Principles/ Policy for Corporate Governance

Transcription

1 Principles/ Policy for Corporate Governance March 2011 Risk management 1

2 TABLE OF CONTENTS 1. Objective Value creation Roles and responsibilities Governing bodies Control bodies Electoral bodies Management Remuneration of the Board of Directors and management Information/rating Take-overs Compliance with statutes, regulations and ethical standards... 7 Risk management 2

3 1. Objective Sparebanken Vest s principles and policy for corporate governance are intended to ensure that the bank s corporate governance is in accordance with generally accepted perceptions and standards and in compliance with laws and regulations. The principles outline the overriding requirements and are based on the Norwegian Code of Practice for Corporate Governance of 21 October and the CEBS s 2 principles for internal governance, which have been incorporated into the Financial Supervisory Authority of Norway s module for the evaluation of internal governance. Moreover, the bank s corporate governance shall ensure good cooperation between its different stakeholders, such as holders of equity certificates, lenders, customers, employees, governing bodies, management and society at large. The principles for good corporate governance thus describe how the bank is managed and controlled in order to create value for the bank and its stakeholders. The principles for corporate governance are specified in various governing documents for Sparebanken Vest s business. They include the bank s Articles of Association, strategies, rules of procedure for the Board of Directors, framework for management and control, ethical guidelines and procedures for proprietary trading. 2. Value creation Sparebanken Vest s object is defined in the bank s Articles of Association. The bank s object is to deliver financial services to the public, business and industry and the public sector in Western Norway. The business shall be run at a satisfactory profit and with acceptable risk. The bank is an independent institution with equity certificate holders who currently own approx. 18% of the core capital. Holders of equity certificates shall be ensured predictable conditions with respect to equal treatment, returns and influence on how the bank is run. The stock exchange listing of the equity certificates ensures that the bank accepts and complies with the market conditions that prevail at all times in the equity certificate market, and it means that the bank accumulates historical data that can help it to utilise the stock market as a potential source of equity. Sparebanken Vest s profit for the year is divided between equity certificate capital and primary capital in proportion to the owner fraction. Equity certificate holders share of profits will be divided between a cash dividend and the equalisation reserve. Sparebanken Vest s financial goal for its business is to achieve results that provide a satisfactory overall return in the form of dividend and an increase in value. The development of the bank s equity situation and its financial strength will be emphasised when allocating profit. At a meeting for holders of equity certificates, no one may vote for equity certificates that represent more than 15% of the total number of equity certificates issued by Sparebanken Vest. The bank has adopted guidelines for corporate social responsibility. Visjon Vest, which manages the bank s funds for the public benefit, is an important instrument for the bank in the social responsibility context. The bank endeavours to plough part of its profits back into society through donations for the public benefit and, as far as its operating profit and capital adequacy allow, it wishes to make provisions within the statutory limits. The bank s vision of being a driving force in the social and economic development of the region through sound banking operations is also reflected in the bank s ownership interests in companies/funds whose object is growth and development. Moreover, the bank participates in and organises various meetings and conferences. The intention is to contribute to the establishment of arenas where participants from the world of politics, the business community, public administration, Committee of European Banking Supervisors Risk management 3

4 education and culture can meet and discuss the future of the region and its growth and development. Sparebanken Vest carries out an annual assessment of the bank s strategic business basis, including its vision, goals and strategies. The bank s business strategy forms the basis for specifying the level of ambition for the bank s overall operations, and thereby for the market activities engaged in by the bank in order to achieve its targets for financial return, growth and development. The bank s employees are involved in this work. Information about the bank s strategic basis is published on the bank s website and in its annual report. The market is kept continuously informed about any changes through presentations to investors. 3. Roles and responsibilities In accordance with statutes and regulations and the management, control and reporting procedures adopted by the bank, there is a clear division of responsibility between the bank s governing bodies. Key bodies in this context are the Supervisory Board, the Nomination Committee, the Control Committee, the Board of Directors, the external auditor, the internal audit function and the bank s management. Regulations have been adopted for handling possible conflicts of interest and impartiality issues Governing bodies The Supervisory Board is the bank s supreme body. It has 48 members. Sixteen members are recruited from among the bank s customers and eight are appointed by municipalities/county councils, while 12 are appointed by equity certificate holders and 12 elected by and from among the bank s employees. The Supervisory Board adopts the bank s Articles of Association, elects the Board of Directors, approves the annual accounts and allocates profit. Amendments to the Articles of Association must be approved by the Financial Supervisory Authority of Norway. The Supervisory Board has power of decision as regards whether to open branches in municipalities where the bank is not already represented. The same applies to decisions on whether to close branches in municipalities where the bank only has one branch office. The Supervisory Board also allocates the funds set aside for donation purposes. The Board of Directors is elected by the Supervisory Board. It has nine members. Competence, gender, capacity and independence are important criteria for board members and the composition of the board. The majority of board members must be independent of the bank s management and main business associates. The overall competence of the Board of Directors is evaluated in relation to the bank s goals, opportunities and challenges. The Nomination Committee is informed about the main points from the evaluation. The Board of Directors of Sparebanken Vest holds 12 to 14 regular meetings every year, as well as meetings in connection with strategy work. Meetings of various board committees and theme days aimed at raising board members competence come in addition. Rules of procedure have been drawn up and adopted for the Board of Directors, with a pertaining calendar for the board s work. The Board of Directors places particular emphasis on work on the rolling long-term strategy plan. The Board of Directors has appointed three committees as part of its work: The Audit Committee is charged with ensuring that Sparebanken Vest has an independent and effective external and internal audit function, and financial and risk reporting that is in accordance with statutes and regulations. The Board s Credit Committee, which deals with credit matters under the authorisation of the Board of Directors. Risk management 4

5 The Compensation Committee, which is tasked with ensuring that the bank practises a competitive, but not leading, pay policy that is seen as motivating by the bank s management in relation to implementing the adopted strategy and achieving the goals set. The Board of Directors has adopted job instructions for the Managing Director, and an organisational structure has been established with a view to ensuring value creation in line with the bank s goals. Sparebanken Vest has a customer-oriented organisation that is divided into business areas, support functions and staff units. Instructions have been adopted for the management s work on ensuring efficient and effective operations. The Board of Directors appoints and dismisses the Managing Director. Assessing the work of the Managing Director, Deputy Managing Director and the internal audit function is part of the Board of Directors annual plan. The Board of Directors has adopted ethical guidelines and procedures for trading, as well as a policy that ensures that the market receives timely information about the bank s growth and development. The Board of Directors has also adopted a framework for management and control of the business. The Managing Director is responsible for the day-to-day management of the bank in accordance with statutes and regulations, the bank s framework as adopted by the Supervisory Board and Board of Directors, and the instructions adopted by the Board of Directors. The Managing Director is responsible for proposing and implementing the bank s strategy. Matters of material importance to the bank s operations must be submitted to the Board of Directors for consideration. The Managing Director shall ensure that the Board of Directors is kept informed at all times about the bank s financial performance and risk development Control bodies The Control Committee is elected by the Supervisory Board. It oversees that the bank is properly managed in compliance with statutes and regulations and official guidelines, instructions from the Financial Supervisory Authority of Norway and the decisions of the Supervisory Board. The committee monitors the bank s activities by holding regular meetings with the external and internal auditor, the management and Board of Directors, and by monitoring information about the development of the bank s operations and balance sheet. The external auditor, who is elected by the Supervisory Board, is responsible for assessing, on an adequate basis, whether any breaches exist of statutes and regulations that are material to the annual accounts. The external auditor shall also ensure that the bank s asset management is organised in a satisfactory manner and is subject to adequate control. The auditor shall also contribute to preventing and uncovering any irregularities and errors. The auditor submits an annual report to the Supervisory Board and prepares a follow-up management letter to the Board of Directors. On behalf of the Board of Directors, the internal auditor shall ensure that the bank has established and implemented an adequate and effective system of internal control. The bank s internal auditor reports to the Board of Directors. An important part of the internal audit function s work consists of continuously monitoring the bank s strategic and operational risk management, including ensuring that it is carried out with sufficient independence, competence and resources. The internal audit function submits an annual report to the Board of Directors, which includes confirmation in accordance with the Regulations relating to risk management and internal control, the Capital Adequacy Regulations and the Securities Trading Regulations Electoral bodies The Nomination Committee is appointed by the Supervisory Board, which has also adopted instruction for its work. The committee submits a recommendation for the election of new officers of Risk management 5

6 the bank. One of the Nomination Committee s most important tasks is to submit a reasoned recommendation to the Supervisory Board in connection with the election of members of the Board of Directors. This includes assessing the bank s strategic opportunities and challenges and the Board of Directors qualifications and capacity in relation to them. The Board of Directors selfevaluation, which is based on the same criteria, forms an important part of the basis for the work of the Nomination Committee. The committee must state its reasons for its recommendation to the Supervisory Board, and the recommendation must contain relevant information about the candidates, including about their competence, capacity and independence. The recommendation shall also contain information about the committee s work. The equity certificate holders elections to the Supervisory Board are prepared by a separate nomination committee for equity certificate holders. 4. Management Based on adopted strategies and goals, long-term target rates of return are drawn up for the business. They govern the bank s specific targets, limits, budget etc. Where natural, risk-adjusted targets are set for the business. The required rate of return reflects the fact that the different risks to which the bank is exposed must be moderate and manageable on both the assets and liabilities side of the balance sheet and be expressed in an adopted risk profile. Risk and capital assessments are an integral part of the bank s management process and value creation. The Board of Directors adopts the bank s risk strategies (for credit, market, liquidity and operational risk), and procedures have been established for identifying risk. In addition to the bank s ongoing financial reporting, a system of quarterly risk reporting has been established that reports on status in relation to targets and any necessary measures. Analyses and studies are carried out as required, and the results are considered by the bank s management and Board of Directors. The Board of Directors has adopted guidelines for the bank s capital assessment. An annual process is carried out in connection with the bank s need for risk capital. It is based on requirements stipulated by the authorities and on the bank s own assessments. The bank s internal control is set out in instructions, procedures and guidelines for the line organisation. Overall control and follow-up, including the reporting of events and confirmation of internal control, are attended to by the bank s Risk Management and Compliance department. 5. Remuneration of the Board of Directors and management Directors fees are decided by the Supervisory Board on the recommendation of the Nomination Committee. The remuneration is not performance-related, and options are not issued to members of the Board of Directors. As a rule, board members or companies to which they are attached shall not take on specific assignments for the bank in addition to their office as board member. Any additional fees shall be approved by the Supervisory Board. In urgent matters, however, the chairs of the Supervisory Board and the Nomination Committee may jointly make decisions concerning additional fees. The remuneration of the Managing Director, Deputy Managing Director and internal auditor is decided by the bank s Board of Directors, while the remuneration of other executive personnel is decided by the Managing Director on the basis of principles adopted by the Board of Directors. The Managing Director can grant additional remuneration to executive personnel based on the results achieved and work performance. Such additional remuneration is also intended to ensure the bank s attractiveness in the employment market, while at the same time not being a risk driver. The bank has adopted guidelines for remuneration systems. In accordance with the regulations and the Code of Practice for Corporate Governance, they include provisions that set a ceiling on Risk management 6

7 performance-related remuneration of executive personnel, and a requirement that 50% of such remuneration shall be paid in the form of equity certificates in the bank, allocated over a period of three years. 6. Information/rating The bank shall ensure it has the confidence of the financial markets by emphasising correct, relevant and timely information about the bank s development and performance. Information is given to the market through quarterly open investor presentations, stock exchange announcements and press releases, the bank s website and accounting reports. Regular presentations are also held for international partners, lenders and investors, and the bank is rated by at least two international rating agencies. 7. Take-overs Sparebanken Vest emphasises satisfactorily safeguarding the interests of all stakeholders in connection with take-overs. Good information and equal treatment of shareholders/owners have a central place in this context, at the same time as the take-over must ensure continued operation in the target company. 8. Compliance with statutes, regulations and ethical standards The bank s business is governed by a number of statutes, regulations and standards. In order to ensure compliance with relevant laws and to underpin the bank s position in the market, emphasis is placed on ensuring that the bank operates within the bounds of such rules. Overall responsibility for the bank s compliance rests with the Risk Management and Compliance department. Compliance in sub-areas is also attended to by various specialist functions in the organisation. The securities business has its own Compliance Manager. Both Risk Management and Compliance and the other functions are responsible for reporting possible breaches/non-conformities to the bank s management and Board of Directors. Emphasis is also placed on maintaining high ethical standards in how the bank conducts its business. Sparebanken Vest has adopted ethical guidelines and procedures for trading. These guidelines cover areas such as conflicts of interest, the duty of confidentiality, customer relations/hospitality, participation in business activity, transactions with close associates and trading in financial instruments. The Board of Directors of Sparebanken Vest, 16 March 2011 Risk management 7