THE HAGUE, 08/04/09 - Banks in the Netherlands should equip their management with a Chief Risk Officer. Also, the CEO should take an oath on taking office. And variable remuneration must be restricted, according to recommendations by the Maas Commission.

The commission, formally called the Advisory Commission on the Future of Banks, was set up at the end of last year by the Netherlands Banking Association (NVB). Chairman Cees Maas, former executive of banking and insurance group ING, presented its advice yesterday.

The many recommendations should be forced through by legislation if the sector does not apply them itself, Maas said yesterday. NVB president Boele Staal however said the banks would implement the recommendations.

Until just before the credit crisis, it was customary at many financial institutions to add, on top of the fixed salary, a 200 percent package of bonuses, options and shares. But Maas does not want banks' management board members to receive more variable than fixed remuneration any more.

Further, variable remuneration can still be paid out in the form of shares but not as options. Additionally, financial performances should no longer be the sole basis of the question of whether certain targets have been met. For example, client satisfaction should also be a factor, or the degree of 'sustainable entrepreneurship.'

These restrictions should also apply to the layer just below management board level. For lower management such as bankers in the trading department, who sometimes pocket more bonuses than their directors, the commission has not formulated any ceiling. This is impossible, according to Maas, because such departments are largely found in London and New York. But the supervisory board should in future consider the remuneration of these people, something that practically never happens now.

Supervisory board members must be better educated. People should only be on this board if they can independently make an assessment of the balance-sheet of the bank, or at least be prepared to take a course on this. Maas drew a comparison with pilots and doctors, who also have to continue to follow developments in their sector throughout their lives in order not to become incompetent.

There should be a Chief Risk Officer (CRO) on the management board. If this person says a certain activity is too risky, management must drop it, though there does not need to be a technical veto for the CRO.

As well, CEOs should take an oath, comparable to the oath of Hippocrates for doctors. In it, they should promise to serve their clients.

All these measures can according to Maas be introduced immediately. Banks must either introduce them in full, or clearly explain why they are diverging from them. If banks shove the report to one side, the legislator must take over the measures. "This is no self-regulation," Maas claimed.