1.0 CORPORATE GOVERNANCE IN BBK
Corporate governance is the framework by which business corporations are directed and controlled. It describes a set of relationships between a company’s management, its board, its shareholders and other stakeholders that provides the structure through which the objectives of the companies are set, and the means of attaining those objectives and monitoring performance are determined. The corporate governance structure specifies the distribution of rights and responsibilities among different participants such as the Board, Management, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. It influences how the objectives of the Bank are set and achieved, how risk is monitored and assessed, and how performance is optimised. The corporate governance structure of BBK is designed to enshrine the concepts of good governance as required by the Corporate Governance Code of the Kingdom of Bahrain issued by the Ministry of Industry and Commerce, the Central Bank of Bahrain (CBB) in their High-Level Controls (HC) Module, Basel II paper on ‘Enhancing Corporate Governance’ of 2006, Bahrain Commercial Company Law and other supporting references.
The guidelines provided herein are to support the principles stated in any other of the Bank’s prevailing governance documents and related policies. The Bank also adheres to the Code of Best Practice on Consumer Credit and Charging (prepared jointly by the Bankers’ Society of Bahrain and Central Bank of Bahrain).
2.0 BBK’S CORPORATE GOVERNANCE PHILOSOPHY
High standards in corporate governance are fundamental in maintaining BBK’s leading position within the local and regional banking sector and the community. Continuous review and adherence to strong corporate governance practices help enhance compliance levels according to international standards and best practice.
BBK shall continue its endeavor to enhance shareholders value, protect their interests and defend their rights by practicing pursuit of excellence in corporate life. The Bank shall not only comply with all statutory requirements but also formulate and adhere to strong Corporate Governance practices.
BBK shall continuously strive to best serve the interests of its stakeholders including shareholders, customers, staff and public at large.
The adoption and implementation of Corporate Governance would be the direct responsibility of the Board of Directors, in line with the regulatory and statutory requirements in the Kingdom of Bahrain and other countries where BBK operates.
3.0 CORPORATE GOVERNANCE MODEL
The standard Corporate Governance model interconnects the dynamic relation between the three main stakeholders namely Shareholders, the Board and the Management. The roles of shareholders, the Board and the Management are distinctly different but complimentary to the core objectives and functioning of the institution. Such model can be drawn as under.
BBK’s Corporate Governance practices ensure a healthy relationship with all the stake holders while achieving core objectives of the institution.
3.1 Board of Directors
The Bank's Board of Directors is accountable to the Bank's shareholders and other stakeholders, to ensure that the Bank is managed in a safe and sound manner. To fulfill their fiduciary duties, the Directors must be independent of the Management of the Bank; familiar with the Bank's business and general financial and accounting principles; and actively engaged in directing and overseeing Management.
3.2 Management Team:
The Bank's Executive Management team is accountable to the Board to manage the Bank in accordance with the policies and principles established by the Board and applicable legal and regulatory requirements.
3.3 Subsidiaries and Overseas Branches:
Bank will ensure that, as a minimum, the same or equivalent corporate governance requirements would apply to its overseas branches and to subsidiaries. The Corporate Governance framework for BBK covers all subsidiaries and overseas branches. Subsidiaries would also adopt their own corporate governance policies and frameworks being independent licensees. Some requirements, however, would be met by subsidiaries through BBK’s corporate governance status. Some of the functions of the subsidiaries such as audit, nomination & remuneration can be outsourced to the main Bank, if recommended by their Boards. The subsidiaries would periodically and on need based basis report to the Bank’s Board.
4.0 PURPOSE OF THIS FRAMEWORK:
The purpose of this Framework is to outline the corporate governance structure for the Bank.
This Corporate Governance Framework document together with the Board Charter and the terms of reference of all Board Committees, Code of Conduct for Directors, Directors Remuneration and Compensation Policy, Key Persons Dealing Policy, Disclosures Policy and such other independent policies related to Corporate Governance will form the Corporate Governance Policy Manual and would be the reference document for the Board and the Management.
The individual policies/documents may change with market and regulatory requirements from time to time and will be suitably replaced.
5.0 CORPORATE GOVERNANCE PRINCIPLES:
The Bank will follow the corporate governance principles as issued by the Ministry of Industry and Commerce in the Corporate Governance Code and the CBB as per the High-Level Controls (HC) Module of the Rulebook. The principles are as follows:
1. The Bank shall be headed by an effective, collegial and informed Board.
2. The approved persons must have full loyalty to the Bank.
3. The Board must have rigorous controls for financial audit and reporting, internal control, and compliance with law.
4. The Bank must have rigorous and transparent procedures for appointment, training and evaluation of the Board.
5. The Bank must remunerate approved persons fairly and responsibly.
6. The Board must establish a clear and efficient management structure.
7. The Bank must communicate with shareholders, encourage their participation, and respect their rights.
8. The Bank must disclose its corporate governance.
Building on the above, the Bank’s guiding principles of good corporate governance are:
5.1 Board operations - the Board’s ability to manage its own activities
5.1.1 The Board would consist of Directors representing varied/appropriate mix of applicable skills and experience and meeting ‘fit and proper’ requirements of the CBB.
5.1.2 There will be separation and clear division in the roles and responsibilities of the Chairman and the Chief Executive. The Chairman of the Board will be an Independent Director.
5.1.3 Bank would have a nomination process designed to ensure that the appropriate balance and capability of the Board is maintained on the basis of periodic evaluation of the performance of the Board, its Committees and individual Directors.
5.1.4 Bank will have a fair representation on the Board by Directors, including adequate ‘independent’ Directors, to meet minimum regulatory requirements and to facilitate objectivity in decision making.
5.1.5 Bank will provide the Directors with access to training (particularly on induction) and professional advice on issues when required.
5.2 Strategy – the Board’s role in the strategy development process will ensure:
5.2.1 Active Board participation in strategy development, including the review and challenge of the strategy.
5.2.2 Creation of an adaptable organization that is able to respond quickly to changing market opportunities.
5.2.3 Appropriate dissemination of the strategic plan of Bank.
5.3 Corporate Culture - the Board’s role in setting and communicating standards for organisational behavior shall:
5.3.1 Promote openness with Management on issues for which the Board will ultimately be accountable.
5.3.2 Sponsor and actively promote adherence to the organization’s defined code of conduct.
5.3.3 Promote the use of incentive schemes that align the interests of the Board and Executive Management with those of the shareholders and other stakeholders.
5.4 Monitoring and evaluation – the Board’s role in monitoring Management and evaluating its performance against defined goals will require to:
5.4.1 Ensure that the organization complies with relevant laws and regulations as well as with accounting, human resource and other internal policies.
5.4.2 Understand organizational risks and be informed routinely about how they are managed and be assured that this is effective.
5.4.3 Apply a rigorous process for evaluating and monitoring the performance of the Chief Executive (“CE”) and Executive Management.
5.5 Stewardship – the Board’s responsibility towards stakeholders and accountability for their interests will need to:
5.5.1 Uphold rigorous standards for individual members preparedness, participation and conduct.
5.5.2 Protect the organization and its stakeholders from potential damage due to conflicts of interest.
5.5.3 Manage stakeholder expectations regarding the safeguarding of their interests, in part by ensuring that communication is thorough, timely and transparent.
6.0 CORPORATE GOVERNANCE STRUCTURE
The Board will form the necessary Board and Management Committees to assist the Board in providing effective oversight over the Bank’s operations. Board would review the structure periodically and modify it if deemed necessary. Additional committees may be formed from time to time and/ or the existing Committees could be assigned additional responsibilities. The structure, after reconstitution of the Board after March 2011 is as under.
The role of the Board Secretary is to assist the Board and its Committees in maintenance of relation between Executive Management and the Board, and in his role as Company Secretary; between the Board and shareholders and vice versa. The risk management, credit management, compliance, financial control functions would be independent of the business lines. The Audit function would be independent and report to the Audit Committee of the Board.
6.1 Board Committees:
The Board delegates (without abdicating) some of its responsibilities to different Board Committees. The present established Board Committees are given below. The terms of references have been separately established for each Committee.
- Minimum five members (CE is a member) are appointed for a 1 year term.
- Minimum number of meetings required each year: 8
- Role: reviews, approves/recommends and directs the Executive Management on matters raised to the Board of Directors
- Minimum three members are appointed for 1 year term.
- Minimum number of meetings required each year: 4
- Role: reviews the internal audit programme and internal control systems, considers the major findings of internal audit review, investigations and Management’s response and ensures coordination between internal and external auditors
- Tracks, monitors and reports trading activities of Key Persons and Insiders in accordance with the requirements of CBB and the Bahrain Bourse Company.
Nomination, Remuneration and Corporate Governance Committee
Minimum three members are appointed for a 1 year term.
Minimum number of meetings required each year: 2
Role: establishes a Board compensation policy for the Directors and Executive Management, recommending Board members’ appointments to various Committees, to the Board for approval, in addition to reviewing, assessing and having oversight on all aspects of Corporate Governance in keeping with the regulatory and statutory requirements.
Minimum four members are appointed for a 1 year term.
Minimum number of meetings required each year: 4
Role: establishes an effective risk management framework through appropriate risk policies/processes, monitors risk profile of the Bank to ensure that it is in accordance with risk appetite of the Bank.
The Board reserves the right to form temporary Committees and discontinue them, from time to time as it sees it necessary.
6.2 Management Committees:
Management Committees are chaired by the Chief Executive and, other Committee members are heads of the relevant divisions appointed by the Committee Chairman. Specific terms of references have been established for each Committee formed.
The Chief Executive reserves the right to form temporary Committees and discontinue them, from time to time and as necessary.
Summery Terms of Reference
Asset & Liability Management
Establishes strategies and guidelines for the overall management of the balance sheet and its associated risks.
Senior Human Resources
Establishes appropriate policies, procedures and guidelines for the management of human resources.
Reviews and establishes provisioning requirements for loans, advances and investments.
Identifies, measures, monitors and controls risk by establishing risk policies and procedures. .
Reviews and monitors progress on strategic initiatives.
|Approves credit and investment proposals of a certain limit. Also reviews and recommends any proposals requiring Executive Committee or Board approvals.|
6.3 Delegation of authority
The Board Committees, Management Committees and other specific Management personnel will execute activities/transactions on behalf of the Bank in accordance with the delegated authority limits. As a general principle, policies covering operational issues, internal control, risk management, human resources, IT, compliance and such other functions in the Bank would be approved by the Board. The approval of relative Procedure is delegated to the Chief Executive. The procedures / processes relating to the functioning of the Board or Board Directors would be would be part of the Board Charter or approved either by the Board or by the appropriate Board Committee.
The application of the authority limits to different functionaries will be based on principles of delegation and will form part of the relevant Policy and Procedure.