State aid to banks (IVOR nr. 109) 2018/11.3.3.1:11.3.3.1 The level of detail with which the corporate governance issues are described

State aid to banks (IVOR nr. 109) 2018/11.3.3.1

11.3.3.1 The level of detail with which the corporate governance issues are described

Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.

As set out in subsection 11.3.2, there are 43 decisions that mention that the bank will improve its corporate governance framework. However, these 43 decisions do not mention the corporate governance measures with the same level of detail. There are two extremes. On the one hand, there are decisions that merely mention that the bank has undertaken a significant overhaul of its corporate governance framework.1 By contrast, some decisions explain in-depth the corporate governance issues. In that regard, it should be kept in mind that corporate governance issues can be elaborated in two ways: the measures themselves can be described in detail; and/or the need for those measures (and thus their relevance) can be underlined. This can be clarified by the following examples.

The decision on Landesbank Baden-Württemberg (LBBW) is an example of a decision in which the corporate governance measures are described in detail.2 LBBW is a German Landesbank and all its shareholders were either public entities or in state ownership.3 Several measure were taken to improve the corporate governance, including the following:

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The restructuring plan ensured that LBBW would be less subject to improper influence by the shareholders. The restructuring plan envisaged a change in legal form: LBBW would be converted from a company governed by public law into an SE or public limited company.4

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Important aspects of the voluntary German Corporate Governance Code were introduced.5

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The restructuring pan envisaged that the Administrative Board of LBBW would be reshaped into an independent Supervisory Board in accordance with the model in the Corporate Governance Code.6

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The ‘fit and proper’ test was introduced.7

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The arms-length principle should apply in relations with shareholders.8

The decision on Sparkasse KölnBonn is an example of a decision that dwells on the need for an improvement of the corporate governance framework. Sparkasse KölnBonn is a German savings bank, held by city of Köln (70%) and the city of Bonn (30%). In the Opening Decision, the Commission noted that there was a lack of separation of the interests of the owners as public entities and as owners of the economic entity of a bank.9 Many investment decisions of Sparkasse KölnBonn were politically-driven.10 For instance, the 100% ownership of Sparkasse KölnBonn in Magic Media Company TV Produktionsgesellschaft – which contributed to the need for risk provisions in 208 – seemed to be driven by the desire of the city of Koln to develop and promote the city as a media city.11 In the Opening Decision, it was pointed out that “it must be ensured that the problems of the past are not replicated and that any lasting solution should therefore address the issue of corporate governance”.12

A very specific corporate governance measure can be found in the decision on the Italian bank Monte dei Paschi di Siena (MPS). The Articles of Association of the Italian bank MPS contained a limitation with respect to the voting rights that shareholders could exercise. It was stipulated that no shareholder other than the Foundation could own ordinary shares exceeding 4% of MPS’s share capital and that the voting rights on shares held in excess of this 4%-cap could not be exercised. In July 2013, this 4%-cap was removed. The Commission welcomed this, since this would introduce “market discipline through effective shareholder control of the management actions”.

Deze functie is alleen te gebruiken als je bent ingelogd.