Dutch Banking Code
LeasePlan and the Dutch Banking Code
LeasePlan is a Dutch financial services company focused on vehicle and fleet management. We have held a Dutch banking licence since 1993 and, as such, fall under the supervision of the Dutch Central Bank (De Nederlandsche Bank N.V.). The Netherlands Authority for the Financial Markets also supervises our operations and one of the main regulations we need to comply with is the Dutch Act on Financial Supervision. In September 2009, the Netherlands Bankers’ Association (NVB) published the Dutch Banking Code in response to a report entitled ‘Restoring Trust’ published by the Advisory Committee on the Future of Banks in the Netherlands. The Banking Code lays out the principles of conduct for Dutch banks in terms of the role of the banks’ Executive Board (Managing Board in LeasePlan) and Supervisory Board, corporate governance, risk management, audit and remuneration. The Banking Code is a form of self-regulation that took effect on 1 January 2010 on a ‘comply or explain’ basis.
About the specific banking activities of LeasePlan
In February 2010 we established LeasePlan Bank, a Dutch internet savings bank and an undertaking of LeasePlan which operates on a global scale. LeasePlan Bank was established with the purpose of further diversifying the financing of LeasePlan’s core business activities. Attracting funds from both corporate and private clients through straightforward internet savings products fits well into this strategy. LeasePlan Bank only provides non-complex banking products in the Dutch savings market. The bank pursues an honest, transparent and customer-friendly approach, offering comprehensible internet savings products with clear conditions.
Implementation of the Banking Code
Impact assessment
In the course of 2010, we paid much attention to the implementation of the Banking Code
following the completion of a comprehensive compliance gap analysis. Under the supervision of
the Managing Board, the gap analysis was carried out by the Legal and Compliance Department and
involved a group of representatives from across the organisation. The result of the gap
analysis was then reported to the Managing Board and the Supervisory Board of LeasePlan with
advice on the effective implementation of the Banking Code.
On the basis of the gap analysis of the principles of the Banking Code against the governance
structure, service and products offered by LeasePlan, we found that:
- we already complied with most of the principles;
- we will apply the Banking Code at the consolidated level of LeasePlan. As such the Supervisory Board and Managing Board endorse the principles of the Banking Code; and
- overall, we will follow the comply approach.
Furthermore, with respect to the areas where we did not yet satisfy the requirements, measures
were taken during 2010 to implement the principles. This section of our website sets out which
activities were carried out within the scope of this implementation since the Banking Code came
into effect.
Moral ethical statement
The members of the Managing Board of LeasePlan support the Banking Code with regard to the banking activities of the Company and as such have signed the moral ethical statement. The statement was signed for the first time by each member of the Managing Board on 3 May 2010. During its meeting of 19 January 2011 the Managing Board signed the moral ethical statement again. In view of changes in the Managing Board as of 1 April 2011, the moral ethical statement was also signed by Sven Huster, who succeeded Hans Peter Lützenkirchen as member of the Managing Board and Chief Operating Officer. In the meantime also the Identified Staff of LeasePlan (staff whose professional activities have a material impact on our risk profile, including the control functions) will sign the Moral Ethical Statement in 2011.
The moral ethical statement reads as follows:
“I declare that I will perform my duties as a banker with integrity and care. I will carefully consider all the interests involved in the bank, i.e. those of the clients, the shareholders, the employees and the society in which the bank operates. I will give paramount importance to the client’s interests and inform the client to the best of my ability. I will comply with the laws, regulations and codes of conduct applicable to me as a banker. I will observe secrecy in respect of matters entrusted to me. I will not abuse my banking knowledge. I will act in an open and assessable manner and I know my responsibility towards society. I will endeavour to maintain and promote confidence in the banking sector. In this way, I will uphold the reputation of the banking profession.”
Putting clients first - duty of care
In the Banking Code, it is noted that putting the client first is a prerequisite for the
bank’s continuity. We believe that the moral ethical behaviour and duty of care towards clients
prescribed in the Banking Code are complementary to our approach in business. In fact, these
underlying principles have long been part of our culture and practices. For LeasePlan this
means continually investing in the quality, expertise and professionalism of our people so that
we deliver high standards of service, quality and care, which goes beyond any statutory
framework. This was a central theme in establishing LeasePlan Bank’s approach to client service
and is reflected in the bank’s approach to offering savings products that provide clients with
a transparent interest rate.
In 2010 our underlying cultural principles were further reinforced by the roll-out of the LeasePlan Engagement Programme (LEP), followed by the LeasePlan Identity Programme (LIP) in 2012. These programmes centre on our core values: Commitment, Expertise, Passion and Respect and on how to act on them in order to ensure that we fulfill our promise to customers of “it’s easier to leaseplan”. Our value ‘Respect’ focuses on treating others, (colleagues, clients and other stakeholders) as we would want to be treated ourselves. As part of LEP and LIP, all employees worldwide participate in workshops to help them better understand our values and apply them to their behaviours and daily activities. A new dilemma game was rolled out for LeasePlan to support the LIP programme and encourage discussion among all LeasePlan staff globally about the various potential dilemmas in our business.
With a view to further reinforcing ethical business practices in the interests of our clients, we renewed our Code of Conduct to better reflect the values and behaviour that exist in our organisation. Our renewed Code of Conduct more than covers the principles of the Dutch Banking Code with respect to moral ethical conduct. In 2011, we started a corresponding global awareness campaign to help embed the renewed Code of Conduct even further in our organisation. In order to be able to measure the level of integrity within LeasePlan an Integrity Benchmark was rolled out globally in 2011.
More information on the renewed Code of Conduct can be found in the Corporate Responsibility section of our Annual Report 2010.
Supervisory Board
The Supervisory Board has been composed in such a way to warrant proper execution of the function of the Board and its Committees. The Supervisory Board size and composition are attuned to the nature and characteristics of our business, and the required expertise and background of each member. The Supervisory Board has a complementary and mixed composition and complies with the Banking Code’s provisions in the duties it performs under its purview. The appointment of Ada van der Veer as member of the Supervisory Board ion 10 December 2010 further strengthened the independence and diversity of the Supervisory Board. The other four Board members are associated, by way of employment, to the LeasePlan shareholders. As such those four Board members are compensated by the shareholders for the performance of their tasks and responsibilities as LeasePlan Supervisory Board members. Ada van der Veer is compensated by LeasePlan for her tasks and responsibilities as a member of the LeasePlan Supervisory Board.
In 2010, the regulations for the Supervisory Board and its Committees were adjusted to reflect the Banking Code and its provisions. An individual profile outline was prepared also for each vacancy on the Supervisory Board in order to fully comply with principle 2.1.5 of the Banking Code. In addition, a continuing lifelong learning programme for the members of the Supervisory Board was set up. This programme addresses developments mainly in the field of duty of care for the client, governance for banks, integrity, risk management, financial reporting and audit. The programme includes at least one Supervisory Board visit a year to a LeasePlan operating entity entailing presentations by local LeasePlan management and external experts about the local economy or other relevant developments, customers, business and related risks. In 2010, the Supervisory Board visited the LeasePlan subsidiary in Spain followed in 2011 by a visit to the LeasePlan offices in the USA.Furthermore, the programme includes, at least once a year, a presentation and discussion facilitated by an external specialist. In 2011 external presentations were given in the areas of governance and Basel III. In December 2010, the Supervisory Board discussed its own performance and that of its Committees as well as the effectiveness of the lifelong learning programme. During this assessment, the Supervisory Board concluded that the required knowledge and experience are sufficiently available within the Supervisory Board for the proper execution of such duties. End 2011 such assessment of its performance and the lifelong learning programme is supported by a questionnaire custom-made for LeasePlan by an external governance expert agency, that will be discussed by the Supervisory Board members in Q1, 2012. The functioning of the Supervisory Board and the lifelong learning programme shall continue to be evaluated on an annual basis. Once every three years it will be done under independent supervision, for the first time at the end of 2012.
Currently there are three Committees of the Supervisory Board, namely the Remuneration Committee, Audit Committee and Credit Committee. Under the ‘comply or explain’ principle of the Banking Code it is explained that there is no separate Risk Committee. In view of the importance of risk management, and also taking into account the size of the Supervisory Board, the Board has determined that, instead of establishing a separate Risk Committee, all members will retain full responsibility for overseeing decisions concerning the risk management framework for the group.
Managing Board (Executive Board)
The Managing Board has sufficient diversity in the background, knowledge and expertise of the individual members to warrant proper execution of the overall management of the group, including its relevant banking activities. The division of tasks within the Managing Board is determined by the Board itself and is approved by the Supervisory Board. The members of the Managing Board are fully supported in performing their duties with the advice and services provided by a mixed and diverse Executive Management Team.
The Banking Code provisions applicable to the Managing Board have been fully adopted. Also an individual profile outline was prepared for each vacancy on the Managing Board in order to comply with the requirements of the Banking Code. We have a continuing lifelong learning programme in place for the members of the Managing Board which meets the requirements of the Banking Code. Training sessions for and discussions with the Managing Board and the members of the Executive and Corporate Management Teams have been facilitated by various internal and external experts One of the highlights of the program in 2010 was a session for the Managing Board, the Executive Management Team and the Corporate Management Team in November led by Professor Winter and Professor Cools regarding Corporate Governance. In November 2011 Prof. Dirk Schoenmaker lectured this audience on Developments in the European Banking World and Financial Markets. Tone at the Top workshops were organised for all Managing Directors and Senior Vice-Presidents of LeasePlan entities during the International Directors Meeting in November 2011. Going forward, this programme will ensure that it addresses future developments in the field of duty of care for the client, integrity, risk management, financial reporting, corporate governance and audit.
The Supervisory Board will ascertain, for the first time early 2012, whether the members of the Managing Board comply with the capability requirements of the Dutch Central Bank. Such assessment will be performed on a yearly basis.
In accordance with principle 3.1.7 of the Banking Code, the Chief Financial Officer is the member of the Managing Board specifically charged with the responsibility for preparing the decision making with regard to risk management.
Monitoring Committee
During the course of 2011 representatives of the LeasePlan Supervisory Board and Managing
Board, as well as senior staff participated in each of the meetings organised by the Monitoring
Committee Banking Code. Furthermore LeasePlan completed the survey initiated by the Monitoring
Committee on compliance with the remuneration principles of the Code and contributed to the
survey on Customer First and Risk Management organised by the Monitoring Committee Banking Code
launched in August 2011.
Risk management
In 2010, the definition of the risk appetite of the group has been confirmed in accordance with the requirements of the Banking Code and was discussed with and approved by the Supervisory Board. At least once a year, the Managing Board will submit the risk appetite of LeasePlan to the Supervisory Board for its approval. In 2011 this will be done in the Supervisory Board meeting of December. LeasePlan embeds the role of risk appetite into its remuneration policy, and particularly into its variable pay plan.
Product Approval Process (PAP)
A standard procedure exists for developing products related to our core business of vehicle
leasing and fleet management. Several departments are involved in the development of newly
proposed products, and for making their own assessment of the new product. In addition, new
products are developed based on market demands and, as part of the standard development
process, are often tested with existing and/or prospective clients. Furthermore, in the area of
duty of care, we have established mechanisms for monitoring and acting on client and driver
feedback as part of the service lifecycle. Our standard product development procedure is
currently under review to ensure that it reflects the principles of the Banking Code.
In view of the introduction of LeasePlan Bank in 2010, the Managing Board approved a separate PAP for products offered specifically by the bank. The PAP for LeasePlan Bank products consists of an eight phase development process which includes an assessment of the risks and duty of care towards clients. A dedicated Product Approval Committee, acting as an advisory body to the Managing Board, owns the primary task of overseeing this process for new products and changes to existing products. Group Audit annually reviews whether the PAP for LeasePlan Bank products has been designed properly, is present and works effectively. The PAP for LeasePlan Bank complies with section 4.5 of the Banking Code.
Audit
The Group Audit Department is headed by a Senior Corporate Vice-President, who reports to the Chief Executive Officer. Sufficient measures are in place to warrant the independence of the audit function, including the right to directly approach the Chairman of the Supervisory Board if circumstances so require. Before the introduction of the Banking Code, the Group Audit Department did not prepare a yearly overall report to the Audit Committee on the effectiveness of the organisational structure and the procedures and measures aimed at managing the institution’s risk exposure. A specific audit program to achieve this was rolled out in 2011 and the first report regarding such effectiveness will be presented to the Audit Committee in December 2011. The required level of audit resources has been allocated to this task. Internal audit will progress with following the extended audit universe in the years to come.
Remuneration policy
Our group remuneration policy, including Managing Board remuneration, is in line with the requirements of the Banking Code and takes account of the strategy, objectives and long-term interests of the group. Following the issue by the Committee of European Banking Supervisors (CEBS) on 10 December 2010 of its Guidelines on Remuneration Policies and Practices (the Guidelines), followed by associated implementation rules of the Dutch Central Bank, in relation to the remuneration principles contained in the amendments to the European Capital Requirements Directive (CRD III), we have revised our remuneration policy which has been approved by the Supervisory Board in March 2011.. The Guidelines are more stringent and more prescriptive, except where it concerns the maximum variable remuneration provisions in the Banking Code for Managing Board members. On this principle the Banking Code is more stringent and will continue to be followed by LeasePlan. The members of the Managing Board have accepted the applicability of the claw back requirements under principle 6.4.6 of the Banking Code.
All variable remuneration elements relating to the period as from 1 January 2011 are also aligned with the scope of CRD III and in a manner that is appropriate and proportionate to the size of our internal organisation and the nature, risk profile and long-term strategy of our business. The Supervisory Board will regularly conduct a risk analysis with respect to possible outcomes of the adjustments made to the group remuneration policy concerning variable remuneration to ensure that it is aligned with CRD III and all other relevant best corporate governance practices, the Banking Code and any future applicable legislation.
The key aspects of the Remuneration Policy with regards to base salary, maximum variable remuneration being below 100%, discretionary adjustments, claw back and pensions have remained unchanged for members of the Managing Board. In addition, he targets for variable remuneration are still designed to drive and reward the achievement of LeasePlan’s annual and long term performance objectives. The Variable Pay Plan has however been redesigned to be fully compliant with CRD III and is now applicable to ‘Identified Staff’ below Managing Board level whose professional activities have a material impact on the institution’s risk profile . The long term focus and risk management engagement have been further strengthened by introducing deferrals and phantom shares as mechanisms for the payment of variable remuneration, which is subject to the achievement on the performance criteria of the variable pay plan, The Variable Pay Plan also included risk assessments and claw back provisions for all participants.
LeasePlan is one of the banks that provided input for the Interim Report on Implementation of the Banking Code Remuneration Principles, which was presented by the Monitoring Committee Banking Code to the Minister of Finance in September 2011. Although LeasePlan is listed in Appendix 2 of the Report as a subsidiary of a foreign bank, we believe we should have been listed in category f “smaller Dutch banks”. We are confident that we comply with the remuneration requirements of the Banking Code and other applicable remuneration rules and regulations and that we are able to demonstrate that we have taken the call for change seriously and have translated that call into actions.
PUBLISHED APRIL 2011
UPDATED NOVEMBER 2011
