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Netherlands: Industry Code of Conduct Caps Bank Manager Bonuses

(Sept. 16, 2009) The Dutch Banking Federation (Nederlandse Vereniging van Banken, NVB) published a code of conduct, applicable to domestic and foreign banking activities, on September 9, 2009. In particular, it regulates the bonuses of bank management board members, restricting them as of 2010 to no more than 100 percent of their annual salaries. The restriction applies to the granting and cashing of options and stock packages as well. The code also sets forth principles on risk management, corporate governance, and remuneration policies.

The code apparently does not impose limits on other bank employees' bonuses. The reason why traders are not explicitly targeted for bonus caps is that, according to NVB Chairman Boele Staal, “[b]anks should have the freedom to reward their best traders when they seal a good deal. High bonuses can be justified there. But those rewards should now be related to long-term perspectives and not short-time commercial goals.” (Id.) The new guideline is said to have been formulated with a view to setting an example for the upcoming G20 meeting in Pittsburgh, which is slated to consider the issue of restricting bankers' bonuses. (Bankers Cap Their Own Bonuses in the Netherlands, NRC HANDELSBLAD, Sept. 9, 2009, available at
; Provisional Banking Code, 8 September 2009,NVB website, (last visited Sept. 10, 2009).)

While the Dutch Minister of Finance Wouter Bos praised the code – “[f]or the first time the banking sector takes an initiative like this. That is a giant and a good step on the route of restoring the faith in the financial sector” – several press reports were skeptical of the initiative's ultimate impact. According to NRC HANDELSBLAD, “[t]he effect of the banking code in the Netherlands will probably be limited,” because at present there are no executives in the country who receive bonuses above the amount of their fixed salary. (Id.) The TROUW contends that the code “is packed full of exceptions”; Dutch legislators had sought an arrangement that had “a bit more muscle.” DE TELEGRAAF wrote that financial experts were “lukewarm” about the code, and while the banks “are clearly demonstrating their goodwill and the code of conduct appears to be substantial … in reality, it's a bit like putting a plaster on a broken leg.” (all cited in Banks Introduce Code of Conduct to Regulate Bonuses, RADIO NETHERLANDS WORLDWIDE, Sept. 10, 2009, available at

On July 10, 2009, Bos had submitted to parliament the government's “vision” of the future of the Dutch banking sector. It was characterized by NRC HANDELSBLAD as “more an inventory of existing plans and ideas than anything else,” noteworthy because it reflects the government's apparent powerlessness to act. The paper added that any major overhaul of the system of oversight depends on the European Commission or the Basel Committee on Banking Supervision and, due to the interconnectedness of capital markets, “any solution must be found on the global level.” (Daan van Lent & Jeroen Wester, Bos: 'Banking Will Never Be the Same Again,' NRC HANDELSBLAD, July 13, 2009 [changed July 14, 2009], available at