Corporate Governance and Access to Finance - ESBG

The commercial success of a savings bank is deeply linked to the economicdevelopment of its region, since it cannot fall back on doing businessanywhere else. The Sparkasse therefore must have a significant interest ina positive economic development of this particular region. Thus a deeplywelcomed economic incentive to finance projects which are strengtheningthe economic potential of the respective region is established.It is not the first priority of the savings bank to make the highest possibleprofit, but to fulfil its task and accomplish its mission (i.e. to guaranteethe provision of financial services – ”Access to Finance“). As far as surplusesdo not have to be retained in order to increase the capital base they willbe used for public welfare oriented purposes, especially in the area ofsocial and cultural engagement as well as promotion of sports.The savings bank is being committed to run a prudent and soundbusiness policy. Based on the savings banks laws of the Länder a numberof especially risk-taking activities are excluded or subject to restrictions. 36The Board of Administration carries out typical supervision and surveillancefunctions. It gives guidance for the business policy, decides on theappointment and the discharging of the Members of the Executive Boardand decides on further issues as laid down in the legal framework:e.g. selling and mortgaging real estate, opening and closure of branchesand generally speaking on the distribution of the surplus as well. The Boardof Administration consists (in most Länder) of representatives of themajor body of the Träger, citizens and for one third of representatives ofthe savings bank’s staff.The Board is in charge to manage the saving banks and is responsible forthe well-functioning and the success of the savings bank.All credit sector institutions (including the savings banks) are supervisedby the Bundesanstalt für Finanzdienstleistungsaufsicht BaFin and theDeutsche Bundesbank. Apart from this supervision savings banks are inaddition supervised by the Sparkassenaufsicht of the Länder, whose taskit is to supervise that administration and management of the savingsbank is in line with the law and the statutes. 37 The Länder task is tocontrol that the business is performed according to the savings bank law,while BaFIN has a financial stability perspective.36,37 Lohmiller, R.:”Sparkassen-Finanzgruppe: Rechtsgrundlagen der Sparkassen”, in:“Enzyklopädisches Lexikon des Geld-, Bank- und Börsenwesens“, 2007.116