Report of the Board of Supervisory Directors
KfW IPEX-Bank began operating as a legally independent subsidiary of KfW on 1 January 2008, and celebrated its ten-year anniversary in 2018. Within KfW Group, it is responsible for the export and project finance activities that have been carried out since the late 1950s. As of the end of December 2018, almost 700 employees worked for the wholly-owned subsidiary of KfW, distributed between its headquarters in Frankfurt and ten further locations outside Germany. The Board of Supervisory Directors has been delighted to support the bank during its first decade.
During the past financial year, the Board of Supervisory Directors carried out its duties in full with regard to monitoring and advising the Management Board and continued to cooperate closely with the Management Board. It was informed by the Management Board of all significant developments at the company in a timely, proactive and comprehensive manner, and was satisfied of the due and proper conduct of business. The Board of Supervisory Directors was involved in all decisions of major importance for the company and granted its approval in relevant cases, where required, fol-lowing extensive consultation and review.
Meetings of the Board of Supervisory Directors
During the four ordinary meetings that took place on a quarterly basis, the Board of Supervisory Directors was provided with regular updates from the Management Board on the bank’s results, risk situation and current business development. It was presented with relevant risk and performance reports as well as the interim financial statements and discussed these at length.
The Board of Supervisory Directors was supported in its duties by five committees, with four members of the Board of Supervisory Directors – in differing combinations – belonging to each committee. In accordance with their respective areas of responsibility, these committees examined upcoming issues in depth and reported accordingly to the Board of Supervisory Directors.
The Executive Committee is primarily responsible for personnel matters in relation to the Management Board and for the bank’s management policies. It monitored compliance with the Management Board’s Rules of Procedure and advised the Board of Supervisory Directors regarding the annual evaluation of the structure, size, composition and performance of the Management Board and the Board of Supervisory Directors. The committee met three times during the reporting year.
The Remuneration Control Committee dealt in particular with the remuneration strategy and the process for identifying risk takers. It also supported the Board of Supervisory Directors with monitoring duties to ensure that systems of remuneration for the various groups (Management Board, employees, Head of the Risk Controlling function, Head of the Compliance function and risk takers) were appropriate. It examined the suitability of the remuneration system for members of the Management Board and the compatibility of this system with the corporate strategy geared towards the company’s sustainable development, and made a recommendation in this regard to the Board of Supervisory Directors. Furthermore, it assessed the impact of these remuneration systems on the company’s risk, capital and liquidity situation, as required by the German Remuneration Ordinance for Institutions (Institutsvergütungsverordnung – IVV). The committee was able to consult with KfW IPEX-Bank’s Remuneration Officer at all times when performing its supervisory duties. Five committee meetings took place during 2018.
The Risk Committee is responsible for advising the Board of Supervisory Directors on the current risk situation, future risk tolerance and the risk strategy, and helps it to monitor implementation of this strategy. During its meetings, risk reports and risk-specific developments in selected portfolios were discussed in detail. The committee monitored implementation of the risk culture and examined whether the incentives set within the remuneration system take sufficient account of the company’s risk, capital and liquidity structure. It ensured that the strategies are commensurate with the company’s specified risk appetite. The committee met four times during 2018.
The Audit Committee deals in particular with accounting matters and monitors the accounting process. Pursuant to another of its core responsibilities, it closely monitored the performance of the audits by the auditor and the swift resolution of any deficiencies identified by the auditor. It recommended that the Board of Supervisory Directors approve the annual financial statements as of 31 December 2017 and the 2017 management report. The Audit Committee also received detailed reports on the resolution status of audit findings regarding the departments 'IT' and 'Internal Auditing', both outsourced to KfW, as well as on regulatory audits performed during the current financial year. Further areas covered by the committee included monitoring the effectiveness of the risk management system, in particular the internal control system (ICS) and the Internal Auditing department. It held five meetings during 2018.
The Loan Committee is responsible for loan-related issues. During 2018, it took final decisions on a total of 35 loans at the appropriate authorisation level. There was one instance where a member of the committee abstained from voting due to a conflict of interest. Given the normal market situation, this committee convenes on a monthly basis. It met 12 times during 2018.
Within the framework of their respective areas of responsibility, these committees addressed relevant issues in detail and, where appropriate, made recommendations to the Board of Supervisory Directors. The work of the committees was reported regularly and in detail in subsequent meetings of the Board of Supervisory Directors. The recommendations made by the committees during the reporting year were confirmed by the Board of Supervisory Directors without exception.
In 2018, KfW IPEX-Bank held a total of three advanced training seminars for the Board of Supervisory Directors and the Management Board, during which participants looked in detail at monitoring of outsourced functions as practiced at KfW IPEX-Bank, governance and control in the SREP of the ECB, and due diligence regarding environmental and social sustainability in financing projects.
Changes to the Board of Supervisory Directors
Following his departure from the Federal Ministry for Economic Affairs and Energy, former State Secretary Matthias Machnig resigned from the Board of Supervisory Directors on 13 April 2018. State Secretary Dr Ulrich Nußbaum was appointed as his successor, also replacing Mr Machnig as a member of the Loan Committee and on all other committees as a deputy to the member appointed by the Federal Ministry of Finance.
Furthermore, Dr Ludger Schuknecht resigned from the Board of Supervisory Directors on 15 August 2018 to pursue other professional challenges. He was succeeded by Dr Jörg Kukies, State Secretary in the Federal Ministry of Finance, who was duly elected as a member of the Executive Committee, Remuneration Control Committee, Audit Committee and Risk Committee and as a deputy to the member of the Loan Committee appointed by the Federal Ministry for Economic Affairs and Energy.
Audit of the 2018 annual financial statements
Following completion of the audit and after conducting a final review of the annual financial statements as of 31 December 2018 and of the 2018 management report, the Board of Supervisory Directors approved the audit result, the annual financial statements and the management report at its first ordinary meeting, held today, with no objections, and recommended that the general shareholders’ meeting approve the annual financial statements.
Discussion centred on the audit report of Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft (EY), covering the audit of the annual financial statements as of 31 December 2018 that were prepared by the Management Board as of 19 February 2019, and the management report for the 2018 financial year. EY issued an unqualified audit opinion on 5 March 2019.
The Board of Supervisory Directors would like to thank the Management Board and all employees, as well as those members of the Board of Supervisory Directors who left during 2018, for their commitment, hard work and achievements during the 2018 financial year.
Frankfurt, 22 March 2019
On behalf of the Board of Supervisory Directors
Prof. Dr Joachim Nagel
Chairman of the Board of Supervisory Directors
The information contained in this online Annual Report 2018 is based on KfW IPEX-Bank’s Management Report 2018, which you can download . Should this online Annual Report 2018, despite the great care taken in preparation of its content, contain any contradictions or errors compared to the Management Report, KfW IPEX-Bank’s Management Report 2018 takes priority.