Corporate Governance Report
As the promotional bank of the Federal Republic of Germany, KfW has committed itself to making responsible and transparent action comprehensible. The Executive Board and the Board of Supervisory Directors of KfW recognise the Public Corporate Governance Code (Public Corporate Governance Kodex – “PCGK”) of the Federal Republic of Germany. A declaration of compliance with the recommendations of the PCGK was issued for the first time on 6 April 2011. Since then any potential deviations are disclosed and explained on an annual basis.
KfW is a public law institution under the Law Concerning KfW (KfW Law). The Law sets out KfW’s main structural features. For example, KfW does not have a general shareholders’ meeting. The shareholders are represented on the Board of Supervisory Directors of KfW and exercise control and shareholder functions (e.g. approval of the financial statements and adopting resolutions concerning the KfW Bylaws). The number of members, composition and duties of the Board of Supervisory Directors are set out in the KfW Law. The KfW Law also provides that the Board of Supervisory Directors is subject to legal supervision by the Federal Ministry of Finance in consultation with the Federal Ministry for Economic Affairs and Climate Action as well as direct control of the Federal Audit Office (Bundesrechnungshof). The KfW Law in conjunction with the Regulation concerning key banking supervision standards under the German Banking Act (Gesetz über das Kreditwesen – “KWG”) to be declared applicable by analogy to KfW and supervision of compliance to these standards to be assigned to the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – “BaFin”) (KfW Regulation), dated 20 September 2013, further stipulates that KfW is subject to supervision by BaFin in collaboration with the Bundesbank.
Declaration of compliance
The Executive Board and Board of Supervisory Directors of KfW hereby declare: “Since the last declaration of compliance issued on 24 March 2021, the recommendations of the PCGK, as adopted by the Federal Government on 16 September 2020, were and will be fulfilled to the extent applicable to KfW as a public law institution with the exception of the following recommendations.”
D&O insurance excess
KfW has taken out D&O insurance for members of the Executive Board and the Board of Supervisory Directors, which – in derogation of clause 4.3.2 of the PCGK – does not include any policy excess.
Delegation to committees
The KfW Law sets out the size of the Board of Supervisory Directors at 37 members. To ease the work of the Board of Supervisory Directors, committees more specialised in the subject matter and flexible in terms of time are in place, whose establishment is prescribed by law. In some cases, the committees not only prepare the decisions of the Board of Supervisory Directors but also – in derogation of clause 6.1.7 of the PCGK – make final decisions. This is done for reasons of practicality and efficiency. Pursuant to the KfW Bylaws, the Presidial and Nomination Committee and the Risk and Credit Committee have final decision-making authority. More details are provided in the Board of Supervisory Directors section under the descriptions of the respective committees.
In derogation of clause 5.4.3 of the PCGK, the Chair of the Presidial and Nomination Committee accepts information on Executive Board member conflicts of interest, in lieu of the Board of Supervisory Directors. Moreover, the Chair of the Presidial and Nomination Committee approves secondary employment of Executive Board members instead of the Chair of the Board of Supervisory Directors, in derogation of clause 5.4.4 of the PCGK.
Meetings of the supervisory body
In accordance with section 1 (1) sentence 2 of the rules of procedure of the Board of Supervisory Directors and its committees, the KfW Board of Supervisory Directors holds at least three instead of four meetings per calendar year, in derogation of clause 6.5 of the PCGK. This meeting frequency has proven to be successful in the past, was agreed with the legal supervisor and continues to be deemed appropriate. Due to the statutory size of the Board of Supervisory Directors and delegation of duties to the committees created, some of which involve final decision-making, three meetings per calendar year are deemed sufficient.
Cooperation between Executive Board and Board of Supervisory Directors
The Executive Board and Board of Supervisory Directors work closely together for the benefit of KfW. The Executive Board maintains regular contact with the Chair and Deputy Chair of the Board of Supervisory Directors and discusses important issues concerning the management of the bank and strategy with them. The Chair of the Board of Supervisory Directors informs the Board of Supervisory Directors of serious issues and, if necessary, convenes an extraordinary meeting.
During the reporting year, the Executive Board informed the Board of Supervisory Directors about all relevant matters regarding the bank’s strategies, planning, development of business, profitability, risk situation, risk management, compliance, remuneration strategy, IT strategy, financial position, sustainable corporate governance and its implementation and results including relevant information on the group companies, transactions of particular importance to the profitability or liquidity of the company and the changes in the economic environment significant to the company.
The Executive Board is responsible for managing the activities of KfW pursuant to the KfW Law, the KfW Regulation, the KfW Bylaws and the procedural rules for the Executive Board. A schedule of responsibilities stipulates business responsibilities within the Executive Board. As of 1 August 2014, the Executive Board requires prior approval of the Presidial and Nomination Committee regarding significant changes to responsibilities within the Executive Board.
Changes at Executive Board level in 2021 required some redistribution of responsibilities during the course of the year. Christiane Laibach succeeded Prof. Dr Joachim Nagel with effect from 1 June 2021, assuming responsibility for front office Financial Cooperation (“FC”) and the two subsidiaries DEG and KfW IPEX‑Bank and replacing Dr Ingrid Hengster.
Moreover, Stefan Wintels succeeded Dr Günther Bräunig with effect from 1 November 2021; Dr Bräunig stepped down from the Executive Board with effect from 31 October 2021. The two served together as Co-CEOs from 1 October to 31 October 2021, with responsibility for General Secretariat, Group Development and Economics, Legal, Internal Auditing and Financial Markets.
Both Stefan Wintels and Christiane Laibach were appointed to the Executive Board for a four-year term in 2021, in derogation of clause 5.2 of the PCGK.
Due to Dr Bräunig’s planned resignation as of 31 October 2021, the Executive Board decided to temporarily redistribute the following responsibilities with effect from 1 November 2021:
- Stefan Wintels – General Secretariat, Group Development and Economics, Legal, Internal Auditing, Financial Markets, and Sustainability;
- Dr Ingrid Hengster – Domestic Finance, including the Individualfinanzierung & Öffentliche Kunden (Customised Finance & Public Clients) and Mittelstandsbank & Private Kunden (SME Bank & Private Clients) business sectors, New Business Credit Service, Domestic Marketing and Digital Channels, and KfW Capital GmbH & Co. KG;
- Christiane Laibach – KfW Development Bank, DEG, and Export and project finance (KfW IPEX‑Bank GmbH);
- Melanie Kehr – Information Technology, Transaction Management, and Central Services;
- Bernd Loewen – Accounting, Portfolio Credit Service, Organisation and Consulting, and Human Resources;
- Dr Stefan Peiß – Chief Risk Officer/Head of Risk Controlling, Credit Risk Management, and Compliance.
Executive Board members are obliged to act in the best interests of KfW, may not consider personal interests in their decisions, and are subject to a comprehensive non-competition clause during their employment with KfW. Executive Board members must inform their Board colleagues of any conflicts of interests prior to adopting resolutions and disclose them to the Chair of the Presidial and Nomination Committee without delay.
As of 31 December 2021, the proportion of women on the Executive Board was 50%.
As of 31 December 2021, the proportion of women in senior management (i.e. the two management levels below the Executive Board) was 26%.
Board of Supervisory Directors
The Board of Supervisory Directors supervises and advises the Executive Board in the management of the bank.
In accordance with the KfW Law, the Board of Supervisory Directors consists of 37 members. In accordance with the law, seven Federal Ministers are members of the Board of Supervisory Directors. In addition, the German Bundestag and Bundesrat appoint seven members each. The remaining members of the Board of Supervisory Directors are appointed by the Federal Government after consultation with stakeholder groups. The Federal Minister of Finance and the Federal Minister for Economic Affairs and Climate Action alternate on a yearly basis as Chair of the Board of Supervisory Directors. The Chair of the Board of Supervisory Directors in the reporting year was Federal Minister Olaf Scholz from 1 January 2021 to 8 December 2021 and Federal Minister Christian Lindner from 8 December 2021 to 31 December 2021. There were eight female members on the Board of Supervisory Directors as of 31 December 2021.
No member of the Board of Supervisory Directors may have business or private dealings with KfW or its Executive Board members which are based on a substantial and more than temporary conflict of interests. Each member of the Board of Supervisory Directors informs the Chair of the Board of Supervisory Directors or the relevant committee of conflicts of interest before a resolution is adopted.
Three members of the Board of Supervisory Directors attended fewer than half of the board meetings in the reporting year.
Committees of the Board of Supervisory Directors
The Board of Supervisory Directors has created four committees in accordance with Section 25d KWG in order to increase efficiency in performance of its duties. They are listed below with their (primary) responsibilities, stipulated in the KfW Bylaws.
The Presidial and Nomination Committee is responsible for all business and corporate policy matters, as well as all legal and administrative matters. It approves important administrative matters of the Executive Board and legal matters of the Chair of the Board of Supervisory Directors with Executive Board members and makes urgent decisions on pressing matters within its scope of responsibility. The Presidial and Nomination Committee is also responsible for handling nominations. It draws up job descriptions with candidate profiles for Executive Board positions, identifies candidates, and proposes appointments to the Board of Supervisory Directors. It draws up job descriptions with candidate profiles for positions on the Board of Supervisory Directors, and can support the government bodies which make the appointments in selecting the individuals. It also ensures with the Executive Board that long-term succession planning is in place for the latter. The Presidial and Nomination Committee’s tasks also include advising and adopting resolutions on the remuneration system for the Executive Board, including in respect of contract components and their regular review, notwithstanding the tasks of the Remuneration Committee. The Board of Supervisory Directors, on the other hand, decides on the basic structure of the Executive Board remuneration system. The Presidial and Nomination Committee regularly (at least once a year) assesses the structure, size, composition and performance of the Executive Board and Board of Supervisory Directors and makes recommendations to the Board of Supervisory Directors. It also regularly (at least once a year) assesses the knowledge, skills and experience of the individual members of the Executive Board and Board of Supervisory Directors, and of each body as a whole. It sets objectives for promotion of representation of the underrepresented gender on the Board of Supervisory Directors, develops a strategy to achieve them, and reviews the rules for selecting and appointing individuals to KfW senior management, providing recommendations to the Executive Board in this regard.
The Remuneration Committee deals with remuneration matters. It deals in particular with the appropriate structure of the remuneration system for the KfW Executive Board and employees and advises the Presidial and Nomination Committee on remuneration of the Executive Board members. It also monitors the proper involvement of the internal control and all other areas of relevance in structuring the remuneration systems.
The Risk and Credit Committee is responsible for advising the Board of Supervisory Directors on risk issues, such as, in particular, the group’s overall risk tolerance and strategy. It examines whether the incentives offered by the remuneration system take into account KfW’s risk, capital and liquidity structure as well as the probability and due dates of income. The Risk and Credit Committee is also responsible for handling credit matters, loans and financial guarantees without collateral, and approval of funding through the issue of bonds or taking out loans in foreign currencies and via KfW swap transactions, in some cases making final decisions, i.e. without involving the Board of Supervisory Directors. It is standard procedure at banks for the final decision in such matters to be taken by a committee. It serves to accelerate and bundle expertise in the committee.
The Audit Committee is responsible for accounting and risk management issues. In particular, it deals with monitoring the accounting process, the effectiveness of the internal controlling system, the internal audit system and risk management system, auditing the annual and consolidated financial statements, the required independence of the auditor, determining the focus areas of the audit, and monitoring the prompt elimination by the Executive Board of any deficiencies found by the auditor, Internal Auditing or financial regulators. The Audit Committee makes recommendations to the Board of Supervisory Directors concerning its approval of the annual and consolidated financial statements.
The chairs of the committees report to the Board of Supervisory Directors on a regular basis.
The Board of Supervisory Directors provides information about its work and that of its committees during the reporting year in its report. An overview of the members of the Board of Supervisory Directors and its committees is available on KfW’s website.
As of 31 December 2021, the proportion of women on the Board of Supervisory Directors was 23.5%.
The Federal Government owns 80% of KfW’s share capital, the German federal states 20%. In accordance with Article 1a of the KfW Law, the Federal Republic of Germany is liable for certain of KfW’s liabilities. There is no profit distribution. The KfW Law does not require a general shareholders’ meeting; the Board of Supervisory Directors performs the function of a general shareholders’ meeting.
In accordance with Article 12 of the KfW Law, KfW is subject to legal supervision by the Federal Ministry of Finance in consultation with the Federal Ministry for Economic Affairs and Climate Action. The supervising authority has the power to take all measures necessary to ensure that KfW operates its business activities in accordance with the law, the KfW Bylaws and other rules and regulations.
KfW is not considered a credit institution within the meaning of Section 2 (1) no. 2 KWG. The KfW Regulation dated 20 September 2013, however, declares central banking supervision regulations henceforth applicable by analogy to KfW, and subjects KfW to supervision by the German Federal Financial Supervisory Authority (“BaFin”) in collaboration with the Bundesbank regarding KfW’s compliance with these regulations.
The group companies KfW IPEX‑Bank GmbH and DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH (DEG) are, on the other hand, credit institutions within the meaning of the KWG. KfW IPEX‑Bank GmbH is subject to the provisions of the KWG in full, while DEG is only subject to it with certain restrictions. The group company KfW Capital GmbH & Co. KG is a medium-sized investment firm and subject in particular to the relevant regulatory requirements of the German Securities Trading Act (Wertpapierhandelsgesetz – “WpHG”) and the Investment Firm Act (Wertpapierinstitutsgesetz – “WpIG”).
KfW provides all important information about the bank’s annual and consolidated financial statements, the quarterly and semi-annual reports and the financial calendar on its website. Investor relations activities and corporate communications also involve regular announcements on the latest company developments. The annual corporate governance reports of KfW and the group companies KfW IPEX‑Bank GmbH, KfW Capital GmbH & Co. KG and DEG including the declaration of compliance with the PCGK, are always available on KfW’s website.
Risk management and risk control are primary responsibilities of overall bank management at KfW. In its risk strategy, the Executive Board defines the framework for the bank’s business activities regarding risk tolerance and risk-bearing capacity. This ensures that KfW fulfils its particular responsibilities with an appropriate risk profile effectively and for the long term. The bank’s overall risk situation is subject to comprehensive analysis in monthly risk reports to the Executive Board. The Board of Supervisory Directors regularly receives detailed information on the bank’s risk situation, at least once a quarter.
Compliance at KfW includes, in particular, measures for data protection, securities compliance, financial sanctions, for the prevention of money laundering, terrorist financing and other criminal activities and to achieve adequate information security. There are therefore binding rules and procedures that influence the day-to-day implementation of values and the corporate culture and are continually updated to reflect current law as well as market requirements. Compliance’s responsibilities also include collaboration with financial regulators BaFin and Bundesbank as well as the central function for compliance in accordance with the minimum requirements for risk management (MaRisk). Regular training sessions on all compliance issues are held for KfW’s employees. E-learning programmes are available in addition to classroom seminars.
Accounting and auditing
As the supervisory authority, the Federal Ministry of Finance in consultation with the Federal Audit Office appointed Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft as auditor for financial year 2021 on 18 December 2020. The appointment was based on the proposal of KfW’s Board of Supervisory Directors on 1 April 2020, which was then confirmed by the Board on 15 December 2020. The Audit Committee prepared the recommendation. The bank and the auditor agreed that the Chair of the Audit Committee would be informed without delay of any findings and incidents discovered during the audit that are significant to the duties of the Board of Supervisory Directors. It was furthermore agreed that the auditor would inform the Audit Committee Chair and remark in the auditor’s report if it noticed any facts in performing the audit that represent misstatements in the declaration of compliance with the PCGK. The audit engagement also included verification that the declaration of compliance with the PCGK was submitted and published in the Corporate Governance Report (clause 8.2.4).
Efficiency review of the Board of Supervisory Directors
Since Section 25d (11) KWG became applicable as of 1 July 2014, the Presidial and Nomination Committee has been required to evaluate the efficiency of both the Board of Supervisory Directors and the Executive Board on an annual basis. Both evaluations are performed on a yearly basis, for the first time in mid‑2015 and most recently in December 2021.
Sustainability/non-financial report/fair taxation
KfW pursues sustainable corporate governance in accordance with Germany’s National Sustainable Development Strategy and the UN’s Sustainable Development Goals (“SDGs”). Work on the six tranSForm sub-projects will also shape 2022. KfW aims to introduce an additional sector guideline and create a greenhouse gas accounting system. In exchange with its stakeholders, KfW also continues its preparation for application of the EU taxonomy and the new EU directive on sustainability reporting.
As part of its non-financial reporting, KfW publishes its declaration of compliance with Germany’s Sustainability Code (Deutscher Nachhaltigkeitskodex – “DNK”) every two years; its Task Force on Climate-related Financial Disclosures (“TCFD”) report and its human rights due diligence are published in its annual sustainability report.
As a state-owned promotional bank, KfW is subject to a specific fiscal regime and is partially tax-exempt. In contrast, unlike KfW itself, KfW’s subsidiaries are fully or partially subject to income tax. Full compliance with all national and international tax laws is part of sustainable corporate governance at KfW and is set out in the bank’s tax mission statement and code of conduct. KfW complies with the requirements of Directive (EU) DAC 6 2018/822 on fair taxation as well as its reporting obligations in accordance with the law to implement mandatory exchange of information in the field of taxation on cross-border arrangements.
Diversity and equal opportunities/inclusion
Diversity and equal opportunities are a matter of course for KfW. Discrimination based on nationality, ethnic origin, gender, religion, fundamental beliefs, disability, age or sexual orientation is prohibited. This is set out in KfW’s mission statement, as well as in the binding targets for a balanced proportion of men and women at all management levels in KfW’s Equal Opportunities Plan. To underpin its commitment to a diverse workforce, KfW signed the Diversity Charter in 2019, implementing it through a variety of internal and external measures.
KfW includes people with disabilities in line with the UN Convention on the Rights of Persons with Disabilities. KfW has embedded the convention’s goals in its Inclusion Agreement, which was concluded between the general representative for those with severe disabilities for KfW and KfW’s General Staff Council. In spring of 2021, KfW set a binding target of a 6%-quota of employees with disabilities. This target is accompanied by comprehensive measures to recruit employees with disabilities (e.g. posting job advertisements on target group-specific job platforms, such as myAbility.jobs, cooperating with a number of associations and organisations, as well as with a working group on establishing physical and digital accessibility).
Mobile working/work-life balance
Striking a balance between work and personal life is key to staff remaining healthy and employable. This approach forms the basis of KfW’s strategically designed, family-friendly personnel policy. KfW helps its employees to balance their work and personal lives as well as possible, each in their own unique way. To this end, it offers them a broad range of part-time working models and significantly expanded mobile working in 2020.
The collective bargaining agreements for the public and private banking sector concluded by the Association of German Public Banks (Bundesverband Öffentlicher Banken Deutschlands – “VÖB”) apply to KfW employees subject to collective bargaining, by classification in pay scale groups. Employment contracts of employees not covered by collective bargaining agreements contain provisions in line with the main working conditions of the VÖB master collective agreement (in particular working hours and leave entitlement), to ensure a coherent remuneration level. KfW supports the policies by means of staff agreements. Similar policies on collective and individual contractual bases are also in place for employees of the other KfW Group companies. KfW is expressly committed to fair, transparent and non-discriminatory remuneration principles and to the same standards for the evaluation process.
All KfW employees have been able to assert their right to access information in accordance with Section 10 of the German Transparency of Remuneration Act (Entgelttransparenzgesetz) since 2018. All KfW Group companies have implemented this legislative requirement.
In awarding contracts for services, KfW also ensures that applicable collective bargaining and statutory provisions on the remuneration of service providers are observed.
The remuneration report describes the basic structure of the remuneration plan for members of the Executive Board and Board of Supervisory Directors; it also discloses their remuneration on an individual basis. The remuneration report is an integral part of the notes to the consolidated financial statements.
Frankfurt am Main, 6 April 2022
The Executive Board
The Board of Supervisory Directors
The information contained in this online Annual Report 2021 is based on KfW’s Financial Report 2021, which you can download Should this online Annual Report 2021, despite the great care taken in preparation of its content, contain any contradictions or errors compared to the Financial Report, the KfW Financial Report 2021 takes priority.