Triodos Bank’s strategic focus
The Supervisory Board, in various discussions, encouraged the Executive Board in its efforts to respond to a more challenging external landscape, both strategically and practically, while remaining true to Triodos Bank’s essence. Throughout the year developments in different countries and at Triodos Investment Management were reviewed, as well as the main strategic risks of the business, and a quarterly analysis of Triodos Bank’s overall performance, health and development.
The Supervisory Board particularly focused on the development and implementation of a new organisational structure in Triodos Bank. In close consultation with the Executive Board, the decision was made to expand the Executive Board with one additional role by creating the role of Chief Risk Officer (CRO) as a full member of this board. The area of Risk was previously covered by the CFO. Given Triodos Bank’s growth and increased complexity it is felt that the Risk Management and Compliance perspective should be represented more emphatically at this strategic level. Triodos Bank operates in a context of growing demands from society to perform a gatekeeper role in the financial system coupled with increasing bank supervision. The focus on Risk Management and Compliance is very intense and is expected to further intensify. This requires a strategic response in the composition of the EB. The CFO-role will also be strengthened by this decision as it allows for more focus on the financial strategy, including capital planning, as well as reporting and data management.
Additionally, the Supervisory Board and the Executive Board discussed the management structure in the organisation and what changes might be prudent to support the strategic ambitions. The creation of a ‘Banking Committee’ to allow the Executive Board to take a more strategic and oversight role, has been discussed intensively. The Supervisory Board will monitor whether this restructuring delivers the envisaged improvements in efficiency and effective alignment.
Impact, risk, return
2018 was characterised by managed growth, increased impact and robust financial performance despite a low interest rate environment. The ratio of loans to funds entrusted has improved over the year. During its discussions with the Executive Board, the Supervisory Board paid attention to the continuous improvement of Triodos Bank’s business model and operating model while remaining focused on Impact, Risk and Return. The Supervisory Board monitored Triodos Bank’s health through its financial ratios, its access to capital and the impact of stricter regulatory capital requirements. Improvements in risk management were discussed and implemented in the area of credit risk, interest rate risk and operational risk.
During 2018, topics discussed at the Supervisory Board’s meetings and contacts with the Executive Board included:
- Finance: economic developments concerning Triodos Bank and their financial impact. More specifically, Triodos Bank’s current capital position and future capital requirements, quarterly financial results, the management letter of the External Auditor, the 2017 annual report and the Executive Board report, the 2018 half-year report as well as the accompanying press releases and the dividend proposal.
- Risk and Audit: the design and effectiveness of the internal risk management framework and control systems, the ‘risk appetite’ and the actual risk profile (described in the bank’s Internal Capital Adequacy Assessment Process (ICAAP)/Individual Liquidity Adequacy Assessment Processes (ILAAP), the audit findings, the auditor’s reports, annual internal audit plan, quarterly reports and loan reports and implementation of new regulatory requirements.
- Human resource management: organisational changes and the company culture, the annual revision of the international remuneration and nomination policy.
- Business Units: meetings were held with the management of local branches and Triodos Investment Management by individual Supervisory Board members, together with a representative of the Board of SAAT and the Executive Board. A Supervisory Board branch visit was organised by Triodos Bank’s Spanish branch during the year.
- Triodos Bank’s mitigation plan for being able to continue to operate in the United Kingdom (UK) after the UK leaves the European Union was reviewed and subsequently approved.
- Contacts with the Dutch central bank: The Chair and the Vice-Chair, also the Chair of the Audit and Risk Committee, as well as the Chair of the Nomination and Compensation Committee met several times with representatives of the Dutch central bank. The main topics we discussed in these meetings were the Supervisory Review and Evaluation Process (SREP), Culture and Governance.
- Leadership transition: several discussions were held on the leadership transition that the bank faces in the coming years.
- Contact with the Board of SAAT: A Supervisory Board delegation had an informal meeting with a delegation from the Board of SAAT in advance of the 2018 Annual General Meeting. Also, informal meetings between the Chairs of the Supervisory Board, Board of SAAT and Executive Board took place throughout the year.