Update to the bank director’s guide
Interview with Virginie Lagrange & Stanislas Chambourdon
A third edition of the “ILA Bank director's guide - a practical guide for directors” has just been published to take account of the latest regulatory and best practice development. This publication is central to work of the ILA banks committee, which offers a range of information and training to directors in this sector.
“The previous edition of the guide needed updating to take account of numerous changes, particularly the redrafted CSSF circular 12/552, guidelines from the European Banking Authority, and best practice innovations,“ said committee chair Stanislas Chambourdon. “There are more expectations than ever on bank directors and this publication considers each of these in turn,” added Virginie Lagrange, Vice-Chair of ILA and a banks committee member.
Practical steps to take during the whole board lifecycle
There is a one-pager on key steps and considerations when joining a board, including what is expected from the CSSF. Also when a mandate comes to an end, one must ensure this relationship is brought to a close by keeping all stakeholders informed correctly, with an effective succession taken care of.
The regulator also takes a view on board diversity, which as Virginie points out: “is more than just having a woman on the board, and also refers to age, culture, nationality, expertise and more.” The regulator wants boards to avoid group-think, and this challenge is explained in the text.
Beyond this is the broader topic of board composition. This features the roles performed by independent directors and non-executives, with these distinctions spelt out in the guide. Some banks have representatives of employees or the state on the board, and the dynamics of these relationships are discussed. There is also the question of succession planning.
Understanding how the board functions is also detailed. Everything from the chair’s role, through to how meetings are run, and communication maintained, including how sub-committees operate and coordinate with the full board. Managing potential conflicts of interest is keenly watched by the supervisor. These need to be explained, discussed and clearly understood by the board, with decisions taken if these relationships can be maintained or how they should be dealt with.
Central to committee work
Ultimately the guide is part of the banks committee’s role of ensuring Luxembourg directors have the knowledge and tools they need as a bank director. “This covers different responsibilities including IT, regulations, financials, strategy and so forth, and we work to help members in their day-to-day work,” said Stanislas.
Challenges are numerous. There are new regulations and how these can impact on board work. Most banks in this country are branches or subsidiaries of larger groups, and these relationships also need to be managed with care, and the committee shares best practice here too. The sub-committee works to understand these challenges, and then communicates the practical implications, including through training courses as well as the guide. “In short, it’s about offering advice on what makes a good bank director,” Stanislas said.