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 2019 for this purpose; the Audit Committee twice and the Risk and Credit Committee five times.
At the meetings, the Board of Supervisory Directors acknowledged the information provided by the Executive Board on:
- KfW's 2018 annual and consolidated financial statements;
- the business activities and current developments in each of KfW’s business sectors, including KfW IPEX-Bank GmbH, DEG and KfW Capital;
- the group’s net assets, financial position, results of operations, and risk situation in general, and sensitive risk areas in particular;
- the further development of KfW into a transformative promotional bank for a net-zero GHG future;
- the further development of KfW into a digital promotional bank;
- 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;
- the status on the modernisation of IT and the payment systems, as well as on the realignment of Internal Auditing;
- business and risk strategies, the group and KfW IT strategies for 2020, as well as the Equal Opportunities Plan.
In addition, the Board of Supervisory Directors addressed the following key issues at its meetings based on the reports submitted by the Executive Board on the individual business sectors:
- As regards domestic promotional business, the Board of Supervisory Directors discussed the impact of the persistent low interest rate environment on promotion, and the associated KfW measures proposed, improvements to innovation promotion in the field of digitalisation, the comprehensive offering on the start-up platform for entrepreneurs and the promotional activities in the context of environmental and climate protection and the German Federal Government's climate cabinet resolutions.
- With a view to the business sector Promotion of developing countries and emerging economies, the Board of Supervisory Directors discussed key issues of Financial Cooperation, DEG's business orientation and results and the stepped up activities in Africa.
- As for KfW IPEXBank GmbH, i.e. the Export and project finance business sector, the focus was on the support the bank provides to German and European investors and exporters. The Board of Supervisory Directors addressed in particular the future growth outlook for KfW IPEX-Bank GmbH in light of its targeted approach to further developing its syndication and structuring expertise.
- The Board of Supervisory Directors approved KfW's acquisition of a strategic interest in a Belgian transmission system operator which holds a majority stake in the German transmission grid in Hamburg and in eastern Germany.
- The Board of Supervisory Directors received regular reports on capital market development and KfW’s funding status. KfW’s activities on the green bond market continue to make a key contribution to the development of the “sustainable finance” market segment.
- The Board of Supervisory Directors also monitored KfW Group's environmental and sustainability commitment and was informed about the sustainable finance roadmap, which KfW follows in implementing a stringent, multi-dimensional sustainability concept.
The Board of Supervisory Directors was informed at the meetings as well as quarterly, in writing, of the group’s net assets, financial position and results of operations, 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, in particular promotional funding of future investments in Germany and sustainable further development of the IPEX business model, and approved the planning for 2020. It acknowledged the multi-year business strategy, the risk strategy, the IT strategies for the group and the individual group companies, as well as the new Equal Opportunities Plan.
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. Consequently, on some occasions during the reporting year, members of the Risk and Credit Committee abstained from voting or refrained from participating in resolutions.
Seven members of the Board of Supervisory Directors attended fewer than half of the board meetings in the reporting year. Two members attended fewer than half of the meetings of the Presidial and Nomination Committee. The same applies to the Remuneration Committee. One member attended fewer than half of the Audit Committee meetings and seven members fewer than half of the Risk and Credit Committee meetings.
Members of the Board of Supervisory Directors attended six training events and four individual training sessions in 2019 to gain and maintain the expertise required in accordance with the German Banking Act. Two training sessions were also conducted for employees of members of the Board of Supervisory Directors.
Committees of the Board of Supervisory Directors
In exercising its responsibilities prescribed in the Bylaws, the Presidial and Nomination Committee discussed Executive Board matters, resolved an adjustment to Executive Board remuneration and made recommendations to the Board of Supervisory Directors on the appointment of Ms Kehr and the reappointment of Dr Peiß and Prof. Dr Nagel to the Executive Board. It resolved on details of the basic business policy strategy underlying KfW's strategic guidelines for 2020.
The committee resolved a redistribution of Executive Board responsibilities resulting from Ms Kehr's appointment as the sixth Executive Board member, in charge of information technology and transaction management.
It was also informed about banking supervisory issues, KfW Stiftung and legal disputes. It conducted an evaluation of the KfW bodies, making relevant recommendations to the Board of Supervisory Directors.
The Remuneration Committee discussed remuneration issues 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. It reviewed and confirmed the appropriateness of the Executive Board members' remuneration. The group-wide remuneration strategy and the assessment base for variable employee remuneration for 2019 and 2020 were also discussed.
The Risk and Credit Committee reviewed the commitments, equity investments, and loans to members of senior management 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 and regions, the development and assessment of political risks in relevant areas of activity, measures to further develop the risk culture, details of stress testing and market price risks, including further development of their measurement, 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. The report on shadow banks initiated an in-depth discussion on the topic. The results of Bundesbank assessments, along with the resulting measures and projects, the discussions with the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – “BaFin”) and the regulatory capital requirements to KfW were also 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 position and results of operations, the reports by Internal Auditing and Compliance and the annual financial statements of KfW Group 2018. It made corresponding recommendations to the Board of Supervisory Directors for the approval of the annual financial statements 2018 and the appointment of the auditor for 2020. 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, also dealing with the risk culture. In addition, it addressed auditor independence, determined focal points of the 2019 financial statements audit and discussed the initial results of the 2019 financial statements audit (audit report part I). The committee approved the audit plan of the Internal Auditing department for 2020. It monitored banking supervisory issues and closely reviewed the Bundesbank 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
In the period under review, the Board of Supervisory Directors appointed Ms Melanie Kehr to the KfW Executive Board with effect from 1 March 2019. It also reappointed Dr Peiß and Prof. Dr Nagel to the KfW Executive Board with effect from 1 January 2020 and 1 November 2020, respectively.
In accordance with Article 7 (1) no. 1 of the KfW Law, in my capacity as Federal Minister for Economic Affairs and Energy, I assumed the Chair of the Board of Supervisory Directors for 2020 from my colleague Olaf Scholz, Federal Minister of Finance.
Doris Ahnen, Verena Göppert, Olav Gutting, Andrea Kocsis, Peter Strobel and Heike Taubert joined the Board of Supervisory Directors with effect from 1 January 2019. Andreas Ibel, Bartholomäus Kalb, Lutz Lienenkämper, Eckhardt Rehberg and Carsten Schneider stepped down from the Board of Supervisory Directors effective the end of 2019. Dr Florian Toncar resigned from the Board of Supervisory Directors with effect from 31 March 2020. The Board of Supervisory Directors would like to thank the members stepping down for their work.
Volker Bouffier, Dr Louis Hagen, Reinhold Hilbers, Gerhard Hofmann, Joachim Rukwied and Edith Sitzmann stepped down with effect from 31 December 2019, and were reappointed with effect from 1 January 2020, according to schedule.
Dr André Berghegger, Ingeborg Esser, Albert Füracker, Johannes Kahrs and Alois Karl joined the Board of Supervisory Directors after the reporting period with effect from 1 January 2020.
Annual financial statements
Ernst & Young GmbH, which was appointed auditor for the 2019 financial year, 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 2019 by the Executive Board, and issued an unqualified auditor's report thereon. The financial statements and the management report were prepared in accordance with the provisions of the German Commercial Code (HGB) and the consolidated financial statements and the group management report were prepared in accordance with International Financial Reporting Standards (IFRS) as applicable within the European Union.
At its meeting on 1 April 2020, 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, 1 April 2020
THE BOARD OF SUPERVISORY DIRECTORS
The information contained in this online Annual Report 2019 is based on KfW’s Financial Report 2019, which you can download Should this online Annual Report 2019, despite the great care taken in preparation of its content, contain any contradictions or errors compared to the Financial Report, the KfW Financial Report 2019 takes priority.