Green paper on corporate governance in financial institutions and remuneration policies

Letter to European Commission Directorate-General Internal Market and Services

31 August 2010

Norges Bank Investment Management (NBIM) holds assets of approximately €380 billion, of which €145 billion is invested in European Commission regulated markets. NBIM is committed to make active use of its ownership rights in order to promote legitimate, efficient and well functioning markets. We welcome this review of corporate governance practices of regulated financial institutions and the Commission’s decision to prepare a Green Paper on corporate governance for all companies.


The financial crisis highlighted inadequate governance structures and practices among some banks and financial institutions but it also revealed weak application of existing governance standards. We see no advantage to the segregation of financial institutions from other sectors and we regard a separate code of governance for financial institutions as unnecessary. Specific governance rules for banks cannot eliminate the systemic risk of the sector. Rather, NBIM seeks improvements to the implementation and disclosure of the board’s role in risk management in all sectors.

 
We recognize that banks and other financial institutions are highly complex companies but this first necessitates the selection of capable directors with appropriate skill sets equal to the task of risk management and oversight. It also requires the board of each financial institution to establish and enforce a governance structure appropriate for the long term success of the business.  


Recommendations from the Green Paper on corporate governance in financial institutions that have relevance to the wider market should be considered in a Green Paper on corporate governance in all companies. Any recommendations that are specific to financial institutions should be taken up by the Basel Committee on Banking Supervision and the appropriate local market financial regulatory authority. Those recommendations can be incorporated into the relevant local regulatory rule-making, investigatory and enforcement powers.


We look forward in due course to providing a detailed response to any consultation on the forthcoming Green Paper on corporate governance in all companies.

 

Sincerely,

Anne Kvam
Global Head of Ownership Strategies

Gavin Grant
Head of Research, Ownership Strategies