Virgin Money Holdings (UK) plc (the Company ) Balance Sheet Committee Terms of Reference

Transcription

1 Virgin Money Holdings (UK) plc (the Company ) Balance Sheet Committee Terms of Reference A. Purpose The role of the Balance Sheet Committee (the Committee ) is to review and report its conclusions to the Board on: the Company and its subsidiaries (together the Group) key Balance Sheet financial exposures and impact on earnings; all matters relating to the proper management of the Balance Sheet, including the adequacy of liquidity and capital; and oversight of market risk and wholesale credit risk; and agreed Balance Sheet Management strategies, whilst ensuring liquidity, capital and market risks are suitably understood and within the Group s risk appetite. The Board Risk Committee, amongst other matters, considers, reviews and approves risk appetite, whereas this Committee may only approve strategy or management actions concerning balance sheet matters which fall within Board approved risk appetite. The Committee oversees management s execution of those matters outlined in Section F below. Execution of such matters within the parameters set by the Board, through the agreed terms of the Group's operating plan and approved risk appetite, has been delegated by the Board to the Asset and Liability Committee or senior management (pursuant to the Delegated Authorities Manual) or to the committee established by the Board ( Fundco ) with full authority to negotiate and execute any funding transactions contemplated within the funding plan or new funding initiatives proposed and agreed with the Board from time to time, in accordance with paragraphs (F)(2)(vi) and (F)(2)(x) of the Duties and Responsibilities section below. The Committee will take a forward looking perspective, anticipating changes in business conditions. The Committee should have consideration for the potential added value that may be gained by drawing on external input to its work as a means of taking full account of relevant experience elsewhere and in challenging its own analysis and assessment. B. Membership The Committee shall comprise at least three members all of whom shall be Independent Non- Executive Directors. At least one of the Non-Executive Directors shall have recent, relevant and practical financial services experience. Appointments to the Committee are made by the Board on the recommendation of the Nomination Committee, in consultation with the Committee Chair. Appointments shall be for a period of up to three years, which may be extended for further periods of up to three years, provided the member continues to meet the criteria for membership of the Committee. Any term beyond six years, for Non-Executive Directors, should be subject to rigorous review. Only the members of the Committee have the right to attend and vote at Committee meetings. However, other individuals such as the Chief Financial Officer, Chief Risk Officer, Chief 12 November 2014 Page 1 of 6

2 Executive Officer, Group Treasurer (or, if the Group Treasurer is unavailable, Head of Balance Sheet Management), other Directors and External Auditor may be invited to attend all or part of any meeting, as and when appropriate and necessary and with the agreement of the Committee Chair. The Committee shall remain independent at all times. The Board shall appoint the Committee Chair. In the absence of the Committee Chair and/or an appointed deputy, the remaining members present shall elect one of their number to chair the meeting. The Company Secretary, or his or her nominee, shall act as the Secretary of the Committee and shall ensure that where members have concerns on any matters raised or any proposed action, those concerns are recorded in the Committee minutes. C. Quorum The quorum necessary for the transaction of the business shall be two members. D. Meetings The Committee shall meet at least three times a year. Additional meetings will be held in accordance with business requirements, at such times as the Committee Chair or any member of the Committee may request. Notice of each meeting, confirming the venue, time and date together with an agenda of items to be discussed and any supporting papers shall be issued to each Committee member and, as appropriate, any other person required to attend, no later than three working days before the date of the meeting. The Committee may participate in meetings by means of conference telephone or similar communications equipment whereby all persons participating in the meeting can hear each other, provided the meeting is quorate. Such meetings shall be deemed to take place where the largest group of those participating is assembled, or if there is no such group, where the Committee Chair is. The Committee Chair shall have a casting vote. E. Authority The Board authorises the Committee to: investigate any activity within its Terms of Reference and make recommendations to the Board which it deems appropriate on any area within its remit where action or improvement is needed; seek any information it requires from or request the attendance at any of its meetings of any Director or employee of the Group and all Directors and employees are expected to co-operate with any requests made by the Committee; and obtain, at the Group s expense, such external professional advice as it considers necessary - such expense to be agreed in advance with the Chief Executive Officer and where such agreement is not reasonably given, such agreement will be sought from the Board. 12 November 2014 Page 2 of 6

3 F. Duties and responsibilities The Committee should make available its Terms of Reference, explaining its role and the authority delegated to it by the Board. Subject to the Committee s authority (set out above) the Committee shall: (1) Balance Sheet Management oversee the performance of the Balance Sheet to: review performance against key balance sheet and profitability metrics and risk appetite; (v) agree and recommend approval to the Board of any changes to the current or proposed Treasury investment strategy within the Group's approved risk appetite; agree and recommend approval to the Board of any changes to the current or proposed approach to satisfying the requirements of the Capital Plan, within the Group's approved risk appetite; review any acquisition strategies to assess the market/liquidity, funding and capital implications; and monitor the Group's current and forecast Balance Sheet growth and mix projections in relation to impact on corporate ratings; (2) Liquidity and Funding Risk Management and Funding Transactions oversee the Group's liquidity and funding risk to: review and monitor the Group s current and forecast liquidity and funding positions to ensure they remain within internal and regulatory limits (e.g. encumbrance levels and refinancing risk); (v) (vi) (vii) (viii) (ix) ensure that there is adequate and appropriate liquidity to meet obligations as they fall due; ensure that an adequate supply of highly liquid eligible assets are maintained so that both the Internal Liquidity Requirement (ILR) and regulatory Individual Liquidity Guidance (ILG) 'target' levels are not breached; review and recommend for approval by the Board the Group s Individual Liquidity Adequacy Assessment (ILAA), including the effectiveness of the Contingency Funding Plan (CFP); review the outcome of the liquidity stress testing scenarios; monitor the Group s current and forecast liquidity position in relation to impact on corporate ratings; agree and recommend approval to the Board of any changes to the current or proposed funding plan including approving new funding initiatives; review strategies for optimising the Group s liquidity position within its approved risk appetite; consider and recommend approval by the Board of any funds transfer pricing framework; and 12 November 2014 Page 3 of 6

4 (x) review and recommend for approval to the Board guidance on parameters relating to structure, size and pricing for proposed significant funding and capital transactions which are outside of the delegated authority given to the Chief Executive Officer, Chief Financial Officer or Group Treasurer ( Significant Funding Transactions ). Significant Funding Transactions proposed must satisfy the requirements of the Capital Plan and be executed within Board-approved risk appetite. Once approved by the Board, execution of Significant Funding Transactions shall be delegated to the Fundco (defined in paragraph (A) Purpose above) with regular updates on the progress of such transactions to be provided to the Committee and Board; (3) Market Risk Management review the Group s market risk, primarily interest rate risk within the Balance Sheet, within the defined control parameters set by the Board, in particular to: review and consider the Earnings at Risk, and Capital at Risk positions, trends and forecasts to ensure they remain within internal and regulatory limits; (v) (vi) (vii) (viii) (ix) (x) monitor and ensure control of interest rate re-pricing and maturity risks; review structural interest rate mismatch positions and ensure they are within the Board agreed risk appetite parameters; monitor the quantum of and review the management of, customer and product optionality risks within the Balance Sheet, namely pipeline and prepayment risk; review the outcome of regular interest rate stress testing scenarios; monitor the level of hedge accounting volatility flowing through the Balance Sheet and income statement; in conjunction with the Board Risk Committee, approve the internal interest rate forecast assumptions for planning purposes; monitor and review any currency risk exposure and note actions taken by management to mitigate such exposure, within Board approved risk appetite; review and consider levels of basis risk appropriate for risk appetite; and review and recommend for approval by the Board the proposed strategy for net free reserves and monitor and review the investment of net free reserves; (4) Capital Management maintain prudent Capital Adequacy levels to: review and monitor the Group s current and forecast capital ratios to ensure they remain within regulatory limits and the Group s approved risk appetite; ensure that the approach to satisfying the requirements of the Capital Plan, under both base and stressed scenarios is adequate to meet the Group s Internal Capital Adequacy Assessment (ICAA) and regulatory Individual Capital Guidance (ICG) requirements; review forecast business projections and associated Capital Plan, approved by the Board Risk Committee, to identify any need for, and recommend to the Board for approval, future capital raising activities; monitor the Group s current and forecast, base and stressed capital position in relation to impact on corporate ratings e.g. adherence to commitment on minimum regulatory Tier 1 ratio and Leverage Ratio; 12 November 2014 Page 4 of 6

5 (5) Wholesale Credit Risk oversee the Group s Wholesale Credit Risk exposure to: review and monitor the Group s current and forecast wholesale credit risk exposures to ensure they remain within internal and regulatory limits; in conjunction with the Board Risk Committee, ensure that relevant credit risk assessment has been undertaken on proposed new counterparties/proposed new investments; ensure regular assessment of changes in credit risk profiles for the Group s approved counterparties and review potential impact on investment strategy against risk appetite; and regularly review the investment holdings with counterparties to assess and analyse the risks of individual investments and individual counterparties; (6) Other review and monitor resourcing within the Treasury function to ensure it has adequate resources to enable it to perform its function effectively; and consider and approve matters as are delegated to the Committee by the Board from time to time; (7) Asset & Liability Committee have oversight of the work and reports of the Asset and Liability Committee (including any sub-committees of the Asset and Liability Committee established from time to time) and to recommend to the Board for approval any delegation of powers from the Committee to the Asset & Liability Committee; and (8) Fundco have oversight of the work and reports of the Fundco and to recommend to the Board for approval any delegation of powers from the Board to Fundco. G. Reporting Responsibilities The Committee shall: report to the Board on its proceedings after each meeting on all matters within its duties and responsibilities; provide such recommendations to the Board as it deems appropriate on any area within its remit where action or improvement is needed; review and agree any Balance Sheet disclosures made in the Annual Report and any other financial statements (including the Half Year Report and Interim Management Statements); and ensure that the Secretary minutes the proceedings and resolutions of all Committee meetings, including the names of those present and in attendance. Draft minutes of Committee meetings should be circulated promptly to all members of the Committee. Once approved, minutes should be circulated to all other members of the Board unless it would be inappropriate to do so. 12 November 2014 Page 5 of 6

6 H. Review The Committee will conduct an annual review of its performance and ensure that is provided with sufficient resources to undertake its duties, and that sufficient training is provided to members on appointment and on an ongoing basis and recommend any changes that it considers necessary to the Board for approval. These Terms of Reference shall be reviewed by the Committee and, where necessary, updated at least once a year. 12 November 2014 Page 6 of 6