Governance

NIB was established in 1975 by Denmark, Finland, Iceland, Norway and Sweden. In 2005, the membership of the Bank was enlarged when Estonia, Latvia and Lithuania joined the Bank as new members.

NIB is governed by its constituent documents. These are the Agreement among its member countries dated 11 February 2004, the Statutes adopted on the same date, and the recently renewed Host Country Agreement concluded between the Government of Finland and the Bank in 2010. According to the constituent documents NIB has the status of an international legal person with full legal capacity.

According to the Statutes, the Bank shall have a Board of Governors, a Board of Directors, a President and the staff necessary to carry out its operations. In addition, the Bank has a Control Committee.

Board of Governors

The Board of Governors is composed of eight Governors, designated by each member country from among the ministers in the government. The Board of Governors appoints a Chairman for one year according to the rotation principles adopted by it. The Governor for Latvia currently serves as the Chairman until 1 June 2011.

The Board of Governors held its annual meeting on 25 May 2010. In this meeting, the Board of Governors proclaimed its strong support for the Bank's work in the focus sectors and acknowledged the need for continuous financial resources. In an ensuing decision by written procedure on 28 June 2010, the Board of Governors increased the Bank's capital by EUR 2 billion, to EUR 6.141 billion.  

Board of Directors

All the powers not vested exclusively in the Board of Governors are vested in the Board of Directors. The Board of Directors may delegate its powers to the President to the extent it considers appropriate. The Board of Directors consists of eight Directors, each of whom has one Alternate. The Directors and their Alternates are appointed by the respective member country. The Board of Directors appoints a Chairman and a Deputy Chairman from among the Directors. The chairmanship and the deputy chairmanship rotate among the member countries. The Board of Directors met eight times during 2010.

For more information on the Board of Directors' activities during the year, read the Report of the Board of Directors.

President

The President is responsible for the current operations of the Bank and is appointed by the Board of Directors for a term of five years at a time. The first term of the President ended on 1 April 2010 and the Board of Directors has re-appointed the President for a new term of two years ending 1 April 2012.

The President is assisted in his work by the Management Committee, the Credit Committee and the Finance Committee.

The Management Committee is the forum for addressing policy and management issues with the overall responsibility for risk management. The Management Committee consists of the President and six senior officers, whose appointment to the Committee is confirmed by the Board of Directors. The Committee meets once or twice a month. In 2010, it met 18 times. The meetings are chaired by the President, who makes decisions after consulting with the members of the Committee.

The Credit Committee is responsible for the preparation and the decision-making on matters related to the Bank's lending operations. The President exercises his delegated decision-making powers concerning lending operations through the Credit Committee.

The Committee includes the President and six senior officers appointed to the Committee by the Board of Directors. Currently, the Credit Committee has the same members as the Bank's Management Committee. The Credit Committee is chaired by the President or in his absence by one of its members. The Committee meets once a week. In 2010, it met 50 times.

The Finance Committee is an advisory body to the President and monitors the market risk, liquidity risk and credit risk related to the Bank's treasury operations. The Committee includes the President and four members, and convenes once a month. The Finance Committee met 10 times during 2010.

Control Committee

The Control Committee is established to ensure that the operations of the Bank are conducted in accordance with the Statutes, and is further responsible for the audit of the Bank's accounts. The Control Committee delivers its audit report to the Board of Governors.

The Control Committee consists of ten members. The Nordic Council and the Parliaments of Estonia, Latvia and Lithuania appoint eight members to the Committee, with one member representing each member country. The members are appointed for a term of up to two years at a time. Furthermore, two members are appointed by the Board of Governors to serve as Chairman and Deputy Chairman according to the rotation scheme adopted by the Board of Governors.

The Chairman and Deputy Chairman attend at least two of the Board of Directors' meetings per year and also receive the Board meeting minutes. The Board of Governors appointed Hannu Riippi from Finland to act as Chairman for the period 1 June 2010 to 31 May 2011 and Toomas Vapper from Estonia to serve as Deputy Chairman for the same period.

The work of the Control Committee is governed by its rules of procedure. Decisions of the Committee require the assent of the majority of its members, except for decisions concerning the financial statements and the audit report, which shall be unanimous.

The Control Committee appoints two professional external auditors every year for the purpose of assisting the Committee in carrying out its responsibilities. The professional auditors carry out the audit of the Bank in accordance with the International Standards on Auditing as issued by the International Federation of Accountants and as commissioned by the Committee. The Committee monitors that the coordination between the professional auditors and the Bank's internal auditors is arranged efficiently in order to cover all areas of control. The Committee may also instruct the professional auditors to carry out audit reviews of other specific matters. The Committee shall pay particular attention to the professional auditors' ability to perform their tasks independently. The professional auditors report directly to the Control Committee.

One of the professional auditors is appointed from the Bank's host country and one from another member country. According to the rules of procedure, the election of the professional auditors shall be subject to review at regular intervals. Following a tender carried out during 2007, the Control Committee decided to select two auditors from KPMG, one each from Helsinki and Copenhagen, to carry out the audit of the Bank from the financial year 2008 onward, with annual re-confirmation.

The Control Committee met twice during 2010. In addition to the normal reporting the Control Committee was also presented with a report on the mandate fulfilment and the revised ICT Principles and Guidelines.  

Remuneration and incentive programmes

The Board of Governors determines annually the amount of remuneration and attendee allowance for the Board of Directors and for the Control Committee.

The President's employment terms, including remuneration, are determined by the Board of Directors. The principles for remuneration of the professional auditors are determined by the Control Committee.

The principles for remuneration of the staff are set out in the Compensation Policy. The Bank applies a fixed salary based system where individual performance plays an important role, as well as a small bonus programme, which rewards exceptional performance on a yearly basis.

For further information on remuneration, see Note 5 in the Financial Report.

Internal control

The dual objective of NIB's internal control system is to secure and develop the long-term financial preconditions for operations, while conducting operations in a cost-efficient way, in compliance with given rules and regulations. Internal control is focused on the management of financial and operational risks.

NIB's internal audit follows international professional standards established by the Institute of Internal Auditors. The task of the internal audit is to assure the effectiveness of the Bank's internal control, risk management and governance processes and to make recommendations to the management. The Internal Audit function of the Bank reports to the Board of Directors and to the Control Committee but works administratively under the auspices of the President. The Board of Directors approves the annual plan for the Internal Audit.

For further information on risk management, see the Financial Report.

The policy documents referred to in this chapter are available on the Bank's website, www.nib.int.