Corporate governance report

General

Swedbank applies the Swedish Code of Corporate Governance (“the Code”). The Code, which is an element in the self-regulation of Swedish businesses, is based on the principle of “comply or explain”. This means that a company that applies the Code can deviate from individual rules provided that the reason for each deviation is explained. This corporate governance report has been prepared by Swedbank’s Board of Directors in accordance with the rules of the Code. The report is included in the printed annual report, but is not part of the annual accounts and has not been reviewed by Swedbank’s auditors.

Ownership structure

Swedbank’s shares have been listed on the Nasdaq OMX (Stockholm) since 1995. As of 31 December 2009 the bank had 346 272 shareholders, the largest of which was Folksam Försäkring, with 8.6 per cent of the capital. A total of 313 133 shareholders, or 90.4 per cent, owned less than 1 000 shares, while 22.5 of the capital was owned by international shareholders. Further information on shareholders and shareholdings can be found on The share and owners.

Delegation of responsibility and governance

A transparent, efficient structure for delegating responsibility and governance provides a foundation for proper corporate governance. Corporate governance within Swedbank is based on current external regulations, such the Swedish Companies Act, the Banking and Financing Business Act, Swedbank’s Articles of Association, the Code, the Financial Supervisory Authority’s rules and internal policies and instructions. These regulations specify the delegation of responsibility for governance, control and oversight of Swedbank’s operations. The structure for delegating responsibility and governance comprises:

  • Shareholders, who exercise their influence at the Annual General Meeting,
  • The Board of Directors
  • The Chief Executive Officer
  • Business areas
  • Group Risk, Group Credit, Group Compliance and other Group Staffs, and
  • Internal Audit.

Annual General Meeting

The shareholders exercise their rights at the Annual General Meeting (AGM) of Swedbank. In addition, Extraordinary General Meetings can be called. Swedbank normally holds its AGM before the end of April. Under special circumstances the meeting can be held at a later date, though not later than 30 June. The AGM is normally held in Stockholm, but can also be held in Göteborg, Malmö or Umeå. In the year-end report and on its website, Swedbank indicates where and when the meeting will be held. The notice of the AGM is normally published around five weeks in advance in the Swedish dailies Dagens Nyheter and Svenska Dagbladet, as well as Post och Inrikes Tidningar (Official Swedish Gazette) and at least one other newspaper, usually Dagens Industri. The notice is also made available on the bank’s website. The AGM is held in Swedish with an English interpretation. The material released prior to and in connection with the meeting is in Swedish, but is translated to English, including the minutes. The documents are posted on Swedbank’s website.

The AGM resolves, among other things, to:

  • elect the Board of Directors and set their compensation,
  • discharge the members of the Board of Directors and the CEO from responsibility,
  • amend the Articles of Association
  • adopt the income statement and balance sheet,
  • dispose of the bank’s profit or loss, and
  • approve the compensation principles for the CEO and certain other senior executives by adopting the compensation guidelines for them.

Right to attend the AGM

Swedbank is a so-called VPC company, which means that its share register is maintained by Euroclear Sweden AB. All shareholders who are directly recorded in the register on the fifth day before the meeting and who have notified Swedbank in time of their intention to participate are entitled to attend the meeting. Shareholders may attend the meeting in person or by proxy. Shareholders may be accompanied by a maximum of two persons. Swedbank gives shareholders the opportunity to register for the meeting in several different ways. The notice indicates in which ways and by which dates shareholders must register and notify the bank in order to be entitled to attend the meeting.

Agenda and documents for the AGM

Shareholders who wish to have an issue brought before the AGM must submit a request in writing to the Board. The request must normally be received by the Board not later than seven weeks prior to the meeting.

Board of Directors and Auditors

The AGM elects the members of the Board, including the Chair, and, if an election is scheduled, the Auditors. Board members have a term of one year. The nomination of Board members, including the Chair and Auditors, is made by the Nomination Committee. The principles for appointing the Nomination Committee are set by the AGM.

Nomination Committee

The AGM 2009 decided on the principles for the appointment of the Nomination Committee for the AGM 2010. The Nomination Committee consists of five members: the Chair of the Board and a representative designated by each of the four largest shareholders in the bank, based on holdings known as of the last business day in August 2009. The Nomination Committee has the right to co-opt a member designated by a shareholder which became one of the bank’s four largest shareholders after the Committee convened and has not already appointed a member of the Nomination Committee. Co-opted members do not participate in the Nomination Committee’s resolutions. The Chair of the Board may not serve as Chair of the Nomination Committee. Members who step down from the Nomination Committee before its work is completed will be replaced, if so decided by the Nomination Committee, by another person representing the same shareholder or by a person representing the next largest shareholder. No compensation for work or expenses is paid to members of the Committee. The Nomination Committee has the right to hire a recruiting consultant or other outside consultants, as deemed necessary, at the bank’s expense, to fulfil its duties. Prior to the AGM 2010, the Nomination Committee presented a proposal for the Chair of the meeting, the Chair of the Board and other Board members, as well as the Auditors. In addition, the Nomination Committee has proposed the fees paid to Board members, including for committee work, and the fees paid to the Auditors. In accordance with the resolution of the AGM 2009, the Committee has evaluated whether to change how it is appointed. Lastly, the Nomination Committee has presented a proposal for the principles for appointing the Committee for the AGM 2010.

The Nomination Committee for the AGM 2010 consists of the following persons:

Lars Idermark, representing Folksam and Chair of the Nomination Committee; Lennart Anderberg, Deputy Chair, representing the savings banks; Tommy Hjalmarsson, representing the savings bank foundations; Hans Sterte, representing Skandia; and Carl Eric Stålberg, Chair of the Board of Directors of Swedbank. The Nomination Committee has held a number of meetings, in addition to other contacts. Its members have not received any compensation from Swedbank for their work. The Nomination Committee has received the evaluation of the Board’s work conducted in part through discussions between the Chair and each Board member and in part through a written questionnaire. The Nomination Committee has discussed the Board’s competence needs and the composition of the Board taking into consideration Swedbank’s strategies. To a limited extent, the Nomination Committee has hired a recruiting consultant at the bank’s expense.

Composition of the Board, etc.

The AGM 2009 elected eight members. The Board also includes two members appointed by the Financial Sector Union of Sweden. Furthermore, the Financial Sector Union and the Swedish Confederation of Professional Associations (SACO) have each appointed one deputy. The deputies normally do not participate in the Board’s meetings. The CEO is not a member of the Board but attends its meetings, except when it discusses issues that disqualify him/her, e.g., when the CEO’s work is evaluated. The Head of Internal Audit and the Secretary of the Board, as well as the Chief Legal Counsel of the bank, also attend the Board’s meetings. The new Board members elected by the AGM 2009 - Anders Igel, Pia Rudengren, Anders Sundström and Karl-Henrik Sundström - have received introductory training from Swedbank. As members of the board of other listed Swedish companies, they have already received training from the OMX Nordic Exchange (Stockholm).

The Board’s organisation and work in general

The delegation of the Board’s duties is stipulated in its rules of procedure and the special instructions for the Board’s committees. The Board appoints and dismisses the CEO and deputy. The delegation between the Board and the CEO, including the Chair of the Board and the CEO, is stipulated in the Board’s rules of procedure and its instruction for the CEO. The Board has a Compensation Committee, a Risk and Capital Committee, and an Audit and Compliance Committee. The Risk and Capital Committee is the only committee with decision-making authority. In addition, the Board has at its disposal an independent audit function directly subordinate to the Board (Internal Audit). Internal Audit’s responsibility is to review and evaluate efficiency, governance, risk management and control in the Group. The function works proactively to propose improvements to internal control.

The Chair of the Board has certain specific areas of responsibility, including:

  • Overseeing the CEO’s work and providing a discussion partner and support, as well as monitoring that the Board’s decisions and instructions are implemented,
  • Ensuring that the Board maintains its responsibility for risk control through the necessary instructions, routines and risk reports,
  • Ensuring that the Board maintains its responsibility for the independent audit function (i.e., that the function works and reports according to established instructions),
  • Organising and managing the Board’s work, encouraging an open and constructive discussion within the Board, and initiating the development of the Board’s competence in issues of importance to operations, including the evaluation of the Board’s work.

The Board’s rules of procedure mainly cover strategic and supervisory roles, the Board’s responsibility for risks, conflicts of interest and disqualifications, the Compensation Committee and other committees, special issues decided by the Board, the decisions taken at the statutory meeting, signatories, evaluations, confidentiality and formalities (e.g., the distribution of information prior to meetings, the attendance of individuals other than Board members, presentations, and the signing, content and distribution of the minutes).

Prior to each Board meeting, a proposed agenda is sent out along with in-depth material. The documents are normally sent out a week in advance. The material from Board meetings is saved electronically, including documents that are not attached to the minutes. At least twice a year, the Auditors’ Chair reports to the Board on the Auditors’ reviews and observations, once in the absence of the CEO. In addition, the Auditors’ Chair regularly meets the Chair of the Board and the Chairs of the Audit and Compliance Committees. Swedbank’s interim reports are reviewed by the bank’s Auditors.

Compensation Committee

The Board’s Compensation Committee monitors, evaluates and prepares compensation issues for resolution by the Board, including:

  • Salary, pension, bonus and other benefits for senior executives according to the guidelines adopted by the AGM and for the Head of Internal Audit and the Secretary of the Board,
  • The Board’s proposal to the AGM with compensation guidelines for senior executives,
  • The Board’s incentive policy for the Group and other related documents,
  • Decisions according to policies in the compensation area,
  • Changes in allocation criteria for the Swedbank Group’s profit-sharing fund, Kopparmyntet, and a recommendation on the annual allocation,
  • Questions concerning the bank’s pension funds which, according to the Board’s rules of procedure, are resolved by the Board,
  • Questions concerning the terms by which the Board hires outside expertise, including ensuring that there are no conflicts of interest in the hiring of such experts,
  • Other compensation issues that deviate from established policies or questions of principle.

The Committee strives to ensure that proposed compensation models are aligned with the bank’s long-term interests. The Committee ensures that compensation models specified in the Group’s incentive policy comply with effective risk management and do not encourage exaggerated risk-taking, and that these models comply with the Code, current regulations from the Financial Supervisory Authority and all other applicable rules.

The AGM 2009 adopted the compensation guidelines for senior executives proposed by the Board. For more information, see Note 12, Staff costs. Swedbank’s compensation principles and compensation comply with the stipulations of the Code. Swedbank did not have any share or share price-related incentive programs in 2009.

The Committee consists of no fewer than two and no more than four Board members. The members of the Committee since the AGM 2009 were Carl Eric Stålberg (Chair), Anders Igel, Helle Kruse Nielsen and Anders Sundström. All members, with the exception of the Committee Chair, are independent. In 2009, the Committee held 12 meetings.

For information on compensation to members of the Board of Directors, the CEO and other members of the Group Executive Committee, see Note 12.

The Risk and Capital Committee

The Board’s Risk and Capital Committee monitors, prepares and decides in the following areas:

  • Market risk,
  • Credit risk,
  • Liquidity and funding (e.g., limits on liquidity risk),
  • Operational risks, including continuity planning and security, and
  • Capital (e.g., monitoring the capital base, risk-weighted assets and related control models).

The Risk and Capital Committee prepares cases in the above-mentioned areas for treatment by the Board and otherwise decides on credit-related issues within the limits set by the Board. In addition, the Committee recommends strategies for these areas prior to treatment by the Board. The Risk and Capital Committee consists of not more than four members appointed from among the Board’s members. The CEO is not a member of the Committee, but normally attends the Committee’s meetings.

Decisions require a quorum of three Committee members. If any of those present express reservations about a decision, it is referred to the Board for a ruling. Questions of principle or otherwise of major importance will always be resolved by the Board. The members of the Committee since the AGM 2009 have been Carl Eric Stålberg, (Chair), Ulrika Francke, Pia Rudengren and Anders Sundström. In 2009, the Committee held 22 meetings.

Audit and Compliance Committee

The Board’s Audit and Compliance Committee is a drafting body for the Board. Through its work, and in consultation with the outside auditor, the Head of Internal Audit and the Group Executive Committee, the Committee provides the Board with additional information on:

  • Operations, including that internal control and governance processes are sufficient and that the internal audit is performed effectively and relevantly,
  • Financial reporting, including the quality of the financial reports and that the reports are prepared in accordance with current laws, applicable accounting standards and other requirements for listed companies, and
  • Compliance, including that activities within Swedbank are conducted in accordance with external laws and regulations, as well as internal policies and instructions.

The Committee’s main responsibility is to provide the Board with additional information on any deficiencies in routines and the organisation with regard to governance, risk management and control. The Audit and Compliance Committee reviews that the Auditors’ work has been conducted efficiently and otherwise in a satisfactory manner. Moreover, the Committee reviews internal compliance reports and accordingly proposes measures that are ultimately decided on by the Board where deemed necessary. The Audit and Compliance Committee consists of not more than four Board members. More than half the full number of members constitutes a quorum. If the Committee consists of four members, three constitute a quorum, one of whom must be the Chair. The Head of Internal Audit is a co-opted member of the Committee. The members of the Committee since the AGM 2009 have been Ulrika Francke, (Chair), Berit Hägglund-Marcus and Karl-Henrik Sundström. All members are independent. In 2009, the Committee held 6 meetings.

Board work in 2009

In 2009, the Board held 24 meetings, 4 of which were held per capsulam. All meetings were held in Stockholm. The Board establishes an annual plan for its work, normally at the statutory meeting, where it decides which issues will be treated in depth. The issues in 2009 included an analysis and review of certain strategic business areas, a review of IT operations, ICAAP and the rights issue. The CEO is evaluated continuously. Considering that the CEO took over last year, the Board did not devote much attention to this issue in 2009. The Board regularly monitors operational risks and the capital situation, for which it receives a risk report at each meeting. It also receives reports on security and compliance. No objections were noted to any of the decisions during the year. In 2009, the Auditor reported at four of the Board’s meetings. At one of these meetings, neither the CEO nor other members of Group Executive Committee were present, except for the Chief Legal Officer in her capacity as Secretary of the Board. The AGM 2009 was attended by 8 of 10 Board members, 8 of 14 members of the Group Executive Committee and the Chief Auditor. More than half of the Board’s members as well as the Chief Auditor were present at the Extraordinary General Meeting held in September 2009.

The Board’s independence

The Board’s composition complies with the requirements of the Code in terms of independent Board members, i.e.:

- The majority of the Board members elected by the AGM are independent in relation to Swedbank and its Management, and

- At least two of the Board members who are independent in relation to Swedbank and its Management are also independent in relation to Swedbank’s major shareholders.

Auditors

In accordance with the Articles of Association, Swedbank shall have no less than one and no more than two authorised public accountants. The appointed auditor is Deloitte AB, Sweden, with Authorised Public Accountant Jan Palmqvist as Chief Auditor. Jan Palmqvist has supervised auditing duties for Swedbank since 2003. Aside from Swedbank, he has auditing assignments for primarily the following companies: D. Carnegie AB and HEBA Fastighets AB. In addition, he is auditor for AFA försäkring and Länsförsäkringar Stockholm. Jan Palmqvist has no assignments for other companies that affect his independence as an auditor of Swedbank. Compensation for the Group’s auditors is reported in note 13 of the annual report for 2009. The Financial Supervisory Authority did not appoint an auditor for 2009.

CEO and Group Executive Committee

The CEO is responsible for the operating management of Swedbank. The delegation of responsibility between the Board and the CEO is stipulated in the Companies Act as well as the Board’s rules of procedure and its instruction for the CEO. The CEO leads the work of the Group Executive Committee and makes decisions after consulting its members. The Group Executive Committee consists of (i) the CEO, (ii) the Head of Baltic Banking, (iii) the Head of Swedish Banking, (iv) the Head of International Banking, (v) the Chief Financial Officer, (vi) the Chief Risk Officer, (vii) the Head of Human Resources, (viii) the Head of Corporate Affairs and (ix) the Chief Legal Officer, totalling nine members. The Group Executive Committee normally meets four times a month.

Business areas

The CEO has decided that Swedbank will be organised in the following six business areas: Swedish Banking, Baltic Banking, International Banking, Swedbank Markets, Asset Management and Ektornet. The business areas receive support from shared functions and Group staffs, such as treasury, communication, legal support and administrative functions, as well as the bank’s internal insurance company, Sparia. For more information on Swedbank’s business areas, see Two-year summary - business areas. The head of each business area is responsible for the business area’s operations. Swedish Banking primarily comprises Swedish retail and corporate banking operations, Swedbank Försäkring and Swedbank Luxembourg. Baltic Banking comprises retail and corporate banking operations in the Baltic countries, Estonia, Latvia and Lithuania. International Banking comprises the Ukrainian and Russian banking operations as well as other international banking operations. Swedbank Markets, Swedbank’s investment bank, is responsible for the Group’s securities, fixed income and foreign exchange trading; professional analysis and advice on the equity, fixed income and foreign exchange markets; financial institutions; Corporate Finance; project, export and corporate financing; and management of large credits. The Asset Management business area is comprised of Swedbank Robur. The Ektornet business area comprises assets taken over during the current recession. Ektornet operates through subsidiaries in certain markets where the bank is active, primarily the Baltic countries.

Group Staffs

Swedbank has a number of Group Staffs, including Accounting, Risk Management, Communication, Human Resources, Legal Affairs and Compliance. Among the roles of the Group Staffs is to draft Group-wide policies for decision by the Board and Group-wide instructions for decision by the Board or the CEO. The purpose of the Group-wide rules and processes is to support the CEO and the business operations in the Group and to clarify Swedbank’s vision, mission and values in all of the bank’s markets. The Staffs are also responsible for compiling, analysing and providing information to the CEO and the Board.

Internal control

The following information relates strictly to the organisation of internal control with regard to financial reporting and does not contain an opinion on how well the control has worked. External financial reporting in Swedbank comprises (i) interim reports, (ii) the year-end report and (iii) the large part of the annual report. The internal control in the most important processes in financial reporting, based on the largest profit and loss statement and balance sheet items in the Group, have been evaluated during the year in the Parent Company, Swedbank AB, including Swedbank Markets, Swedbank Mortgage, Swedbank Robur, Baltic Banking, OAO Swedbank (Russia) and JSC Swedbank (Ukraine). As a basis for this evaluation and the report, Swedbank has used the so-called COSO model. The Board has issued an overall Group policy for internal control. Moreover, the Board determines the overall organisation and financial objectives for the CEO and operations, and evaluates the CEO’s performance and results. The CEO ensures that an evaluation is made of other senior executives. The CEO establishes a special Group-wide instruction for internal control and is responsible for and ensures that the Group has a well-structured process for succession planning.

Regulatory framework

The policies laid down by the Board apply to all companies in the Group after adoption by each company. Among the areas where the Board has established policies are ethics, internal control, gender equality and diversity, communication, crisis management, environmental concerns, compliance, risks, security and outsourcing. Policies and instructions at the Board and CEO level follow an established structure. The same applies to directives issued by Swedbank’s Group staffs. For financial reporting, Swedbank Accounting Policies are in place. There is also a Group-wide system for internal accounting principles, planning and follow-up processes and report routines. At the company level, detailed instructions are in place for practical account registration and reconciliation routines.

Reporting

The Board establishes reporting requirements in order to obtain effective information on financial outcomes as well as the risks in the Group’s operations and how outcomes and risks are affected by various scenarios. Monthly risk reports are compiled by Group Risk Control and otherwise by Group Finance. Reports are also presented to the CEO and Group Executive Committee. Since 2006, the compliance and security functions serve the entire Group in order to safeguard the Group’s perspective and independence. The CEO annually establishes an operating plan for the Group, including an IT plan. The risks inherent in the Group are included in the plan. The operating plan is managed by each business area based on local demands and needs.

Risk assessment

A structured risk assessment facilitates identification of significant operational risks. Through self-evaluation processes, Swedbank has documented where the relevant risks exist at the company, business unit, function and process level. The organisation to assess risks mainly consists of Group Risk Control - which is responsible for managing operational risk, credit risk, financial risk, and security - Group Credit and Group Compliance. In addition, each business unit has functions to monitor and limit risks, including IT risks. Moreover, Internal Audit conducts an annual independent risk analysis to serve as the basis for its annual audit plan, which is adopted by the Board after preparation by the Audit Committee.

Control activities

The Group has overall control activities that are shared by several processes. Continuous work is done to evaluate, improve and document control activities in all significant processes. A special process is in place to ensure that identified deficiencies are remedied. Examples of significant processes include lending to the public, lending to credit institutions, deposits and borrowings from the public, borrowing from credit institutions, issuance of securities, card processing services, asset management, human resource administration, invoicing services and financial reporting. Examples of control activities include routines for duality, risk classification and other routines for credit decisions, payouts, reviews and monitoring of credits, compilation of the total credit portfolio and risk profiles. In other areas, examples include limit monitoring, manual and automated reconciliation of various positions, stress tests, self-evaluations and risk and vulnerability analyses. Control activities associated with financial reporting mainly relate to reconciliations - manual and automated - against sub-ledgers and ledgers and comprise routines to ensure the existence of assets and liabilities and that assets, liabilities and business transactions have been correctly recorded. Continuous system development produces gradual improvements in control activities, e.g., by replacing manual routines with automated alternatives. A special process to test and approve new products ensures that new products can be handled in the system and are correctly reported.

Information and communication

The Group-wide intranet introduced in the previous year has been further enhanced. In addition, each country has its own intranet where applicable rules are available to all employees. Current policies, instructions, guidelines and manuals are updated continuously. Moreover, all employees have channels to communicate significant information to relevant recipients (ultimately the Board) when necessary. Swedbank has a whistleblower system that allows employees to anonymously report rules transgressions. A policy for communication with external parties includes guidelines. The purpose of the policy is to ensure that information obligations are met in a correct and thorough manner.

Monitoring

The main monitoring units within the Group are Group Finance, Group Risk Control, Group Compliance and Internal Audit. Monitoring is performed monthly based on balanced scorecards in which profitability, efficiency, risk, sales and market shares, customer satisfaction and employeeship are reported and evaluated. In-depth monitoring meetings are held monthly with the CEO, the CFO and the heads of Group Finance and each business area. Monthly monitoring reports are prepared in the business areas based on the balanced scorecards. Results, risks and events are always traceable to specific customers and departments. Monitoring meetings are held monthly or at least quarterly at all levels within each business area. Operational risks are also monitored at least once a month by the CEO and the Board.

Internal Audit

Internal Audit’s duty is to review and evaluate the internal controls. All audit work in the Group is coordinated, i.e., reviews are planned, implemented and reported using the same approaches and methods. Internal Audit is a review function independent from the Group Executive Committee and directly subordinate to the Board. The Head of Internal Audit regularly reports to the Board, the Audit Committee, the CEO and the external Auditor. Reviews are summarised quarterly in reports to the Board. The written report contains an opinion of internal control in various areas, based on the reviews conducted.

Information on website

On its website, Swedbank has a separate section for corporate governance issues that includes information requirements in accordance with the Code. Visit www.swedbank.com under the heading “About Swedbank/Corporate governance”.