The Supervisory Board has two committees as set out in the chapter: the Audit and Risk Committee, and the Nomination and Compensation Committee. Both committees met separately throughout the year. Their main considerations and conclusions were shared with the full Supervisory Board, where formal decision making takes place.
The composition of the Committees is as follows:
Audit and Risk Committee
- Ms M.A. Scheltema (Chair)
- Mr M. Eguiguren Huerta
- Ms C. van der Weerdt
Nomination and compensation committee
- Mr M.M. Frank (Chair)
- Mr H. Voortman
The , adopted for the first time in 2011, was updated. It highlights areas in which Board members have substantial expertise and helps to assess whether the Supervisory Board has the appropriate skills to perform its duties.
The matrix is based on requirements outlined in the collective profile of the Supervisory Board, which is regularly updated.
Activities of the Audit and Risk Committee
The Audit and Risk Committee met on four occasions in 2012. Triodos Bank’s Chief Financial Officer, the Head of Internal Audit and the Head of Risk Management were present at each meeting. The external auditors were present at two meetings.
During its deliberations, the Committee reviewed issues including: Triodos Bank’s overall risk and control framework; the annual accounts and the quarterly results; the findings of the internal auditor; important accounting decisions and treasury management. It also monitored progress on Information Security and Cybercrime risk mitigation.
In addition, one meeting was held with the external auditor, without the Executive Board being present. The Chair of the Audit and Risk Committee also met separately with the external auditor from time to time. There were no specific issues to report as a result of these meetings.
The Committee is pleased with progress made during the year. Improvements were noted in the areas of measuring and managing risks, determining Triodos Bank’s risk appetite and establishing a more cohesive reporting methodology. The finance department was further strengthened in support of these activities.
The Committee also welcomes the inclusion of non-financial risks into the overall framework and specific attention paid to compliance and operational risks. An adequate Internal Liquidity Adequacy Assessment Process (ILAAP) and Internal Capital Adequacy Assessment Process (ICAAP) were performed during the year.
Credit losses, in particular in the biomass industry, continue to be an area of attention for the Executive Board and Supervisory Board. Although central ownership of credit risk is now firmly established at Group level, further attention is required to improve the timely revision of credits.
The Audit and Risk Committee discussed the management letter with the external auditor containing, among others, the external auditor’s observations regarding internal control. It is satisfied that Triodos Bank’s internal control environment is adequate on the basis of comprehensive information including external and internal audit, and compliance and risk management reports. The internal audit function further professionalised during the year. It runs an internal audit programme that supports Triodos Bank in its overall risk approach and increasingly acts as an effective third line of defence.
Activities of the Nomination and Compensation Committee
The Nomination and Compensation Committee met on eleven occasions during the year. One of its primary roles is to advise the Supervisory Board on the remuneration policy of Triodos Bank in general and on setting the remuneration packages of the Statutory Directors. It also advises the Supervisory Board on the approval of the remuneration of Managing Directors reporting directly to the Statutory Directors. Both members of the Nomination and Compensation Committee have senior management experience, good knowledge of – and experience with – performance management and remuneration in general. Additionally they seek advice from independent, external experts in case of specific issues.
Co-ordinating the recruitment of a successor to the Supervisory Board Chair was an important activity in 2012 and will continue in 2013.
The committee organised a two day session of a permanent education programme for the Supervisory Board and the Executive Board. This permanent education programme meets the Banking Code’s requirement to create a life-long learning programme. In 2012 the programme addressed risk management and regulatory framework developments; the roots of the mission of the bank and their personal and professional relevance – moderated by an external consultant; and developments in the European banking landscape, with an in-depth introduction from the director of the Dutch Banking Association who is also the Chair of the European Banking Federation.
In 2012, the committee advised the Supervisory Board on the review of Triodos Bank’s international remuneration policy, which is now fully aligned with European and Dutch regulation regarding remuneration for banks. In reviewing it, the Supervisory Board regrets that the impact of the changes, in some of its provisions, is contrary to the spirit and purpose of Triodos Bank’s approach to remuneration. The latter aims to reward exceptional results only, and this on a fully discretionary basis. These regulatory changes are the consequence of a directive designed for banks with very different remuneration philosophies to Triodos Bank. The Supervisory Board brought these concerns to the attention of the Dutch Central Bank. For more information on the international remuneration policy please refer to the .
The committee also discussed the structure and remuneration levels of Managing Directors with the Statutory Directors, an external consultant and the Human Resources director, to prepare the discussion with the Supervisory Board.
Existing employment contracts for the two Statutory Directors have been updated to make sure they comply with new regulations.
Other issues discussed during the meetings included:
- The profile of the new Chief Operating Officer
- The Supervisory Board capability matrix
- The size of the Supervisory Board
- Yearly reviews with Statutory Directors.