Board Charter

1.0 OVERVIEW:

1.1 The purpose of the Board Charter is to outline the principal role of the Board of Directors (Board), the demarcation of the roles, functions, responsibilities and powers of the Board, various Board Committees of the Bank and matters reserved for final decision-making or pre-approval by the Board; and the policies and practices of the Board in respect of matters such as conflicts of interest and convening of Board meetings. Bank, the Bank or BBK shall mean Bank of Bahrain and Kuwait. Board or the Board shall mean the Board of Directors. GCE shall mean Group Chief Executive. Senior Management shall mean 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 Chief Executive or the Board Committees.

1.2 This charter is superseded by the articles of association of the Bank for matters not covered in the charter or for matters conflicting with the provisions of the articles of association. It is developed bearing in mind all prevailing relevant laws, rules and regulations of the Kingdom of Bahrain including the Commercial Companies Law No. 21 for the year 2001 and its subsequent amendments, the CBB Law and Rulebook particularly relating to Corporate Governance and Bahrain Bourse Company exchange rules and any other statutory rules or regulations.

1.3 This Charter further defines the specific responsibilities of the Board of Directors, and clarify both Board and Management accountability for the benefit of the Bank and its stakeholders.

2.0 ROLE OF THE BOARD:

2.1 The principal role of the Board is to oversee the implementation of the Bank’s strategic initiatives and its functioning within the agreed framework, in accordance with relevant statutory and regulatory structures. The Board ensures the adequacy of financial and operational systems and internal control, as well as the implementation of corporate ethics and the code of conduct. More specifically, the Board shall:

2.1.1 Set the “tone at the top” and play a leading role in establishing the Bank’s corporate culture and values, and oversee management’s role in fostering and maintaining a sound corporate and risk culture.

2.1.2 Ensure that no individual or group of directors dominates the Board’s decision-making and no individual or group has unfettered powers of decision.

2.1.3 The Board has delegated responsibility for overall management of the Bank to the Group Chief Executive.

2.1.4 The Board reserves a formal schedule of matters for its decision to ensure that the direction, management and control of the Bank rests with the Board at all times. This includes strategic issues and planning, performance reviews, material acquisition and disposal of assets, capital expenditure, authority levels, appointment of auditors and review of the financial statements, financing and borrowing activities including annual operating plan and budget, ensuring oversight over regulatory compliance & AML and reviewing the adequacy and integrity of internal controls.

2.1.5 Approve and oversee the development of the Bank’s strategy, business plans and budget, and monitor their implementation.

2.1.6 Actively engage in the affairs of the Bank, keep up with material changes in the Bank’s business and the external environment and act in a timely manner to protect the long-term interests of the Bank.

2.1.7 Approve, and oversee the implementation of, the Bank’s governance framework, risk management framework and all policies, and review the relevant parts of these as well as review key controls in case a new business activity is considered, or in case of material changes to the Bank’s size, complexity, business strategy, markets or regulatory requirements, or the occurrence of a major failure of controls.

2.1.8 Establish, along with senior management and the chief risk officer, the Bank’s risk appetite, considering the Bank’s strategy, competitive and regulatory landscape, the Bank’s long-term interests, risk exposure and ability to manage risk effectively, and oversee the Bank’s adherence to the risk appetite statement, risk policy and risk limits.

2.1.9 Ensure that:

i. Adequate systems, controls, processes and procedures are implemented by senior management in line with the Board approved policies;
ii. The Bank has adequate processes to ensure full compliance with the requirements of the CBB Law, other relevant laws and the pertinent rulebooks;
iii. The Bank has a robust finance function responsible for accounting and financial data;
iv. The Risk Management, Compliance & AML and Internal Audit functions are properly positioned, staffed and resourced and carry out their responsibilities independently, objectively and effectively; and
v. Senior management maintains an effective and transparent relationship with the CBB.

2.1.10 Approve the annual and interim financial statements.

2.1.11 Approve the selection and oversee the performance of the GCE, Chief Financial Officer and heads of the Risk Management, Compliance & AML and Internal Audit functions.

2.1.12 Actively oversee, with the assistance and advise of the Nomination, Remuneration and Governance Committee, the remuneration system’s design and operation for approved persons and material risk-takers and monitor and review executive compensation and assess whether it is aligned with the Bank’s remuneration policy, risk culture and risk appetite.

2.1.13 Consider the legitimate interests of depositors, shareholders and other relevant stakeholders in their decision-making process.

2.1.14 The Board may, where appropriate, delegate some of its functions, but not its responsibilities, to the Board committees.

2.1.15 The Board is responsible to decide and circulate the agenda for the Annual General Meetings or any other meetings of the shareholders.

2.1.16 The Board must ensure equitable treatment to the minority shareholders.

Oversight of Senior Management:

2.1.17 The Board shall exercise proper oversight of senior management against formal performance and remuneration standards consistent with the long-term strategic objectives and the financial soundness of the Bank. In doing so, the Board must:

(a) Meet regularly with senior management; this could be in regular Board or Board Committee meeting. Other means of meeting with the Management is subject to clause 2.3.4 Below.
(b) Subject senior management to annual performance assessment and document such assessments;
(c) Ensure that approved persons’ collective knowledge and expertise remain appropriate given the Bank’s nature of business and risk profile;
(d) Ensure that senior management’s actions are in full compliance with applicable laws and regulations and consistent with the strategy, business plan and policies approved by the Board, including risk appetite;
(e)Question, challenge and critically review the explanations and information provided by senior management; and
(f) Ensure that appropriate succession plans are in place for all approved persons within senior management (provided that such plans are subject to review in case of any changes to approved persons within senior management).

Board Composition.

2.1.18 The Board shall comprise of individuals with a balance of skills, diversity and expertise, who individually and collectively possess the necessary qualifications commensurate with the size, complexity and risk profile of the Bank. The Board must have a sufficient number of independent directors. At least one-third of the Board must be independent.

2.1.19 A controller or a group of controllers acting in concert, must recognise their specific responsibility to the minority shareholders as Board members have responsibilities to the Bank’s overall interests, regardless of who appoints them.

2.1.20 At least half of the Bank’s Board should be non-executive directors and at least three of those persons should be independent directors.

2.1.21 The members of the Board must exercise their fiduciary and other duties of care, candor and loyalty to the Bank in accordance with local laws and regulations.

Whistle blowing:

2.1.22 The Board shall:

(a) Have oversight of the whistleblowing policy mechanism and ensure that senior management addresses legitimate issues that are raised;
(b) Take responsibility for ensuring that staff who raise concerns are protected from detrimental treatment or reprisals, and that their rights are not undermined;
(c) Approve and oversee how and by whom legitimate material concerns shall be investigated and addressed such as by an objective and independent internal or external body, senior management and/or the Board itself; and
(d) Ensure that, after verifying the validity of the allegations, the person responsible for any misconduct is held accountable and is subjected to an appropriate disciplinary measure.

Employees must be encouraged and be able to communicate, confidentially and without the risk of reprisal, legitimate concerns about illegal, unethical or questionable practices. This must be facilitated through a well communicated and Board approved whistleblowing policy and adequate procedures and processes, consistent with applicable laws. This includes the escalation of material concerns to the CBB.

Conflict of Interest:

2.1.23 The Board shall establish a conflict of interest policy on identifying and managing potential conflicts of interest related to all approved persons.

Principal Responsibilities of the Chairman:

2.1.24 The Chairman is responsible for the overall leadership and efficient functioning of the Board of Directors. The Chairman of the Board shall have the following duties:

• Maintain a role in recommending the skills and experience that the Board should contain and exhibit , for its effective operation;
• Encourage active engagement and participation by all members of the Board;
• Ensure that new Directors participate in a full, formal and tailored induction program;
• Identify the development needs of the Board as a whole to enhance its overall effectiveness as a team;
• Promote the highest standards of corporate governance;
• Ensure the long-term sustainability of the Bank
• Ensure the continual improvement in quality and caliber of the Executive Management;
• Establish a close relationship of trust with the Group Chief Executive and the Executive Management, provide support and advice while respecting their executive responsibility;
• Meet regularly with the Group Chief Executive to discuss issues of importance and to ensure the effective alignment of goals of Executive Management with that of the Board;
• Provide coherent leadership to the Bank including, in conjunction with the Group Chief Executive, representing BBK with customers, suppliers, governments, financial institutions, the media, the community and the public;
• Set the Board’s agenda;
• Ensure that Directors receive accurate, timely and clear information to enable the Board to take sound decisions, monitor effectively and provide advise to promote the success of BBK;
• Ensure clear structure for the effective running of the Board Committees.

The Chairman of the Board of the Bank shall:

(a) Not be an executive Director;
(b) Not be the same person as the GCE. This applies also to the deputy chairperson;
(c) Commit sufficient time to perform their role effectively;
(d) Play a critical role in promoting mutual trust, efficient functioning of the Board, open discussion, constructive dissent from decisions and constructive support for decisions after they have been made;
(e) Ensure that all Directors receive an agenda, minutes of prior meetings and adequate background information on each agenda item in writing well before each Board meeting;
(f) Encourage and promote critical and objective discussion and ensure that dissenting views can be freely expressed, discussed and recorded in the minutes of the Board meeting; and
(g) Ensure that Board decisions are taken on sound and well-informed bases. The chairperson of the Bank should be an independent Board member.

Role of Directors:

2.1.25 Each Director shall:

(a) Understand the Board’s role and responsibilities pursuant to the CBB Rulebook, the Commercial Companies Law and any other laws or regulations that may govern their responsibilities from time to time;
(b) Consider themselves as representing all shareholders and must act accordingly; and
(c) Ensure that they receive adequate and timely information before each meeting and must study it carefully.

Corporate Culture and Values

2.1.26 In order to promote a sound corporate culture, the Board must:

(a) Approve an appropriate code of conduct/ ethics that must outline the acceptable practices that all Board members, senior management and other staff must follow in performing their duties, and the unacceptable practices/ conduct that must be avoided;
(b) Set and adhere to corporate values that create expectations that the business must be conducted in a legal, professional and ethical manner, and oversee the adherence to such values by Board members, senior management and other employees;
(c) Promote risk awareness within a strong risk culture, convey the Board’s expectation that it does not support risk-taking beyond the risk appetite and risk limits set by the Board, and that all employees are responsible for ensuring that the Bank operates within the established risk appetite and risk limits;
(d) Ensure that the corporate values, professional standards and codes of conduct it sets, together with supporting policies, are adequately communicated throughout the Bank; and
(e) Ensure that all Directors, senior management and other staff are aware that appropriate disciplinary or other actions will follow unacceptable behavior, practices and transgressions.

2.2 Authority:

2.2.1 The Board of Directors is the ultimate decision making body of the Bank except for matters reserved for the shareholders of the Bank as delegated by the shareholders in the Bank’s article of association.

2.2.2 Consistent with the Board’s power to delegate to the Management the day-to-day operation of the Bank’s business, the Board shall exercise judgment in establishing and revising the delegation of authority for Board Committees and Management. This delegation could be for authorization of expenditures, approval of credit facilities and for other corporate actions. Such delegation may be approved and expressed under various policies of the Bank. The thresholds for the identified authorities will depend upon the operating requirements of the Bank.

2.2.3 The issues of major capital expenditure, divestitures, mergers and acquisitions, certain strategic investments would be within Board’s authority.

2.2.4 The recommendations of the Committees will be referred to the Board. In the event that the Board is unable to approve a decision of the Committee due to lack of material information or otherwise, the matter will be referred back to the Committee for further consideration.

2.2.5 The Board has full authority to seek any information it requires from the Management or any employee of the Bank at any time.

2.2.6 The Board reports to and is accountable to the shareholders of the Bank.

2.3 Board Appointment and Remuneration:

2.3.1 Board Member Selection

The Board must have a clear and rigorous process for identifying, assessing and selecting Board candidates. The Board, and not management, must nominate the candidates for shareholders’ approval.

Nominated directors of the Bank must possess the requisite experience and competencies specified in Module TC (Training and Competency).

A GCE who has resigned or retired, may serve as a Board member of the same bank but not as an independent director. A cooling period of one year can be considered.

Each proposal by the Board to the shareholders for election or re-election of a director must be accompanied by a recommendation from NRG Committee, a recommendation from the Board, a summary of the advice of the Nomination Committee and the following specific information:

(a) The term to be served, which may not exceed three years;
(b) Biographical details and professional qualifications;
(c) In the case of an independent director, a statement that the Board has determined that the applicable rules and criteria for independent director have been met;
(d) Any other directorships held;
(e) Particulars of other positions which involve significant time commitments; and
(f) Details of relationships (if any) between:
i. The candidate and the Bank, and
ii. The candidate and other approved persons of the Bank.

Newly appointed non-executive directors must be made aware of their duties before their nomination, particularly as to the time commitment required.

Where the number of candidates exceeds the number of available seats, the notice of the meeting should explain the voting method by which the successful candidates will be selected and the method to be used for counting of votes; and
The notice of the meeting should present a factual and objective view of the candidates so that shareholders may make an informed decision on any appointment to the Board.

The Bank will at all times comply with the regularity time lines for receiving names and other regularity requirements of candidates and submission of these to the Central Bank of Bahrain as well as announcements thereof.

2.3.2 Board Members’ Appointment and Induction

The Chairman of the Board shall confirm to shareholders when proposing re-election of a director that, following a formal performance evaluation, the person’s performance continues to be effective and they continue to demonstrate commitment to the role.

Where an independent director has served three consecutive terms on the Board, such director will lose his independence status and must not be classified as an independent director if reappointed unless an exception is obtained from the CBB.

The Bank shall have a written appointment agreement with each Director which recites the Directors’ powers, duties and responsibilities, accountability, term, the time commitment envisaged, the committee assignment (if any), remuneration, expense reimbursement entitlement and their access to independent legal or other professional advice at the expense of the bank when needed to discharge their responsibilities as Directors.

The Board shall ensure that:

(a) Sufficient time, budget and other resources are allocated annually for the Board members’ induction programmes;
(b) Each new director receives a formal and tailored induction and has access to ongoing training on relevant issues which may involve internal or external resources to ensure their effective contribution to the Board from the beginning of their term; and
(c) The induction programmes include meetings with senior management, visits to the Bank’s facilities, presentations regarding strategic plans, significant financial, accounting and risk management issues, compliance and AML programs, and meetings with internal and external auditors and legal counsel.

Board members must understand their oversight and corporate governance role and be able to exercise sound, objective judgment about the affairs of the Bank.

All continuing directors must be invited to attend orientation meetings and all directors must continually educate themselves as to the Bank’s business and corporate governance.

2.3.3 Organisation and Assessment of the Board

The Board shall:

(a) Adopt a formal Board charter specifying matters which are reserved for it, which must include, but are not limited to, the specific requirements and responsibilities of directors stipulated in this Module and the Commercial Companies Law;
(b) Structure itself in terms of leadership, size and the use of committees so as to effectively carry out its oversight role and other responsibilities. This includes ensuring that the Board has the time and means to cover all necessary subjects in sufficient depth and have a robust discussion of key issues;
(c) Maintain and periodically update its governance structure, organisational rules, by-laws and other similar documents setting out its organisation, rights, responsibilities and key activities; and
(d) Carry out annual evaluation and assessments – alone or with the assistance of external experts – of the Board, its committees and individual Board members. This shall include:

i. Assessing how the Board operates in terms of the requirements of the CBB Rulebook and the Commercial Companies Law;
ii.Evaluating the performance of each committee considering its specific purposes and responsibilities, which shall include review of the self-evaluations undertaken by each committee;
iii.Reviewing each Director’s work, their attendance at Board and committee meetings, and their independence and constructive involvement in discussions and decision making;
iv.Reviewing, based on the NRG Committee’s advice and assessment, the Board’s current structure, size, composition as well as committees’ structures and composition in order to maintain an appropriate balance of skills, diversity and experience and for the purpose of planned and progressive refreshing of the Board; and
v. Recommendations for new directors to replace long-standing members or those members whose contribution to the Board or its committees is not adequate.

Where the Board has serious reservations about the performance or integrity of a Board member, or he ceases to be qualified, the Board must take appropriate action and inform the CBB accordingly.

The Board shall report to the shareholders, at each annual shareholder meeting, that evaluations have been done and report its findings.

Non-executive Directors shall be fully independent of management and must constructively scrutinise and challenge management and executive directors.

The Board shall maintain appropriate records of meeting minutes, including key points of discussions held, recommendations made, decisions taken and dissenting opinions (if any).

Directors shall have free access to the Bank’s management beyond that provided in Board meetings. Such access should be through the chairperson of the Audit Committee or the GCE. The Board will make this policy known to management to alleviate any management concerns about a director’s authority in this regard.

2.4 The form and amount of Director compensation is determined by the Board based on the Directors Remuneration and Compensation Guidelines Policy.

2.5 Board Composition and Skills:

2.5.1 The Board composition will be guided by the Bank’s Memorandum of Association and Articles of Association and shall presently comprise of 10 members.

2.5.2 The definitions of ‘executive directors’, ‘non-executive directors’ and ‘independent directors’, shall carry the same meanings as that defined (from time to time) by the Central Bank of Bahrain. The present definition as per the Rulebook is reproduced in Appendix 1.

2.5.3 The Board of the Bank recognises the need for composition of the Board to reflect fair mix of independence, skills and expertise; and facilitate objectivity in decision making. High levels of professional skills and appropriate personal qualities are pre-requisite for directorships.

2.5.4 Candidates for the Board whether appointed by shareholders or submitted for elections shall be considered by the Nomination, Remuneration and Governance Committee, and recommended to the Board for onward recommendation to the shareholders for appointment, at their next general meeting, in accordance with the qualifications acceptable by the Board taking into consideration the overall composition and diversity of the Board and areas of expertise that new Board members might be able to offer.

2.5.5 Appointment of Directors is subject to prior CBB approval.

2.5.6 The Board shall consist of only non-executive directors. The Board will have adequate number of “Independent” Directors in keeping with regulatory requirements.

2.5.7 There will be separation and clear division in the roles and responsibilities of the Chairman and the Group Chief Executive. The Chairman shall not be the Group Chief Executive in any case. The Chairman of the Board shall be an “Independent” Director.

2.6 Board Memberships:

2.6.1 Board candidates must:

(a) Possess the knowledge, skills, experience and, particularly in the case of non-executive directors, independence of mind necessary to discharge their responsibilities on the Board in light of the Bank’s business and risk profile;

(b) Have a record of integrity and good repute;
(c) Have sufficient time to fully carry out their responsibilities;
(d) Not have any conflicts of interest that may impede their ability to perform their duties independently and objectively and subject them to undue influence from:

i. Other approved persons, controllers or other connected parties;
ii. Past or present positions held; or
iii. Personal, professional or other economic relationships with other approved persons (or with other entities within the group); and

(e) Not have more than two directorships of Bahraini banks, bearing in mind that two directorships of Banks within the same license category (e.g. ‘Retail Bank’) are not permitted.

Board candidates should not hold more than three directorships in public companies in Bahrain. In case such directorships exist, there must be no conflict of interest, and the Board shall not propose the election or re-election of any director where such conflict of interest exists.

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

3.0 PRINCIPAL RESPONSIBILITIES OF THE BOARD,

Governance

• Approve the Bank’s corporate governance framework and ensure it conforms to best practices and regulatory and statutory requirements.
• Approve the organisational/management structure and responsibilities.
• Provide effective oversight over Management’s activities.

Strategic

• Approve the vision and strategy proposed by Management.
• Approve Management’s long term corporate strategy and performance objectives and ensure appropriate resources are available.
• Review the bank’s business plans and the inherent level of risk in these plans.
• Assess the adequacy of capital to support the business risks of the bank.
• Appropriately disseminate strategic plan of Bank.

Performance Measurement Systems

• Approve performance objectives and performance measurement systems.
• Review the performance of Board, Board Committees and Executive Management.

Business Decisions

• Approve and monitor the progress of material financial restructurings, including mergers, acquisitions, divestitures and acquisitions, annual budgets, dividends etc. affecting the balance sheet.
• Approve financings and changes in authorised capital.
• Approve entering into, or withdrawing from, businesses or service lines.

Human Resources

• Define the goals and objectives of the CE and Executive Management and review performance at least annually.
• Ensure that succession programs and plans are in place.

Financial Performance

• Approve the annual budget and targets, annual financials and interim results and monitor financial performance.
• Ensure financial results are reported fairly and in accordance with IFRS.
• Recommend to shareholders the Annual Report / financial statements released by Management and ensure that any reports issued by the Bank, including the financial statements, present a ‘true and fair’ view of its position and performance.

Compliance and AML

• Ensure the Bank operates at all times within applicable laws and regulations, including an effective Code of Conduct and Anti Money Laundering and Countering Financing of Terrorism policies.
• Ensure that the Bank’s policies and procedures manuals comply with all government and regulatory requirements covering all operations.

Communications

• The Board should ensure that there is an agreed communications strategy and procedure including agreement about appropriate channels and spokespersons.
• Develop and implement an investor relations programme or shareholder communications process for the Bank.

Risks

• Approve the risk parameters / policies and the Bank’s risk appetite.
• Ensure principal risks are identified and Management has implemented appropriate systems to manage these risks.
• Ensure that the systems and controls framework, including the Board structure and organizational structure of the Bank is appropriate for the Bank’s business and associated risks.

Internal Controls

• Assess the adequacy of the systems of risk management, internal control, control environment and legal compliance.

Delegation of Authority

• Approve the delegation of responsibilities and authorities to Board Committees and to Senior Management; and reserve certain powers for the Board.

External Auditors

• Recommend the appointment of the external auditors (and the remuneration payable); to the shareholders and seek their no objection.

Reporting to Shareholders

• Report annually to the Shareholders on the Board’s stewardship for the preceding year.

Litigation

• Monitor litigation that may have a material impact on the Bank.

Appropriation of Profit

• Recommend to shareholders on appropriation of profit, payment of dividend, allocation to reserve account, donations and remuneration to Directors.

Succession Planning

• Determination of a succession plan for CE and Executive Management.

Listing Requirements

• Oversee the ongoing obligations in respect of the listing requirements, including but not limited to issues relating to disclosure, dissemination of price sensitive information and other communication, and the prevention of market abuse and insider trading;

4.0 BOARD MEETINGS, RIGHTS OF DIRECTORS:

4.1 Board members Tenure:

Members of the Board of Directors shall be elected/appointed for a three year renewable term subject to CBB approval. but shall be eligible for re-election/reappointment, if recommended by the Board, for a further three-year period.

4.2 Procedure for resignation of Directors:

If a Director needs to resign from the Board he/she should provide a written statement to the Chairman, for circulation to the board and after acknowledgment by the Board.

The Bank must immediately notify the CBB when a Director, for whatever reason, ceases to hold his position. The notification must include the reasons for the action taken.

4.3 Filling of Vacancies on the Board of Directors:

If the position of one of the Board members becomes vacant, he/she shall be replaced by the member following him/her in the number of votes in the latest elections of the Board. The new member shall complete the unexpired term of his/her predecessor. If the vacant offices are equal to one-fourth of the original offices, the Board of Directors shall invite the ordinary general assembly to convene within two months from the date of the last office becoming vacant to fill them. If the vacant offices exceed more than half the number of the Board members, the Board shall be deemed dissolved and new elections shall be called for to elect a new Board of Directors for the company.

4.4 Board Attendance:

4.4.1 All Board members must attend at least 75% of all Board meetings within a calendar year. Attendance by proxy is prohibited.

4.4.2 Board membership may be terminated if Board members are unable to attend three consecutive Board meetings (without lawful excuse notified in writing to the Board).

4.4.3 If a Board member has not attended at least 75% of Board meetings in any given financial year, the Bank must notify the CBB, within one month from its financial year-end, indicating which member has failed to satisfy this requirement, their level of attendance and the reason for non-attendance.

4.4.4 The absence of Board members at Board and committee meetings must be noted in the relevant meeting minutes. In addition, Board attendance percentage must be reported during any general assembly meeting when Board members stand for re-election.

4.4.5 Voting and attendance proxies by Directors for Board and committee meetings are prohibited at all times.

4.4.6 The Board members can attend Board meetings via telephone conference or video conference subject to the following:

Attendance by electronic or video conference is considered an attendance of meeting subject to:

a) ensuring the identity of the attendee
b) 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.
c) Any other directions issues by the MOIC from time to time in this regard.

4.5 Appointment of Head of Group Corporate Secretariat:

The appointment and removal of the Head of Group Corporate Secretariat is subject to the approval of the Board. The Board recognises the fact that the Head of Group Corporate Secretariat should be suitably qualified and capable of carrying out the duties required of the post.

4.6 Meetings and Quorum:

4.6.1 Board meetings will be conducted at least on a quarterly basis (minimum four) and Board Committees will meet as often as required. At least half the Board meetings in any twelve-month period must be held in the Kingdom of Bahrain.

4.6.2 The Head of Group Corporate Secretariat shall prepare and distribute a timetable for the meetings.

4.6.3 Meetings may also be held through video/tele-conferencing facility as per the rules set out in clause 4.4.6 above.

4.6.4 At least seven six Directors (including the Chairman or Deputy Chairman) are required to attend the Board meetings in person including one independent Director in order to ensure a quorum. Should one or more members be required to leave the meeting room at the time of discussing a matter due to conflict of interest, this would not affect the quorum. Attendance by proxy is prohibited. Quorum must be maintained throughout the meeting.

For the sake of this document in person shall also mean attending via telephone or video conferencing.

4.6.5 The Chairman will chair all sessions of the Board. In absence of the Chairman at a meeting, the Deputy Chairman will chair the meeting.

4.6.6 The Group Chief Executive or his delegate will be an invitee in all Board and its committee meetings.

4.6.7 Any member of the Senior Management or other Management members may be invited to attend for particular items within their responsibility. The Board may also invite external parties such as the auditors, solicitors and consultants as and when the need arises. The GCE or any other invitee from the Management shall leave the meeting room if requested so by the Chairman.

4.6.8 To facilitate free and open communication among Independent Directors, each Board meeting can be preceded or followed with a formal meeting at which only Independent Directors are present, except as may otherwise be determined by the independent Directors themselves. The said meeting will take place at least once a year.

4.6.9 Bank has an automated system of communication with Directors and maintenance of Board records. This facilitates the Board to take timely and studied decisions and adopting resolutions, either during the meetings or by circulation.

4.7 Voting Rights:

4.7.1 A duly convened meeting of the Board at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretions vested in or exercisable by the Board.

4.7.2 Any attendee who is not a member of the Board shall not vote on any matter coming before the Board for a vote.

4.7.3 All decisions of the Board will be based on a simple majority of the members present at the meeting in person. In the event of a tie, the Chairman or in his absence, the Deputy Chairman of the Board will have a casting vote.

4.7.4 The Board may adopt resolutions by correspondence, including electronic means, 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. It is the responsibility of the Head of Group Corporate Secretariat for the timely follow up in case it is needed.

4.8 Meetings and agenda:

4.8.1 The Board of Directors shall meet at the summons of its Chairman or his Deputy or if requested to do so by at least two Directors. A meeting of the Board of Directors shall be valid if attended by not less than seven six Directors in person including one independent Director.

4.8.2 The notice of a Board meeting should be given in advance of the meeting. The Chairman, Group Chief Executive and Head of Group Corporate Secretariat shall undertake the primary responsibility of preparing the Board’s agenda. The agenda should include matters specifically reserved for the Board’s decision.

4.8.3 Save in urgent cases, as a matter of best practice and to allow sufficient time for Directors to consider the information, the Group Corporate Secretary shall provide the members with an agenda and any necessary documentation as early as possible and in general, at least seven calendar days before a meeting takes place or latest by 4 calendar days before the meeting in urgent cases. Any exception should be approved by the Chairman of the Board. Where there is a need to table a report, a brief précis of findings and/or recommendations should be presented.

The report for the Board or its committees may also be uploaded to the Board of Director’s portal at any time.

4.8.4 A record of Board submissions and papers, and of materials presented to the Board, shall be maintained and held by the Head of Group Corporate Secretariat together with minutes of meetings. All such records are accessible to members.

4.8.5 Directors access to the Bank’s Management is covered under clause 2.3.4 of this charter.

4.9 Independent Professional Assistance:

The Board members are entitled to obtain independent professional advice relating to the affairs of the Bank or to their individual responsibilities as members subject to approval by the Board.

4.10 Director’s Professional Development:

4.10.1 The Board is required to be up to date with current business, industry, regulatory and legislative developments and trends that will affect the Bank’s business operations.

4.10.2 Immediately after appointment, the Bank will provide a formal induction to the new Board members.

4.10.3 Meetings will also be arranged with Senior Management, Heads of Divisions and the Bank’s auditors. This will foster a better understanding of the business environment and markets in which the Bank operates.

The induction program will also include meetings with the Chairman and, if necessary, legal counsel or Head of Group Compliance and AML officer to review the Board’s role and duties, particularly covering legal and regulatory requirements.

4.10.4 A continuing awareness program is essential and it may take many different forms, through distribution of publications, workshops, presentations at Board meetings and attendance at conferences encompassing topics on directorship, business, industry, regulatory developments. Bank will have rigorous training procedures for the continuous development and awareness of Board members, on need-based basis and as a minimum 15 hours of training shall be arranged and attended by Board members or otherwise compensated by Board members attending sessions outside the Bank or using the Bank’s E-Learning platform.

5.0 CODE OF CONDUCT, CONFLICTS OF INTEREST, INSIDER TRADING:

5.1 The members of the Board should ensure that they conduct their affairs with a high degree of integrity, taking note of applicable laws, codes and regulations.

5.2 A member of the Board must not take any benefit from any projects or investments which are managed by the Bank or promoted to its customers or potential customers except for Board related remuneration in the performance of his/her fiduciary duties to the investors of the project/investment (i.e. Director is appointed as member of the Board of special purpose vehicle or other operating companies set up by the Bank for projects/investments). The Director must not receive any commission, fees, shares/consideration in kind or other remuneration of incentives in respect of the performance of the project/investment. Any Board-related remuneration received by the Director must accordingly be declared to the Board on an annual basis.

5.3 The Board has approved a Code of Conduct for Directors. The Board has also approved the Code of Ethics for Senior Management and members of staff of the Bank. In addition, the Bank has adopted a separate gifts policy to govern the receipt and acceptance of gifts by members of staff and the appropriate declaration of any gifts received. ‘A separate Whistle Blowing Policy’ covering Directors and all the staff of the bank is adopted’. The Code of Conduct binds signatories to the highest standard of professionalism and due diligence in discharging their duties. The Codes outline areas of conflict of interest, confidentiality and responsibilities of the signatories.

5.4 A Director shall declare to the Board any personal interest, whether direct or indirect (of ‘connected persons’), he may have in matters brought before the Board. This declaration shall be recorded in the minutes and the interested Director shall leave the meeting room during the debates or voting on the resolutions to be adopted in this respect and if the issue is sent by circulation the concerned Director shall not receive any information or correspondence on the issue and will not be asked to vote. For previously undeclared or unknown conflict of interest the Director concerned will immediately inform the Head of Group Corporate Secretariat of his conflict and shall not take part in the decision. .

5.5 Any decisions to enter into transactions, under which Bank’s Directors would have conflicts of interest that are material, shall be formally and unanimously approved by the full Board. Directors must inform the entire Board of (potential) conflicts of interest in their activities with, and commitments to other organizations as they arise and leave the meeting room during the time of discussing those subjects and if the issue is sent by circulation the concerned member shall not receive any information or correspondence on the issue and will not be asked to vote. For previously undeclared or unknown conflict of interest the Director concerned will immediately inform the Head of Group Corporate Secretariat of his conflict and shall not take part in the decision. This disclosure must include all material facts in the case of a contract or transaction involving the Director.

5.6 All Directors must declare in writing all of their other interests in other enterprises or activities (whether as a shareholder of above 5% of the voting capital of a company, a manager, or other form of significant participation) to the Board (or the Nomination, Remuneration and Corporate Governance Committee or Audit & Compliance Committee) on an annual basis.

5.7 The Chairman of the Board shall communicate to the Annual General Meeting, when it is convened, the result with respect to the significant transactions in accordance with article 189 of the Commercial Companies Law or amendments thereof.

5.8 The Board shall disclose to the shareholders in the Annual Report any abstention from voting as a result of a conflict of interest and will disclose to the shareholders any authorisation of a conflict of interest contract or transaction.

5.9 All Board members and members of Senior Management must declare in writing all of their and of their ‘connected persons’ holding and interests in BBK and other entities, annually in the form and manner as provided in the Insider Trading/Key Persons Procedure.

5.10 The Bank has established Insider Trading/Key Persons Procedures, consistent with the CBB and Bahrain Bourse Company guidelines, to ensure that the Insiders/Key Persons are aware of the legal and administrative requirements regarding holding and trading in the Bank’s securities, with the primary objective of preventing abuse of inside information. The responsibility for ensuring compliance with Insider Trading/Key Persons procedure is entrusted to the Audit & Compliance Committee of the Board. The procedural details and requirements are contained in the Insider Trading/Key Persons Procedure.

5.11 All Directors (individuals and institutions who nominate Directors along with their ‘connected persons’) are considered as ‘Insiders’ or ‘Key Persons’. The definitions of ‘Insider’ and ‘Key Person’ are included in Appendix 1.

5.12 Bank protects members of the Board by insuring them against personal liability as per the Directors’ Compensation Policy through a Directors and Officers Liability Insurance cover.

6.0 BOARD RESOLUTIONS AND MINUTES:

6.1 The Head of Group Corporate Secretariat shall minute the proceedings and resolutions of all Board and its Committee meetings. These Resolutions will be promptly no later than 2 business days communicated to concerned executives of the Bank.

6.2 The minutes of the Board meetings shall be approved by the Board at the end of each meeting. The final minutes shall be circulated to the members of the Committee not later than 5 working days using the online portal for obtaining Committee members’ electronic signatures.

6.3 A Director who objects to any resolution adopted by the Board shall have his objection recorded in the minutes and if not present or take part of in discussion of an item in the meeting shall request to record his objection if any at the time of ratifying the resolution in the subsequent Board meeting.

6.4 All resolutions by circulation should be tabled at the subsequent Board meeting for ratification.

7.0 BOARD, DIRECTORS AND COMMITTEE EVALUATION:

The Board shall perform a self-evaluation on an annual basis and its own effectiveness and composition; and initiate suitable steps for any amendments. The Board shall review its Charter at the start of each new term of the Board or whenever needed.

7.2 The evaluation process shall also cover the review of the performance of each individual Board member, his attendance and his constructive involvement in discussions and decision making.

7.3 The Board will also review self-evaluations of the Board Committees and consider appropriately any recommendations arising out of such evaluation.

7.4 While the evaluation is a responsibility of the entire Board, it will be organized and assisted by the Nomination, Remuneration and Corporate Governance Committee.

7.5 The Board will report to the shareholders, at each annual shareholder meeting, that evaluations have been done and report its findings.

7.6 The Chairman or the Head of Group Corporate Secretariat shall confirm to shareholders when proposing re-election of a Director that, following a formal performance evaluation, the person’s performance continues to be effective and continues to demonstrate commitment to the role.

8.0 COMMUNICATION WITH SHAREHOLDERS

8.1 The Bank has an open policy on communication with its shareholders. The Bank has an approved ‘Disclosure Policy’ which is consistent with Basel III requirements.

8.2 The Board will ensure that the Annual General Meeting (AGM) and any other general shareholders meetings are conducted in an efficient manner and serves as a crucial mechanism in active shareholder communications. Key ingredients behind this include the supply of comprehensive timely information to shareholders and the encouragement for their active participation in the AGM.

8.3 Shareholders are invited by the Chairman to attend the General Shareholders meetings. The Chairman and other Directors attend that attend will be available to answer any questions.

8.4 On annual basis, the Board shall submit report on Corporate Governance to the AGM as a separate agenda item, addressing implementation of and non-compliance with corporate governance regulatory requirements.

8.5 The Bank is at all times mindful and conscious of its regulatory and statutory obligations regarding dissemination of information to its shareholders.

8.6 A suitable section on the website provides appropriate and useful information to the shareholders.

8.7 Bank would advise the Bahrain Bourse Company issues relating to the shareholders on a timely basis and it would be posted on the Bulletin Board of the exchange.

8.8 Shareholders can complete an online form on the Bank’s website to forward any queries they may have.

8.9 Shareholders Meeting:

a. The ordinary General Meeting of the shareholders will be summoned by the Chairman of the Board of Directors at the time and place as decided by the Board of Directors subject to provisions of the law in this respect. The Ordinary General Meeting will be held at least once in every financial year within three months following the end of the financial year of the company. The Board of Directors may summon the Ordinary General Meeting at any time if requested to do so by the Auditors or a number of shareholders representing 10% of the capital of the company provided that they shall have serious cause for such request.

b. The Auditor may summon the Ordinary General Meeting as per provisions of the Law.

c. The Ministry of Industry & Commerce may summon the General Meeting to convene on the lapse of one month following the date fixed for convening such meeting without a meeting being convened, or if the number of members of the Board of Directors falls below the required quorum for holding the Board’s meetings, or at the request of a number of shareholders representing 10% of the capital of the Company provided that they shall have reasonable grounds justifying such request.

d. The Minister of Industry & Commerce may by resolution summon the General Meeting to convene whenever he deems that if there are reasons requiring such action.

9.0 SHAREHOLDERS RIGHTS

9.1 Shareholders of the Same Class:

a. All shareholders of the same type, class and series shall be treated equally and will carry the same rights.
b. All investors shall be able to obtain information about the rights attached to all types, series or classes of shares before they purchase, where applicable. Any changes in voting rights shall be subject to approval by those shareholders which are negatively affected.
c. Bank shall protect the interests of minority shareholders and ensure their equitable treatment.
d. The Bank shall encourage the attendance of shareholders at all shareholder meetings.
e. Where shareholders are unable to attend, the Bank will make provision for such shareholders to vote by proxy, subject that such proxy is revocable and provides for two-way voting item.
f. Processes and procedures for general meetings shall allow for equitable treatment of all shareholders.

9.2 Other Shareholders Rights

a. The Bank will protect all rights of shareholders in keeping with the Memorandum and Articles of Association of the Bank, Article 168 of the Commercial Companies Law No. 21 of 2001 or amendments thereof and other legal and regulatory provisions.
b. Basic shareholders rights include but are not limited to:
– Secure methods of ownership registration
– The transfer of shares
– Obtaining relevant and material information on the Bank on a timely and regular basis
– Electing and removing members of the Board
– Sharing in the profits of the Bank and receiving profit dividends decided for the shareholders
– Receiving a share of the Bank’s total property on liquidation
– Participating in the Bank’s management, whether through the general assemblies and as a member of the Board of Directors, according to the Articles of Association
– Obtaining information/details comprising the Bank’s balance sheet for the past financial year, the profit and loss account and the reports of the Board of Directors and the Auditor, in hard copy format or in soft copy as available on the website
– Filing lawsuits to invalidate any resolution issued by the general assembly or by the Board in contravention of the law, the public order or the Memorandum or the Articles of Association
– Disposing of the shares and having a priority in subscribing for new shares in accordance with the provisions of the law
– Examine the Bank’s records and obtain copies according to the conditions and procedures defined in the Articles of association, provided that the use shall not prejudice the Bank’s interests or financial position or third parties
c. Shareholders shall also have the right to participate in, and to be sufficiently informed on decisions concerning fundamental corporate changes, such as:
– Amendments to the statutes, or articles of incorporation or similar governing documents of the Bank;
– The authorization and approval of additional or new shares or securities; and
– Extraordinary transactions, including the transfer of all or substantially all assets that in effect result in the sale of the Bank.

Shareholders’ rights shall be disclosed on the Bank’s website.

10.0 EXTERNAL TRANSPARENCY:

10.1 The Bank provides information on all events that merit announcement, either on its website – www.bbkonline.com – or social media, through newspapers, stock exchanges and other channels.

10.2 The Bank’s three-year financials are posted on the website together with the last two years’ financials in Bank’s Annual Reports.

10.3 The Bank uses an electronic intranet bulletin board for communicating with its staff on general matters and sharing information of common interest and concern.

10.4 The Annual Report will contain a separate section on Corporate Governance and Disclosures, which will cover details on the number of Board meetings, information on Directors, Board Committees and other related information. The Chairman’s Report in the Bank’s Annual Report may review major events during the past financial year and the outlook for the future.

10.5 On an annual basis, the Bank will submit, as an attachment to the year-end quarterly Prudential Information Returns (PIR), a report recording the meetings during the year by the Board as per the requirement of the Central Bank of Bahrain.

10.6The remuneration paid to the Chairman and members of the Board shall be published in the Annual Report.

11.0 CONCLUSION:

11.1 This Board Charter was developed with the intention of providing an informative written reference for Board members and for others who work with the Board. The provisions in this document are consistent with the regulatory requirements under the Central Bank of Bahrain Rule Book and with best market practice. Although this document sets forth the key principles under which the Board operates; it is a statement of intention.

Accordingly, it is a working document that can change from time to time as the Board considers appropriate and as circumstances and conditions change.

11.2 Wherever necessary, CBB/Board approval should be obtained for any material exceptions.

11.3 This document is not intended to supersede the requirements under Bank’s Memorandum of Association and Articles of Association. In the case of a conflict between this document and the Memorandum of Association and Articles of Association, the provisions in the Memorandum of Association and Articles of Association will govern, unless and until the relative provisions are duly amended through appropriate corporate action.

Appendix 1

Definitions:

1. Directors:

The Directors must be identified in the annual report as executive, non-executive, and independent, as follows, as per CBB Rule Book:

a) Executive Director (or ‘Managing Director’ under the Commercial Companies Law ‘) – A person who is involved in the day-to-day management and/or is in full-time employment of the bank and/or any of its affiliates or subsidiaries or parent companies. An Executive Director may not occupy the post of ‘Chairman’;

b) Non-Executive Director – A person not involved in the day-to-day management and/or is not a full-time salaried employee of the bank and/or any of its affiliates, or subsidiaries or parent companies;

c) Independent Director –
Determination by the Board:
Under Module HC an ‘independent director’ is a director whom the board has specifically determined has no material relationship which could affect his independence of judgment, taking into account all known facts. The board should consider that, although a particular director meets the formal requirements, he may not be independent owing to specific circumstances of the person or the bank, ownership structure of the bank, or for any other reason. The board’s determination should be a good faith finding after diligent review and full discussion.

Formal Requirements:
‘Independent director’ means a 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:

(a) Was not an employee of the company;
(b) Did not:

(i) Make to, or receive from, the bank payments of more than 31,000 BD or equivalent (not counting director’s remuneration); This excludes dividends, deposits, investment accounts and credit facilities from the payments referred; reference to such payments only applies to contractual payments for services rendered and to which the BD 31,000 threshold should apply
(ii) 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;
(iii) 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;
(iv) 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. Dividends, deposits, investment accounts and credit facilities are to be considered here.

(c) 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;

(d) Was not engaged directly or indirectly as an auditor or professional advisor for the bank, and

(e) Was not an associate of a Director or a member of senior management of the bank.

The Board on annual basis shall review the independence of Directors as per the above mentioned criteria.

Any term beyond six years for a director shall be subject to particularly rigorous review from the point of ‘independence,’ and shall take into account the need for progressive refreshing of the Board. Appropriate disclosure to CBB shall be made and the appointment will be subject to CBB approval.

Note 1

A controller of a Bank is a natural or legal person who either alone, or with his associates:

(a) Holds 10% or more of the shares in the Bank, or is able to exercise (or control the exercise of) 10% or more of the voting power in the Bank; or
(b) Holds 10% or more of the shares in a parent undertaking of the Bank, or is able to exercise (or control the exercise of) 10% or more of the voting power in the parent undertaking; or
(c) Is able to exercise significant influence over the management of the Bank or the parent undertaking.

Note 2

“Associate” includes:

(a) The spouse or child of a controller;
(b) An undertaking of which a controller is a Director;
(c) A person who is an employee or partner of the controller;
(d) If the controller is a corporate entity, a Director of the controller, a subsidiary of the controller or a Director of any subsidiary undertaking of the controller.

Note 3

‘Senior Management’ as per CBB would mean ‘Senior Management’ of the Bank, which is defined in this charter.

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