Report of the Board of Supervisory Directors

Meetings of the Board of Supervisory Directors

The Board of Supervisory Directors and its committees constantly monitored the conduct of KfW's business activities and the management of its assets. It has taken the necessary decisions on the provision of financing and the conduct of other business in accordance with the conditions set forth in the KfW Law and Bylaws. The Board of Supervisory Directors, the Presidial and Nomination Committee and the Remuneration Committee each met three times in 2023 for this purpose; the Audit Committee met twice and the Risk and Credit Committee seven times.

In addition, the Board of Supervisory Directors addressed the following key issues based on the reports submitted by the Executive Board on the individual business sectors:

• With regard to domestic promotional business activities, the focus remained on housing, after restructuring of the promotional offering for particularly demanding energy efficiency projects. The Board of Supervisory Directors was also informed of KfW Capital’s successful performance since it was established five years ago, and in particular also about the German Growth Fund. Other important topics included measures to mitigate the effects of the geopolitical situation, in particular, energy procurement and supply security. The Board of Supervisory Directors also addressed development of promotion for innovation and digitalisation for SMEs in Germany, and promoting business start-ups and succession.
• With regard to the promotion of developing countries and emerging economies, the Board of Supervisory Directors considered the key issues of Financial Cooperation, including KfW’s involvement in Ukraine and the Middle East, as well as cooperation within the framework of global partnerships such as with the World Bank.
• As for KfW IPEX-Bank, i.e. the Export and project finance business sector, the focus was on the support the bank provides to German and European investors and exporters.
• The Board of Supervisory Directors received regular reports on capital market development and KfW’s funding status. KfW’s funding on the capital market continued to be supplemented in the context of the special transactions carried out for the Federal Government from the Economic Stabilisation Fund (“WSF”).
• The Board of Supervisory Directors also monitored KfW Group's environmental and sustainability commitment.

The Board of Supervisory Directors was informed at the meetings as well as every quarter, in writing, of the group’s net assets, financial and earnings position, its risk situation, the development of its promotional business, and Internal Auditing's activity. The Executive Board also kept the Chair of the Board of Supervisory Directors and his deputy informed of key developments at the bank between meetings.

The Board of Supervisory Directors discussed key aspects of the business strategy and approved the planning for 2024. It acknowledged the multi-year business strategy, the risk strategy, and the IT strategy for the group and the individual group companies, as well as the Equal Opportunities Plan.

Each member of the Board of Supervisory Directors is obliged to inform the Chair of the Board of Supervisory Directors or of the relevant committee about potential conflicts of interest before a resolution is made. No material conflicts of interest were flagged during the reporting period. As a precautionary measure, there were nine instances in which members of the Risk and Credit Committee abstained from voting or refrained from participating in resolutions.

Six members of the Board of Supervisory Directors attended fewer than half of the board meetings in the reporting year. Two members of the Presidial and Nomination Committee attended fewer than half of the meetings; the same applied to member attendance at the meetings of the Remuneration Committee and the Risk and Credit Committee. One member attended fewer than half of the meetings of the Audit Committee.

Members of the Board of Supervisory Directors attended eight training events and ten individual training sessions organised by KfW in 2023 to gain and maintain the expertise required in accordance with the German Banking Act.

Committees of the Board of Supervisory Directors

In exercising its responsibilities prescribed in the Bylaws, the Presidial and Nomination Committee discussed Executive Board matters, in particular new appointments and reappointments. It resolved an updated redistribution of responsibilities, partly due to changes in the domestic funding department and in IT. In addition, the Presidial and Nomination Committee specified the orientation of KfW’s basic business policy in line with the strategic guidelines for 2024.

It was also informed about banking supervisory issues, KfW Stiftung, construction activities and legal disputes. The Presidial and Nomination Committee regularly discussed the issue of dealing with potential conflicts of interest at Executive Board and Board of Supervisory Directors level. It conducted an evaluation of the KfW bodies, assessed the professional qualifications and composition of its members and made appropriate recommendations to the Board of Supervisory Directors. The Presidial and Nomination Committee also debated the status of promoting representation of the underrepresented gender on the Board of Supervisory Directors.

The Remuneration Committee discussed remuneration issues and the reports in accordance with the Remuneration Ordinance for Institutions (Institutsvergütungsverordnung - “IVV”). It was informed of the annual risk analysis to identify risk takers. As part of this risk analysis, KfW, both as an individual institution and at group level, has to identify staff members whose work could have a material impact on the risk profile of the institution/the group. The Remuneration Committee discussed the Executive Board remuneration system with external remuneration experts.

It made recommendations to the Presidial and Nomination Committee on the remuneration-relevant components of new Executive Board contracts in the context of Executive Board appointments. The group-wide remuneration strategy and the assessment base for variable employee remuneration were also discussed.

The Remuneration Committee was also informed about an employer positioning project and the key results of the group-wide employee survey.

The Risk and Credit Committee reviewed the commitments, equity investments, and intra-entity loans that must be presented to it under the KfW Law and KfW Bylaws as well as the scope of borrowings required by KfW for its funding and the related swap transactions necessary for hedging. It debated the effectiveness of the risk management system, the remuneration system, in particular with regard to the IVV, the report on shadow banks and measures to further develop the risk culture.

The committee discussed in detail the development of KfW’s risk situation, including the impact of economic developments on risk provisioning, the consequences of the Russian war on Ukraine, the attack on Israel and the crisis in the Middle East, the development of the interest rate risk position in an environment of rising rates, stress tests and focus scenarios, ways to deal with equity investment risk, and default rates in the special coronavirus programme.

Furthermore, it analysed and discussed the performance of the cruise shipping portfolio, taking into account new propulsion technologies. The committee also addressed the Federal Government’s guidance on dealing with financing in uncooperative countries and the issue of sensitive supply chains in the context of several loan financing programmes. It dealt with the further development and implementation of the Paris Agreement-compliant sector guidelines for KfW’s new business and with information security risks, particularly with regard to increasing cyber risks.

The performance of the banking markets, particularly in the USA and Switzerland, the commercial real estate market situation, KfW’s role in the project financing market and possible changes in the supervision of KfW IPEX-Bank were also considered.

The regulatory capital requirements of KfW and the requirements under Basel IV were also discussed. And lastly, the committee debated the risk strategy, including capital planning for the next few financial years.

The Audit Committee addressed the accounting process, KfW's net assets, financial and earnings position, the reports by Internal Auditing and Compliance and the annual financial statements of KfW Group 2022. It made corresponding recommendations to the Board of Supervisory Directors for the approval of the annual financial statements 2022 and the appointment of the auditor for 2024. Based on information supplied by the Executive Board, it discussed the efficiency of the risk management system, the internal control system (“ICS”) and the internal audit system. In addition, it addressed auditor independence and audit quality, determined focal points of the 2023 financial statements audit and discussed the initial results of the 2023 financial statements audit (audit report part I). The committee approved the audit plan of the Internal Auditing department for 2024. It monitored banking supervisory issues and closely reviewed the banking supervisory assessments, along with the resulting measures and projects to remedy the findings. Lastly, the committee dealt with current developments in IT and was informed about future reporting in accordance with the Corporate Sustainability Reporting Directive (“CSRD”).

The committee chairpersons reported to the Board of Supervisory Directors regularly on the work of the committees.

Changes on the boards

At the proposal of the Presidial and Nomination Committee, the Board of Supervisory Directors appointed Katharina Herrmann as a member of the Executive Board on 30 March 2023 with effect from 8 April 2023 and reappointed Bernd Loewen to the Executive Board on 6 December 2023 with effect from 1 July 2024.

In accordance with Article 7 (1) no. 1 of the KfW Law, in my capacity as Federal Minister of Finance and Climate Action, I assumed the position of Chair of the Board of Supervisory Directors for 2024 from my colleague Christian Lindner, Federal Minister of Finance.

Marion Höllinger, Prof. Dr Ulrich Reuter and Jan Wenzel Schmidt joined the Board of Supervisory Directors on 1 January 2024. Reiner Hoffmann resigned from the Board of Supervisory Directors with effect from 8 February 2023, and Yasmin Fahimi was appointed with effect from 24 May 2023. Dietmar Strehl resigned from the Board of Supervisory Directors with effect from 5 July 2032, and Björn Fecker was appointed with effect from 20 October 2023. Dr Bruno Hollnagel, Dr Hans-Walter Peters and Helmut Schleweis stepped down from the Board of Supervisory Directors at the end of 2023.

Yasmin Fahimi, Robert Feiger, Tanja Gönner, Stefan Körzell, Rainer Neske and Frank Schäffler stepped down and were reappointed according to schedule with effect from 31 December 2023. After the reporting period, Dr André Berghegger stepped down from the Board of Supervisory Directors with effect from 20 February 2024; Olav Gutting joined the Board with effect from 22 February 2024. The Board of Supervisory Directors would like to thank all the members who stepped down for their work.

Financial statements

Deloitte GmbH, which was appointed auditor for financial year 2023, has audited the annual financial statements, consolidated financial statements and the combined management report, all of which were prepared as of 31 December 2023 by the Executive Board, and issued an unqualified auditor's report thereon. The annual financial statements of KfW were prepared in accordance with the provisions of the German Commercial Code (HGB), and the consolidated financial statements were prepared in accordance with International Financial Reporting Standards (IFRS) as applicable within the European Union.

At its meeting on 21 March 2023, the Board of Supervisory Directors approved the financial statements and the consolidated financial statements, both of which were prepared by the Executive Board, as stipulated in Article 9 (2) of the KfW Law, following a recommendation by the Audit Committee.

Frankfurt am Main, 21 March 2024

The Board of Supervisory Directors

Chair

Legal notice:
The information contained in this online Annual Report 2023 is based on KfW’s Financial Report 2023, which you can download here. Should this online Annual Report 2023, despite the great care taken in preparation of its content, contain any contradictions or errors compared to the Financial Report, the KfW Financial Report 2023 takes priority.