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Dutch rules to limit risk and pay at banks

DUTCH banks will see their remuneration structures curbed and be required to obtain regular approval of risk strategies under a new voluntary code of self-regulation to begin on 1 January.<br /><br />The bank code follows a report in April on the future of the country&rsquo;s banking system, after the collapse or near-collapse of a number of Dutch banks during the worst of the credit crisis last October.<br /><br />The code comes as the G20 prepares to thrash out an international agreement on reining in the bonus culture that some have blamed for exacerbating the credit crunch.<br /><br />Members of the management board will have severance payments restricted, generally to one year&rsquo;s salary, while variable compensation will be capped at the same level.<br /><br />The Dutch code repeatedly emphasises the responsibility of managers and directors to balance the interests of customers, shareholders and employees when making decisions.<br /><br />It includes draft language for a code of moral conduct that top bankers will be required to sign.<br /><br />The code addresses risk management in detail, calling for one management board member to oversee a bank&rsquo;s risk profile and requiring annual supervisory board approval of management's intended &ldquo;risk appetite&rdquo;.<br /><br />Supervisory board members will need relevant financial sector experience and cultural familiarity with a bank&rsquo;s markets. Their compensation, however, does not have to be linked to the bank&rsquo;s performance.<br /><br />The code also calls for an independent review of the supervisory board every three years.<br /><br />The Dutch banking association said banks will have to explain in their annual report how they did in complying with the code, and if they have not, why.<br /><br />The association said it will appoint, in consultation with the finance minister, an independent monitoring committee to review performance.<br /><br />The Dutch code comes in advance of planned reforms by the G20, which could include capping bonuses as a percentage of revenue.