Evaluating the suitability of Supervisory Board members

Date 26 April 2012

From now on, the Supervisory Board members of banks and insurance companies will always be assessed for their suitability. Regulator AnneMarie Smit was recently interviewed about the suitability assessment, which DNB will initiate in mid-2012.

AnneMarie Smit

There was already a reliability check, so what will change for the Supervisory Boards?
‘The suitability assessment goes a step further than the former reliability check. The Minister of Finance, Jan Kees de Jager, emphasised in a debate in parliament that when assessing suitability, the regulator will not only consider the knowledge, experience and skills of the individual concerned but the composition of the Supervisory Board as a whole. Incidentally, the suitability assessment is nothing new: DNB has been using it for some time to assess the suitability of its own governors.’

So does this mean Supervisory Board members will have to meet more stringent requirements?

‘Yes. Tightening requirements is important for strengthening the governance of banks and insurance companies. More will be expected of Supervisory Boards, whose members must provide an adequate counterbalance to Executive Boards. And checks and balances must be correctly regulated.'

When will DNB start assessing Supervisory Board members?

'DNB will begin the process in mid-2012. From then on, each newly nominated Supervisory Board member will be assessed. Serving board members will also be screened, although clearly not all at the same time:. It would be impossible to assess all 2,000 Supervisory Board members simultaneously. Mr De Jager has therefore implemented a three-and-a-half year transition period to assess serving Supervisory Board members. In 2012, DNB will be screening all the Supervisory Board members of the Netherlands’ four biggest banks and insurance companies.’

Can a Supervisory Board member be assessed at any time?

‘There are various points at which this could happen, for example when a serving Board member is next proposed for reappointment. Or when a Board member is given a new role, such as being appointed chairman or a member of the audit committee. Supervisory Board members who fulfil this type of role must possess additional skills or have appropriate knowledge. In such cases, we must find out whether these individuals are suitable. It is up to the organisation to notify DNB of proposed reappointments or changes in the role of their Supervisory Board members in a timely way.’

What does DNB look at when applying the suitability assessment?

‘DNB specifically looks at whether a Supervisory Board as a whole has a balanced composition. I therefore feel it is important that Supervisory Boards carefully consider succession scenarios. You need to be able to replace the specific knowledge of outgoing members in an adequate way. My advice is to start planning for it early on.

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