Report of the Board of Supervisory Directors
Meetings of the Board of Supervisory Directors
The Board of Supervisory Directors and its committees constantly monitored the conduct of KfW's business activities and the management of its assets. It has taken the necessary decisions on the provision of financing and the conduct of other business in accordance with the conditions set forth in the KfW Law and Bylaws. The Board of Supervisory Directors, the Presidial and Nomination Committee, and the Remuneration Committee each met three times in 2021 for this purpose; the Audit Committee four times and the Risk and Credit Committee seven times – primarily virtually in the form of conference calls and video conferences due to the pandemic.
At the meetings, the Board of Supervisory Directors acknowledged the information provided by the Executive Board on:
- KfW’s 2020 annual and consolidated financial statements;
- the business activities and current developments in each of KfW’s business sectors, including KfW IPEX‑Bank, DEG and KfW Capital;
- the group’s net assets, its general financial, earnings and risk position, and on sensitive risk areas in particular;
- banking supervisory issues relating to KfW, current consultations with the banking supervisory authorities, compliance with regulatory capital requirements, audits completed and ongoing and the resulting measures, as well as potential effects of future regulatory changes;
- KfW’s advancement towards being a digital and transformative promotional bank for a net-zero greenhouse gas future and initial integration of the COP26 decisions, the status of the creation and realisation of a fund for forward-looking technologies of up to EUR 10 billion;
- the impact of the persistent pandemic situation and ordered restrictions, as well as the steps taken under KfW coronavirus aid;
- the revision of KfW’s guidelines on dealing with projects associated with uncooperative jurisdictions.
In addition, the Board of Supervisory Directors addressed the following key issues based on the reports submitted by the Executive Board on the individual business sectors:
- As regards domestic promotional business activities, the focus remained on processing the special programme for coronavirus aid, which has been extended until April 2022, in addition to the energy-efficient refurbishment programmes for buildings and the reorientation of SME promotion.
- With a view to the business sector Promotion of developing countries and emerging economies, the Board of Supervisory Directors looked at key issues of Financial Cooperation in a fundamentally difficult geopolitical pandemic environment, in which countries are affected to differing extents. In the Export and project finance business sector, the focus was on the support KfW IPEX‑Bank provides to German and European investors and exporters, and for infrastructure investment in Germany and Europe.
- The Board of Supervisory Directors received regular reports on capital market development and KfW’s funding status.
- The Board of Supervisory Directors also monitored KfW Group’s environmental and sustainability commitment and was informed about realisation of the bank’s sustainable finance concept, in particular the selected management approaches, via the sector guidelines, as well as the establishment of an impact management system to measure the carbon footprint of the KfW portfolio.
The Board of Supervisory Directors was informed at the meetings as well as quarterly, in writing, of the group’s net assets, financial and earnings position, its risk situation, the development of its promotional business, and Internal Auditing’s activity. The Executive Board also kept the Chair of the Board of Supervisory Directors and his deputy informed of key developments at the bank between meetings.
The Board of Supervisory Directors discussed key aspects of the business strategy and approved the planning for 2022. It acknowledged the multi-year business strategy, the risk strategy, and the IT strategies for the group and the individual group companies.
Each member of the Board of Supervisory Directors is obliged to inform the Chair of the Board of Supervisory Directors or the relevant committee about potential conflicts of interest before a resolution is made.
Three members of the Board of Supervisory Directors attended fewer than half of the board meetings in the reporting year.
Members of the Board of Supervisory Directors attended three training events and three individual training sessions in 2021 to gain and maintain the expertise required in accordance with the German Banking Act.
Committees of the Board of Supervisory Directors
In exercising its responsibilities prescribed in the bylaws, the Presidial and Nomination Committee discussed Executive Board matters, in particular filling vacant positions including in connection with the position of CEO, and resolved updated job descriptions for Executive Board roles and a temporary redistribution of responsibilities due to the domestic finance vacancy on the Executive Board from the beginning of this year. It also resolved guidelines in accordance with regulatory requirements on professional qualifications for members of the Board of Supervisory Directors and Executive Board and on dealing with conflicts of interest, and addressed the promotion of representation of the underrepresented gender on the Board of Supervisory Directors. The strategic guidelines for 2022 confirm the general alignment of KfW’s business policy.
The committee was also informed about banking supervision issues, the conversion of a silent contribution of KfW at KfW IPEX‑Bank, the activities of KfW Stiftung and legal disputes. It conducted an evaluation of the KfW bodies, made relevant recommendations to the Board of Supervisory Directors and passed the specified resolutions on professional qualifications. It also addressed the remuneration system for the KfW Executive Board.
The Remuneration Committee discussed remuneration issues relating to refilling positions on the Executive Board and the reports in accordance with the Remuneration Ordinance for Institutions (Institutsvergütungsverordnung – “IVV”). It was informed of the annual risk analysis to identify risk takers. As part of this risk analysis, KfW, both as an individual institution and at group level, has to identify staff members whose work could have a material impact on the risk profile of the institution/the group. The committee reviewed and confirmed the appropriateness of the Executive Board members’ remuneration and discussed the system for remunerating said members. The group-wide remuneration strategy and the assessment base for variable employee remuneration were also discussed.
The Risk and Credit Committee reviewed the commitments, equity investments, and intra-entity loans that must be presented to it under the KfW Law and KfW Bylaws, as well as the scope of borrowings required by KfW for its funding, and the related swap transactions necessary for hedging, and addressed the risk situation and the effectiveness of the risk management system. It also dealt with KfW’s exposure in various countries, regions and sectors, the development and assessment of political risks in relevant areas of activity, measures to further develop the risk culture, the potential effects of regulatory measures currently under discussion, the risk profile of financing in certain sectors, and the remuneration system, with a particular focus on the IVV. It dealt with the report on shadow banks and the revised guidelines on dealing with financing in uncooperative countries. There was in-depth discussion on the current developments of the coronavirus pandemic and its impact on KfW’s risk situation, with a particular view to KfW’s risk-bearing capacity and the development of credit risks in the countries and sectors most affected.
The committee also addressed the process of environmental and social impact assessments and the sustainability of financing, including based on the results of mapping to the Sustainable Development Goals (SDGs). It discussed the results and key factors influencing KfW’s sustainability ratings by rating agencies, as well as the status quo and the next steps for sectoral management in line with the Paris climate targets. The regulatory capital requirements of KfW, in particular the requirements under Basel IV were also repeatedly discussed. And lastly, the committee discussed the risk strategy, including capital planning for the next few financial years.
The Audit Committee addressed the accounting process, KfW’s net assets, financial and earnings position, the reports by Internal Auditing and Compliance and the annual financial statements of KfW Group 2020. It made corresponding recommendations to the Board of Supervisory Directors for the approval of the annual financial statements 2020 and the appointment of the auditor for 2022. Based on information supplied by the Executive Board, it evaluated the efficiency of the risk management system, the internal control system (ICS) and the internal audit system. In addition, it addressed auditor independence and quality, determined focal points of the 2021 financial statements audit and discussed the initial results of the 2021 financial statements audit (audit report part I). The committee approved the audit plan of the Internal Auditing department for 2022. It monitored banking supervisory issues and closely reviewed the banking supervisory assessments, along with the resulting measures and projects to remedy the findings.
The committee chairpersons reported to the Board of Supervisory Directors regularly on the work of the committees.
Changes on the boards
Dr Günther Bräunig retired with effect from 31 October 2021 and therefore stepped down from the Executive Board. Dr Ingrid Hengster stepped down from the KfW Executive Board at her own request with effect from 31 December 2021. The Board of Supervisory Directors would like to thank Dr Bräunig and Dr Hengster for their commitment. At the proposal of the Presidial and Nomination Committee, the Board of Supervisory Directors appointed, on 24 March 2021, Christiane Laibach as member of the Executive Board with effect from 1 June 2021; on 23 June 2021, Stefan Wintels as Chief Executive Officer of KfW with effect from 1 October 2021; and on 16 December 2021, reappointed Melanie Kehr as member of the Executive Board with effect from 1 September 2022.
In accordance with Article 7 (1) no. 1 of the KfW Law, in my capacity as Federal Minister for Economic Affairs and Climate Action, I assumed the position of Chair of the Board of Supervisory Directors for 2022 from my colleague Christian Lindner, Federal Minister of Finance.
Rainer Neske joined the Board of Supervisory Directors with effect from 6 January 2021. Robert Feiger, Reiner Hoffmann, Stefan Körzell, Dr Joachim Lang, Dr Hans-Walter Peters and Helmut Schleweis were all reappointed as of this date. Edith Sitzmann stepped down effective 11 May 2021, and Dr Danyal Bayaz was appointed to the Board of Supervisory Directors effective 8 October 2021. Johannes Kahrs stepped down from the Board of Supervisory Directors with effect from 19 November 2021, Peter Altmaier, Julia Klöckner, Heiko Maas, Dr Gerd Müller, Andreas Scheuer and Olaf Scholz with effect from 8 December 2021, Sören Bartol with effect from 13 December 2021 and Michael Theurer with effect from 15 December 2021. Annalena Baerbock, Dr Robert Habeck, Steffi Lemke, Christian Lindner, Cem Özdemir and Dr Volker Wissing joined the Board of Supervisory Directors with effect from 8 December 2021. Doris Ahnen, Dr Holger Bingmann, Verena Göppert, Olav Gutting, Peter Strobel and Heike Taubert stepped down with effect from the end of the year. The Board of Supervisory Directors would like to thank the members who stepped down for their work.
The following members stepped down with effect from 31 December 2021 and were reappointed according to schedule effective 1 January 2022: Andrea Kocsis, Holger Schwannecke and Dr Martin Wansleben. The following new members were appointed to the Board of Supervisory Directors effective 1 January 2022: Dr Andreas Dressel, Prof. Dr Hans-Günter Henneke, Dr Dirk Jandura, Dietmar Strehl and Michael Richter. Katharina Beck, Verena Hubertz, Achim Post and Frank Schäffler joined the Board of Supervisory Directors after the reporting period with effect from 13 January 2022.
Annual financial statements
Ernst & Young GmbH, which was appointed auditor for financial year 2021 for the last time, has audited the annual financial statements and the management report of KfW as well as the consolidated financial statements and the group management report of KfW Group, all of which were prepared as of 31 December 2021 by the Executive Board, and issued an unqualified auditor’s report thereon. The annual financial statements of KfW were prepared in accordance with the provisions of the German Commercial Code (HGB), and the consolidated financial statements were prepared in accordance with International Financial Reporting Standards (IFRS) as applicable within the European Union.
At its meeting on 6 April 2022, the Board of Supervisory Directors approved the financial statements and the consolidated financial statements, both of which were prepared by the Executive Board, as stipulated in Article 9 (2) of the KfW Law, following a recommendation by the Audit Committee.
Frankfurt am Main, 6 April 2022
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.