New governance rules for credit institutions
The Belgian law of 25 April 2014 on the status and supervision of credit institutions (the ‘Banking Law’) brought some material changes to the governance of Belgian credit institutions, most of which are based on Directive 2013/36/EU on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms (CRD IV).
The Banking Law includes the following new governance rules:
Legal entities cannot be appointed as directors
New directors, persons entrusted with the management and members of the independent supervision bodies of the credit institution must be natural persons.
Combination of directorships
Stringent rules regarding combinations of directorships have been introduced under Belgian law. Similarly to what is provided under CRD IV, the Banking Law provides as a maximum the combination of four non-executive directorships or three non-executive and one executive directorship. Going further than CRD IV, which provides that directorships held within a single group of companies count as a single directorship, the Belgian Law restrict these rules to directorships held within the group of the credit institution only.
Loans and securities to directors and shareholders
Pre-existing limitations on loans and securities to directors have been extended in the Banking Law. In a nutshell, (i) members of the board of directors and persons entrusted with the management, (ii) holders of a qualified shareholding and members of their corporate bodies and managers, (iii) companies and institutions in which credit institutions and persons referred to above hold an interest or a function, and (iv) close family members of those persons can only benefit from loans or securities from the credit institution to which they relate under market conditions. Such loans and securities must be notified to the competent supervisory authority. In addition, the Banking Law prohibits financial assistance to those persons and entities. Infringement of the rules relating to loans and securities can give rise to criminal sanctions.
New board committees
In addition to the audit committee and the remuneration committee that already existed under the previous legislation, the Banking Law provided for a risk committee and a nomination committee. The two new committees must be set up for 1 January 2015. Smaller credit institutions can, however, decide not to set up any remuneration committee and merge the audit and risk committee. All of the committees of the board must include at least one independent director and directors cannot belong to more than two committees.
Rules on variable remuneration of directors, members of supervisory bodies and senior employees
Pursuant to the Banking Law, variable remuneration is capped to the higher of (i) 50 per cent of base remuneration, and (ii) €50,000 and cannot be guaranteed (except in limited circumstances). Moreover, a substantial part of the variable remuneration must be payable in financial instruments and spread over time. The law also provides for a right of claw-back under specific circumstances. Finally, credit institutions benefiting from the support of public authorities cannot provide for variable remuneration.
Rules on golden parachutes
Golden parachutes exceeding 12 months (or 18 months with the agreement of the nomination committee) must be approved by the shareholders’ meeting. Credit institutions benefiting from the support of public authorities cannot provide for golden parachute exceeding 9 months.
Most of the provisions of the Banking Law entered in force on 7 May 2014.