the members of the board of directors from liability to the company.

Netherlands

The Banking Code provides that every bank shall have a product approval process. The executive board shall organise the product approval process and shall be responsible for the process working properly. Products that go through the product approval process at the bank shall not be launched on the market or distributed without careful consideration of the risks by the bank’s

The executive board – and primarily the chairman of the executive board – shall be responsible for adopting, implementing, monitoring and, where necessary, adjusting the bank’s overall risk policy. The executive board shall propose the risk appetite to the supervisory board for approval at least once a year. Any material changes to the risk appetite in the interim shall also

The executive board shall ensure that a systematic audit is conducted of the management of the risks related to the bank's business activities (5.1. Banking Code). Each bank shall have its own, internal auditor who shall occupy an independent position within the bank. The head of the internal audit team shall present a report to the chairman of the executive board and shall report to the chairman of the audit

It is the responsibility of the bank’s executive board to consider the interests of all of the parties involved with the bank, such as its clients, shareholders and employees, in an integrated manner. These considerations shall take into account the continuity of the bank, the environment in society in which the bank operates and legislation,

The Banking Code was designated as a code of conduct within the meaning of article 2:391, paragraph 5, of the Dutch Civil Code by order in council of 23 December 2009. As a result all banks have a legal obligation to report every year in their annual report on the manner in which they applied the principles of the Banking Code in the previous year, providing a substantiated explanation of why a particular principle may

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risk manager and a careful assessment of any other relevant factors, including the duty of care towards the client. Based on an annual risk analysis, the in-house auditor shall check whether the product approval process has been designed properly, is present and is working effectively and shall then inform the executive board and the relevant supervisory board committee (risk committee or similar committee) about the results (4.5 Banking Code).

require the supervisory board’s approval. (4.1 Banking Code)

committee (5.2 Banking Code). The internal auditor shall have the task of assessing whether the internal control measures have been designed properly, are present and are working effectively. This assessment shall include the quality and effectiveness of the system of governance, risk management and the bank’s control procedures. The internal auditor shall report the findings to the executive board and the audit committee. (5.3 Banking Code).

regulations and codes that apply to the bank. The bank shall always treats its clients with due care. (Banking Code Preambule)

not have been applied, either partly or in full (comply or explain). All banks shall place this report on their website.

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Poland

Yes.

Yes.

Yes (the supervisory board).

Yes.

The members of the management board bear civil and penal responsibility for acting against the interests of the company.

Portugal

Pursuant to Article 14 of the CIFCGR and the BdP Notice 5/2008, credit institutions are required to maintain an effective internal control system, so as to ensure the efficient and profitable performance of the institutions, the business continuity and the institutions’ survival, the existence of sufficient information for an informed decision making process, and compliance with the applicable rules and regulations. The internal control system must be based on an adequate control environment, a

Article 120 of the CIFCGR requires that credit institutions provide BdP with all the necessary information for the verification of the risks incurred, including the level of exposure to different kinds of financial instruments. Specific BdP regulatory instruments set out more detailed rules on the information to be provided to the supervisor, such as Instruction 19/2005,

Under Article 120 of the CIFCGR credit institutions must provide BdP with the necessary information for the verification of their risk control and management practices. According to Notice 5/2008 of BdP, the internal control system must be evaluated periodically by the board, and each credit institution must present to BdP a report on the structure and effectiveness of the internal control system. Additionally, the Corporate Governance

Article 75 of the CIFCGR provides that the directors of a credit institution must take into account the interests of the depositors, the investors, the remaining creditors and the clients of the institution in general. The occurrence of a situation in which the interests of depositors are put to risk is a possible cause for revocation of the institution’s authorisation (Article 22 of the CIFCGR).

Board members are subject to civil liability for breach of their duties, and may have to compensate the company for any damages caused in result of their unlawful behaviour (Article 72 of the PCC). Business misjudgements do not, in themselves, bring liability to the directors. The standard of care to be analysed in each case relates to the business decision-taking process. In addition, directors are liable for damage directly caused to the

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solid risk management system, an efficient information system and an effective monitoring process. It is expressly provided that the risk management system must include all the institutions’ products (Article 11 of BdP Notice 5/2008). New products must be approved by the board (Article 18 of BdP Notice 5/2008).

concerning the disclosure of information regarding interest rate risk, Instruction 23/2007 regarding credit, counterparty, operational and market risks, and Instruction 5/2011 and Notice 7/2010 regarding concentration risk, respectively. The Corporate Governance Code recommends that companies include in their corporate governance report a reference to the main risks to which the company is exposed.

Code recommends that companies describe in their corporate governance report the performance and adequacy of the risk management system.

creditors of the company or to other third parties (Articles 78 and 79 of the PCC). Moreover, the fact that the company may be considered liable for performance of illegal acts under the CIFCGR, does not exclude personal liability of directors for such acts (Articles 204 through 212 of the CIFCGR).

Spain

The CUGC states that Board should approve the company’s strategy and authorize the organizational resources to carry it forward, and to ensure the

Yes.

The Spanish Securities Markets Law states that listed companies shall elaborate and make public an annual report on corporate governance, including, among others

The CUGC states that the Board of Directors should ensure that the company abides by the laws and regulations in its

The board members could face administrative, civil and even criminal responsibilities in case of breach of their duties and obligations.

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management meets the objectives set while pursuing the company’s interest and corporate purpose. So, the Board in full should approve, among others, the strategic or business plan, management targets and annual targets.

issues, the risk and internal control systems. This report must be submitted to a consultive vote of the General Shareholders Meeting and sent to the National Securities Markets Commission, who will send it, in case of listed banks, to the Bank of Spain.

dealings with stakeholders; fulfils its obligations and contracts in good faith; respects the customs and good practices of the sector and territories where it does business; and upholds any additional social responsibility principles it has subscribed to voluntarily.

Sweden

According to the Banking- and financing business Act and the Companies Act the board of directors is responsible for ensuring that the requirement for risk management, solvency, liquidity, transparency and soundness are met. According to the FSA (Finansinspektionen) general guidelines regarding Governance and Control of Financial

According to the FSA (Finansinspektionen) general guidelines regarding Reporting of Events of Material Significance a company should report to the FSA the occurrence of such events as may result in changes in financial circumstances which may have the consequence that the

According to the FSA general guidelines regarding Governance and Control of Financial Undertakings the board of directors should ensure that the undertaking´s management of risks and follow-up of the undertaking´s risks are satisfactory. For this purpose, internal regulations should be adopted regarding risk management and risk

According to the Banking- and financing business Act the board of directors are responsible for ensuring that the requirement for risk management, solvency, liquidity, transparency and soundness are met.

According to the Companies Act a founder, member of a board of directors or a managing director who, in the performance of his or her duties, intentionally or negligently causes damage to the company shall compensate such damage. The aforesaid shall also apply where damage is caused to a shareholder or other person as a consequence

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Undertakings the board of directors should adopt a strategy and targets for the operations conducted by the undertaking. The board of directors should also follow up compliance with these targets.

company is unable to fulfil its obligations to customer and events which may result in significant damage to a large number of customer and events which may result in significant badwill for the company.

control. Compliance with these regulations should be ensured constantly.

of a violation of this Act, the applicable annual reports legislation, or the articles of association.

UK

Boards are not strategically best placed to approve new products but should instead maintain an oversight role to ensure that the necessary business approvals and checks have been obtained and carried out. The Walker Review determined that there should be an approval process for new products, but saw it as the responsibility of the Chief Risk Officer to assess, independently of the executive, whether a proposed

Principle 11 of the FSA Handbook establishes that a bank “must disclose to the FSA appropriately anything relating to the [bank] of which the FSA would reasonably expect notice.

Yes – as set out some time ago in the form of the Turnbull Guidance and more recently supported by FRC Guidance on Audit Committees. In updating the Corporate Governance Code in 2010, the FRC expanded the principle on internal control so that it also states explicitly that the board “is responsible for determining the nature and extent of the significant risks it is willing to take in

While the board’s principal duty of care is to the franchise and shareholders, in the UK Section 172 of the Companies Act 2006 establishes a statutory obligation to consider the interests of creditors, which for a bank would include depositors.

The 2006 Companies Act codified directors’ duties and is subject to civil liability. We would not support the introduction of criminal liability and are concerned that if directors are subjected to an extremely high level of liability then the number of candidates available for Board positions will diminish considerably.

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product launch was consistent with risk tolerance determined by the risk committee and the board.

achieving its strategic objectives.”

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Table 3: Risk Committee

Obligation to have a risk committee within the board

Obligation to have member(s) of the audit committee to be part of the risk committee

Should the Chairman of the risk Committee report to the general meeting

Existence of a risk control declaration

Austria

N/A

N/A

N/A

N/A

Belgium

The Board as a whole (collegial body) should remain responsible for risk management, but indeed with the possibility (no obligation) to set up a separate risk committee or a similar committee within the Board.

A number of financial institutions have created separate committees (Risk Committee, Audit Committee, …), whereas others combine Audit and Risk (and compliance as well, in some cases) into one Committee, because, in their opinion, these aspects are closely interwoven and should better be dealt with together in one single Committee.

No. It is up to the chairman of the Board of Directors to speak on behalf of the Board as a whole, at the shareholders’ meeting, in order to defend the work that has been accomplished by the Board as a whole. Consequently, the chairman of the Risk Committee does not have to defend the Committee’s work in the shareholders’ meeting, since the Risk Committee is only an advisory committee, no decision-taking

The Belgian Code of Corporate Governance recommends the Board of Directors to decribe the major characteristics of the internal supervision and risk management system in its declaration on corporate governance. There is no obligation to edit a separate Risk Report at the level of the Board of Directors.

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Other institutions have split up the Audit Committee into a Risk Committee and an Accounts Committee. It is up to the sole discretion of the Belgian regulator to decide upon the adequacy of the audit and risk measures a credit institution has put in place.

body.

Cyprus

It is required that banks establish a Risk Management Committee if:

i. Their shares are listed on a Stock Exchange or

ii. They have branches or subsidiaries abroad or

iii. Their total assets, including off balance sheet items, exceed the amount of two billion euro.

iv. The requirement to establish a Risk Management Committee can be waived in the case of subsidiaries where the relevant duties are carried out at a group

No The Risk Management Committee is appointed by the Board of Directors and should consist of Directors who possess adequate knowledge and expertise in risk management. Its membership should include at least one Executive Director and one non executive and independent Director.

The Chairman of each Committee should be able to communicate directly with the major shareholders. The circumstances under which this should happen should be determined in the Committee’s terms of reference.

The Head of the Risk Management Unit submits annually to the Board, through the Risk Management Committee, a report raising issues relating to risk control.

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level by the corresponding Committee which covers explicitly the operations of the Cyprus subsidiary.

Denmark

No.

No.

No.

N/A

Finland

No. However, according to the FSA Standard on internal control arrangements an independent risk control function outside the risk-taking business must be established to monitor the risk-taking activities. By controlling risks and risk management, the risk control function shall ensure the supervised entity’s compliance with the risk management principles and risk strategy approved by the board of directors. No risk control function need be established if the nature and scale of the business carried out

No.

The risk control function must ensure that the total effect of all material business risks on the performance of the supervised entity and its consolidation group and on the regulatory capital is reported to the board of directors. Furthermore, a comprehensive summary or account of the operations of the risk control function and its observations shall be submitted at least once a year to the board of directors. Measures taken to remedy possible shortcomings shall be mentioned in the summary or account.

No.

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by the supervised entity is such that the board of directors is otherwise capable of ensuring the functioning and effectiveness of risk management. Not to establish a risk control function in the supervised entity requires a specific decision by the board of directors. The decision shall make it clear how the board of directors can ensure the functioning and effectiveness of risk management.

France

According to French law and regulation, listed companies and banks are requested to have an audit committee that ensures the follow up of the risk policy, procedures and systems. This takes may, upon the board’s decision, be handled by a separate committee.

No, this participation is not compulsory. However, when two separate committees are created, it is desirable that the members of the risk committee and the audit committee meet regularly to ensure that the missions are accomplished by those two committees make it possible to apprehend all issues.

The risk committee is merely an emanation of the board which holds solely the decision-making power. The risk committee does not assume any specific direct responsibility; except for helping the board to form its own opinion and its chairman does not have to address the general meeting of shareholders, unless expressly mandated by the board.

No, it is not the responsibility of the board to validate a declaration of risk control. However, the board is entrusted with the assessment that risk are under the control of the executive management. In that regard, the latter draws up a specific report on risk surveillance and measurement that is required by the French regulation and sent as such to the French supervisory authorities. The report is

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presented to the board and to the auditors on an annual basis.

Germany

BaFin can require the establishment of a risk committee on the basis of Section 25 (a) of the German Banking Act (Kreditwesengesetz, KWG) if the type, scale, complexity and riskiness of the institution’s activities make such a committee necessary. According to the German Corporate Governance Code (no 5.3.2, sentence 1), the supervisory board should set up special expert committees within the board depending on the specific circumstances of the company and the number of board members. In line with the Statutory Audit Directive (2006/43/EC), Section 324 (1) of the German Commercial Code (Handelsgesetzbuch, HGB) requires all “capital market oriented companies” within the meaning of Section 264 (d) of

There is no obligation.

The supervisory board has to be regularly informed about the work of the committees (Section 107 (3), sentence 4 of the German Stock Corporation Act (Aktiengesetz, AktG)). And for its part, the supervisory board is accountable to the owners.

Section 340(k) in conjunction with Section 289 of the German Commercial Code (Handelsgesetzbuch, HGB) requires the management commentary to provide an accurate picture of the company’s situation and explain the main risks and opportunities. This includes setting out the company’s risk management objectives and methods, i.e. its risk control system.

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the German Commercial Code (Handelsgesetzbuch, HGB) to set up an audit committee.

Greece

Credit institutions are required to establish a risk management committee when:

- they are listed in the Stock Exchange or they operate abroad through subsidiaries or branches, and

- their assets (both off- and on balance sheet) exceed the amount of 10 billion euro

The chairman of the committee must be a member of the board. The board has the discretion to transfer the competences of the risk committee to at least two of its members (one executive and one non-executive). In this latter case, the board must notify the Bank of Greece and make known the reasons for making use of this option (Section IV part B articles 1 and 2 of the Act of the Governor of the Bank of Greece 2577/2006).

There is no obligation to have members of the audit committee to be part of the risk committee. However, participation to the audit committee does not preclude participation to other committees of the board (Section IV part Ba art. 3.2.1 Act of the Governor of the Bank of Greece 2577/2006)

The chairman of the risk committee holds no obligation to report to the general meeting. Said obligation exists only with regard to the board (Section IV part Bb Act of the Governor of the Bank of Greece 2577/2006).

N/A

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Hungary

No

No

No

(1) Credit institutions

are required to have sound governance arrangements with respect to the principle of proportionality, having regard in particular to the diversity in size and scale of operations and to the range of financial services and activities auxiliary to financial services, which shall include:

a) the credit institution’s structural organization clearly documented in the internal policies;

b) well defined, transparent and consistent lines of responsibility;

c) effective processes to identify, measure, manage, monitor and report the risks the credit institution is or might be exposed to, and

d) adequate internal control mechanisms, including sound administrative and accounting procedures in compliance with the

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relevant legislation. (2) In accordance with

Subsection (1): a) the credit institution’s

board of directors shall approve and periodically review the strategies and policies for the segregation of duties in the organization and the prevention of conflicts of interest, for taking up, managing, monitoring and mitigating the risks the credit institution is or might be exposed to, including those posed by the macroeconomic environment in which it operates in relation to the status of the business cycle;

b) credit-granting shall be based on sound and well-defined criteria fixed in the internal policies;

c) administration and monitoring of the credit institution’s various credit risk-bearing portfolios and exposures, including for identifying and managing problem credits for which

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adequate value adjustments and provisions are necessary, and such value adjustments and provisions shall be operated through effective systems;

d) diversification of credit portfolios shall be adequate given the credit institution’s target markets and overall credit strategy. Act CXII of 1996 on Credit Institutions and Financial Enterprises Section 13/D

Ireland

Where the board comprises only 5 members, the full board may act as the Risk Committee. Minutes of these meetings should reflect that the board was sitting as the Risk Committee. Where an institution is part of a wider group which has a Group Risk Committee, it may rely on that committee provided that the board is satisfied that it is appropriate to the specific circumstances of the institution.

No.

Not mentioned

The Risk Committee shall advise the board on the effectiveness of strategies and policies with respect to maintaining, on an ongoing basis, amounts, types and distribution of both internal capital and own funds adequate to cover the risks of the institution. In addition each institution shall submit to the Central Bank an annual statement

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indicating whether it has complied with the Corporate governance Code.

Italy

Bank of Italy Supervisory Instruction for Banks (Tit. IV, Cap 11, par 2) Banks decide their policies for risk assumption that must be approved by the Board of Directors. Banks evacuate the opportunity to concentrate the functions of risk measurement and control into an independent structure. Bank of Italy: New prudential provisions for banks (Dec. 2010 – Liquidity Risk Management) In complex banks, liquidity risk management can be devolved to a specific committee. Corporate Governance Code (art. 5.P.1) The Board of Directors shall establish among

Legislative Decree n. 39/2010 (implementation of the Directive on Statutory Audit n. 2006/43/CE) Art.19 – Internal Control Committee. In public interest entities, the Internal Control Committee corresponds with the control body.

Some different provisions require information to the general meeting on existing risks and management. The information is charged on the Board and the CFO (information for balance sheet)

It is required transparency to the public as for Pillar 3 provisions (Bank of Italy, New prudential provisions for banks, 2010, Title IV, Chapter 1)

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its members one or more committees with proposing and consultative functions according to what set out in the articles below.

Latvia

It is not required to have a risk committee within the board (or to have a risk committee at all), however it is required that the board should ensure implementation of overall internal control system that also should include risk management function.

No

No, however the risk control function must ensure that the bank’s board, the council and the relevant units’ managers are informed about risks related to bank’s activities and their level on regular basis. Such information should ensure that the board, the council and the relevant units’ managers can independently assess the risks that may impact bank’s plans and targets, accordingly decision regarding changes into those plans can be made.

No

Netherlands

The Banking Code provides that as part of its supervisory tasks, the supervisory board shall pay special attention to the bank’s risk management and that all discussions about risk management shall be prepared by a risk committee

As regards the composition and functioning of the risk committee, the Banking Code does not provide that one or more members of the audit committee should be part of the risk committee and vice versa.

With respect to reporting to the shareholders, the Banking does not provide that the chairman of the risk committee can directly report to the general meeting of shareholders. This is because under Dutch law and in conformity with the Banking

Dutch law provides for a risk control declaration. The Dutch Corporate Governance Code provides that as regards financial reporting risks the management board has to state in the annual report

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or a similar committee, which committee shall be appointed by the supervisory board from its ranks for this purpose (2.2.1 Banking Code). In line with the principle that members of the supervisory board should possess the specific expertise needed to perform his or her role in the supervisory board (2.1.4. Banking Code), the Banking Code provides that the risk committee shall be subject to specific requirements as regards competency and experience. For example, a number of members of the risk committee must have sound knowledge of the financial aspects of risk management or the experience needed to make a thorough assessment of risks (2.2.2 Banking Code).

This is because as a general rule the audit committee and the risk committee consist of members of the supervisory board. These members prepare an advice for the supervisory board on the basis of which the supervisory board as a collegial board takes its decision.

Code (2.1.1) the supervisory board performs its tasks as a collegial board. Consequently it is not possible that the chairman of the risk committee can individually report to the general meeting. The supervisory board will as a collegial board report on risk management in the annual account (III.1.8 Corporate Governance Code).

that the internal risk management and control systems provide a reasonable assurance that the financial reporting does not contain any errors of material importance and that the risk management and control systems worked properly in the year under review. The management board shall provide clear substantiation of this (II.1.5.).

Poland

No.

No.

No.

No.

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Portugal

Under Portuguese law, there is not an obligation to have a board committee in charge of risk identification, management and control. In companies with an Anglo-American governance model, however, the audit committee (part of the board), is in charge for the monitoring of the risk management, internal control and internal audit systems. In companies with the traditional and Germanic governance models, that role is performed by the monitoring council and by the supervisory (upper-tier) board, respectively. As far as credit institutions are concerned, though, it is clear that the board is the body with the most important responsibility in this respect, in accordance with Notice 5/2008 of BdP.

No.

No.

According to Notice 5/2008 of BdP, the internal control system must be evaluated periodically by the board, and each credit institution must present to BdP a report on the structure and effectiveness of the risk management system. Additionally, the Corporate Governance Code recommends that companies describe in their corporate governance report the performance and adequacy of the risk management system.

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Spain

Yes. The Securities Markets Law states that all listed companies are obliged to have, within their Board of Directors, an Audit Committee which has the legal duty of supervising the internal control, the internal audit, and the risk management systems. So does the CUGC. Apart from the Audit Committee functions, although there is no legal obligation, all banks have their own Risk Committee.

The Audit Committee has currently the functions on risk management and control systems.

Yes, according to the Securities Markets Law and the CUGC.

There is not a separate statement called “risk control declaration” but the description of risks, risks’ controls and management, is one of the mainest contents of the Annual Report on Corporate Governance that all spanish listed companies are obliged to make public, once it is approved by the Board of Directors and submitted to a consultive vote of the General Shareholders Meeting. The very structure and contents of this report have been stated by the Spanish Securities Markets Commission (CNMV) in its Circular 1/2004.

Sweden

According to the FSA general guidelines regarding Governance and Control of Financial Undertakings the undertaking should contain a composite function for independent risk control.

No

According to the FSA general guidelines regarding Governance and Control of Financial Undertakings the risk function should inform the board of directors, management and other persons who require the information.

No

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UK

Yes in the case of the major board of a main banking group; not necessarily in the case of a smaller institution or a wholly-owned subsidiary where risk policy may be determined primarily at group level.

The Walker Review recommends the participation of the chairman of the audit committee within the board risk committee and added that overlap is preferable to underlap in determining the responsibilities of the two committees.

FTSE 100 banks are expected to act upon the Walker Report recommendation that a board risk committee report should be included as a separate report within the annual report and accounts, describing the risk strategy, key exposures, risk appetite and tolerance and information on the membership and activities of the committee.

The UK Corporate Governance Code establishes that the board should, at least annually, conduct a review of the effectiveness of risk management and internal control systems and report to shareholders that they have done so. The review is to cover all material controls, including financial, operational and compliance controls (C.2.1). Such a review may however be undertaken by the relevant board committee on behalf of the board. CRD Pillar 3 requirements additionally mandate the provision of a narrative description of risk control processes and governance.

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Table 4: Chief Risk Officer (CRO)

Status of the CRO Direct report to the Board

Austria

Member of the Management Board.

Member of the Management Board.

Belgium

Given the principle of proportionality, there seems to be no need for a formal obligation to appoint a Chief Risk Officer (CRO) in all of the financial institutions. If this function exists, he could be member of the Management Committee. In the wake of the financial crisis, changes may be made to the position of compliance and/or chief risk officers. Currently in Belgium the debate is ongoing, but it is most likely that a.o. the position of truly independent compliance and/or chief risk officers, who report individually and directly to the Board of Directors will gain importance/relevance.

Possibility to have a direct reporting line to the Board of Directors or to participate at the meetings of the Audit Committee or the Board for the points specifically related to risk.

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Cyprus

Not specified.

Not specified.

Denmark

It is not required that The Chief Risk Officer has a specific status in the bank.

The Chief Risk Officer is not obliged to report directly to the board, but the bank is required by law to have an organizational structure allowing the Chief Risk Officer to report directly to the board of directors.

Finland

There is no legislation concerning the status of the Chief Risk Officer.

No

France

There are no legal statements on the status of the CRO. According to the French banking regulation (Regulation 97-02 relating to internal control in credit institutions and investment firms) : Where the CRO is not a member of the executive

According to the French banking regulation, the CRO shall report on the performance of his assignment to the executive management and shall alert it on any situation that may have significant repercussions on risk control. Where the executive management or the board deems it necessary, he shall also report directly to the board or as the case maybe to the audit committee.

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management or the board, he shall report directly to it and may not perform any commercial, financial or accounting operation. In addition, the French regulator is informed of his identity by the company.

Germany

According to the Minimum Requirements for Risk Management care has to be taken to ensure that the structure of the front office and the trading areas are kept separate up to and including the management board level from risk management and other control areas.

There is no obligation. In any case, the Board members should be responsible of risk management.

Greece

The CRO is appointed directly by the board. His identity is made known to the Bank of Greece, which has the right to demand his/her replacement if the criteria of the fit-and-proper test are not met. The CRO must have a sound scientific background and adequate experience in risk management methods and best international practices (Section V part b art. 5. of the Act of the Governor of the Bank of Greece 2577/2006).

The CRO participates in the decision-making process on credit standards not subject to predefined or general parameters. (Section V part b art. 5.3 of the Act of the Governor of the Bank of Greece 2577/2006). Other than that, he/she participates in the preparation and submission of recommendations and proposals directly to the Senior Management and, through the risk management committee, to the board regarding changes in the composition of the bank’s portfolios, restructuring of existing loans and the alteration of the provisioning policy (Section V part b art. 5.5 of the Act of the Governor of the Bank of Greece 2577/2006)

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Hungary

Not specified

Not specified

Ireland

Not yet addressed. May be addressed in a later consultation / Code in 2011.

Italy

N/A

N/A

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Latvia

There is no legislation concerning the status of the Chief Risk Officer.

No

Netherlands

Member of the Board of Directors (Banking Code 3.1.7)

The Banking Code does not provide that the member of the executive board, who is responsible for preparing the decision-making with regard to risk management, can directly report any riskrelated problem to the supervisory board. Under Dutch law and in conformity with the Banking Code (3.1.1) the executive board performs its tasks as a collegial board. Consequently it is not possible that the CRO individually reports back to the supervisory board. The executive board will take up this task.

Poland

There is no formal title, but one of the members of the management board of the bank is responsible for risk management. This member has to be approved by the Supervisory Authority before including the position.

The member of the management board responsible for risk management is obliged to report to management board about any risk-related issues. The management board, if necessary, informs the supervisory board.

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Portugal

The CRO is not necessarily a member of the board and must be an independent individual and have access to the necessary information and means for the discharge of its functions (Article 16 of Notice 5/2008 of BdP).

Yes. The CRO advises the board and must present a report on the risk management function to the board at least once a year.

Spain

The Audit Committee has the duty of supervising the risk control and management systems. Apart from the Audit Committee functions, although there is no legal obligation, all banks have their own chief risk officer who is a member of the Managing Committee

The Audit Committee is a special committee established within the Board of Directors.

Sweden

There are no legal statements on the status of the CRO.

According to the FSA general guidelines regarding Governance and Control of Financial Undertakings the risk function should inform the board of directors, management and other persons who require the information

UK

CRO role within financial institutions viewed as being of high status and authority reporting to the board risk committee and having direct access to its chair.

Reports principally to the risk committee and participates in board discussions on risk; not necessarily a board member but usually a member of the Executive Committee.

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Table 5: Role of External Auditors Duties towards the board of

directors on possible serious matters discovered

Duties towards the supervisory authorities on possible serious matters discovered

Control of risk-related financial information

Austria

Austrian Business Code, Article 273 para. 2: The external auditor must report to the Management Board and the Supervisory Board if facts are discovered during the audit which endanger the continued existence of the company or which affect the development of the company or if breaches of law or articles of association by legal representatives or employees of the company are discovered. Further the external auditor must report regarding fundamental weaknesses in the internal control on the accounting process.

Austrian Banking Act: If, in the course of his/her auditing activities, the bank auditor identifies facts which 1. give rise to a reporting obligation pursuant to Article 273 para. 2 Business Code (see left); or 2. indicate that the fulfilment of the obligations of the credit institution may be endangered; or 3. indicate a substantial deterioration of the risk situation; or 4. indicate violations of this federal act or of other legal or other provisions or administrative rulings (Bescheide) of the Federal Minister of Finance or the FMA which govern banking supervision; or 5. indicate that material balance sheet items or off-balance-sheet items are worthless, or if the bank auditor finds reason to doubt the accuracy of documents or the declaration of completeness provided by the management board, then the bank auditor must report these

Austrian Code of Corporate Governance: The auditor shall make an assessment of the effectiveness of the company’s risk management based on the information and documents presented and shall report the findings to the management board. This report shall also be brought to the notice of the chairperson of the supervisory board. The chairperson shall be responsible for ensuring that the report is dealt with by the audit committee and reported on to the supervisory board.

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facts to the FMA and the Oesterreichische Nationalbank in writing immediately along with explanations, Article 273 para. 2 Business Code notwithstanding. If the bank auditor identifies other defects, changes in the risk situation or economic situation which are not a cause for concern, or only minor violations of provisions, and if these defects and violations can be remedied in the short term, then the bank auditor is only required to report to the FMA and the Oesterreichische Nationalbank if the credit institution fails to remedy the defects and to provide the bank auditor with evidence of such remedies within a reasonable period of time, at the latest, however, within three months. The reporting requirement also applies in cases where the directors fail to provide information properly as requested by the bank auditor within a reasonable period of time. Bank auditors appointed by an auditing association must submit reports pursuant to this paragraph through the auditing association, which must pass on such reports without delay. In cases where an external auditing company is appointed as the bank auditor, the reporting requirement also applies to the natural persons named pursuant to

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Article 88 para. 7 Professional Code of Conduct for Certified Public Accountants and Tax Advisors.

Belgium

Belgian Business Code :

• Supervisory board members who, within the framework of their control, detect serious and concomitant shortcomings that may jeopardize the continuity of the company, report this to the management body in a written and comprehensive document.

• The supervisory board member reports to the audit committee about the important facts he has detected iwhile fulfilling his duty of legal contrôle of accounts, more particularly the significant weaknesses in the internal control as for the financial information process.

Similar obligations are laid down in art. 20, § 6 of the Law of 22 March 1993 on the legal status and supervision of credit institutions. In the wake of the financial crisis, there may be changes to the position of external auditors. Currently in

In Belgium, the involvement of external auditors is clearly described in the Banking Law. Article 55 of the Law of 22 March 1993 on the legal status and supervision of credit institutions, for example imposes on external auditors the legal obligation to report to the supervisory authorities each time they identify situations that may jeopardize the financial situation of the bank, weaknesses in its internal control functions and breaches of the relevant prudential laws.

N/A

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Belgium the debate is ongoing, but it is most likely that external auditors will receive more competence and responsibility with/acting as a direct point of contact between the credit institution and the competent supervisor(s).

Cyprus

Not specified under the Laws and Directives of the Central Bank of Cyprus.

The approved auditor of the bank is obliged to report promptly to the Central Bank any fact or decision concerning the bank, of which he has become aware while carrying out its audit which may:

i. constitute a material breach of the laws, regulations or administrative provisions which lay down the conditions governing authorisation or which specifically govern the pursuit of the activities of banks;

ii. affect the continuous functioning of the bank; or

iii. lead to refusal to certify the accounts or to the expression of reservations.

Not mentioned explicitly.

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Denmark

It is recommended that the external auditors have a regular dialog and exchange of information with the board of directors and that the possible serious matters are reported to the board as a part of the current audit.

The external auditors have a obligation to inform the Danish Financial Supervisory Authority if serious matters are discovered.

N/A

Finland

According to the Auditing Act an auditor must issue, for each financial period, an auditor's report. The auditor’s report shall contain an opinion on: 1) whether the financial statements and the annual report give a true and fair view, in accordance with the applicable financial reporting framework, of the result of operations and the financial position of the corporation or foundation; and 2) whether the information included in the annual report is consistent with the information included in the financial statements. The auditor shall make a remark in the auditor’s report if a partner, a member or the chairperson or the deputy chairperson of the board of directors or of the supervisory board or of an

Auditors of authorised supervised entities shall report, without undue delay, to the FSA any fact or decision concerning a supervised entity of which they have become aware while performing their duties and which can be considered as: 1) constituting a material breach of the legal provisions concerning the requirements set for the supervised entity’s authorisation or conduct of business and the regulations issued thereunder; 2) jeopardising the continuation of the supervised entity’s conduct of business; or 3) leading to the issuance in the auditor’s report of an opinion other than the standard opinion or a comment as referred to in section 15, subsection 4 of the Auditing Act.

Auditors of authorised supervised

N/A

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equivalent governing body, or the managing director or any other accountable person in the corporation or foundation: 1) is guilty of an act or negligence which may result in liability in damages towards the corporation or foundation; or 2) has violated a law applicable to the corporation or foundation, or the articles of association, deed of partnership, or bylaws of the corporation or foundation. An auditor may make remarks to the board of directors about matters not covered in the auditor's report. These matters shall be entered into the audit memorandum. The audit memorandum shall be submitted to the governing body responsible for the administration of the corporation or foundation and for the proper conduct of its operations. This body shall process the audit memorandum without delay and retain it in a reliable manner.

entities shall likewise report to the FSA any fact or decision of which they become aware while performing their duties in an undertaking which belongs to the same conglomerate or group as the supervised entity.

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France

According to French law (commercial code), if in the performance of his duties, the auditor of a company notes situations likely to compromise the continuity of the activity, he shall inform the chairman of the board. The auditors are also required to disclose to the prosecutor in the courts of first instance the offences which they are aware of.

The exercise of the duty to alert must normally take the form of the general management informing the supervisor within the framework of the regulatory obligation that is imposed on the company.

Pursuant to the French law, independent auditors must submit, in a report attached to their general report, their observations on the chairman’s report on internal audit and risk management procedures relating to the preparation and processing of financial and accounting information.

Germany

According to the German Corporate Governance Code (no. 7.2.3), the supervisory board has to arrange with auditors to report without delay all facts and events arising in the course of the audit which have implications for the tasks of the supervisory board.

Section 29 (3), sentence 2 of the German Banking Act (Kreditwesengesetz, KWG) requires auditors to elucidate their report to supervisors on request and inform them of any facts which came to their attention suggesting that the company’s business has not been conducted properly. Auditors must meet supervisors’ requirements regarding the content and main focus of the audit (Section 30 of the German Banking Act (Kreditwesengesetz, KWG) in conjunction with Section 3 (4) of the German Audit Report Regulation [Prüfungsberichtsverordnung, PrüfbV]).

Auditors check the functioning and results of the institution’s system of reporting to supervisors. In particular, Section 18 of the German Audit Report Regulation [Prüfungs-berichtsverordnung, PrüfbV) obliges auditors to evaluate the appropriateness of processes for determining and disclosing information required under Sections 319 to 337 of the German Solvency Regulation (Solvabilitätsverordnung). The auditor’s report has to state whether the institution has complied with the disclosure requirements set out in Sections 319 to 337 of the German Solvency Regulation. Risk reporting is checked by the auditor in the course of the annual audit.

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Supervisors have a comprehensive right of evaluation under Section 44 of the German Banking Act (Kreditwesengesetz, KWG). Section 321 (1) of the German Commercial Code (Handelsgesetzbuch, HGB) requires auditors to report any evidence of impropriety or infringements of the law discovered in the course of an audit, as well as any facts which might jeopardise the existence of the company or seriously impair its development or which indicate that management or staff have seriously infringed the law or the company’s statutes.

Greece

The external auditors carry out the annual financial statements audit under the supervision and in close cooperation with the audit committee. The audit committee is appointed by the board and consists of at least three non-executive board members. The external auditors must report any weaknesses or problems of the Internal Control System, uncovered during the annual audit of the financial statements, to the Audit Committee. At least every three years, external auditors carry out an individual

At least every three years, external auditors carry out an individual assessment of the adequacy of the Internal Control System both at solo- and group- level. Their assessment is discussed on a tri-party basis (auditors-Bank of Greece-credit institution) and in special circumstances only with the Bank of Greece (Section IV part B3 art.5 of the Act of the Governor of the Bank of Greece 2577/2006)

In determining the adequacy of the Internal Control System, external auditors review the risk assessment procedure followed by the credit institution. In this context, the external auditors take stock of: - the role of the Risk Management Committee

- whether there are mechanisms for identifying, analysing, controlling and managing all kinds of risks inherent in the credit institution’s operation (both at single credit institution and at group levels),

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assessment of the adequacy of the Internal Control System both at solo- and group- level. Their assessment is discussed on a tri-party basis (auditors-Bank of Greece-credit institution) (Section IV part B3 art. 1.1, 2.3.3, 4.1,5 of the Act of the Governor of the Bank of Greece 2577/2006)

- the management of liquidity risk in contingencies, - the independence, powers and tasks of the Risk Management Unit and its head, - where the credit institution is active abroad, whether there are different risk management procedures per country, - during the assessment of organisational units involved in lending procedures: whether objective criteria are followed in the processing of loan applications or requests for credit lines, the credit scoring or credit rating systems, the way collaterals are monitored, whether approved credit lines are not exceeded, the measures taken in cases of non-performing loans and the transfer of NPLs to special purpose accounts, as well as the possibility of credit risk monitoring collectively at the entire loan book level, - the procedures for extending credit to parties related to the credit institution and ensuring non-preferential treatment. (Annex 3 of the 2577/2006 Act of the Governor of the Bank of Greece, Section II part B)

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Hungary

Same as the next column. If the auditor ascertains or otherwise learns that a considerable decrease in assets of the business association is probable, or perceives any other issue which entails the liability of the executive officers or the supervisory board members as set forth in this Act, he shall request that the business association's supreme body be convened. If the business association's supreme body is not convened, or the supreme body fails to adopt the decisions required by legal regulations, the auditor shall inform the competent court of registry vested with judicial supervisory competence. (Act IV .of 2006. on Business Association Section 44.)

(1) The auditors of financial

institutions shall have a duty to report promptly to the Authority, while notifying the financial institution at the same time in writing, of any fact concerning that financial institution of which they have become aware while carrying out that task which is liable to:

a) lead to refusal to certify the accounts or to the expression of reservations;

b) constitute a material breach of the laws, or the financial institution’s internal rules and regulations, or to forewarn any imminent infringement of such regulations;

c) constitute a material breach of this Act or other regulations, or the provisions decreed by the MNB;

d) result in any uncertainty as to the ability of the financial institution to meet its liabilities and commitments, or safeguard the assets entrusted to it; or

e) constitute serious deficiencies or insufficiencies in the internal control regime and compliance functions of the financial institution; or

f) result in a considerable difference of opinion between the auditor and an executive employee of the financial institution regarding issues affecting

(1) When auditing the annual account of

a credit institution the auditor shall also examine the following:

a) the accuracy of evaluations by professional standards;

b) whether the prescribed and necessary value adjustments and readjustments have been made;

c) whether the prescribed and necessary provisions have been set aside;

d) ongoing compliance with the provisions on own funds, capital adequacy, financial stability and liquidity, and also the regulation pertaining to the various financial services;

e) compliance with the legal provisions on prudential management for effective, reliable and independent operations, as well as the provisions of the MNB Act, regulations on financial transactions, foreign exchange regulations and resolutions of the Authority and the central bank; and

f) the operation of the adequate controlling mechanisms.

(2) Upon conclusion of the audit, the auditor must record his findings on the issues specified in Subsection (1) in a separate supplementary report and send it to the board of directors, the managing director, the chairman of the supervisory

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the solvency, income, data disclosure or accounting of the financial institution, which are considered essential from the point of view of operations. (Act CXII of 1996 on Credit Institutions and Financial Enterprises Section 134)

board, the Authority and the MNB by 31 May of the following year. (Act CXII of 1996 on Credit Institutions and Financial Enterprises Section 134 Section 136)

Ireland

To be addressed in a later consultation in 2011.

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Italy

N/A

Consolidated Banking law Art. 52 - External auditors as well as the Board of Auditors shall notify the Bank of Italy without delay of acts or facts found in the performance of the engagement that may constitute a serious violation of the provisions governing banking, jeopardize the continued existence of the undertaking or result in an adverse or a qualified opinion on the annual accounts or a disclaimer. Such persons shall send the Bank of Italy any other information or documents requested. Consolidated Law on Finance Art. 155, co. 2 - The statutory auditor or independent statutory auditors shall inform Consob and the control body without delay of any censurable facts found during statutory audit of the separate and consolidated financial statements

N/A

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Latvia

According to the Commercial Law the annual reports shall be audited and an opinion thereof shall be submitted by a sworn auditor elected in the meeting of shareholders. The Sworn auditors report shall contain an opinion on whether the financial accounts included in the annual report, also, in the consolidated annual report, present a truthful and clear view regarding the financial situation, profit or losses, and cash flow of the relevant client in accordance with the relevant financial account preparation principles (standards) and conform with regulatory enactments. According to the Law On Sworn Auditors a sworn auditor shall notify the board of directors or an audit committee (if such committee has been established) of the issues not included in the opinion (for example, shortcomings, errors and violations of the internal control system), which shall not affect the opinion delivered.

According to the Law On Sworn Auditors a sworn auditor has a duty to, without delay, submit a report in writing to the FSA regarding facts found during the provision of audit services and performance of an entrusted task in a financial institution and which are violations of the regulatory enactments regulating the establishment of the financial institution or its operations, or other facts due to which the fulfillment of the obligations of such institution and its further operations are jeopardized, or due to which the sworn auditor refuses to submit an opinion. A sworn auditor has a duty to, without delay, submit a report in writing to the FSA regarding facts which have been found while providing audit services to a client who is in decisive influence relations or in close relations in the form of control with the financial institution, or while performing a specialist's task or an entrusted task assigned by a client.

According to the Law On Sworn Auditors and Law On Credit Institutions a sworn auditor has to perform audit in accordance with international standards of auditing that are approved by Latvian Association of Certified Auditors. International standards of auditing (ISA) require that a sworn auditor assess efficiency of internal controls as a part of audit engagement. Specifically, ISA 330 describe that objective of the auditor is to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement, through designing and implementing appropriate responses to those risks. Risk control system and risk reporting is assessed by a sworn auditor in the course of an audit.

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Netherlands

Please note that from a Dutch point of view it is not necessary to extend the reporting scheme, as Dutch law goes further than the capital requirement directive requires. According to Dutch law the external auditor is not only obliged to inform the competent authorities wherever they become aware of certain facts which are liable to have a serious effect on the financial situation of an institution, but also has to inform the supervisory authority of the auditor’s report to the Executive Board and the Supervisory Board, the management letters, and any other correspondence between the auditor and the financial undertaking that directly concerns the statement concerning the fair presentation of the annual financial statements or the records of the financial undertaking. If and when the supervisory requests such, the external auditor has to provide a further explanation of the correspondence provided (Decree on Prudential rules pursuant to the Act on Financial Supervision, section 136).

Please note that from a Dutch point of view it is not necessary to extend the reporting scheme, as Dutch law goes further than the capital requirement directive requires. According to Dutch law the external auditor is not only obliged to inform the competent authorities wherever they become aware of certain facts which are liable to have a serious effect on the financial situation of an institution, but also has to inform the supervisory authority of the auditor’s report to the Executive Board and the Supervisory Board, the management letters, and any other correspondence between the auditor and the financial undertaking that directly concerns the statement concerning the fair presentation of the annual financial statements or the records of the financial undertaking. If and when the supervisory requests such, the external auditor has to provide a further explanation of the correspondence provided (Decree on Prudential rules pursuant to the Act on Financial Supervision, section 136).

Not mentioned explicitly.

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Poland

The management board is obliged to attach the audit review of the company to its annual report on the company’s condition. External auditors are obliged to analyse the company’s financial situation and they submit the audit review for the board containing all the information about the company.

None, except the situation when the external auditors are engaged by the supervisory authority in order to conduct the inspection procedure.

External auditors’ audit review regarding the financial annual report of the company is an obligatory attachment of the management board’s annual report presented to the shareholders at least 15 days before the ordinary shareholders’ meeting.

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Portugal

Under Article 420-A of the PCC, the external auditor must communicate immediately to the chairman of the board (or to the chairman of the management board, in companies with the Germanic governance model) the facts of which it becomes aware and which raise serious obstacles to the furtherance of the company’s purpose, e.g. non-performance of payments to suppliers, the delivery of NSF cheques or breach of tax and social security obligations.

Article 121 of the CIFCGR, requires external auditors of credit institutions to communicate to BdP, in the shortest time frame possible, the facts relating to the audited institution of which they become aware in the performance of their functions which are capable of: a) Constituting a serious breach of the rules and regulations establishing the conditions for authorisation or regulating in a specific manner the exercise of the activities of credit institutions; or b) Threatening the survival of the credit institution; or c) Determining the refusal of the certification of the institution’s accounts or the certification of the accounts with reserves.

The external auditor has the responsibility of confirming the reliability of the accounting records and respective supporting documents, verifying the extension of cash and stock of any kind of the assets or securities belonging to the company or received by it by way of guarantee, deposit or to some other end, whenever it deems such action convenient, verifying the exactitude of the financial statements and whether the accounting policies and valuing criteria adopted by the company lead to the correct evaluation of the assets and the results. In addition, the company’s chartered accountant, who may or may not be a member of one of its corporate bodies, depending on the governance model elected, must certify the company’s accounts before they are approved in the annual general meeting.

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Spain

The external auditors have the duty to describe any risk or serious matters discovered during the development of their work over the company’s annual accounts and describe them into their report. This report must be sent to the Board of Directors together with the accounts and to the General Shareholders Meeting.

The Law 19/1988 imposes to the external auditors the obligation to communicate any serious issue discovered during their work to the correspondent supervisory body, and, in case of banks, to the Bank of Spain.

Included in their review of the company’s annual accounts.

Sweden

According to the Accountants Act and the Auditing Act a public accountant shall observe generally accepted accounting principles. Where the auditor has presented criticisms to the management of the undertaking, such fact shall be noted in minutes or in another document. The document shall be submitted to the management of the undertaking and the undertaking shall store it in a secure manner. According to the Companies Act the external auditor shall submit to the Board and CEO the recollections and the observations in accordance with generally accepted auditing standards.

According to the Banking- and Financing Business Act an auditor or a special examiner shall immediately report to the FSA in the event he or she, upon performance of his or her duty in a credit institution, learns of circumstances which:

1. may constitute a material violation of the statutes governing the institution’s operations;

2. may negatively affect the institution’s continued operations; or

3. may result in the auditor recommending that the balance sheet or profit and loss statement not be adopted or in a notation being filed pursuant to Companies Act, the Economic

Not mentioned explicitly. The auditor shall report to the FSA he or she, upon performance of his or her duty in a credit institution learns of circumstances which may constitute a material violation of statutes governing the institution´s operations, e.g. the Banking- and financing Act and the Act on capital adequacy and large exposures. (see “Duties towards the supervisory authorities... “)

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Associations Act, the Savings Banks Act and the Members’ Banks Act (SFS 1995:1570).

UK

Under ISA 260, auditors have a duty to report matters of significance to those charged with governance, which usually happens through the Audit Committee. The findings, including key areas of the audit such as critical accounting estimates, are then discussed between the auditors and the audit committee. Auditors are expected to highlight in their reports to, and discussions with, Audit Committees any concerns or areas where estimates look to be at the extreme of ranges of acceptable outcomes. Their report to the Audit Committee would also include other possible serious matters.

Auditors are already required by EU law to report any serious matters to the supervisory authorities and under ISA 260 to those charged with governance, usually the Audit Committee. In its report Audit of banks: lessons from the crisis, the ICAEW identified as a process weakness a lack of engagement between bank supervisors and auditors in the period preceding the crisis. This found resonance with the FSA and as a result bilateral meetings with auditors and trilateral meetings with banks have been reintroduced. It is important that the scope of this dialogue is clear; guidance from the FSA may be forthcoming as an output from its consultation Enhancing the auditor’s contribution to prudential regulation.

Understanding an entity and the risk of material misstatement is governed by ISA 315 and the auditor’s procedures in response to assessed risks set out in ISA 330. ISA 610 adds a responsibility to consider the work of internal audit and ISA 260 the responsibility for communicating audit matters for those charged with governance. Internal control including risk management, however, is the responsibility of management under the Corporate Governance Code. The code confirms management's responsibility for maintaining a sound system of internal control; auditors specifically opine on whether the information given in the corporate governance statement with respect to internal control and risk management systems is consistent with the financial statements. It is further proposed, in a paper published by the Financial Reporting Council on 7th January, that Audit Committees report on the approach that they have taken to

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discharge their responsibilities including in respect of key areas of sensitivity or risk and also proposes that auditors ‘report on the completeness and reasonableness of the audit committee report and, if necessary, set out any further information required to achieve that outcome’.

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Table 6: Role of Supervisory Authority Duties to check the functioning of the board of

directors and the risk management function Do the eligibility criteria (fit and proper test) cover the technical and professional skills and behavioural characteristics of future board members?

Austria

As stated above: in bigger banks, state commissioners who act as functionaries of the Financial Market Authority participate in the meetings of the Supervisory Board, its committees and the shareholders’ meeting. Therefore they are well informed on the functioning of the Supervisory Board.

Austrian Banking Act: The licence for a credit institution is to be issued if: […] 6. no reasons for exclusion as specified in Article 13 paras. 1 to 3, 5 and 6 Trade Act 1994, Federal Law Gazette No. 194/1994 in the applicable version, are identified with regard to any of the directors, and bankruptcy proceedings have not been initiated for the assets of any of the directors or any entity other than a natural person on whose business a director has or has had a decisive influence, unless a compulsory settlement was agreed upon and fulfilled in the bankruptcy proceedings; this also applies to comparable situations which have arisen in a foreign country. 7. the directors find themselves in an orderly economic situation and no facts are known which would raise doubts as to their personal reliability as required for conducting transactions pursuant to Article 1 para. 1; if such facts are known, then the licence may only be issued if the doubts are proven to be unfounded; 8. on the basis of their prior education, the directors possess the professional qualifications and experience necessary for operating the credit institution. The professional qualifications of the directors require that they possess sufficient theoretical and practical knowledge of the transactions applied for pursuant to Article 1 para. 1 as well as management experience; professional qualification for the management of a credit institution is to be assumed if the directors have carried out management activities in a company of comparable size and business type for at least three

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years; 9. with regard to a director of a credit institution who is not an Austrian citizen, no reasons for exclusion as specified in nos. 6, 7, 8 or 13 exist in the director's country of citizenship; this must be confirmed by the banking supervisor in the director's home country; however, if such a confirmation cannot be obtained, the director in question must provide credible evidence of this, certify the absence of the named reasons for exclusion and submit a declaration stating whether any of the named reasons for exclusion exist; 0. the centre of at least one director's vital interests lies in Austria; 11. at least one director has a command of the German language; 12. the credit institution has at least two directors and the articles of association rule out individual powers of representation, individual powers of commercial representation and individual commercial powers of attorney for the entire business operation, or, in the case of credit cooperatives, the management of the business is restricted to the directors; 13. none of the directors have another main profession outside of the banking industry or outside of insurance undertakings or pension funds Austrian Stock Corporation Act regarding supervisory board members: Prior to the election of a supervisory board member by the shareholders’ meeting, the candidate has to state his professional qualifications, his professional and other functions, as well as any circumstances that might give rise to concerns about bias.

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Belgium

Check if the company has an adequate management structure, adequate internal supervision, an efficient independent system for internal audit, an adequate independent system for compliance and an adequate risk management.

The CBFA form to be filled in upon the nomination of a Board member contains information which should enable the CBFA to assess the professional honour, the expertise and experience required for taking up the function of non-executive Director.

Cyprus

The Central Bank shall review the arrangements, strategies, processes and mechanisms implemented by the banks to comply with all relevant legal provisions and evaluate the risks to which the banks are or might be exposed to. On the basis of this review and evaluation, the Central Bank shall determine whether the arrangements, strategies, processes and mechanisms implemented by the banks and their own funds ensure a sound management and coverage of their risks.

Yes. There are restrictions for people who were convicted or declared bankrupt. Also the Central Bank assesses a future board member’s competence and soundness of judgement for fulfilling the responsibilities of that position, the diligence with which he is fulfilling or likely to fulfil those responsibilities and whether the interests of depositors of the bank are likely to be in any way threatened by his holding that position. Moreover, the Central Bank will not consider a person to be fit and proper to act as director, chief executive or manager of a bank, if that person is not of sufficiently good repute or lacks sufficient experience to hold that position.

Denmark

Yes, as a part of the ongoing monitoring work.

Yes, the fit and proper test covers the technical and professional skills and behavioural characteristics of future board members.

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Finland

According to the Act on the Financial Supervisory Authority the FSA shall monitor that financial market participants comply with the provisions applicable to them governing financial markets and the regulations issued hereunder, the terms of their authorisation and the rules concerning their operations.

Yes, according to the FSA Standard on assessment of fitness and propriety.

France

According to French law (commercial code), listed companies are obliged to submit to the general shareholders meeting an annual report. This document is publicly available and thus accessible to the regulator. Among other contents, this report describes the functioning of the Board and its different committees. More specifically, the Chairman of the Board reports on the Company’s Corporate Governance to the General Meeting; this report is attached to the annual report.

From a more general stand point, while we agree that the supervisory authority has to consider the internal governance rules on the occasion of the Pillar II process, this assessment should be made without interfering with the Board’s functioning. This would not be appropriate because of the nature of the deliberating body, which represents the shareholders and is appointed by their general meeting, to which it reports. Going farther would mean an in depth change in the organization of the society and an increasing confusion of the responsibilities between the private interest and public one represented by the state.

No, this principle applies only to the two “seniors managers” as defined by the French regulator (“Autorité de Contrôle Prudentiel”) and not to the board members.

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Germany

Section 25(a) of the German Banking Act (Kreditwesengesetz, KWG) requires institutions to have suitable arrangements in place for controlling and managing risk; compliance is checked by supervisors. Under par. 1 of General Section 1 of the German Minimum Requirements for Risk Management (MaRisk), the supervisory board is part of the risk monitoring system and its correct functioning is also monitored by supervisors. Supervisors have the authority to remove board members in the event of irregularities.

Section 36 (3) of the German Banking Act (Kreditwesengesetz, KWG) requires supervisory board members to have the necessary expertise and be sufficiently reliable to perform their duties; a bulletin issued by supervisors specifies, in particular, what must be checked on a member’s initial appointment (focus: CV). According to the German Corporate Governance Code (no. 5.4.1), the supervisory board has to be composed in such a way that its members as a group have the knowledge, ability and expertise necessary to properly carry out its tasks. The supervisory board has to specify concrete objectives with respect to its composition. These should, in particular, specify an appropriate level of female representation.

Greece

The Bank of Greece has the right to demand the replacement of the CRO if the criteria of the fit-and-proper test are not met. The CRO submits annually to the board through the Risk Committee a report on the activities of the risk management unit. This report is also submitted to the Bank of Greece (Section VI art. 1.2 of the Act of the Governor of the Bank of Greece 2577/2006)

The board of directors must hold, as a whole, adequate knowledge and experience regarding the most important activities of the credit institution. It must be able to supervise the entirety of the credit institution’s functions either directly or through its committees. The Bank of Greece deems it expedient that credit institutions adopt international best practises of corporate governance, including the separation of executive and supervisory competences of the board of directors (Section V part A art. 1.1 of the Act of the Governor of the Bank of Greece 2577/2006)

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Hungary

The Authority’s permission is required for the

election or appointment of executive officers of a credit institution; The executive officer of a financial institution or a payment institution may be elected or appointed upon the prior authorization of the Authority, as well as the executive employee directing the operations of a financial holding company or a mixed financial holding company. Act CXII of 1996 on Credit Institutions and Financial Enterprises Section 44(1))

The executive officers and employees of a financial institution

shall at all times act with due diligence and expertise consistent with the professional requirements applicable for their respective positions, also in view of the interests of the financial institution and its customers, in compliance with the relevant regulations.

(4) The persons described in the following may not be appointed as an executive officer of a financial institution or payment institution:

a) having (or having had) a qualifying interest in or being (or having been) the executive officer of a financial institution or payment institution:

1. in the case of which insolvency can only be avoided by exceptional measures taken by the Authority, or

2. which was liquidated due to its authorization being revoked, and whose personal responsibility for the development of this situation has been established by final resolution;

b) persons who have seriously or systematically violated the provisions of this Act or another legislation pertaining to banking, payment services activities or the management of financial institutions and such has been determined by the Authority, another authority or a court in a final resolution dated within the previous five years;

c) having a criminal record. d) persons who are not of good business reputation. (5) In addition to what is contained in Subsection (4), with the

exception of supervisory board members, the person designated to be an executive officer of a credit institution, payment clearing house or payment institution must satisfy the following criteria:

a) have at least three years of experience in banking or business management, or in financial or economic management in the public sector;

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b) shall not act as auditor for another financial institution or payment institution;

c) shall not hold another office or position which may hinder performance of his professional duties. (Act CXII of 1996 on Credit Institutions and Financial Enterprises Section 44(4))

Ireland

Not yet addressed – likely later in 2011.

The Central Bank (CB) currently interviews candidates for appointments at executive Director level in a regulated entity. The process assesses candidates skill set and experience relative to the role to be filled, their understanding of the principal risks in the firm, capabilities in devising and executing risk management strategy, insight/understanding of their regulatory responsibilities and approach to fulfillment. A suitably tailored process applies in the case of relevant non executive Directors. The CB introduced this new element to its process of assessing and validating prospective candidates under the Fitness and Probity regime. It is selectively applied on a risk based basis. The Fitness & Probitly regime is to be reviewed in 2011.

Italy

Consolidated Law on Finance (art. 7-8) and Consolidated Banking Law (art. 51-52) Bank of Italy and Consob, within the scope of their respective authority, may take the following actions with respect to authorised intermediaries: a) convene the directors, members of the board of auditors and managers; b) order the convening of the governing bodies and set the agenda for the meeting; c) proceed directly to convene the governing bodies where the competent bodies have not complied with an

Consolidated Banking Law Art.26 (Experience, integrity and independence requirements for corporate officers) - Persons performing administrative, managerial or control functions in banks shall satisfy the experience, integrity and independence requirements established by the Minister for the Economy and Finance, after consulting the Bank of Italy. Consolidated Law on Finance Art. 13 - Experience, integrity and independence requirements for corporate officers. Persons performing administrative, management and supervisory functions in Italian investment companies, asset

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order issued under paragraph b) The Bank of Italy and Consob, to the extent of their duties, may require authorised intermediaries to communicate data and information and to transmit documents and records in the manner and within the time limits they establish. Consolidated Banking Law Art. 70 - In case of serious administrative irregularities or serious violations of laws, serious capital losses are expected or a reasoned request by the administrative bodies or an extraordinary general meeting, the Minister for the Economy and Finance, acting on a proposal from the Bank of Italy, may issue a decree dissolving the administrative and control bodies of a bank (the functions of the general meetings and other governing bodies different from those mentioned shall also be suspended by effect of the special administration decree) Consolidated Law on Finance Art. 53 - Suspension of administrative bodies. In situations of danger for customers or markets, Consob may suspend the administrative bodies of an Italian investment company as a matter of urgency and appoint a provisional administrator to take over its management where serious administrative irregularities or serious violations of laws, regulations

management companies or SICAVs shall fulfil the experience, integrity and independence requirements established by the Minister of the Economy and Finance in a regulation adopted after consulting the Bank of Italy and Consob.

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Latvia

According to the Law on Financial and Capital Market Commission the FSA have the following functions and authority:

1) to issue binding rules and take decisions setting out requirements for the functioning of financial and capital market participants and calculation and reporting of their performance indicators;

2) by controlling compliance with laws and regulations and rules and decisions adopted by the FSA, to regulate activities of financial and capital market participants;

3) to specify the qualification and conformity requirement for financial and capital market participants and their officials;

4) to examine compliance of the activities of financial and capital market participants with the legislation, and regulations and decisions of the Commission;

5) to apply sanctions set forth by the regulatory requirement to financial and capital market participants and their officials in case said requirements are violated.

According to the Law on Credit Institution the member of the board may be a person:

1) who are competent in issues of financial management; 2) who have the necessary education and three years professional

work experience in an undertaking, organization or institution of relevant size;

3) who have an unimpeachable reputation; 4) who had not have revoked the right of engaging in commercial

activities.

The member of the board may not be person: 1) who have been convicted of the intentional commission of a

crime, including bankruptcy in bad faith; 2) who have been convicted of the intentional commission of a

crime, even though released from serving the sentence because of a limitation period, clemency or amnesty; or

3) against whom criminal proceedings for the intentional commission of a crime have been terminated due to a limitation period or amnesty.

The FSA may request to remove from office without delay the persons of who may be applied above-mentioned requirements.

Netherlands

It is the primary task of the supervisory board to check the functioning and effectiveness of the board of directors and it is the primary task of the supervisory board to annually evaluate itself (which is done under independent supervision once every three years) and of shareholders to check the functioning and effectiveness of the supervisory board. Both the supervisory board and the board of directors are aided by the internal and

In the Netherlands the supervisory authorities test future board members on these criteria. They are able to supervise the governance of financial institutions (section 2:12 in conjunction with section 3:16 Dutch Financial Supervision Act).

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external auditor. The internal auditor has the task of assessing the quality and effectiveness of the system of governance and will report the findings to the executive board and the audit committee (5.3 Banking Code). The external auditor shall as part of the general audit assignment for the financial statements, produce a report for the executive board and the supervisory board which shall contain the external auditor’s findings concerning the quality and effectiveness of the system of governance (5.5 Banking Code)

Poland

Bank is obliged to submit to the Supervisory Authority certified external auditors’ audit review on their financial condition within 15 days after the issuance. Where irregularities are determined in the audit review commissioned by a bank, the Supervisory Authority may require the bank to commission to an indicated certified auditor examination of the truth and accuracy of all the accounts prepared by the bank, inspection of the books of account, analysis of the loan portfolio.

Yes, the Supervisory Authority must approve two of the members of the management board of bank – especially the chairman and the member responsible for risk management.

Portugal

Under Article 14 of the CIFCGR, credit institutions must fulfil, among other, the following requirements: (i) have solid corporate governance principles, including a clear organisational structure, with defined, transparent and coherent responsibilities; (ii) have in place efficient processes for the identification, management, control and communication of risks; (iii) have adequate internal control mechanisms, with solid operational and accounting procedures.

Yes. Pursuant to Article 30 of the CIFCGR, members of the management and monitoring bodies of credit institutions must be persons whose appropriateness and availability guarantee the prudent management of the institution, having in mind, in particular, the safety of the funds entrusted to it. The members of the board of a credit institution must have adequate qualifications for the performance of their functions, e.g. through academic or professional experience. The possession of adequate qualifications is presumed where the person in question

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Since that the fulfilment of the aforementioned requirements is a condition for authorisation and the latter may be revoked should they cease to be fulfilled (Article 22 of the CIFCGR), BdP must ensure that the institutions maintain minimum adequacy levels for the performance of the services for which they are authorised. Another cause for revocation of authorisation is the occurrence of serious irregularities in the administration, accounting organisation and internal monitoring of the institution. In fact, if, for any reason, the conditions for the normal functioning of the board or of the monitoring body cease to be fulfilled, the situation must be corrected, or the authorisation will be revoked by BdP (Article 32 of the CIFCGR). Another relevant aspect is the fact that amendments to credit institutions’ by-laws as to the management and monitoring structure or the limitation of the board’s powers have to be previously authorised by the BdP. Additionally, the registration of institutions with the BdP must include the identification of their directors and the delegation of management functions (Article 66 of the CIFCGR) and the directors of credit institutions must be individually registered with BdP (Article 69 of the CIFCGR). Furthermore, Article 73 of the CIFCGR provides that credit institutions must show high levels of technical

has had high-level functions in the financial sector in the past. The adequateness of the experience, in each case, is reviewed with reference to the characteristics of the institution in question (Article 31 of the CIFCGR). If BdP considers that the board or some of its members no longer have the appropriateness availability, or ability to manage the credit institution in question, the situation must be corrected, with the substitution of the problematic directors or the authorisation will be revoked by BdP (Article 32 of the CIFCGR). Finally, as has already been mentioned, under the terms of Article 73, credit institutions must show high levels of technical competence, with the adequate human and physical resources to perform all its activities with a high degree of quality and efficiency.

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competence, with the adequate human and physical resources to perform all its activities with quality and efficiency. Circular Letter 24/2009/DSB, of 27/02/2009, of BdP, interpreted the above provision as requiring the board to be collectively vested with the qualifications necessary for the characteristics and dimension of the credit institution in question.

Spain

Listed companies are obliged to elaborate, make public, submit to the General Shareholders Meeting, and send to the National Securities Markets Commission the Corporate Governance Annual Report. Among other contents, this report should describe the functioning of the Board or Directors and its different Committees, i.e. the Audit Committee.

Yes. The Royal Decree 1245/1995, on banks creation, requires proper professional experience and technical knowledge to the majority of the members of the Board of Directors.

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Sweden

According to the Banking- and Financing Business Act the FSA has the responsibility to overseeing the company's owners and management meet suitability requirements and that the business is run under the requirements in applicable laws.

Yes, according to the FSA regulation on ownership and management assessment.

UK

Yes, a clear part of the programme of enhanced supervision introduced as part of the response to the financial crisis.

Yes, FSA Handbook requires a fit and proper test for approved persons including board members encompassing: honesty, integrity and reputation; competence and capability; and financial soundness.

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Table 7: Engagement of Shareholders Disclosure of institutional investors’

voting practices Existence of a code of conduct for

institutional investors Disclosure of Shareholders’ identity

Austria

Austrian Stock Corporation Act: The Articles of Association of a listed company may state the disclosure of shareholders’ voting practices.

N/A

Austrian Stock Exchange Act: the purchase or sale of shares has to be disclosed to FMA and the stock exchange company if certain thresholds are exceeded / underrun. Austrian Banking Act: Credit institutions must notify the FMA of any acquisition or disposal of shares as well as any cases in which the participation limits defined in paras. 1, 2 and 4 are reached, exceeded or underrun in writing immediately as soon as the credit institutions become aware of such transactions. Moreover, credit institutions must notify the FMA in writing at least once per year of the names and addresses of shareholders and other members holding qualifying participations as well as the sizes of such participations as shown in particular by the information received at the annual general meetings of shareholders or other members, or as a result of the information received on the basis of Articles 91 to 94 Stock Exchange Act. Austrian Code of Corporate Governance:

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The company shall disclose on its website and in the annual report – if it has knowledge thereof – the current shareholder structure broken down by geographical origin and type of investor, any cross-holdings, the existence of syndicate agreements, restrictions on voting rights, registered shares and their related rights and restrictions.

Belgium

There are no specific / additional disclosure requirements taking into account the quality of a shareholder. However, disclosure requirements with respect to significant changes in percentage of a bank’s shareholding will apply (see the columns on the right side) irrespective of the shareholder’s quality (private, institutional, professional, etc.).

No.

General regulations concerning the disclosure of major holdings in (listed companies):

• Title II of the Law of 2 May 2007 on the disclosure of major holdings in issuers whose shares are admitted to trading on a regulated market and laying down miscellaneous provisions

• Royal Decree of 14 February 2008 on the disclosure of major shareholdings

In addition, specific reporting rules for banks as soon as significant changes in the percentage of a bank’s shareholding occur (art. 24 Law of 22 March 1993 on the legal status and supervision of credit institutions).

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Cyprus

No disclosure requirements.

No such code exists. In the Code of Conduct for listed companies, institutional investors are prompted to be involved in a constructive dialogue with companies.

The bank shall know for every legal person that possesses at least five percent (5%) of its issued share capital, the names of the ultimate beneficial owners to whom each legal person belongs to, and to disclose this information to the Central Bank at least once a year or when there has been an amendment or change to the information.

Denmark

Institutional investors are not required to disclose their voting practices.

No.

Shareholders have to disclose their identity, if the amount of voting rights is 5 p.c. or more of the total number of voting rights in the company or

if the value of the shares passes certain percentage limit compared to the total share capital.

Finland

The management report must include any agreements and arrangements known to the issuer relating to the shareholdings and use of voting rights that are likely to have a material effect on the value of the security. According to the FSA Standard on disclosure of information at least the following is generally disclosed: parties to the agreement, maturity of the agreement and essential contents of the agreement.

N/A

According to the FSA Standard on disclosure of information, in so far as they are known to the issuer, the management report must include an indication of the shareholders who, directly or indirectly, hold at least one-twentieth (5%) of the voting rights carried by the shares or of the total number of the shares, an indication of the top ten shareholders holding most of the voting rights and of the top ten shareholders holding most of the total number of shares, and an indication of the portion of voting rights and total number

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of shares of each of these shareholders. This information is generally disclosed for the date of the statement of financial position or a subsequent date prior to the signing of the financial statements.

France

Under French law, institutional investors, who actively solicit proxies, must make public their voting policies. They can also make public their voting policies on draft resolutions of General meeting. AMF (“Autorité des Marchés Financiers”) recommends that all institutional investors should be required to make their voting policy public as well as any updates of them each year, sufficiently in advance of the general meetings for issuers to take them into account when writing draft resolutions of general meetings. Indeed, the topics addressed in these voting policies generally relate to the composition of the board, the delegations awarded to the board concerning financial resolutions, etc. In France, portfolio management companies are required to prepare a document entitled “voting policy” which presents the conditions under

No, there is no such specific code in France.

Identification of shareholders is made possible with the legal right for issuers to know their shareholders. If the company’s by-laws provides for it, the financial intermediary has the obligation to disclose the identity of the holder of bearer shares. The information is delivered for the sole use of the company and is not made public. More recently, French law (October 2010) provided for transparency measures during the period of general meetings for the lending/borrowing of securities. In addition, a shareholder who comes into possession of a number of shares representing more than 5% of the capital or voting rights shall inform the company of the total number of shares or voting rights held. The same obligation shall be respected for several thresholds between 5% and 95% of the share capital or voting rights, and whether the thresholds are crossed downwards or upwards. This obligation only applies to companies having their shares admitted to trading on

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which they intend to exercise the voting rights attached to the securities held by the UCITS they manage. This enables issuers to better identify the concerns of management companies, even if in practice some of them sometimes deplore the overly vague nature of those voting policies or their overly tardy disclosure. In addition, these investors should be required to report ex post on the application of their voting policy. The format of this report could be discussed and take the form either of a detailed report by the issuer, a summary of the resolutions, or the breakdown of the resolutions for which they cast a negative vote. Lastly, if investors decide not to vote, this should be indicated in their voting policy.”

a regulated market. This information must be also transmitted to the French Market Authority and is disclosed to the public. According to French law, the by-laws may provide additional reporting obligations relating to the holding of other fractions of the capital or voting rights which cannot be below 0.5% of the capital or voting rights. In such case, there is no obligation to publish the information, which is just transmitted to the company.

Germany

N/A

N/A

Section 27(a) of the German Securities Trading Act [Wertpapierhandelsgesetz, WpHG] requires investors holding 10% or more of voting rights to provide information about their strategies and source of funding. Issuers of registered shares can insist on the name of the end investor being entered into the share register (Section 67 (4) of

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the German Stock Corporation Act (Aktiengesetz, AktG)).

Greece

According to art. 32 par. 1 of Law 2190/1920 (as it stands after the transposition of Directive 2007/36/EC into Greek law), summaries of all discussions and decisions taken during the General Meeting are kept in a special book. In that same book, a list of all shareholders that participated or were represented in the General Meeting is also kept. All listed companies publish on their websites the voting results of the General Meeting, within 5 days of its taking place. For each resolution taken the following information at least must be disclosed: the number of shares for which votes have been validly cast, the proportion of the share capital represented by those votes, the total number of votes validly cast as well as the number of votes cast in favour of and against each resolution and the number of abstentions.

N/A

Law 3601/2007, which transposes into Greek law the provisions of Directive 2006/48/EC relating to the taking up and pursuit of the business of credit institutions, requires that shareholder identity be disclosed to the Bank of Greece on a number of occasions.

According to article 5 par. 10 b of Law 3601/2007, in order for a credit institution to acquire authorization from the Bank of Greece, the identities of the shareholders, natural or legal persons that have –directly or indirectly- shares or voting rights equal to or more than 5% of the equity capital must be previously disclosed to the Bank of Greece. This disclosure requirement covers also the 10 biggest shareholders, as well as every other natural person who controls the credit institution through agreements, written or otherwise concluded, or through a common venture.

According to article 24 par. 1a of Law 3601/2007, every natural or legal person who proposes to hold,

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indirectly or directly, or to dispose of a holding equal to or more than 5% of the equity capital or of the combined voting rights, ought to give prior notification in that regard to the Bank of Greece.

Finally, according to article 24 par. 10a of Law 3601/2007, credit institutions are required on an annual basis, and no later than the 15th of July, to provide to the Bank of Greece with the name of all shareholders who are in possession of a holding more than 1%, as well as with the size of said holdings, as these data are shown by the information received at the annual general meeting of shareholders or as a result of compliance with obligations stemming from legal provisions regarding listed companies.

Hungary

There are no special provisions or disclosure requirements for voting practices of institutional investors.

No.

42.With the exception of non-voting

preference shares, the shares of financial institutions operating in the form of limited companies may only be registered shares.

43. (1) The board of directors of the financial institution shall keep a register on registered shares and shareholders, and this register shall inter alia include the

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following information: a) the shareholders’ name and address,

mother’s name, and citizenship for natural persons, the registered address for legal persons, unincorporated business associations and sole proprietorships;

b) if a share is held by more than one person, the information of the owners and their common representative as set forth in Paragraph a);

c) the share’s securities code, its series and face value;

d) type of the shares; e) date of purchase; f) date of entry of the purchase in the

register of shareholders; g) date of stamping; h) the date when the share is retired and

destroyed; i) the case number and date of the

resolution of the Authority related to acquisition of ownership.

(2) The register of shareholders must contain sufficient facilities to permit unrestrained identification of all changes, modifications, deletions or corrections, the name of the person making the entry and the legal title and date of entry.

(3) The register of shareholders shall have an appendix attached in which to record information for future identification of the direct ownership interest of owners of a financial institution holding at least

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five percent interest, calculated according to the formula illustrated in Schedule No. 4. Persons having or acquiring an ownership interest of five percent or more in a financial institution must announce their indirect ownership in the financial institution or any change therein - by disclosing simultaneously the data suitable for identification - to the financial institution.

(4) The Authority shall suspend the voting rights of any owner who fails to discharge the obligations specified in Subsection (3) until the time at which such obligations are discharged.

(5) Executive employees of financial institutions operating in the form of limited companies must formally notify the financial institution’s board of directors concerning the shares issued by the financial institution that are in their holding. Act CXII of 1996 on Credit Institutions and Financial Enterprises Section 42,43

The following persons may not be entered into the register of shareholders:

a) persons who so requested; b) persons who have acquired their

shares in violation of the regulations on the transfer of shares set forth by law or

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the articles of association. Shareholders shall have the right to inspect the register of shareholders and may request copies of the section which pertains to them from the management board, or its representative, with which the keeper of the register of shareholders must comply with within five days. Third persons may be allowed access to the register of shareholders. Act IV .of 2006. on Business Association Section 202.

Ireland

Not required but many listed firms tend to comply, for best practice, with UK Stewardship Code.

Yes, investors comply with principles relating to the obligations of institutional shareholders in the UK Combined Code.

All shareholdings above 3% must be disclosed for listed companies.

Italy

Yes, see Code of conduct of Assogestioni (Italian Association of Asset Management Industry)

Yes.

N/A

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Latvia

Article 268 of the Commercial Law. Competence of a meeting of stockholders: (1) Only a meeting of stockholders has a right to take decisions regarding: 1) the annual accounts of a company; 2) the use of the profit from the previous year of activities; 3) the election and dismissal of members of the council, the auditor, the company controller, and liquidator; 4) bringing of actions against members of the board of directors, the council and the auditor or withdrawing actions against them, as well as regarding the appointment of a representative of the company to maintain actions against members of the council; 5) [excluded by the Law of 14 February 2002] 6) amending the articles of association of the company; 7) increasing or reducing equity capital; 8) the issuance and conversion of the company’s securities; 9) specifying the remuneration for

None

According to the Commercial Law: the stockholders register shall be disclosed to the stockholders themselves, members of the board of directors and supervisory council, the auditor and competent public institutions. According to the Law on Credit Institutions: the FCMC is entitled to inspect the identity of founders of any credit institution as well as identity of persons intending to acquire material shareholding. The FCMC shall publicize the information on stockholders of the credit institutions having material shareholding on its website.

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members of the council and the auditor; 10) the termination of the activities of the company or their continuation or regarding the reorganisation of the company; and 11) general principles, types and criteria for stipulating the remuneration to the members of the board of directors and supervisory council. (2) A meeting of stockholders shall take decisions regarding other issues only if it is provided for by law. (Including amendments made by the Law of 14.02.2002 and 24.04.2008 effective as of 28.05.2008)

Netherlands

According to the Dutch law institutional investors are already obliged to publish annually their policy on the exercise of voting rights for shares they hold. They have to report annually how they have implemented their policy and shall report at least once a quarter on whether, and if so how they have voted as shareholders (Dutch Corporate Governance Code IV.4 and section 5:86 Financial supervision act.)

N/A

A Dutch draft bill proposal has the intention to facilitate the identification of shareholders, in order to encourage dialogue between companies and their shareholders.

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Poland

There are no special provisions for institutional investors’. According to the Commercial Companies Code, the voting is public except for elections and on motions to dismiss board members or liquidators, to held them liable, as well as personal matters. It must also be a secret ballot at the request of at least one of the shareholders present or represented at the meeting.

Depending on the branch, in some of them there are codes of conduct, mostly self-regulatory.

The identity of the shareholder has to be disclosed if it possess more than 5 % of shares.

Portugal

There are no special provisions for disclosure of institutional investors’ voting practices.

However, the PSC establishes an obligation to disclose qualified holdings in sociedades abertas (broadly, companies with a wide shareholding base, e.g. because their shares are listed on a regulator market or were allotted following an IPO) (see column regarding Disclosure of Shareholders’ identity) and, for the purposes of assessing the percentage of voting rights held by an individual, Article 20 sets out several situations in which the votes associated to shares held by a third party are attributed to that individual. If the cause for the attribution of voting

No.

Article 16 of the PSC provides that the identity of the shareholder has to be disclosed if it possesses more than 2% or more (qualified holding) of the voting rights attached to the shares of a sociedade aberta. If such is the case, the relevant shareholder must: (a) Give notice thereof to (i) the CMVM and (ii) the issuer; and (b) Notify the entities mentioned in paragraph (a) above of the situation(s) determining the attribution to the participant of voting rights attached to shares held by third parties, in accordance with Article 20 of the PSC. The minimum threshold is of 5% for

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rights is an agreement between the two shareholders for the exercise of voting rights, the acquisition of the company in question or is otherwise an agreement which causes them to be deemed to be acting in concert, this must be communicated to CMVM and, therefore, the voting practices underlying such agreement shall be disclosed. Equally, pursuant to Article 102 of the CIFCGR, persons with the intention of acquiring a qualified holding in a credit institution must also disclose that fact to BdP, and Annex II to Notice 5/2010 of BdP establishes a number of disclosure requirements for such persons, including in respect of their views on the strategic orientation of the institution, which might uncover their past, present and future voting practices. Moreover, Articles 66 and 111 of the CIFCGR require the registration of shareholders’ agreements in respect of credit institutions, and Article 19 of the PSC require the disclosure of shareholders agreements in respect of sociedades abertas to CMVM, and this authority may decide to make the agreement public.

sociedades abertas that do not have their shares or other equity securities listed in regulated markets located or operating in Portugal. Additionally, pursuant to Article 102 of the CIFCGR, persons with the intention of acquiring a qualified holding (10% or more of the capital or of the voting rights) in a credit institution must also disclose that fact to BdP and, under Article 104, anyone who acquires a holding of at least 5% must communicate that fact to BdP.

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Spain

Institutional investors are not required to disclose their voting practices.

No.

The identity of shareholders is available for the spanish banks, due to the fact that their shares are registered ones according to the Spanish law. Besides, the recently passed Law 2/2011 has granted all listed companies the right to be informed of their shareholders’ identity whenever they ask this information to the different financial entities acting as account providers. Nevertheless the identity of the shareholders neither is available for third parties nor is made public.

Sweden

There is a rather wide spread practice of voting disclosure in Sweden but there are no legal obligations on disclosures.

No

According to the Companies Act in a CSD company, a printout or other presentation from the share register shall be available for all persons who wish to review it. In such a printout or presentation, the shareholders and nominees shall be listed in alphabetical order. The printout or presentation may not be more than three months old. A shareholder shall not be included in a printout or presentation where his or her shareholding does not exceed 500 shares. However, where a shareholder owns all shares in the company, his or her shareholding shall at all times be reported.

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UK

Principle 6 of UK Stewardship Code.

UK Stewardship Code introduced in July 2010 and arrangements put in place for listing compliance and providing access to statements of commitment via the FRC website.

The UK is super-equivalent under the EU Transparency Directive and requires the disclosure of shareholding based on a 3% threshold, including contracts for difference. In addition, there are arrangements by which a company can seek information on shareholdings (under S.793 Companies Act).

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Table 8: Remuneration of Directors

Stock Options regime Severance Packages Variable remuneration regime in case

of public funding

Austria

Austrian Code of Corporate Governance: Management board: If a stock option programme or a programme for the preferential transfer of stocks is proposed for management board members, then such programmes shall be linked to measurable, long-term and sustainable criteria. It shall not be possible to change the criteria afterwards. For the duration of such programmes, but at the latest until the end of the management board member’s function on the management board, the management board member shall hold an appropriate volume of shares in the own company. In the case of a stock option programme, a waiting period of at least three years must be fixed. Supervisory board: The remuneration for the financial year to supervisory board members is to be reported in the Corporate Governance Report for each individual member of the supervisory

Annex regarding Sec. 39b Austrian Banking Act: Payments in connection with a premature termination of the contract mirror the long-term success and are formulated in a way that they don’t reward failure. Austrian Code of Corporate Governance: When concluding contracts with management board members, care shall be taken that severance payments in the case of premature termination of a contract with a management board member without a material breach shall not exceed more than two years annual pay and that not more than the remaining term of the employment contract is remunerated. In the case of premature termination of a management contract for a material reason for which a management board is responsible no severance payment shall be made. Any agreements reached on severance payments on the occasion of the premature termination of management board activities shall take the

Annex regarding Sec. 39b Austrian Banking Act: Credit institutions which receive governmental support according to the provisions of the Financial Market Stability Act and the Inter Bank Market Enforcement Act, have to comply with the following principles:

a) If the maintainance of a solid capital base and timely exit from government support isn’t possible, the variable remuneration is limited to a percentage of the net revenue.

b) Credit institutions must structure their remuneration policies in a manner which is aligned with sound risk management and long-term growth. If necessary, these measures include amongst others the establishment of limits for the remuneration of the directors.

c) No payment of variable remuneration to directors if this isn’t seen as inappropriate

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board. Generally, there are no stock option plans for members of supervisory boards. Should stock option plans be granted in exceptional cases, then these must be decided in every detail by the general meeting.

circumstances under which said management board member left the company as well as the economic situation of the company into consideration.

Belgium

N/A

CEBS Guidelines (items 70 and 71)

Circular of the Banking Commission: the following principle applies in case of an exceptional intervention by the public authorities: «no variable remuneration will be paid to people in charge of the actual management of the company, or the management committee in some cases, unless this is justified ».

Cyprus

The remuneration of the non-executive directors should not be related to the short-term performance of the bank. Independent, non-executive directors do not receive any material additional remuneration from the bank (such as share options or performance related incentives) apart from a non-executive director’s fees. For listed banks, the Code of Conduct specifies that no share option schemes must be given to executive directors at a price below the average closing price

Severance pay or pay related to other scenarios such as mergers and acquisitions should be related to performance achieved over time and be designed in such a way as not to reward failure.

Not applicable. No bank in Cyprus has received public funding during the recent financial crisis.

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of the last 30 market sessions prior to the date of granting the stock options. According to the Code, share option schemes must be adopted following approval by an extraordinary general meeting of shareholders.

Denmark

In banks stock options to executive directors or members of the board cannot exceed 12.5 p.c. of the fixed remuneration inclusive pension or fee respectively.

If a member of the board, an executive director or a risk taker is awarded a variable severance pay, the bank has to retain the part in shares or other financial instruments for 5 years.

The variable remuneration for members of the board or executive directors may not exceed 20 percentage of the fee or the fixed remuneration inclusive pension respectively.

Finland

The FSA recommendation 1/2010 on remuneration policies is currently under review. The new recommendation will be based on the principles defined in the CRD III and on the Decree of the Ministry of Finance on the remuneration policies.

According to the FSA recommendation 1/2010 any severance pay related to early termination of employment should be designed so as not to reward failure or encourage excessive risk-taking.

The regime is based on CRD III.

France

Non executive directors cannot receive stock-options. French law provides that shareholders vote on a resolution by which they authorize the board to allot options to employees/executive managers. However, executive managers (CEO,

Under French law, severance payments are subject to performance conditions and disclosure requirements and they have to be approved by the General meeting This provision applies only to the chairman, the CEO and deputy general managers of listed companies. Board members are not concerned by this

French law provides that the variable remuneration of executive management in case of public funding must be based on performance criteria (quantitative and qualitative) and made public. In addition, French law has prohibited in case of public funding the award of free

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Deputy CEO, Chairman of the Board) cannot exercise all their options before the termination of their mandate or have to keep in their nominative account a certain amount of shares, as decided by the Board. The AFEP-MEDEF corporate governance code of listed corporations specifies the conditions for the term of award and the conditions of exercise : “Award: Awards of options and shares to executive managers must be conditional on the attainment of performance targets. An executive manager may not be awarded any stock option or performance share at the time of his departure. If the stock options or performance shares are not awarded to all employees, then it is necessary to provide for another scheme involving them in corporate performance (incentive scheme, profit-sharing scheme departing from the mandatory scheme, grant of bonus shares, etc.). The total amount of the stock option plans and performance shares must represent a small fraction of the capital, and the right balance must be

rule.

shares and stock-options to executive management.

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struck according to the benefits derived by shareholders from the management. The level of dilution must be taken into account. Furthermore, it is necessary to ensure that: - The awarded options and shares valued in accordance with IFRS standards do not represent a disproportionate percentage of the aggregate of all compensation, options and shares awarded to each executive manager. To that end, the board must systematically review the award of new options and shares in view of all compensation items of the executive manager concerned. The board shall then be responsible for determining the percentage of the compensation (in accordance with market standards) not to be exceeded by the said award. - Awards are not overly concentrated on executive managers. According to the situation of each company (size, industry, broad or narrow scope of the award, number of officers, etc.), the board must define the maximum percentage of options and shares that may be awarded to executive managers, as compared with the aggregate award approved by shareholders.

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- Awards are made at the same calendar periods, e.g. after the disclosure of the financial statements for the previous financial year, and probably each year, in order to limit any windfall effects. - Any windfall effects associated with a bear market are prohibited. The number of awarded options and shares may not be markedly different from the enterprise’s earlier practices, unless a material change to the scope of business justifies a revision of the scheme. - In accordance with terms determined by the board and announced upon the award, the performance shares awarded to executive managers are conditional upon the acquisition of a defined quantity of shares upon the availability of the awarded shares. Price: No discount should be applied upon the award of stock options and in particular as regards stock options awarded to executive managers. Those executive managers who are in office and who are beneficiaries of stock options and/or performance shares may not engage in any risk hedging transactions in respect of their own interests.

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Exercise: The exercise by executive managers of all of the options and the acquisition of the shares must be related to performance conditions that are to be met over a period of several consecutive years. These conditions must be serious and demanding and combine internal and/or external performance requirements, i.e. they must be related to the performance of other industries, a benchmark sector, etc. It is necessary to determine periods preceding the disclosure of the financial statements, during which the exercise of the stock options is not possible. The board must determine these periods and where applicable determine the procedure to be implemented by executive managers prior to any exercise of the stock options in order to ensure that they do not hold any information likely to prevent such exercise. Conservation of the awarded shares: The board periodically determines the number of shares resulting from the exercise of stock options or the award of performance shares that the chairman of the board, the chief

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executive officer, the deputy chief executive officers, the members of the management board are required to hold as registered shares until the end of their term of office. The number of the shares so acquired must be material and must increase over time. The board may use a benchmark serving for the determination of the annual compensation of each executive manager and/or a percentage of the net capital gain after disposals that are required for the exercise of the options and the taxes and social contributions and expenses related to the transaction, or may also use as a benchmark a fixed number of shares. Regardless of the standard used, the standard will need to be compatible with any existing performance criteria and must be periodically revised in light of the executive manager’s situation, at least upon each renewal of the corporate office.”

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Germany

At the proposal of the committee dealing with Management Board contracts, the full 7 Supervisory Board determines the total compensation of the individual Management Board members and shall resolve and regularly review the Management Board compensation system. The total compensation of the individual members of the Management Board is determined by the full Supervisory Board at an appropriate amount based on a performance assessment, taking into consideration any payments by group companies. Criteria for determining the appropriateness of compensation are both the tasks of the individual member of the Management Board, his personal performance, the economic situation, the performance and outlook of the enterprise as well as the common level of the compensation taking into account the peer companies and the compensation structure in place in other areas of the company. If the Supervisory Board calls upon an external compensation expert to evaluate the appropriateness of the compensation, care must be exercised to ensure that said expert is

FSB and CRD 3 standards and requirements have been implemented “as is”. All bonus policies are geared towards sustainable performance and provide for deferrals and clawback. According to the German Corporate Governance Code (no. 4.2.3), companies are recommended to agree a severance pay cap in the event of a management board member terminating his/her contract prematurely without good cause. Severance pay should not exceed the value of two years’ compensation or compensate more than the remaining term of the contract. The Act on the Appropriateness of Management Board Compensation (Gesetz zur Angemessenheit der Vor-standsvergütung, VorstAG): disclosure of management board remuneration and of benefits accruing to management board members after regular or premature termination of their contract. Total compensation (including benefits in the event of termination of employment) must, in addition, be geared towards sustainable company performance (Section 87 (1) of the

German Regulation on Remuneration in Financial Institutions (Instituts-vergütungsverordnung, InstVergütVO) implements all CRD 3’s requirements relating to institutions which have received public funding. German Financial Market Stabilisation Fund Regulation (Finanzmarktstabilisierungsfonds-Verordnung, FMStFV): executive compensation may not exceed €500,000 per annum at institutions receiving state support..

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independent of respectively the Management Board and the enterprise. The total compensation of Management Board members comprises the monetary compensation elements, pension awards, other awards, especially in the event of termination of activity, fringe benefits of all kinds and benefits by third parties which were promised or granted in the financial year with regard to Management Board work. The compensation structure must be oriented toward sustainable growth of the enterprise. The monetary compensation elements shall comprise fixed and variable elements. The Supervisory Board must make sure that the variable compensation elements are in general based on a multiyear assessment. Both positive and negative developments shall be taken into account when determining variable compensation components. All compensation components must be appropriate, both individually and in total, and in particular must not encourage to take unreasonable risks. For instance, share or index-based compensation elements related to the enterprise may come into

German Stock Corporation Act (Aktiengesetz, AktG)).

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consideration as variable components. These elements shall be related to demanding relevant comparison parameters. Changing such performance targets or the comparison parameters retroactively shall be excluded. For extraordinary developments a possibility of limitation (cap) must in general be agreed upon by the Supervisory Board. In concluding Management Board contracts, care shall be taken to ensure that payments made to a Management Board member on premature termination of his contract without serious cause, including fringe benefits, do not exceed the value of two years compensation (severance pay cap) and compensate no more than the remaining term of the contract. The severance payment cap shall be calculated on the basis of the total compensation for the past full financial year and if appropriate also the expected total compensation for the current financial year

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Greece

In anticipation of the entering into force of the Directive 2010/76/EU amending Directives 2006/48/EC and 2006/49/EC as regards capital requirements for the trading book and for re-securitisations, and the supervisory review of remuneration policies (CRD 3), the Bank of Greece has published the Circular no. 7 of 9th June 2010, which determines the criteria that remuneration policy should fulfil.

Section IV art.2 of that Circular stipulates that total remuneration should consist of fixed remuneration and bonuses in adequate proportion. The policy of variable remuneration (bonuses) should be flexible and attuned to market conditions and the nature of the relevant services. Whenever a bonus of significant amount is to be paid out, alternative and gradual payment methods –other than immediate payment in full- should be explored (i.e. stock options), so that current and future risks in relation to the performance in question are taken into account (Section IV art.2.2 of the Circular). If a bonus has already been given and is found to be the result of performance stemming from unfair or inconsistent with the

Pursuant to art. 5 of law 3016/2002, remuneration and any other kind of compensation of non-executive board members is defined according to the provisions of law 2190/1920 (general company law) and is proportionate to the time that said members dedicate to the fulfilment of their duties.

Every credit institution whose company seat is in Greece, from 1.10.2010 and on, formulates and applies a remuneration policy in agreement with Circular no. 7 of 9th June 2010 (preamble of Circular).

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Circular actions, there should be clawback arrangements in place (Section IV art.2.3 of the Circular) Finally, with regard to remuneration of independent non-executive board members, article 4 par. 1 of law 3016/2002 stipulates that, during their term of service, said members must not possess shares in excess of 0,5 % of the credit institution’s share capital.

Hungary

The remuneration of management board members and supervisory board members consists of fixed remuneration and variable components of bonuses i.e. stock options. There is possibility to pay a part of remuneration according to performance in stocks. Those are new provisions of Act CXII of 1996 on Credit Institutions and Financial Enterprises, which are implementing the provisions of CRD III. Directive.

Payments in connection with a premature termination of the contract should be related to performance achieved over time. Act CXII of 1996 on Credit Institutions and Financial Enterprises Section 69/D.

The legislation requires credit institutions to implement remuneration policies that are consistent with efficient and effective risk management, and provides detailed rules regarding remuneration. A credit institution must have internal procedures for remuneration policy that is appropriate to its size, internal organisation and scope, nature and complexity of its activities.

Ireland

As set out in CEBS Guidelines / CRD III, from 1st January 2011.

CEBS/ CRD III applied from 1 January 2011

No variable remuneration for Executive Directors while institutions are supported by State Guarantee scheme.

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Italy

New rules of CRD3 now in course of implementation by the Bank of Italy Transparency regime in case of listed company (Consolidated Law on Finance)

New rules of CRD3 now in course of implementation by the Bank of Italy

Detailed provisions

Latvia

Basic principles of remuneration policy stipulate remuneration constituents, also with regard to stocks or stock option instruments. Stipulation of particularly high variable part of remuneration underlies the assumption that in such case at least 50 per cent of particularly high variable part of remuneration shall be defined in non-monetary terms, if the company’s equities are being quoted on regulated market. The institution with regard to the above instruments shall develop an appropriate non-monetary instruments’ holding policy, i.e. number of years in the course of which the beneficiary is not entitled to sell them in order to secure compliance of motivation schemes incorporated in the institution’s remuneration policy with its long-term interests. Basic principles underlying the

Basic principles of remuneration policy stipulate severance pay in case of termination the labor agreement or contract of authorization, contributions to pension plans of private pension funds, discretionary pension benefits and other retirement-related costs pursuant to the company’s retirement policy that complies with the operational objectives, values, sustainable interests etc. as incorporated in the institution’s development strategy; Provisions for reduction or withholding of severance pays that exceed those stipulated in the Labor Law in case of termination of the labor agreement or contract of authorization should the holder of the position that affects the company’s risk profile during their office period commit mistakes or drawbacks. The institution shall take into consideration that the severance pay in case of termination of labor agreement or contract of authorization should reflect

Basic remuneration policy principles stipulate both financial and non-financial ratios and methods for appraisal of operational results and stipulation of variable part of one’s remuneration. With regard to every position that affects the company’s risk profile shall be defined commensurate proportion between fixed and variable parts of remuneration, including structure of variable part and the upper level thereof, taking into account operational fields the respective position is involved into, their terms and conditions and specific features. The institution shall ensure high enough share of the fixed part to stipulate flexible remuneration policy with regard to the variable part, including an option to withhold the variable part, for instance, due to aggravation of the company’s financial situation and deterioration of its solvency, taking into account capital adequacy requirements. Variable part of remuneration shall be

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remuneration policy shall specify an appropriate variable remuneration part to every position that affects the company’s risk profile irrespective of its structure (company’s shares, stock options, money or other means of payment), outpayment and provisions for acquisition of irrevocable rights thereto.

the performance achieved during the employment period.

defined based on the following requirements: Setting of variable part shall be based on the individually assessed position-holder’s performance results coupled with the assessment of operational results at the level of the respective structural unit and overall results of the institution, consolidation group or consolidation sub-group, as well as taking into account the expert, e.g. risk control function opinion on sustainability (stability) of operational results; Assessment of performance results shall be based on operational results for several subsequent years of operation to ensure that assessment of operational results is substantiated by long-term operational performance. Procedure for suspension (deferment) of material and particularly high variable part of remuneration, taking into consideration that in case of material variable part of remuneration at least 40 per cent (in case of particularly high variable part - at last 60 per cent) shall be deferred for a period of at least three to five years depending on the position or responsibility level, during which period appears an opportunity to assess operational results underlying setting of variable part of remuneration, their sustainability and related risks. The deferment period for variable part shall be

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stipulated in compliance with operational cycle, commercial profile, involved risks and actions of the respective employee.

Netherlands

When variable remuneration is awarded to the executive board, the long-term component shall be taken into account as well as profitability and/or continuity of the bank and a material part of the variable remuneration shall be conditional and shall not be paid until at least three years have passed. (Banking Code 6.3.3)

In the event of dismissal, remuneration may not exceed one year’s salary (the ‘fixed’ remuneration component). If the maximum of one year’s salary would be manifestly unreasonable for an executive board member who is dismissed during his or her first term of office, such board member shall be eligible for severance pay not exceeding twice the annual salary. (Banking Code 6.3.2)

For all banks: Every bank shall set a maximum ratio of variable remuneration to fixed salary that is appropriate for the bank in question. The variable remuneration per annum of members of the executive board shall not exceed 100% of the member’s fixed income. (Banking Code 6.4.2) The supervisory board shall be authorised to reclaim variable remuneration allocated to a member of the executive board based on inaccurate data (whether or not the inaccurate data is financial in nature). (Banking Code 6.4.6)

Poland

There is a possibility to pay a part of the variable remuneration in stocks. Those are new provisions of law, which are implementing the provisions of CRD III Directive.

There are no general provisions. Only in case if the state owns 50 % or more of the shares, the severance package cannot be bigger than 3 monthly salaries (app. 5.000 Euros each).

There are no provisions regarding the variable remuneration, however in the companies where 50% or more of the shares are owned by the state, the remuneration of each member of the management board cannot be higher than the average salary multiplied by six (app. 5.000 Euros).

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Portugal

In accordance with Article 399, 1 of the PCC, the general shareholders meeting or a remuneration commission appointed by the former are in charge of the definition of the remuneration of each of the directors of a public company (sociedade anónima). The directors’ remuneration, unlike that of the members of the monitoring bodies (Articles 442-A, 423-D and 440 of the PCC), may consist on a fixed component and of a variable component (Article 399,2 of the PCC). The Corporate Governance Code recommends that the directors’ remuneration (i) is structured in such a way so as to permit the alignment of their interests with the company’s long term interests, (ii) is based on an assessment of their performance, with reference to predetermined criteria, and (iii)discourage excessive risk taking. In particular, the remuneration of executive directors should integrate a variable component, on a reasonable proportion to the total compensation, and a significant portion of the variable remuneration attributed

Under Article 403 of the PCC, if a director is removed without cause, he / she is entitled to a compensation, under the terms of the contract signed by the director or under the general terms of the law. In any case, the compensation must not exceed the value of the remuneration which the director would presumably receive until the end of the period for which he / she was elected. In addition to this, the Corporate Governance Code recommends: (i) that adequate legal mechanisms are put in place to avoid payment of compensation where the reason for removal without cause was the director’s poor performance; and (ii) that the remuneration policy report referred to in the Law 28/2009, of 19 June includes the amounts paid in relation to severance packages.

According to the terms of Decree-Law 71/2007, of 27 March, directors appointed to a public company – i.e., pursuant to Decree-Law nº 558/99, of 17 December, companies in which the state controls more than 50% of the capital or of the votes or is capable of appointing or removing a majority of the members of the management or monitoring body -, are considered “public managers”. The executive public managers’ remuneration may consist of fixed and variable components, but that of non-executive public managers may not include a variable component. The budget for 2011 (Law 55-A/2010, of 31 December) prohibits companies in which the state or a public entity (including a company of the public sector), directly or indirectly, holds a permanent shareholding, to pay variable remuneration to their directors or other members of their corporate bodies, until 2013 (Article 29).

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should be deferred for a period of no less than three years. Executive directors should maintain a significant part of the company shares they receive for the duration of their term and where stock options are granted, the exercise date should be deferred for a period of no less than three years. In relation to credit institutions specifically, the Circular Letter 2/2010/DSB, of 01/02/2010 of BdP sets out similar recommendations to those of the Corporate Governance Code. The most important points not already included in the Corporate Governance Code are: (i) a recommendation that a significant part of the variable remuneration of the executive directors consists of financial instruments issued by the institution and whose value depends on its medium / long-term performance; (ii) a recommendation that non-executive directors’ remuneration should not include a variable component or a component which is dependent of the institution’s performance or value; and (iii) several recommendations as to the remuneration of the officers who are not directors.

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Under Article 4 of the Notice 1/2010 of BdP, the Circular Letter operates on a “comply or explain” basis. Under the terms of Law 28/2009, of 19 June, applicable to credit institutions and listed companies, inter alia, a report on the remuneration policy of credit institutions, including the information relative to the existent stock option plans, must be presented to and approved by the general shareholders meeting, and the directors’ individual and aggregate remuneration must be disclosed.

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Spain

The Commercial Company Law and the Securities Markets Law state that stock options plans must be granted with the approval of the General Shareholders Meeting. Besides these plans must be disclosed to the market and be described in a special prospectus registered by the National Securities Markets Commission.

According to the Securities Markets Law the board of directors of the listed companies shall elaborate an annual report on directors’ remunerations, describing the current and the future policy on directors’ remunerations. Any severance packages granted to any director must be described in this report.

According to the Royal Law-Decree 2/2011, the Fund for the Orderly Restructuring of the Banking Sector (FROB) might impose restrictions on payments of directors’ variable remunerations if the bank has received public funds and doesn’t fulfil the core capital requirements.

Sweden

The Swedish FSA has issued regulation in accordance with CRD III which got into force 1 March 2011. According to the regulation a significant undertaking has to ensure that at least 50 % of variable compensation to an employee of management consists of shares or share linked instrument.

According to the FSA regulation an undertaking, adopting variable pay which include discretionary pension benefits, shall have a pension policy. The undertaking shall pay out discretionary benefits in the form of shares or share linked instruments. The discretionary benefits shall be subject to deferral.

An undertaking which receive governmental support in accordance with the Government support to Credit institution Act has to comply with the following: Ensure that for the five senior executives of the beneficiary who has the highest total remuneration

• basic salary and other fixed payments does not exceed the compensation decided upon before the application was made and,

• variable remuneration may not be resolved during the time for the aid. Related circumstances during, this period shall be disregarded when the variable remuneration is calculates as a result of previous agreement. No variable compensation decides upon before

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the application was made may be enforce or payable during the time the assistance remains and,

• agreement on severance pay shall not apply to more favorable term than under the current guidelines for the employment of senior executives in state-owned companies.

• fees paid to directors and other remuneration for the mission is capped at the level decided before the application for the assistance was made.

UK

The FSA code is silent with regard to singling out forms of pay for special treatment. Fixed and variable pay, and pay in the form of shares and options are regulated in the same way for prudential and tax purposes.

Guidance: these packages should reflect performance over time, and failure should not be rewarded. There are interactions with the other provisions, ie: proportion in shares, retention periods, deferrals, guaranteed bonuses and voiding provisions. The FSA has now indicated that in 2011 it will limit the voiding provisions to firms which were subject to the 2010 Remuneration Code i.e. the 26 largest financial firms and three significant branches that accepted to be bound by the 2010 rules.

Guidance: overall amounts paid in bonuses should be restrained, thus encouraging banks to prioritise a stronger capital base and loans to the real economy. Bonuses should be not paid to the directors of the institution unless this is duly justified. This mirrors CRD 3 and CEBS guidance.