ANNUAL REPORT 2016

CORPORATE GOVERNANCE

1.0. CORPORATE GOVERNANCE FRAMEWORK

INTRODUCTION

As in previous years, the Board of Directors has exerted, during 2016, every effort to promote the success of Bank Audi by supervising and directing its affairs and by regularly reviewing management performance and monitoring the achievement of objectives. It has also given a particular attention to prudent and effective controls in a year characterized by important challenges that entail effective risk assessment and management.

The Board is thus satisfied that, in 2016, it has fully discharged all its responsibilities, as mapped in its yearly rolling agenda, and has acted on the recommendations of its committees in a way to meet its obligations to its shareholders and to all other stakeholders.

Changes introduced to the Governance framework of the Bank during 2016 (and 2017 to date) include the adoption, review and/or update of a number of Governance, Compliance, and Risk-related policies, the creation of a new Board committee, the “AML/CFT Committee”, and the adoption of its charter.

As usual, the Bank also continued to monitor the evolution in Governance-related regulations and best practices in order to ensure that the necessary changes are introduced to its own guidelines and processes. Bank Audi’s Board is satisfied that the Bank’s Governance framework conforms to applicable directives and guidelines, and is adapted to the Bank’s needs and to the high expectations of its stakeholders.

GOVERNANCE FRAMEWORK

Bank Audi is governed by a Board of Directors consisting of up to 12 members (currently 10) elected by the General Assembly of shareholders for terms not exceeding 3 years. The responsibility of the Board is to ensure strategic direction, Management supervision and adequate control of the company, with the ultimate goal of increasing the long term value of the Bank.

Bank Audi’s Governance framework and that of its major banking subsidiaries encompass a number of policies, charters, and terms of reference that shape the Group’s Governance framework over a wide range of issues including risk supervision, compliance, AML/CFT, audit, remuneration, evaluation, succession planning, ethics and conduct, budgeting, and capital management. Clear lines of responsibility and accountability are in place throughout the organisation with a continuous chain of supervision for the Group as a whole, including effective channels of communication of the Group Executive Committee’s guidance and core group strategy. Strategic objectives setting corporate values and promoting high standards of conduct have been established and widely communicated throughout the Group, providing appropriate incentives to ensure professional behaviour.

The Bank’s Corporate Governance Guidelines are accessible on the Bank’s website at www.bankaudigroup.com.

The Board is supported in carrying out its duties by the Audit Committee, the Risk Committee, the Remuneration Committee, the Corporate Governance and Nomination Committee, and the Executive Committee (and, starting in 2017, by the AML/CFT Committee).
  • The mission of the Group Audit Committee is to assist the Board in fulfilling its oversight responsibilities as regards (i) the adequacy of accounting and financial reporting policies, internal control and the compliance system(1); (ii) the integrity of the financial statements and the reliability of disclosures; (iii) the appointment, remuneration, qualifications, independence and effectiveness of the external auditors; and (iv) the independence and effectiveness of the internal audit function(2).
  • The mission of the Group Risk Committee is to assist the Board in discharging its risk-related responsibilities. The Committee is expected to (i) consider and recommend the Group’s risk policies and risk appetite to the Board, (ii) monitor the Group’s risk profile for all types of risks, and (iii) oversee the management framework of the aforementioned risks and assess its effectiveness.
  • The mission of the Remuneration Committee is to assist the Board in maintaining a set of values and incentives for Group executives and employees that are focused on performance and promote integrity, fairness, loyalty and meritocracy.
  • The mission of the Corporate Governance and Nomination Committee is to assist the Board in maintaining an effective institutional and Corporate Governance framework for the Group, an optimal Board composition, and effective Board processes and structure.
  • The mission of the Group Executive Committee is to develop and implement business policies for the Bank and to issue guidance for the Group within the strategy approved by the Board. The Group Executive Committee also supports the Group Chief Executive Officer in the day-to-day running of the Bank and in guiding the Group.

(1) Starting in 2017, a number of Compliance-related responsibilities of the Audit Committee will be transferred to the newly created AML/CFT Committee of the Board.

(2) It is not the duty of the Audit Committee to plan or to conduct audits or make specific determinations that the Bank’s statements and disclosures are complete and accurate, nor is it its duty to assure compliance with laws, regulations and the Bank’s Code of Ethics and Conduct. These are the responsibilities of Management and/or of external auditors.