شروط مرجعية- اللجان التابعة لمجلس الإدارة

1. INTRODUCTION

The Board in its meeting 353/06/2023 dated 20 July 2023 resolved to prepare a unified document for all Board Committee Terms of Reference, where all common clauses that apply to all committees are mentioned at the beginning of the document and followed by the Terms of Reference for each committee separately. The purpose is ease of reference for Board members and other stakeholders.

1.1 The current Board Committees are:

a) Audit and Compliance Committee:

b) Nomination, Remuneration and Governance Committee

c) Risk Committee

d) Executive Committee

e) Independent Directors’ Committee

2. COMMON CLAUSES APPLICABLE TO ALL BOARD COMMITTEES:

2.1 Definitions: The ‘Bank’ means Bank of Bahrain and Kuwait, ‘BBK Group’ means Bank of Bahrain and Kuwait, its overseas branches and subsidiaries and the ‘Board’ means Bank of Bahrain and Kuwait Board of Directors. The ‘Chairperson’ means the Chairperson of the Committee. The terms ‘Independent’, Executive and ‘Non-Executive’ have the same meaning as defined under the CBB Rule Book and classified accordingly. ‘Senior Management’ within the context of this document shall mean to include Group Chief Executive, Deputy Chief Executives, Group Chief Officers, General Managers, Heads of wholly owned subsidiaries, GM Audit, Head of Group Compliance and AML, Head of Group Corporate Secretariat and other senior direct reports of the Group Chief Executive or the Board Committees.

2.2 Tenure: The term of the Committee members shall be of one year. The tenure of the Director who joins in between would be for the remaining period of the year.

2.3 Membership: Each Committee shall be appointed by the Board and shall consist of not less than 3 members having sufficient technical expertise. In case of the Audit & Compliance, Risk and Nomination, Remuneration and Governance Committees, the majority of the Committee members shall be independent and have no conflict of interest with any other duties they have. The Audit & Compliance Committee members must have sufficient experience in audit practices, financial reporting and accounting. Risk Committee members shall have sufficient experience in risk related issues for the Risk Committee.

2.4 The members of the Committees can be changed/removed at the discretion of the Board of Directors at any time. The GCE and other senior management may not be members of any Board Committee. The Committee members must have sufficient experience in audit practices, financial reporting and accounting. The members of the Committee can be changed/removed at the discretion of the Board of Directors at any time. Members of the Nomination, Remuneration and Governance Committee must be independent of any risk-taking function or committee.

2.5 Quorum: The quorum shall be of more than half of the members and must include the Chairperson or the Deputy Chairperson. The decisions/resolutions shall be adopted by simple majority of the participating members. The Chairperson shall not have additional vote. In the absence of the Chairperson and his Deputy, and on exceptional basis, the Committee may meet and the attending members shall elect the Chairperson for the particular meeting; however if the quorum is not established then the exceptional issues shall be raised to the Board. The quorum at Committee meetings must be established throughout the meetings.

2.6 Election of Chairperson/ Deputy Chairperson: The Chairperson and Deputy Chairperson must be a Director and appointed by the Board or alternatively elected by the members of the Committee in its first meeting after the appointment of its members.

2.7 The Chairperson: Election of the Chairperson is subject to fulfilling regulatory requirements regarding independence for the Audit & Compliance, the Risk and Nomination, Remuneration and Governance Committees. There is no Chairperson for the Independent Directors Committee. Further, the Chairpersons of both the Audit & Compliance Committee and the Risk cannot be the Chairperson of the Board, unless he/she is considered independent; and not be the chairperson of any other Board committee unless a CBB exemption in this regard has been obtained. There are no specific regulatory requirements regarding the Executive Committee in this regard.

The Chairperson of each Committee is responsible for:

i. Ensuring Committee meetings are duly convened and that required quorum is present.
ii. Approving agenda and related materials for the Committee meetings.
iii. Ensuring that the meetings are conducted in an efficient and effective manner.
iv. Ensuring that the Committee has sufficient information to take decisions.
v. Providing leadership to the Committee and assisting it in its responsibilities.
vi. Reporting to the Board on deliberations and recommendations of the Committee in writing.
vii. Monitoring functioning of the Committee as per its Terms of Reference.
viii. Reviewing and approving the annual objectives and annual performance appraisal of the executives directly reporting to the Board Committees i.e. Heads of Internal Audit and Compliance & AML (for the Audit and Compliance Committee) and the Group Chief Risk Officer (for the Risk Committee) in coordination with and subject to the approval of the other Committees’ members and in coordination with Group Human Resources.
ix. The Chairperson or his Deputy shall be available at the Annual General Meeting to answer questions relating to the Committee’s functions.

2.8 Meetings: Meetings shall be held not less than four times a year, except for the Independent Directors Committee and the Nomination, Remuneration and Governance Committees, where the number of meetings can be less. The Chairperson of a Committee may convene a meeting of a Committee at any time giving members reasonable notice. Participation in the meeting through video / Tele conferencing is permitted in keeping with the provisions of the Board Charter. The meetings would normally be synchronized with the Board meetings. Attendance by Proxies is not permitted.

2.9 Attendance by electronic or video conference is considered an attendance of meeting subject to:
i. ensuring the identity of the attendee
ii. enabling the attendee to fully participate in the meeting as if he was physically attending, which includes being aware of all discussions during the meeting and mentioning his/her opinion and participating in the discussions.
iii. Any other directions issues by the MOIC from time to time in this regard.

2.10 Submission of documents: For the sake of having enough time to review the meeting agenda items all items are to be submitted to the Committee 7 days prior to the meeting and latest by 4 calendar days before the meeting. Any item received later than the mentioned period shall be sent by Email and considered an item under any other issues unless approved otherwise by the Chairperson of each Committee.

2.11 Minutes: The draft minutes of each Committee meetings shall be approved by the Committee at the end of each meeting. The final minutes shall be circulated to the members of each Committee not later than 5 working days using the online portal for obtaining Committee members’ electronic signatures. The Chairperson of each Committee will report to the Board in writing as part of the agenda items on the proceedings of Committee meeting following each meeting of the Committee. The minutes will be part of the agenda of the next Committees and Board meetings under items for information.

2.12 Resolutions by circulation: Each Committee may adopt resolutions by correspondence, including mail, electronic or fax correspondence, provided that in order for resolutions taken in this manner to be valid, they shall be approved by all the members. Any member to whom a proposed resolution is sent and who fails to respond within three working days following the date on which the proposed resolution is sent to him shall be considered to have approved the resolution. The Head of Group Corporate Secretariat shall ensure that the documents related to proposed resolution(s) have reached all the Committee members.

2.13 Disclosure: The membership of each Committee, description of its duties and attendance of each member during the year shall be disclosed in the Annual Report/Bank’s official website and to the shareholders.

2.14 Secretary: The Head of Group Corporate Secretariat and in his absence the deputy Head of Corporate Secretariat shall be the secretary to all Board Committees and attend all meetings of the Committees. Attendance of his deputy will be made by the Group Corporate Secretariat taking into account the need for training of the deputy.

2.15 Training: Each Committee shall make available to its new members a suitable induction and ongoing training where appropriate, as discussed with the Committee.

2.16 Resources: The Committees will be supported by the Head of Group Corporate Secretariat or his deputy in his absence and the General Manager Internal Audit and the Group Head of Compliance and MLRO in case of the Audit and Compliance Committee, the Group Chief Risk Officer (GCRO) in case of the Risk Committee and Group Chief HR & Admininstration (GC HR& Admin.) and Head of Human Resources in case of the Nomination, Remuneration and Governance Committees.

2.17 Other meeting Attendees:

i. The Head of Group Corporate Secretariat is a permanent invitee to all Committee meetings.
ii. The Group Chief Executive is also a permanent invitee. Any other Executive Management member as recommended by the Management and decided by the Committee can attend Committee meetings.
iii. The General Manager Internal Audit and the Group Head of Compliance and MLRO shall attend the Audit and Compliance Committee meetings and are permanent invitees to this Committee. The Audit and Compliance Committee must meet with the external auditors at least twice per year, and at least once per year in the absence of any members of executive management and at least once a year in the absence of the GCE and any executive management, but in presence of the Head of Compliance & MLRO, Internal Auditor and GCRO.
iv. The GCRO is a permanent invitee to Risk Committee meetings. The GCRO shall meet the Risk Committee regularly without the presence of the GCE/other executives.
v. The GCHR& Admin is a permanent invitee to the Nomination, Remuneration and Governance Committee meetings.
vi. Other Directors or persons may also attend the meetings with the consent of the Chairperson of the Committee.
vii. All non-permanent invitees should withdraw from the meeting if required to do so by the Chairperson.
viii. Only independent Directors can attend Independent Directors’ meetings.
ix. The Committee Chairperson may request the permanent invitee to withdraw from the meeting in the case of discussion relating to the permanent invitee evaluation his performance, regulatory requirements or any other extreme situation requiring such withdrawal.

2.18 Signing on approved documents: Signing on documents approved/not approved by the Committee reflecting Committee’s conditions directions and reports on actionable items is delegated to the Head of Group Corporate Secretariat or his deputy in his absence.

2.19 Self-Assessment/Performance Evaluation:
The Committee will conduct an annual self-assessment of the performance of the Committee/members and report conclusions and recommendations to the Board. The mechanism of evaluation would be as per the evaluation process adopted by the Board for its committees.

2.20 Reference: Each Committee will be guided by provisions under Commercial Companies law 21 for the year 2001 and its amendments thereto, The Central Bank Rulebook, Bahrain Bourse Company, any other regulatory requirements and the Memorandum of Association, Articles of Association and Board Charter on matters related to its functioning and not specified in this document.

2.21 General Scope:

i. Each Committee will report on periodic basis to the Board. The Committee’s scope will involve issues of the entire BBK Group and its authority extends to all relevant matters relating to the Group.
ii. Each Committee has authority to examine any matters within its responsibilities and to obtain such information as it may require from any Director, member of the Executive Management or employee of the Group subject to provisions mentioned in the Board charter in this regard.
iii. The Committees will review these terms of reference every three years following each new term for the Board or as and when required.

2.22 Access To External Advice:

Each Committee shall have the resources and authority necessary for its duties and responsibilities, including the authority to select, retain, terminate consulting firms and approve the fees of outside legal, and in relation to Nomination and Remuneration:

i. To evaluate the compensation of directors, the GCE or other approved persons, without seeking the approval of the Board or Management. The Bank shall provide appropriate funding for the compensation of any such person.
ii. To determine approved persons and material risk-takers’ remuneration, administering remuneration plans, or related matters.
iii. In any other matters as deemed appropriate by the Committee

3. SPECIFIC TERMS OF REFERENCE FOR EACH BOARD COMMITTEE

A) Audit and Compliance Committee (formerly the Audit Committee):

1) INTRODUCTION:
It was constituted by the Board in its meeting 139 dated 20-12-1995 to enhance the Bank’s commitment to adopt best practices and in keeping with the Central Bank of Bahrain (CBB) regulations and other relevant rules and regulations in the Kingdom of Bahrain.

2) PURPOSE & DEFINITIONS:
2.1 Purpose: The Audit and Compliance Committee’s primary function is to assist the Board of Directors in fulfilling its oversight responsibilities defined by law, regulatory authorities and articles of association and internal policies of the Bank.

3) TERMS OF REFERENCE
3.1 The Committee must:
3.1.1 Ensure that the licensee has effective and adequate policies covering all its business activities, internal audit, financial reporting, compliance & AML, risk management, prevention of frauds and cyber security breaches, etc.;
3.1.2 Oversee the financial reporting process;
3.1.3 Oversee and interact with the licensee’s internal and external auditors;
3.1.4 Review the integrity of the conventional bank licensee’s financial statements;
3.1.5 Recommend to the Board, based on a Board approved objective criteria, the appointment, remuneration, dismissal and rotation of external auditors;
3.1.6 Review and approve the internal and external audit and compliance scope;
3.1.7 Receive internal and external audit and compliance reports and ensure that senior management is taking necessary corrective actions in a timely manner to address any control weaknesses, non-compliance with policies, laws and regulations, and other problems identified by auditors, the head of compliance & MLRO and other control functions;
3.1.8 Assess once a year the extent to which the licensee is managing its compliance and AML risk effectively;
3.1.9 Ensure that the agenda for their meetings includes compliance, AML and internal audit issues at least every quarter;
3.1.10 Recommend the appointment and dismissal of the heads of internal audit and compliance and AML functions. The licensee must also discuss the reasons for their dismissal with the CBB.
3.1.11 Make a determination, at least once a year, of the external auditor’s independence;
3.1.12 Commission every five years a quality review of the effectiveness and efficiency of the internal audit and compliance & AML functions by a third-party consultant, other than the external auditor. The results of such independent review must be provided to the CBB by 30th September of the relevant year;
3.1.13 Review and supervise the implementation and enforcement of the licensee’s code of conduct, unless such mandate is delegated to another committee such as the Governance Committee; and
3.1.14 Ensure that senior management establishes and maintains an adequate and effective internal control systems, procedures and processes for the business of the licensee.
3.1.15 The Committee is also authorized by the Board to function as the Bank’s ‘Insiders Committee’ with the responsibility of providing prior approval for dealing in the Bank’s Treasury Shares and Debt Securities. The Committee will have the responsibility of: a) Monitoring compliance with the Key Persons Dealing Policies issued by the Bahrain Bourse Company (BHB); and b) Monitoring and ensuring compliance with the provisions relating to ‘Prohibited Conduct in Possession of Inside Information’ contained in the ‘Prohibition of Market Abuse and Manipulation (MAM)’ module issued by the CBB.
3.1.16 Establish effective communication and coordination between the Committee and the Risk Committee to facilitate the exchange of information and effective coverage of all risks, including emerging risks, and any needed adjustments to the risk governance framework of the Bank.
3.1.17 The Committee shall have oversight over the Bank’s wholly owned subsidiaries Audit Committees.

4. DUTIES AND RESPONSIBILITIES OF THE COMMITTEE

4.1. In relation to Internal Audit:
4.1.1 To monitor and review the effectiveness of the Bank’s internal audit function in the context of the Bank’s overall risk management framework.
4.1.2 To review the internal audit plan, consider the major findings of internal audit reviews, investigations and management’s response, and ensure coordination among the internal and external auditors.
4.1.3 To review the activities, resources and organizational structure and succession plans of internal audit.
4.1.4 To review, discuss and make recommendations regarding the selection, appointment and termination where appropriate of the head of internal audit and the compliance & AML functions and the budget allocated to the internal audit and compliance & AML functions.
4.1.5 The Committee remains ultimately responsible for the Internal Audit function regardless of whether internal audit activities are outsourced or not.
4.1.6 To review, discuss and approve the Internal Audit Manual.

4.2 In relation to Financial Accounts and External Auditors:
4.2.1 To make recommendations to the Board, in relation to the appointment, re-appointment and removal of the external auditors and to approve the remuneration and terms of engagement of the external auditors. The external auditor shall report directly to the Committee.
4.2.2 To review the Bank’s accounting and financial practices.
4.2.3 To review and monitor, on an annual basis, the external auditor’s independence, including with respect to performance of any non-audit services, objectivity and the effectiveness of the audit process, taking into consideration relevant professional and regulatory requirements and to oversee the appropriate rotation of audit partners with the external auditor.
4.2.4 To obtain from the external auditor a written report listing any relationships that may compromise the auditor’s independence.
4.2.5 To review and discuss with the external auditor the scope and results of its audit, any difficulties the auditor encountered including any restrictions on its access to requested information and any disagreements or difficulties encountered with management.
4.2.6 To receive and review the External Auditors year end ‘Management Letter’ and ensure that all findings mentioned therein are addressed in a timely manner.
4.2.7 To review and recommend for approval to the Board of Directors the Group’s quarterly, half yearly and annual accounts (Balance Sheet and Income Statement) and to carry out the necessary due diligence required in this connection.

4.3 In relation to the system of internal control:
4.3.2 To keep under review the effectiveness of the internal control systems and the financial risk management framework.
4.3.3 To review the Bank’s procedures for detecting fraud and whistle-blowing and ensure that arrangements are in place by which staff may, in confidence, raise concerns about possible improprieties in matters of financial reporting, financial control or any other matters.

4.4 In relation to regulatory compliance:
4.4.1 To review the effectiveness of the Bank’s system for monitoring compliance with relevant laws and regulations and the measures taken by the Management.
4.4.2 To periodically assess and ensure that adequate resources, succession planning commensurate with the scale and complexity of operations, are assigned for compliance & AML activities at Head Office, Overseas Branches and Subsidiaries.
4.4.3 To review outstanding compliance & AML findings and concerns reported by the Group Compliance & AML Head, including those that have been outstanding for a period exceeding the agreed compliance/regulatory timeline.
4.4.4 To review Group Compliance & AML Risk Based Plan, Compliance Risk Based Testing Programme, and Compliance Risk Assessment established and presented annual by the Group Compliance & AML Head.
4.4.5 To review the Central Bank of Bahrain’s Inspection Report and other central bank inspection reports in countries where the Bank is operating, as and when issued and received and to address the issues raised therein as needed.
4.4.6 To ensure, through Audit and Compliance Committee’s oversight, for the below Compliance & AML Function’s rights:

i. Have unrestricted access to any records or files necessary to carry out its responsibilities, and the corresponding duty of licensee staff to co-operate in supplying this information.
ii. Conduct investigations of possible breaches of the applicable laws, regulations and the compliance policy.
iii. Appoint, subject to audit committee’s approval, outside experts to perform a specific task, if appropriate.

4.5 In relation to compliance with Key Persons Policies:
4.5.1 To consider and provide prior approval to requests for trading in Treasury Shares / Securities (for holding, buy-back, supporting market or such other permitted activity). Prior approval of the Committee will not be required for trading by other insiders and key persons in the ordinary shares of the Bank in BBC.
4.5.2 To review and monitor the Key Persons’ Dealing Policies including any periodical changes made to it. To receive and review the reports of trading done by Insiders.
4.5.3 To ensure compliance with the Bank’s Key Persons Dealings policies.

4.6 In relation to compliance with the requirements of Market Abuse & Manipulation Module issued by the CBB:

4.6.1 To ensure prohibition of the abuse of inside information.

4.7 Others:
4.7.1 To review and discuss arrangements under which company employees can confidentially raise concerns about possible improprieties in financial reporting or other matters and ensure that arrangements are in place for independent investigation and follow-up regarding such matters.
4.7.2 The review and supervision of the implementation of enforcement of and adherence to the Bank’s code of conduct.

4.8 Consider any other functions as assigned/delegated by the Board.
B) NOMINATION REMUNERATION AND GOVERNANCE (NRG) COMMITTEE

1. INTRODUCTION
The Nomination and Remuneration Committee is constituted by the Board in its meeting 195/5/2004 dated June 20th, 2004. A Corporate Governance Committee was formed by the Board at its Meeting No. 246//5/2010 held on 18th April 2010. At its Meeting No. 252/3/2011 dated 6th March 2011, the Board decided to merge the Nomination & Remuneration Committee and the Governance Committee to enhance the Bank’s commitment to adopting good governance practices and in keeping with the requirements/recommendations contained in the relevant provisions of Central Bank of Bahrain’s Rule Book.

2. PURPOSE AND DEFINITIONS
2.1 Purpose: NRG Committee is a Board Committee established by the Board of Directors in compliance with the provisions of the Corporate Governance Code and the HC Module of the CBB Rulebook. The purpose of the Committee is:

2.1.1 To oversee the design of, and recommend to the Board, an overall remuneration policy and philosophy for the Bank that is aligned with its long-term business strategy, its business objectives, its risk appetite, values and the long term interests of the Group.
2.1.2 Advise the Board of Directors on all matters relating to nomination including policy formulation, Board composition, appointments of the Boards of wholly owned subsidiaries and affiliate companies, and executive management succession.
2.1.3 Advise the Board in ensuring that BBK Group has the appropriate corporate governance standards and practices.

3. TERMS OF REFERENCE
DUTIES AND RESPONSIBILITIES OF THE COMMITTEE

3.1 Scope under nomination role, the Committee shall:
3.1.1 Regarding Board membership: Provide recommendations and advise to the Board (for submission to the Shareholders) in addition to the following specific information to be submitted to the shareholders for election or re-election of a Director:

i. The term to be served, which may not exceed three years (but there need not be a limit on reelection for further terms)
ii. Biographical details and professional qualifications.
iii. In the case of an independent Director, a statement that the Board has determined that the criteria in the CBB rulebook have been met,
iv. Any other Directorships held,
v. Particulars of other positions which involve significant time commitments.
vi. Details of any relationships between the candidate and the company or its Directors.

3.1.2 Regarding Board membership: Provide recommendations and advise to the Board (for submission to the Shareholders) in addition to the following specific information to be submitted to the shareholders for election or re-election of a Director:

3.1.3 Identify and nominate for the approval of the Board of Directors candidates qualified to become members of
i. Board of Directors of the Bank or its wholly owned subsidiaries.
ii. Board of Directors of other shareholding companies, subsidiaries or a subsidiary of the Bank’s subsidiaries.
iii. Members that will enter the election to represent the Bank in the minority interest.
iv. Members of the Executive Senior Management team and approved persons reporting to the Group CE or a Group Chief Officer. The exceptions are the appointments of the GM Internal Audit, Group Chief Risk Officer and Head of Group Compliance and AML who must be recommended by respective Board committees.
v. Head of Group Corporate Secretariat.

3.1.4 Nominations to Head of controlled functions that are reporting directly to Board’s committees shall be recommended by the respective Committee to the Board; however, should there be a difference in view between the respective Committee and the Management, the Nomination, Remuneration and Governance Committee’s views can be obtained.

3.1.5 In performing the nomination responsibilities, the Committee shall consider any criteria approved by the Board and such other factors as it deems appropriate in arriving to their final recommendation. These may include judgment, specific skills, experience with other comparable businesses, the relation of a candidate’s experience with that of other Directors, and other factors and interviews by some or all of the Committee members if needed.

3.1.6 Make recommendations to the Board of Directors from time to time as to changes the Committee believes to be desirable to the size of the Board or any Committee of the Board.

3.1.7 Regularly review the time commitment required from each non-executive director and require them to inform the committee before accepting any Board appointments to another company.

3.1.8 Assess the role and responsibilities of a Board member, the knowledge, experience and competence which the role requires.

3.1.9 Assess the Board’s and senior management’s effectiveness.

3.1.10 Recommend to the Board, and oversee the implementation of, appropriate human resource policies.

3.1.11 Whenever a vacancy arises (including a vacancy resulting from an increase in Board size), the Committee shall recommend to the Board a candidate to fill the vacancy either through appointment by the Board or through Shareholders election.

3.1.12 Review the leadership needs of the Group and its organization structure and recommend the same to the Board with a view to ensuring the continued ability of the organization to compete effectively in the market place. This shall also include preparation and review of job descriptions of the Group Chief Executive and other members of the Senior Management (which should include as a minimum, the title, authority, duties, accountability and internal reporting responsibilities), as well as other necessary qualifications.

3.1.13 Ensure that orderly and timely succession plan is in place to address any unforeseen vacancy within the Senior Management team and recommend the same to the Board of Directors on annual basis.

3.1.14 The number of other company boards on which a Director may serve shall be subject to a case-by-case review by the Committee, in order to ensure that each Director is able to devote sufficient time to perform his or her duties as a Director.

3.1.15 The Committee will oversee and manage the annual formal performance evaluation process conducted on Board, its committees and members as per the agreed upon process adopted by the Board of Directors.

3.2 Scope Under remuneration role, the Committee shall:

3.2.1 Review and recommend remuneration and HR policies for the approval of the Board taking into account the long-term business strategy, the Group Values, regulatory requirements, as well as the need to promote effective risk management. The general framework of the remuneration policies shall be approved by the Shareholders approval.

3.2.2 Liaise as required with the Board Risk Committee and Risk Function in relation to risk adjusted performance measures to confirm that the Remuneration Policy is in line with sound and effective risk management. The risk committee must, without prejudice to the tasks of the NRG committee, examine whether incentives provided by the remuneration system take into consideration risk, capital, liquidity and the likelihood and timing of earnings.

3.2.3 Approve remuneration amounts, including fixed and variable pay, for members of Senior Management. This shall include hiring salary, exceptional benefits or variable pay and salary increases that exceed the approved total increase matrix or promotion policy. In the case of Group Chief Executive, the committee shall raise its recommendation with regards to the above for the approval of the Board of Directors.

3.2.4 Approve the variable pay for the other approved persons and material risk takers per the approved human resources policy.

3.2.5 Obtain feedback on performance evaluation of the Chief Risk Officer, Chief Internal Auditor, Head of Compliance & AML, from the designated Board committee responsible for oversight of these functions.

3.2.6 The remuneration policy should cover the following components:

i. Compensation strategy
ii. Salary & grading structure.
iii. The specific terms of any performance-related incentive plans including performance share plans, stock options, merit bonus, sales incentive or other deferred-benefit compensation.
iv. Pension plans and fringe benefits such as non-salary perquisites.
v. Retention Schemes.
vi. Termination policies including any severance payment policies.

The remuneration policy shall also include guidelines to be used for determining remuneration in individual cases, including relative importance of each component and Specific criteria to be used in evaluating the performance of the Executive.

3.2.7 Evaluate the annual performance of the Group Chief Executive in terms of achievements of the corporate goals and objectives. In determining the reward, the Committee shall take into consideration, overall achievement and performance of the Group, Shareholder return relative to comparable companies, the value of rewards to GCE’s offered by comparable companies, and awards paid to the Group CE in past years.

3.2.8 The Committee shall evaluate the approved persons and material risk-takers’ performance in light of the Bank’s corporate goals, agreed strategy, objectives and business plans and may consider the Bank’s performance and shareholder return relative to comparable conventional banks, the value of awards to GCE at comparable conventional banks, and awards to the GCE in past years.

3.2.9 Remuneration of both Directors and officers should be sufficient enough to attract, retain and motivate persons of the quality and competency needed to run the company successfully, but the company should avoid paying more than is necessary for that purpose.

3.2.10 Ensure remuneration is adjusted for all types of risks within the Board approved risk appetite and that the remuneration system takes into consideration employees that earn same short-run profit but take different amount of risk on behalf of the Bank.

3.2.11 Evaluate practices by which remuneration is paid for potential future revenues whose timing and likelihood remain uncertain by means of both quantitative and qualitative key indicators. It must demonstrate that its decisions are consistent with the assessment of the Bank’s financial condition and future prospects.

3.2.12 The Committee should ensure that for material risk takers, variable remuneration forms a substantial part of their total remuneration.

3.2.13 Review the stress testing and back testing results before approving the total variable remuneration. Carefully evaluate practices by which remuneration is paid for potential future revenues whose timing and likelihood remain uncertain. The Committee will question payouts for income that cannot be realized or whose likelihood of realization remains uncertain at the time of payment.

3.2.14 Ensure that for approved persons in risk management, internal audit, operations, financial controls, AML and compliance functions the mix of fixed and variable remuneration is weighted in favor of fixed remuneration.

3.2.15 Recommend Board member remuneration based on their attendance and performance and in compliance with Article 188 or any other relevant articles of the Company Law.

3.2.16 Ensure appropriate compliance mechanisms are in place to ensure that employees commit themselves not to use personal hedging strategies or remuneration-and liability-related insurance to undermine the risk alignment effects embedded in their remuneration arrangements.

3.2.17 Discuss and approve or recommend to the Board the cases relating to Malus and Claw back as appropriate.

3.3 Scope Under Corporate Governance role, the Committee shall:

3.3.1 Develop and recommend to the board corporate governance framework and guidelines and review those guidelines at least once a year.

3.3.2 Periodically review and monitor implementation of Bank’s governance practices, framework and relevant issues, by working with the management and the Audit and Compliance Committee, including opportunities for improving the governance framework. Monitor Group’s adherence with applicable legal, regulatory and listing requirements relating to Corporate Governance; and provide the Board of Directors with reports and recommendations based on its findings.

3.3.3 Periodically assess and review the role of the Board and its committees and the methods and processes by which the Board discharges its duties and responsibilities, including the process for the Board’s annual self-evaluation and make recommendations to the Board with respect to such methods and processes.

3.3.4 Advise the Board with respect to significant developments in the law and practice of corporate governance; periodically review and recommend to the Board, the composition of various committees of the Board.

3.3.5 Periodically review the Board Profile and Corporate Governance related policies such as Corporate Governance Framework, Board Charter, Code of Conduct, Conflict of interest, Director’s compensation etc and recommend to the Board such changes as it considers appropriate.

3.3.6 Assess, from time to time, if any third party evaluations, are desirable.

3.3.7 Consider other issues referred to it by the Board or Management.

3.3.8 Ensure there is a satisfactory induction for new directors with respect to their Board and Board committee responsibilities and ensure that an appropriate ongoing training program is in place in line with market practice. Periodically review the orientation programs for new directors.

3.3.9 Review any material information to be made available to public by the Bank relating to corporate governance; Review corporate governance disclosures for the Annual Report and to be made to the shareholders.

3.3.10 Review the annual Corporate Governance report for the Annual General Meeting.

3.3.11 Meet separately with Senior Management, employees or independent advisers, as deemed necessary by the Committee.

3.3.12 Engage at its discretion professional advisers on issues before the Committee at Bank’s cost.

3.3.13 Conduct a review of the Conflicts of Interest events and review if any disclosures relating to conflicts of interest are to be made public.

3.3.14 The Bank shall assign to one of its senior management the role of a Corporate Governance Officer who is responsible for the tasks of verifying the Bank’s compliance with corporate governance rules and regulations.

3.3.15 The responsibilities of the Corporate Governance officer at the Bank is assumed by the Head of Group Corporate Secretariat and inculde:

i. Coordinating and following up on the Bank’s compliance with corporate governance requirements.
ii. Ensuring that the corporate governance policies, their implementation and related internal controls are consistent with the regulatory and legal requirements.
iii. Working closely with the Board and/or the relevant Board committee to improve the governance framework of the Bank.
iv. Reviewing the annual corporate governance disclosure to ensure that its contents are in conformity with the Bank’s internal policies and the CBB rulebook requirements.

3.4 Training & Competency

The Committee shall be responsible for the following with regards to Directors and the Group Chief Executive training and competency:

3.4.1 Define minimum competency requirements.
3.4.2 Describe the process for monitoring and tracking competencies and skills to ensure that competency levels are attained within the established time frames.
3.4.3 Outline assessment criteria and requirements
3.4.4 Outline training and personal development requirements.
3.4.5 Allocate the CPD training budget.
3.4.6 Determine and confirm whether competency requirements are met.

C) RISK COMMITTEE

1. INTRODUCTION

It is a committee of the BBK Board of Directors. The Committee serves as a link between the Bank’s Management and the Board of Directors in fulfilling its oversight responsibilities in respect of the risks inherent in the businesses of the Bank and the control processes with respect to such risks. The Committee takes necessary decisions regarding matters under its authority and/or raises recommendations to the Board of Directors for approval/ratification as per the specializations, powers and responsibilities assigned to it by the Board of Directors.

2. PURPOSE & DEFINITIONS:

2.1 Purpose: The objective for the formation of the Risk Committee is to facilitate the business/operations of the Bank by establishment of an effective risk management framework through appropriate risk policies /processes, to monitor risk profile of the Bank to ensure that it is in accordance with risk appetite of the Bank and, to provide the support necessary to enable the Management to perform their assigned duties and responsibilities in an effective manner.

3. SCOPE:

3.1 The role of the Committee is to review risk policies and recommend to Board for approval. It will also examine and monitor the risk issues related to Bank’s business and operations and direct the Management appropriately.

The Committee’s scope will involve related issues of the entire BBK Group and its authority extends to all relevant matters relating to the Group.

4. TERMS OF REFERENCE:

4.1 DUTIES AND RESPONSIBILITIES OF THE COMMITTEE:*

4.1.1 General Scope:

The Risk Committee shall,:
i. Discuss all risk strategies on both an aggregated basis and by type of risk and make recommendations to the Board, and on the risk appetite;

ii. Ensure that:
a) Risks are identified, measured, aggregated, controlled, mitigated, monitored and reported on an ongoing basis across all business lines, the licensee as a whole, its subsidiaries and overseas branches;
b) Risk identification and measurement include both quantitative and qualitative elements;
c) Each key risk has a policy, process and controls;
d) The Bank has sufficient and robust management information system and policies, supported by appropriate control procedures and processes, designed to ensure that the Bank’s risk identification, measurement, aggregation, controlling, mitigation, monitoring and reporting capabilities are commensurate with the licensee’s size, complexity and risk profile. The sophistication of the Bank’s risk management information system and internal control infrastructure must keep pace with changes to the Bank’s risk profile, the external risk landscape and industry practices;
e) The Bank’s risk management infrastructure, including a sufficiently robust data infrastructure, data governance and architecture and information technology infrastructure keeps pace with developments such as balance sheet and revenue growth, increasing complexity of the Bank’s business, risk configuration or operating structure, geographical expansion, mergers and acquisitions, or the introduction of new products or business lines;
f) Senior management has in place processes to promote the Bank’s adherence to the approved risk policies and risk appetite;
g) The Bank’s policies must determine the key management decisions that must be taken by more than one person;
h) The Bank has an adequate communication within the licensee about risk, both across the organisation and through reporting to the Board and senior management;
i) The Bank has a strong risk culture that promotes risk awareness and encourages open communication and challenge about risk-taking across the organisation as well as vertically to and from the Board and senior management; and
j) The Bank has adequate escalation procedures on risk-related matters.

iii. Advise the Board on the Bank’s risk appetite, overseeing senior management’s implementation of the Risk Appetite Statement, reporting on the state of risk culture in the Bank, and interacting with and overseeing the GCRO;
iv. Oversee the strategies for capital and liquidity management as well as for all relevant risks of the Bank, such as credit, market, operational, interest rate risk in the banking book and reputational risks, to ensure that they are consistent with the stated risk appetite;
v. Commission every five years a quality review of the effectiveness and efficiency of the risk management framework and function by a third-party consultant, other than the external auditor. More specifically, the Bank must undertake reviews referred to above with regards to the following individual areas that are relevant to the risk management framework in compliance with the respective regulatory requirements:

a) ICAAP Framework;
b) Capital adequacy requirements;
c) Recovery and resolution planning (RRP) and related documents;
d) Credit risk management framework;
e) Operational risk management framework;
f) Stress testing framework;
g) Liquidity risk management; and

vi. Establish effective communication and coordination between the audit committee and the risk committee to facilitate the exchange of information and effective coverage of all risks, including emerging risks, and any needed adjustments to the risk governance framework of the Group.
vii. The risk committee must, without prejudice to the tasks of the NRG committee, examine whether incentives provided by the remuneration system take into consideration risk, capital, liquidity and the likelihood and timing of earnings;
viii. Carry on any other duties to be determined by the Board of Directors.

More specific responsibilities:

4.2 Review of Risk Policies: Review various risk policies (comprising inter-alia all areas of risk such as credit risk, credit process, market risk, operational risk, investments, liquidity risk, interest rate risk etc) submitted by the Management and present/recommend them to the Board of Directors for approval.

4.3 Risk Related Documents: Review various risk related documents such as Annual Risk Management Strategy, Liquidity Strategy, Internal Capital Adequacy Assessment Process (ICAAP), tools & techniques and approach papers relating to Risk Management etc., and then recommending for approval of the Board wherever necessary.

4.4 Review of reports: Receive regular reporting and communication from the GCRO and other relevant functions about the Bank’s current risk profile, current state of the risk culture, utilization against the established risk appetite and limits, limit breaches and mitigation plans.

4.5 Any other regulatory / control / risk issues: Reviewing any regulatory, control, risk related aspects pertaining to the Bank such as Business Continuity, Anti Money Laundering etc., for necessary action.

4.6 In relation to the Risk Management function:

4.6.1 To monitor and review the effectiveness of the Bank’s risk management function, which reports directly to the Committee in the context of the Bank’s overall risk management framework.
4.6.2 To review and recommend to the Board the risk management strategy.
4.6.3 To review, discuss and make recommendations regarding the selection, appointment and termination where appropriate of the Chief Risk Officer, who reports directly to the Committee.
4.6.4 To review the activities, resources and organizational structure and succession plans of Risk Management function.

D) EXECUTIVE COMMITTEE

1. INTRODUCTION

It is a committee of the BBK Board of Directors. The Committee serves as a link between the Bank’s Management and the Board of Directors to facilitate the operations of the Bank. The Committee meets more frequently than other Board Committees and has approving and reviewing authority for the Bank’s credit, investment and matters as delegated by the Board.

The Committee takes necessary decisions regarding matters under its authority and/or raises recommendations to the Board of Directors for approval/ratification as per the, powers and responsibilities assigned to it by the Board of Directors.

2. PURPOSE

The objective for the formation of the Executive Committee is to facilitate the business/operations of the Bank through studying the various matters raised to it or the Board by the Management. The Board has delegated to the Committee suitable authorities/powers in order to perform its entrusted duties and tasks, and overseeing of Bank’s budget as deemed necessary in order to ensure Bank’s optimal management and for providing the support and flexibility necessary to enable Management to perform their assigned duties in an effective manner.

On an exceptional basis, the Committee will convene at the summons of its members or at the request of Management to discuss matters of urgency in order to avoid any delay to the business interests of the Bank. The number of members present for such meetings should be more than half of the members of the Committee. The convening of such meeting shall be done by the Group Chief Executive (to be coordinated by the Head of Group Corporate Secretariat) or, in his absence his delegate, and the present Committee members.

3. TERMS OF REFERENCE:

3.1 DUTIES AND RESPONSIBILITIES OF THE COMMITTEE:
The Committee shall perform the following duties/responsibilities:

3.1.2 Planning:
Review and preparation of short-term, medium-term and long-term plans; and policies to fulfill the Bank’s goals/objectives, as per the directions of the Board. The Committee also shall /review business plans to be submitted to the Board. The Committee shall periodically review the Bank’s achievements and recommend to Board appropriately.
3.1.3 Annual estimated budgets
Review the Bank’s budget submitted by the Management in the fourth quarter of every year and modify as deemed appropriate/necessary. This shall be documented in the minutes and submitted to the Board of Directors for ratification/endorsement.
3.1.4 Approve, Decrease or Cancellation/Write-Off of Credit Facilities and Debts/Loans *

i. Credit Facilities
Take required decisions in regard to Management’s recommendations regarding loan applications and credit facilities, whether monetary or non-monetary, which fall within the authorities granted to the Committee by the Board in this respect. Assess and review loans portfolio periodically to ensure compliance with credit policy. Big ticket transactions cannot be approved by circulation and a meeting for the Committee shall be held for discussing the same.

ii. Decrease or Cancellation/Write-Off of Loans
Take decisions in respect to Management’s recommendations regarding the decrease or cancellation/write-off of non-performing loans, which fall within the authorities granted to the Committee by the Board in this respect.

3.1.5 Exceptions Approval:
Reviewing exceptions if any presented for information and approval in terms of the risk policy guidelines.

3.1.6 Review of Policies:
All other Policies which do not come under purview of any other Committees would be reviewed by this Committee before submission to Board.

3.1.7 Authority over Consultancy and Capital Fees/Expenditures
Approve consultancy and capital expenditures/fees recommended by the Management as per the authorities granted to the Committee from the Board in this respect.

3.1.8 Authority for Approval of Direct Investments
Study the various recommendations submitted by Management regarding participation in or performing direct investments for the Bank, as per the authorities granted to the Committee from the Board in this respect.

3.1.9 Grants and Donations
Take decisions regarding recommendations of Management in respect to the distributions of grants/donations as per the allocations decided at the AGM and the delegation of the Board. Ensure the distribution is done in an optimal manner that is in line with the Bank’s policies, priorities and social responsibility.

3.1.10 Any other tasks as assigned to the Committee by the Board of Directors and /or referred by other Committees or the Management.

E) Independent Directors Committee

1. INTRODUCTION
It is a committee of the BBK Board of Directors. The meeting of independent Board members in the absence of other Board members is recommended by the Kingdom of Bahrain’s Corporate Governance Code, the Central Bank of Bahrain (CBB) and international best corporate governance practice.

2. PURPOSE & DEFINITIONS:

2.1 Purpose: The objective for the formation of the Independent Directors Committee is to facilitate the regular review, debate and discussion of all actions and decisions of the Board to ensure that the rights and interests of the minority owners of the Bank are given due importance and protection in accordance with the prevailing laws, regulations and best market practice and raise any issues that prejudice these rights to the attention of the Board of Directors.

2.2 Independent Director:
‘Independent Director’ means a non-executive Director of the Bank who, or whose family shareholders either separately or together with him or each other, does not have any material pecuniary relationships or transactions with the Bank (not counting Director’s remuneration for this purpose) and in particular who, during the one year preceding the time in question met all the following conditions:

i. Was not an employee of the Group;
ii. Did not:
a) Make to, or receive from, the Bank payments of more than BD31,000 or equivalent (not counting Director’s remuneration);
b) Own more than a 10% share or other ownership interest, directly or indirectly, in an entity that made to or received from the bank payments of more than such amount;
c) Act as a general partner, manager, Director or officer of a partnership or company that made to or received from the Bank payments of more than such amount;
d) Have any significant contractual or business relationship with the Bank which could be seen to materially interfere with the person’s capacity to act in an independent manner,

iii. Did not own directly or indirectly (including for this purpose ownership by any family member or related person) 5% or more of the shares of any type or class of the Bank;
iv. Was not engaged directly or indirectly as an auditor or professional advisor for the Bank, and
v. Was not an associate of a Director or a member of senior management of the Group.
vi. For purposes of this definition, the ‘payments’ referred to in paragraph (b)(i), (b)(ii) and (b)(iii) do not include monies received from dividends, deposits, investments and credit facilities arising from the Bank’s normal business activities, but instead ordinarily refer to monies received (and/or payable during the period in question) for services rendered to the Bank by the Director or company concerned, or paid (or payable) by the concerned Director or company to the Bank for services provided by the Bank.

vii. Dividends, deposits, investment accounts and credit facilities are to be considered under item (b)(iv) of this definition.
viii. For the purpose of the definition of “independent Director”:
ix. Where the term “family” or “family member or related persons” is used reference is made to: spouse, father, mother, son(s) or daughter(s); and

x. Where the term “associate” is used reference is made to:
a. Spouse, father, mother, son(s) or daughter(s); or
b. A person who is an employee or partner of the Director or of the firm represented or owned by the Director.

xi. Further to the above, Board approval on independence of a Director must be obtained on annual basis.
xii. Furthermore, any amendment to regulatory requirements concerning the above will be applicable even if not specifically mentioned in these terms and for any breach, the CBB’s approval is to be obtained.
xiii. In addition to the above mentioned CBB’s definition all nominated Directors are considered non-independent.

3. SCOPE:

3.1 The role of the Committee is to provide independent analysis of issues raised to the Board and raise recommendations to the Board if required. This will include determining whether actions or decisions taken by the Board or its other Committee have any material of negative impact to the interests and rights of the minority owners of the Bank.

3.2 The Committee has authority to examine any matters within its responsibilities and to obtain such information as it may require from any Director, member of the Management or employee of the Group. The Committee’s scope will involve related issues of the entire BBK Group and its authority extends to all relevant matters relating to the Group.

3.3 The Committee will review its terms of reference at least every three years or as and when required.

4. TERMS OF REFERENCE:

4.1 DUTIES AND RESPONSIBILITIES OF THE COMMITTEE:

4.1.1 The Committee shall exercise its duties and responsibilities as per its scope mentioned under 3. above.
4.1.2 The Committee will discuss issues of interest to minority/small shareholders.
4.1.3 The Committee shall be responsible to discuss major issues of conflict of interest of its institutional shareholders/Board members or any other related parties.
4.1.4 The Committee shall bring to the attention of the Board such issues mentioned in 4.1.1, 4.1.2 & 4.1.3 and make suitable recommendations for the consideration of the Board.

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