Corporate governance
Organisation and risk management
Following several corporate scandals in the past
few years, corporate governance became a topic
of public discussion worldwide. In turn, this
discussion led to the development of general
principles designed to serve as the basis for sound
corporate governance. Legislation and regulations
have been drafted in various countries with the
aim of preventing new financial scandals.
Examples include the Sarbanes-Oxley Act in the
United States and the Corporate Governance
Code in the Netherlands. This chapter provides
information on corporate governance at
Rabobank. This subject will be further discussed
within Rabobank in the coming period.
Rabobank Group
50 Rabobank Group Annual Report 2004
Organisation and risk management
During the past decade, Rabobank Group has held ongoing deliberations
on corporate governance. In 2002, this resulted in a radical revision of
Rabobank Nederland's management structure.
Rabobank Group's permanent focus on corporate governance naturally
implies that it also follows the global debate on this subject. Financial
institutions such as Rabobank Group have been familiar for years with
many of the latest principles of governance. After all, the financial sector
has always been subject to strict regulation because of its social and
economic role. Given its firm roots in Dutch society and its prominence
in the international capital markets, Rabobank Group endorses the
principles of the Dutch Corporate Governance Code as developed by
theTabaksblat committee. However, Rabobank Group is not actually
subject to this code, as its structure is based on cooperative principles
and it is not listed on the stock exchange. Nevertheless, it will apply the
code where possible.
Cross-guarantee system
Rabobank Group consists of the local Rabobanks, their central orga
nisation Rabobank Nederland and its subsidiaries and other affiliated
entities.
It is important to bear in mind that, through their mutual financial
association, various Rabobank Group units together make up a single
organisation. An internal liability relationship exists between these legal
entities, as referred to in Section 12 of the Act on the Supervision of the
Credit System 1992 (Wet toezicht kredietwezen 1992). This relationship
is formalised in an internal 'cross-guarantee' system, which stipulates
that if a participating institution has insufficient funds to meet its obliga
tions towards its creditors, the other participants must supplement that
institution's funds in order to enable it to fulfil its obligations towards
creditors.
Corporate governance at Rabobank Nederland
Executive Board
The Executive Board is responsible for the management of Rabobank
Nederland and its affiliated entities. This includes responsibility for the
achievement of the objectives of Rabobank Group as a whole, its strategic
policy, its results, the synergy within the Group, compliance with all
relevant laws and regulations, the management of business risks and
the financing of Rabobank Group. The Executive Board reports on all
these aspects to the Supervisory Board, the Central Delegates Assembly
(the organisation's 'parliament', which is authorised to make decisions
on behalf of the local Rabobanks represented therein) and the General
Meeting of Rabobank Nederland, which is formed by the members,
i.e. the local Rabobanks.
The management of Rabobank Group is also based on the interrelati
onship between risk, return and reserves. The Supervisory authorities
- the Dutch Central Bank and the Netherlands Authority for the Financial
Markets - have formulated standards for financial institutions.
The standards of the Dutch Central Bank are laid down for example in
the Regulation on Organisation and Control, which forms the frame
work for the organisation and control of Rabobank Group's activities. In
addition, the supervision on the conduct of the Dutch financial markets
exercised by the Authority for the Financial Markets also applies to
Rabobank Group.
