1.3.1 The responsibilities of the Parent Board include, but are not limited to, the following 1 :

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1 POLICY: CORPORATE GOVERNANCE APPROVED BY: Board of Directors APPROVAL DATE: 13 February, 2018 EFFECTIVE DATE: 13 February, 2018 PREVIOUS UPDATES: 27 February, 2017, 25 July, 2016, 19 February, 2016, 27 February, 2015 SCOPE: Butterfield Group POLICY SPONSOR: General Counsel and Group Chief Legal Officer NEXT REVIEW DATE: February Policy Statement It is the policy of Butterfield Group (the Group ) to exercise strong corporate governance practices that enhance shareholder value, safeguard depositors interests, ensure appropriate disclosure and transparency and promote the long-term growth and financial viability of the Group. The Board of Directors (the Parent Board ) of the Bank of N.T. Butterfield & Son Limited (the Parent ) will strive to maintain the success and continuity of the Group s business through ongoing monitoring to ensure that the Group s activities are conducted in a legal, responsible and ethical manner. 1.2 Purpose The Group is committed to following the rules of its regulators and supervisors in both form and substance, and dealing with stakeholders for example, but not limited to, investors, regulators, customers, employees, creditors and suppliers ( Stakeholders ), in a fair and equitable manner. This Corporate Governance Policy (this Policy ) shall guide the actions of directors, management and Employees ( Employees including those permanent or temporary as well as contractors and third parties acting on behalf of the Group). 1.3 Corporate Governance Responsibilities The responsibilities of the Parent Board include, but are not limited to, the following 1 : a. b. c. to fulfil its duty of care by acting on a fully informed basis, in good faith, with due diligence and in the best interest of the Group; to set the Group s tone at the top by promoting the Butterfield Group Code of Conduct and Ethics, maintaining high ethical standards in their dealings with Stakeholders and promoting the Group s culture of helping individuals, families and businesses protect, grow and optimize their financial well-being; to ensure the integrity of the Group s accounting and financial reporting systems, including independent audits, and that appropriate systems of control are in place; 1 Refer to the Parent Board Bye-Laws for further details of the responsibilities of the Parent Board. Information Classification: Public Page 1 of 34

2 d. e. f. g. h. i. j. k. l. to understand the Group s operational structure, products and services to ensure that an adequate and effective system of internal controls is established and maintained to mitigate risks and protect shareholder value; to oversee the process of disclosure and communications to ensure the timely and accurate disclosure of all material matters, including the Group s financial situation, performance, operating results, governance structures, material risks and policies relating to business ethics and supervisory reporting; to set and enforce lines of authority, clearly articulate responsibilities and establish accountability for management throughout the Group to ensure the integrity of reporting and monitoring of control systems; to challenge Management such as at entity, subsidiary or jurisdictional level ( Management ) to operate within set strategies in such matters as risk appetite; to provide guidance to the boards of directors of the subsidiaries of the Parent (the Subsidiary Boards ) regarding risk appetite; to consider and approve the nomination and appointment of independent nonexecutive directors in respect of the Subsidiary Boards for each regulated jurisdictional Subsidiary in consultation with the Chairman of the Subsidiary Board; to establish Parent Board Committees ( Committees ) and nominate qualified Parent Board Committee members; to select, compensate, and where necessary, replace Key Executives ( Key Executives ), i.e. members of the Executive Management of the Parent, and oversee succession planning to ensure the success and continuity of the Group s business; and to recognise the importance of continuing education for directors and to commit to providing such education through continuing educational programs, including reviewing the strategic plans, key policies and practices, financial statements, changes in relevant laws and regulations, and other materials on subjects that would assist directors in discharging their duties The responsibilities of the Chairpersons of the Parent Board and Subsidiary Boards include, but are not limited to, the following: a. to manage the affairs of the Parent Board or Subsidiary Boards, as applicable, including ensuring that the Parent Board or Subsidiary Boards, as applicable, are organised properly, functioning effectively and meeting their obligations and responsibilities; and Information Classification: Public Page 2 of 34

3 b. to ensure that where there is commonality of directors between Parent and Subsidiary Board, communication is made between them where such director is deemed as either independent or non-independent The responsibilities of the Lead Independent Director ( LID ) of the Parent Board include, but are not limited to, the following: to preside at meetings of the Parent Board at which the Chairman & CEO of the Parent Board is not present and at executive sessions of the independent directors; to serve as a liaison between the Chairman & CEO and the independent directors; to have the authority to call meetings of independent directors, including separate meetings or executive sessions of the independent directors; to have the authority to call meetings and exclude any directors deemed non- independent; a. b. c. d. e. f. to review and approve meeting agendas, meeting schedules, and information to the Parent Board; and to be available for consultation and direct communication with shareholders as appropriate The responsibilities of the Secretaries of the Parent Board and Subsidiary Boards include, but are not limited to, the following: a. b. to distribute information, if practicable at least five business days in advance, if practical, to permit adequate preparation regarding items requiring Board and/or Committee approval 2 ; and to archive and maintain in safe storage all agendas, supporting documents, meeting minutes, and any other relevant documentation arising from meetings of the Parent Board, Subsidiary Board or any related committees, in line with the Group Records Retention Policy. 2 To be distributed via the Diligent board platform or any other applicable electronic means Information Classification: Public Page 3 of 34

4 1.3.5 The responsibilities of the directors of the Subsidiary Boards include, but are not limited to, the following: a. b. c. d. e. f. g. h. i. j. to fulfil their duty of care by acting on a fully informed basis, in good faith, with due diligence and in the best interest of the Subsidiary and the Group; to set the Subsidiary s tone at the top by promoting the Butterfield Group Code of Conduct and Ethics and maintaining high ethical standards in their dealings with Stakeholders; to ensure the integrity of the Subsidiary s accounting and financial reporting systems, including independent audits, and that appropriate systems of control are in place; to understand the Subsidiary s operational structure, products and services to ensure that an adequate and effective system of internal controls is established and maintained to mitigate risks and protect shareholder value; to oversee the process of disclosure and communications to ensure the timely and accurate disclosure of all material matters including the Subsidiary s financial situation, performance, operating results, governance structures, material risks and policies relating to business ethics, and supervisory reporting; to set and enforce lines of authority, clearly articulate responsibilities and establish accountability for management in the Subsidiary to ensure the integrity of reporting and monitoring of control systems; to challenge the Subsidiary management to operate within set strategies, including an established risk appetite; to establish one or more Subsidiary Board Committees (with respect to regulated Subsidiary entities only) as required by applicable law or regulation and nominate qualified Subsidiary Board Committee members to ensure a formal and transparent Subsidiary Board nomination and election process and to notify the Parent Board of these considerations; to select, compensate, and where necessary, replace key executives of the Subsidiary, and oversee succession planning to ensure the success and continuity of the Group s business; and to recognise the importance of continuing education for directors and to commit to providing such education through continuing educational programs including reviewing the strategic plans, key policies and practices, financial statements, changes in relevant laws and regulations, and other materials on subjects that would assist directors in discharging their duties. Information Classification: Public Page 4 of 34

5 1.3.6 The responsibilities of the committees of the Parent Board and Subsidiary Boards include, but are not limited to, the following: a. to provide oversight and assessment of certain functions and advise and make recommendations to the Parent Board or Subsidiary Boards as applicable The responsibilities of the Chairpersons of the Parent Board and Subsidiary Board Committees (see Standard D) include, but are not limited to, the following: a. b. c. to manage the affairs of the Parent or Subsidiary Board Committees, as applicable, ensuring that the Committees are organised properly, functioning effectively and meeting their obligations and responsibilities to the Parent or Subsidiary Board, as applicable; to ensure the performance of, at a minimum, an annual review of the Parent or Subsidiary Board Committee s Terms of References, as applicable; and to ensure Subsidiary Board Committees are aligned with the Committees of the Parent Board The responsibilities of the executive management committees of the Parent Board and of Subsidiary Boards (the Executive Committees - see Standard E) include, but are not limited to, the following: a. to oversee and assess the day-to-day management of Business Units and advise the Chairman & Chief Executive Officer ( Chairman & CEO ) or Subsidiary Managing Director, as applicable The responsibilities of the Chairpersons of the Executive Committees (see Standard E) include, but are not limited to, the following: a. b. to manage the affairs of the applicable Executive Committee, ensuring it is organised properly, functioning effectively and meeting its obligations and responsibilities; and to perform, at a minimum, an annual review of the applicable Executive Committee Terms of Reference The responsibilities of the Chairman & CEO include, but are not limited to, the following: a. b. exercise general supervision over the affairs of the Group, and subject to such restrictions as the Group Board may impose from time to time; keeping proper records of account and maintain safe custody of the cash and securities of the Group; Information Classification: Public Page 5 of 34

6 c. d. e. f. g. h. i. j. k. l. administration of credit; appointment and dismissal of personnel other than officers who are members of the Parent s Executive Committee; negotiation of interest rates and charges; authorisation of expenses necessary for the operation of the Group; arrangements with correspondent banks; negotiating and contracting with person outside the Group (including consultants, correspondents and agents) required in connection with the Group s business; to sustain an ethical culture of integrity and compliance with all applicable laws, rules and regulations; to clearly define the Group s organisational structure and managerial accountabilities; to ensure that decisions made by the Executive Committee are minuted and notified to the Parent Board as required; to approve all chairperson positions for the applicable Executive Committee; m. to emphasise and communicate the importance of strong control functions within the Group and to promptly address and correct reported corporate governance control deficiencies The responsibilities of the Subsidiary Managing Directors of the Parent include, but are not limited to, the following 3 : a. b. c. d. exercise general supervision over the affairs of the local Subsidiary and related entities, and subject to such restrictions as the Parent Board may impose from time to time; to sustain an ethical culture of integrity and compliance with all applicable laws, rules and regulations; to clearly define the Subsidiary s organisational structure and managerial accountabilities; to approve the respective Subsidiary s Executive Committee Terms of Reference; 3 The responsibilities of the Subsidiary Managing Directors are subject to the local Subsidiary Board Bye-Laws, and applicable local regulations. Information Classification: Public Page 6 of 34

7 e. f. g. to emphasise and communicate the importance of strong control functions within the respective Subsidiary and to promptly address and correct reported corporate governance control deficiencies; to minute decisions made by the Subsidiary Executive Committee and notify the Subsidiary Board as required; and to keep the respective Subsidiary Board fully informed by providing it with appropriate and timely communication and internal reporting of the respective Subsidiary s performance The responsibilities of Group Executive Committee of the Parent include, but are not limited to, the following: a. b. to establish a management structure that promotes accountability, while remaining cognisant of its obligation to oversee the exercise of such delegated responsibility; and to keep the Parent Board fully informed by providing it with appropriate and timely communications, and internal reporting of the Group s performance The responsibilities of a Policy Sponsor include, but are not limited to, the following: a. to implement and maintain up-to-date policies and standards to provide appropriate oversight over the Group s corporate governance control systems and ensure adherence to applicable laws and regulations governing the Group The responsibilities of employees of the Group include, but are not limited to, the following: to communicate any problems or control deficiencies in operations, instances of non- compliance with the Butterfield Group Code of Conduct and Ethics and / or any other Group policies, standards, applicable procedures and controls, including illegal actions or unethical behaviour, pursuant to the Group Whistleblower Policy and any other applicable and available channels of redress. a. 1.4 Adherence Employees and Directors at all levels are required to be familiar with, and adhere to, Group Policies, Procedures and Controls. 1.5 Consequence of Policy and Standard Violations It is the responsibility of every Employee, as a condition of employment, to comply with the published policies of the Group. When appropriate, Management may pursue disciplinary action Information Classification: Public Page 7 of 34

8 in the event of violations of policies, up to and including dismissal. It is also the responsibility of every employee to report any suspected violations of standards or procedures established in support of the published policies of the Group to his or her Division/Department Head (who may wish to consult with the Group General Counsel, the Group Head of Compliance, Internal Audit or Human Resources) and in accordance with the Whistleblower Policy. Reports may be oral, electronic (including anonymously) or written. 1.6 Amendment and Interpretation This Policy is in addition to and is not intended to change or interpret any law or regulation or the Group s governing documents (as amended from time to time) or any Committee Terms of Reference reviewed and approved by the Parent Board. This Policy is subject to modification from time to time by the Parent Board. 1.7 Reference Standard A Governance System Standard B Parent Board of Directors Standard C Subsidiary Boards of Directors Standard D Parent Board Committees and Subsidiary Board Committees Standard E Executive Committees Standard F Nominee Companies and Corporate Service Providers Information Classification: Public Page 8 of 34

9 STANDARD A: GOVERNANCE SYSTEM A1.1 Background The Group s governance system provides a structure to establish Group objectives and monitor performance. The governance system is intended to foster effective oversight, transparency, sound governance and promote the Group Code of Conduct and Ethics and all other applicable Group Policies, Procedures and Controls ( Policies, Procedures & Controls, as established by the Group Executive Committee, or the Heads of relevant Business Units to outline the Group s expectations and requirements of Employees). A1.2 Standard A1.2.1 Oversight Achieving sound governance requires oversight by several distinct parties, including the Parent Board, Subsidiary Boards and individuals not involved in the day-to-day management and supervision of Business Units ( Business Units ) and internal control functions. This allocation of oversight duties and responsibilities ensures that there are no gaps in reporting lines and that an effective level of management control is extended to all levels of the Group and its various Subsidiaries. A1.2.2 Key Personnel Key Personnel ( Key Personnel ) must be fit and proper for their jobs and in certain jurisdictions where required by local law or regulation, Fit and Proper checklists must be completed. In selecting key personnel, the Parent Board and Subsidiary Boards must evaluate possible candidates as to expertise, qualification and integrity, and any potential for conflicts of interest. Aspects to focus on include skills and experience in relevant financial operations and compliance and commensurate with the intended activities, and no record of criminal activities or adverse regulatory judgments making them unfit to occupy important positions. All decisions on Key Personnel must be taken in accordance with the Group Code of Conduct and Ethics and all other applicable Group Policies, Procedures & Controls. Management contributes to the Group s corporate governance by overseeing line managers in specific Business Units and activities consistent with established and all other applicable Group Policies, Procedures & Controls. Management must be willing and able to exercise effective oversight and control of the activities of employees. A1.2.3 Group Code of Conduct and Ethics The Group Code of Conduct and Ethics serves as an organisation-wide standard for the conduct of all Employees, setting the framework for the exercise of judgment in dealing with varying and often conflicting constituencies. In addition to providing an overall framework for ethical Information Classification: Public Page 9 of 34

10 conduct that goes beyond compliance with the law, the Butterfield Code of Conduct and Ethics sets clear limits on the pursuit of private interests. A1.2.4 Internal and External Control Functions and the Three Lines of Defence The Parent Board, Subsidiary Boards, Management, and Policy Sponsors shall effectively utilise the work conducted by the internal control functions, Internal Audit function, and external auditors. These functions, including independent, competent and qualified auditors, as well as business controls and risk management, compliance, legal and other related functions, achieve a number of important objectives across all levels of the Group. These functions ensure the sound operation and performance of the Group. The Group has established a framework of policies that define the practices and behaviours required of its employees in the execution of their day-to-day responsibilities, and has implemented Three Lines of Defence ( 3LOD ) to ensure compliance. The 3LOD include systems for internal and external audit, risk management, financial and operational control, compliance and legal. Specific controls of critical functions and Business Units are defined within the Group Policy Management Framework 4, and in documented procedure manuals. The First Line of Defence and level one testing is conducted by the Business Unit on their own processes to assess the efficacy of business conduct and controls as it pertains to specific policies or procedures applicable within that division, as well as to any additional jurisdictional regulations that may be applicable. The Second Line of Defence & level two testing (usually conducted by Compliance) should demonstrate independent quality assurance testing as part of the annual Compliance and Financial Crime Assurance Plan. Other risk divisions within the Group may undertake equivalent evaluations. The Third Line of Defence is Internal Audit, and their periodic undertaking of level three testing on the effectiveness of the first and second levels. Control functions are not merely policies or procedures exclusively performed at a certain point in time, but rather, functions continually operating at all levels within the Group. Although the Parent Board, Subsidiary Boards and Policy Sponsors are responsible for establishing an effective control culture, and overseeing and monitoring its effectiveness on an ongoing basis, each employee within the Group must be a willing, committed and active participant of these processes. The Parent and Subsidiary Boards shall require the timely correction of problems identified by internal and external control functions by management and Policy Sponsors. A1.2.5 Reporting Illegal or Unethical Practices The Group has established procedures and safe-harbours for the confidential reporting of suspected or known illegal practices and unethical behaviour, as set forth in the Group Whistleblower Policy. Employees should closely examine this Policy and report concerns 4 Note that the Group Policy Management Framework is available from Operational Risk Management Information Classification: Public Page 10 of 34

11 pursuant to its terms. This is in addition to other reporting channels available to Employees (such as escalation through managers, or completion of internal disclosures) that fall outside of the Whistleblowing Policy. A1.2.6 Executive Compensation The Parent Board shall ensure that compensation policies and practices are consistent with the Group s corporate culture, long-term objectives and strategy, and control environment. A1.2.7 Know Your Structure Disclosure of the Group s structure makes its objectives and nature transparent. Organisational charts reflecting all Subsidiary entities must be documented and kept current, as well as relevant charts depicting the Group s Business Units and their employees. Documented organisational charts must also exist for the Parent Board, Subsidiary Boards and Executive & Subsidiary Committees. Appropriate levels of internal reporting and communication to the Parent Board and Subsidiary Boards, and vice versa, must exist in respect to all material risk and other issues that may affect the Group. A1.2.8 Parent Board Committee Composition Board Committees are vital elements of any corporate governance system. As such, Board Committee members must be fit and proper for their roles, and capable of exercising judgment independent of the views of management, Business Units or other inappropriate outside interests. To promote adequate oversight, Board Committee composition must include a majority of members not involved in the day-to-day management of Business Units, including a sufficient number of qualified independent and non-executive members 5, to mitigate potential conflicts of interest and provide added assurance to shareholders and other Stakeholders. Additionally, occasional rotation of Board Committee membership and chairmanship should be considered. A1.2.9 Director Orientation and Continuing Education The Parent Board shall establish, or identify and provide access to, appropriate orientation programs, sessions or materials for newly elected directors for their benefit either prior to or within a reasonable period of time after their nomination or election as directors. The orientation will include presentations by senior management to familiarise new directors with the Group s strategic plans, its significant financial, accounting and risk management issues, its compliance programs, the Group Code of Conduct and Ethics, its principal officers, and its independent auditors. In addition, new members to a Committee will be provided information relevant to the Committee and its roles and responsibilities. 5 The required number of Independent Directors, shall be outlined in the relevant Committee s Terms of Reference, or charter. Information Classification: Public Page 11 of 34

12 All continuing directors are invited to attend any such orientation programmes, as above and in addition relevant training will be provided on key regulatory topics and Group Policies, Procedures and Controls (such as the Group Code of Conduct, the Financial Crime and Compliance policies, Conflicts of Interest, sanctions / sensitive jurisdictions and Anti-Bribery and Corruption). The Parent Board believes it is also appropriate for directors, at their discretion, to have access to educational programmes related to their duties as directors on an ongoing basis, to enable them to better perform their duties and to recognise and deal appropriately with issues that arise. The Parent will provide appropriate funding for these programs. In addition, directors will receive periodic reviews of the Group s business and may visit Group facilities as part of their ongoing review of the Group and its operations. A Chairman & CEO Evaluation and Management Succession The Parent Board, through the Compensation & Human Resources Committee, will conduct an annual review of the performance of the Chairman & CEO to ensure that the Chairman & CEO is providing the best leadership for the Group in the long- and short-term. Where the CEO serves as the Chairman of the Parent Board, then a Lead Independent Director ( LID ) will be appointed to preside over the Parent Board or Committee thereof when it meets for this purpose. The Parent Board will conduct an annual review of succession planning and evaluate and nominate potential successors to the Chairman & CEO. The Chairman & CEO should at all times make available his or her recommendations and evaluations of potential successors, along with a review of any development plans recommended for such individuals. In addition, the Parent Board, with input from the Chairman & CEO and other members of management as appropriate, will review annually the Group s programme for management development and succession planning for executive officers other than the Chairman & CEO. The Parent Board will also review succession candidates for executive officers other than the Chairman & CEO or other senior managers as it deems appropriate. A Director Access to Officers and Employees Directors have full and free access to officers and employees of the Group, as applicable to their role. Any meetings or contacts that a director wishes to initiate may be arranged through the Chairman & CEO or the Secretary or directly by the director. The directors will use their judgment to ensure that any such contact is not disruptive to the business operations of the Group and does not inappropriately disclose any confidential or sensitive information in the possession of the director and will copy, to the extent not inappropriate, the Chairman & CEO on any written communications between a director and an officer or employee of the Group. Information Classification: Public Page 12 of 34

13 STANDARD B: PARENT BOARD OF DIRECTORS B1.1 Background The Parent Board is ultimately responsible for providing appropriate oversight to ensure the financial soundness of the Group and the adequacy of the Group s corporate governance system. In this capacity, the Parent Board must set the general strategy and policies of the Group and its Subsidiaries, and determine what governance structure best contributes to an effective chain of oversight. In exercising adequate oversight over the Group s activities, the Parent Board must be fully aware of material risks and issues affecting its entities, at all times. In addition to the below, the Parent Board has adopted bye-laws, which, among other things, address the administration, roles, responsibilities and powers of the Board and its Directors and Officers. The Parent s byelaws are publicly available on the Butterfield Group website. B1.2 Standard B1.2.1 Administration and Directors Orientation The Parent Board shall have a minimum of six (6) meetings during the course of the fiscal year (four (4) quarterly meetings, one (1) strategic planning meeting, and one (1) budget meeting). The Board may meet for the transaction of business, adjourn and otherwise regulate its meetings as it sees fit. The quorum necessary for the transaction of business of the Parent Board shall be five (5) individuals, a majority of whom shall be independent, non-executive directors. The Secretary of the Parent Board shall record meeting attendance for individual directors, to assess performance of their responsibilities. Additionally, the Secretary of the Parent Board shall keep written minutes for all meetings and have minutes formally reviewed, approved and retained as permanent records in accordance with the Group Records Retention Policy. The Bank may adopt a seal in such form as the Board may determine. The Board may adopt one or more duplicate seals for use in or outside Bermuda. A seal may, but need not, be affixed to any deed, instrument or document, and if the seal is to be affixed thereto, it shall be attested by the signature of (a) any Director; (b) any Officer; (c) the Secretary; or (d) any person authorised by the Board for that purpose. Any officer may request to affix the seal of the Bank to certify the authenticity of any copies of documents. Subsidiary companies must ensure appropriate process is in place in their jurisdiction for use of Subsidiary seals. In accordance with the above (within Standard A), new Directors must undergo orientation aimed at familiarising members with the Group s business, industry and corporate governance practices, including internal policies and significant regulatory requirements. Directors will have ongoing access to the advice and services of the Secretary of the Parent Board, who is responsible for ensuring that the Parent Board procedures are followed and that applicable rules and regulations are observed. To further their duties, Directors may take independent, professional advice if necessary, at the Group s expense. The intention to seek independent advice must be communicated in advance to the Parent Board Secretary. Information Classification: Public Page 13 of 34

14 B1.2.2 Compensation It is recommended that a meaningful portion of non-executive directors compensation is in the form of common shares of the Parent for as long as they remain on the Parent Board, to ensure the Parent Board pursues objectives that are in the best interest of the Group and its shareholders. Parent Board compensation guidelines that align compensation incentives with the long-term interests of shareholders must be documented, maintained and approved by the Parent Board. B1.2.3 Parent Board Composition The Parent Board must reflect an appropriate composition of directors who are capable of exercising judgment independent of management influence or inappropriate external interests. The number of directors that constitutes the Parent Board will be fixed from time to time by a resolution adopted by the Parent Board in conformity with the Parent s Bye-laws. The Corporate Governance Committee of the Parent Board shall periodically review the size of the Parent Board to ensure that the current number of directors most effectively supports the Parent. Independence and objectivity are enhanced by including a majority of qualified independent nonexecutive directors capable of providing perspectives from other businesses and insight into local conditions, and serving as a significant source of management experience. Directors shall be appointed at each Annual General Meeting to hold office until the next Annual General Meeting or until a successor is elected. The Parent Board has a key role in identifying potential directors with the appropriate knowledge, competencies and experience to complement existing Parent Board skills. In selecting directors, the Parent Board must evaluate possible candidates as to expertise, qualification and integrity, and any potential for conflicts of interest that might affect their judgment, including membership of other boards of directors. The nomination process benefits from full disclosure of the experience and background of candidates. In identifying potential Parent Board directors, the Parent Board, through its Corporate Governance Committee has the responsibility to ensure that all policies, practices, guidelines and/or procedures do not permit any form of discrimination. The Parent Board, through its Corporate Governance Committee also has the responsibility to ensure that all decisions with regard to recruitment, appointment, retention, and retirement of Parent Board members are made without regard to race, religious beliefs, gender, sexual orientation, marital status, ancestry or place of origin. To further promote independence of the Parent Board, a clear division of responsibility should exist in the separation of the Parent Board Chairman and the CEO roles. Where this is not the case, and the Chairman is the CEO of the Group, further reliance should be placed on the independence of other Group Board members, notably the Lead Independent Director. Information Classification: Public Page 14 of 34

15 B1.2.4 Director Independence The Parent Board should include an appropriate combination of executive and non-executive directors (and, in particular, independent non-executive directors) such that no individual or small group of individuals may dominate the Parent Board s decision making. The majority of the Parent Board shall be composed of non-executive directors determined by the Parent Board to be independent. To empower non-executive directors to serve as a more effective check on management, and to encourage communication among this group, the non-executive directors must meet at regularly scheduled executive sessions without management, or alternatively they may hold regular executive sessions of the independent directors 6. The Parent Board should identify in the annual report each non-executive director it considers to be independent, and any framework under which this assessment has been conducted. The decisions made by the Parent Board will flow through to the Subsidiary Board in this respect, and where a Subsidiary Board has deemed an individual as non-independent, that shall be communicated to the Parent Board. The Parent Board should affirmatively determine that a director has no material relationship with the Parent or Group (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Parent) A Director would not qualify as independent if: a. the Director is, or has been within the last three years, an employee of the Group, or an immediate family is, or has been within the last three years, an executive officer, of any entity within the Group; b. the Director has received, or has an immediate family member who has received, during any twelve-month period,within the last three years, more than $120,000 in direct compensation from Butterfield, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service); c. the Director is a current partner or employee of the Parent s external auditor; or the director has an immediate family member who is a current partner of such firm; or the director has an immediate family member who is a current employee of such firm and personally works on the Parent s audit; or the director or an immediate family member was within the last three years a partner or employee of such firm and personally worked on the Parent s s audit within that time; d. the director or an immediate family member is, or has been within the last three years, employed as an executive officer of another where any of the Parent s present executive officers at the same time or served on that company s compensation committee; or 6 The LID or Chair of the meeting should formally decide whether any non-independent directors should be in attendance. Information Classification: Public Page 15 of 34

16 e. the Director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from, the Parent for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1million or 2% of such other company s consolidated gross revenues. A material relationship is a relationship that could, in the view of the Parent Board, be reasonably expected to interfere with the exercise of a director s independent judgment and includes an indirect material relationship, or be deemed as a potential conflict of interest by a regulator or external body. Any decision of the Parent Board should be shared with the Subsidiary Boards as required. Directors must disclose whether they, directly, indirectly or on behalf of third parties, have a material relationship or interest in any transaction or matter directly affecting the Group that could affect their judgment. Disclosure to the Parent Board may be made through advanced notice or at a scheduled Parent Board meeting. Where a material relationship or interest is declared, the involved director must not be involved in any decision involving such transaction or matter. A director will be deemed not to be independent if the Parent Board finds that a director has undisclosed material business arrangements with the Group which could, in the Parent Board s view, jeopardise the director s judgment. The Audit Committee, Human Resources & Compensation Committee and Corporate Governance Committee of the Parent Board must be composed of solely independent, nonexecutive directors. The Parent Board s Corporate Governance Committee will have oversight responsibility on behalf of the Parent Board for the application of this Standard B, including supervision of the Annual Board Performance Self-assessment process. B1.2.5 Requisite Approvals and Notifications Requisite approval from, and notification to, the Parent Board strengthens the governance system and allows the Parent Board to retain full and effective control of the Group. No request or notification shall go to the Parent Board except with prior notification to the Secretary of the Parent Board. There must be an established process to document matters requiring prior approval from, and notification to, the Parent Board. This schedule of matters must be periodically reviewed by the Parent Board and made available upon request to the Secretary of the Parent Board. The Parent Board must approve various matters, including but not limited to: Information Classification: Public Page 16 of 34

17 Board and Management Secretarial a. any appointment to or removal from the Parent Board; b. appointment or removal of the Chairman & CEO, the Secretary of the Parent Board or members of the Bank s Executive Committee c. Board Committees composition and Terms of Reference; and d. fees of non-executive directors. a. calling shareholders meetings; b. delegating the Parent Board s powers (by resolution or power of attorney); c. allotting, repurchasing for cancellation or otherwise and/or forfeiting securities of the Parent; d. vetting and seeking approval from the Chairman & CEO of the Parent Board for scheduling of matters outside the normal course of business; and e. minuting and recording, including appropriate distribution of such, of Parent Board meetings and the retention of the same in accordance with Group Records Retention Policy. Business Control a. the adoption of the Group Code of Conduct and Ethics, and all other applicable Group Policies, Procedures and Controls including this, the Corporate Governance Policy; b. the review of specific Group Policies, Procedures and Controls, namely: - Group Code of Conduct & Ethics - Financial Crime Policy - Compliance Policy - Anti-Bribery & Corruption - Whistleblower - Insider Trading - Corporate Governance - Board Composition and Succession Policy - Disclosure Policy Information Classification: Public Page 17 of 34

18 Finance Operations c. a framework for internal control functions and financial and operational control systems, in line with the Group s Three Levels of Defence; and d. Risk policy and Capital Assessment and Risk Profile ( CARP ) procedures, including risk appetite of the Group. a. annual budgets; b. capital-raising actions and activities; c. annual and quarterly accounts and accounting policies; d. approval, and recommendation for approval to shareholders, of the appointment or removal of auditors; e. prospectuses, offer documents and listing agreements; and f. dividend policy, including setting of record dates. a. strategic plans and objectives; b. major plans of action; c. adoption of profit plans; d. adoption of redundancy policies; e. adoption of remuneration policies; f. rules for employee retirement plans and retirement of members of the Parent Board; g. formations, acquisitions and divestitures of subsidiaries, associated companies or branches in excess of 5% of the Group s assets; h. major capital expenditures in connection with the acquisition of fixed assets in excess of 5% of the Group s net assets; i. investments outside the ordinary activities of the Group in excess of 5% of the Group s net assets; and Information Classification: Public Page 18 of 34

19 j. transaction(s) with a loss exposure in excess of 25% of the Group's available capital resources, provided, however, that the requisite approval for this item may be given pursuant to a valid resolution of the Risk Policy & Compliance Committee, provided, further, such approval is reported to the Parent Board at its next regularly scheduled meeting). The Parent Board must be notified in advance of the following matters: Board and Management Secretarial a. changes to management structure of Group Executive Committee, lines of accountability and titles of members of the Group s Senior Management; a. disclosure of directors conflict of interests; b. major litigation involving the Parent and / or Group; and c. material regulatory updates and matters involving the Parent and / or Group. Operations a. significant changes in policies in respect of insurance, corporate security, treasury, credit, compliance, legal and other aspects of risk management; and b. all situations in which a Senior Officer requests the appeal of a decision of the Group Credit Committee. B1.2.6 Risk Policy, Appetite and Profile The Group s risk policy, appetite and profile are closely related to corporate governance and strategy because they specify the types and degrees of risk that the Group is willing to accept in pursuit of its goals. The Parent Board must, on an annual basis, formally review and endorse the key components of the CARP procedures. The Parent Board has an ongoing responsibility for ensuring and demonstrating to supervisors and regulators that the risk policy, the level, distribution and composition of capital, the control framework and the Group s strategic planning are appropriately integrated and consistent with the established and documented risk appetite and profile. The Parent Board must develop a Risk Appetite Statement that encapsulates the consideration of various risk scenarios, establishing tolerance or target levels for these risks. To Information Classification: Public Page 19 of 34

20 embed the desired aggregate risk profile within the Group, risk appetite must seamlessly transfer from the Group s Head Office ( Head Office ) to all Subsidiaries and from Subsidiaries to all Business Units within Regulated Subsidiaries. Where the Group outsources key functions, the accountability of directors and management is not delegated to the entities providing the outsourced services, but remains with directors and management. B1.2.7 Code of Best Practice The Parent Board and its individual members strengthen the Group s governance system by: a. applying standards of professional conduct and high corporate values for itself, management and employees through the Group Code of Conduct and Ethics; b. communicating corporate values throughout the organisation to guide the Group s ongoing activities, on a consistent basis; c. structuring the Parent Board in a way, including size, that promotes efficiency and real strategic discussion; d. possessing adequate collective knowledge of material financial activities being pursued; e. committing sufficient time and energy to fulfil their responsibilities; f. finding the right level of involvement in strategic planning and implementation, and avoiding participation in day-to-day management; g. documenting a formal schedule of matters specifically reserved for their approval or requiring their prior notification; h. documenting procedures for directors to, in furthering their duties, take independent, professional advice if necessary, at the Parent s expense; i. documenting procedures for directors to have ongoing access to the advice and services of the Secretary of the Parent Board, who is responsible for ensuring that the Parent Board procedures are followed and that applicable rules and regulations are observed; j. promoting the Group s sustainability and soundness by understanding and complying with governing regulatory environments, and ensuring an effective relationship with applicable regulators is maintained; k. avoiding conflicts of interest, or the appearance of conflicts, in their activities with, and commitments to, other organisations or appointments; Information Classification: Public Page 20 of 34

21 l. review and approval of Group policies and procedures; m. agreeing in advance contingency arrangements to adopt when conflicts of interest arise which would make them incapable of properly fulfilling their duties; n. completing a formal Annual Performance Self-Assessment of the Parent Board s performance relative to this Policy, as well as performance reviews of individual directors, the Chairman & CEO, and Parent Board Committees based on criteria that includes clearly defined strategic and personal goals and objectives; o. periodically assessing the effectiveness of the governance system to identify weaknesses and implement corrective action; p. aligning compensation for Parent Board Committee members and Key Executives to the Group s long-term business strategy to avoid excessive risk-taking and overdependence on short-term performance; q. exercising due diligence in the oversight of external auditors; and r. setting clear limits for the Parent Board and Key Executives on the pursuit of private interests that might conflict with their terms of services and duties to the Group. Information Classification: Public Page 21 of 34

22 C1.1 Background STANDARD C: SUBSIDIARY BOARDS OF DIRECTORS Each Subsidiary Board 7, under the guidance of the Parent Board, is responsible for providing appropriate oversight of their entity s business. The Subsidiary Boards have overall responsibility for the proper stewardship of the Subsidiary in all its undertakings. The Subsidiary Boards shall meet at regular intervals throughout the year, as defined in their respective Bye- Laws or local law or regulation as applicable, to discharge their responsibilities for all important aspects of the Subsidiary s affairs. In any instance where a conflict arises between this Standard C and applicable law, the latter will take precedence. A Board comprising of Executive Directors is deemed sufficient for operational Subsidiaries, that provide support services to other Group entities, such as in Halifax and Mauritius C1.2 Standards C1.2.1 Administration Subsidiary Boards shall establish a formal meeting schedule and record meeting attendance of individual directors to assess performance of their responsibilities. Additionally, Subsidiary Boards will keep written minutes for all meetings and have minutes formally reviewed, approved and retained as permanent records, in accordance with the Group Records Retention Policy. New directors must undergo orientation aimed at familiarising themselves with the applicable Subsidiary s and the Group s business, industry and corporate governance practices, including internal policies and significant legal and regulatory requirements. C1.2.2 Compensation Non-Executive Directors of Subsidiary Boards may receive their compensation in cash, in the form of common shares of the Parent or a mixture of the two. C1.2.3 Subsidiary Board Composition Subsidiary Boards shall have an appropriate composition of directors who are capable of exercising judgment independent of management influence or inappropriate external interests. Subsidiary Board composition will be defined by local applicable legislation and regulation. Independence and objectivity are enhanced, where it is appropriate to do so, by including a sufficient number of qualified directors capable of providing perspectives from other businesses and insight into local conditions, and serving as a significant source of management experience. This is likely to include the appointment of Senior Executives from within the Group rather than external Directors. 7 This applies to Subsidiaries classified as either a regulated jurisdictional subsidiary or support services subsidiary Information Classification: Public Page 22 of 34