These are the primary functions of the Board, and should be the main focus of the Board s attention and activities.

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1 TERMS OF REFERENCE FOR THE BOARD OF DIRECTORS Introduction The Board of Directors is responsible under law for supervising the management of the Bank. This duty is codified in the Bank Act. The Board of Directors has the authority and obligation to protect and enhance the assets of the Bank in the interest of the shareholder. Although Directors may be elected by the shareholder to bring special expertise or points of view, they are not chosen to represent a particular constituency. The Directors are solely accountable to the Bank in their capacity as a Bank Director. Regular Board and committee attendance, preparation, and active participation in setting goals and requiring performance in the interest of the Bank evidence the involvement and commitment of Directors. Duties of the Board The Board operates by delegating certain of its responsibilities to management and reserving certain powers to itself. The Board s principal duties fall into five main categories 1 Approval of: 1. Short-term and long-term enterprise-wide business objectives, strategy and plans (capital, financial, liquidity), including the Risk Appetite Framework. 2. Significant strategic initiatives or transactions, such as mergers and acquisitions; 3. Internal control framework; 4. Appointment, performance review and compensation of the CEO and, where appropriate, other members of Senior Management, including the heads of the oversight functions; 5. Succession plans with respect to the Board, CEO and, where appropriate, other members of Senior Management, including the heads of the oversight functions; 6. Mandate, resources and budgets for the oversight functions; and 7. External audit plan, including audit fees and the scope of the audit engagement. These are the primary functions of the Board, and should be the main focus of the Board s attention and activities. The Board should provide high level advice to management on the following activities, for which management is accountable: Significant operational and business policies; Business and financial performance relative to the Board-approved strategy and Risk Appetite Framework; Compensation policy for all human resources, to be consistent with Financial Stability Board (FSB) Principles for Sound Compensation and related Implementation Standards; Implementation of internal controls, including their effectiveness; Organizational structure; and 1 OSFI Corporate Governance Guideline (2013 Version)

2 Compliance with applicable laws, regulations and guidelines. Each of these duties creates the specific oversight responsibilities, described below: 1. Short and Long Term, Strategies, and Plans. Including the Risk Appetite Framework 2 The Board has the responsibility to monitor the Bank s progress towards its goals, revising and altering direction in light of changing circumstances, and taking action when performance falls short of its goals or special circumstance warrant such action. The Board must understand the principal risks of all aspects of the business in which the Bank is engaged and achieve a proper balance between risks incurred and potential returns. The Board must ensure that there are in place policies and systems, which effectively establish the risk framework and monitor and manage the risks with a view to the long-term viability of the Bank. The Board must ensure that there are in place policies and processes to ensure that the duties of the Directors as stipulated in various Acts are understood and executed Significant Strategic Initiatives or Transactions The Board has the responsibility to develop and approve the mission of the Bank, its goals and the strategies by which it proposes to reach those goals. The Board has the responsibility to ensure congruence and compatibility between shareholder expectations, Bank plans, and management performance. 3. Internal Control Framework The Board has the responsibility for approving and monitoring compliance with all significant policies and procedures by which the Bank is operated. The Board has a responsibility for ensuring that the Bank operates at all times within applicable laws and regulations, and to ethical and moral standards. The Board is responsible for ensuring control and information systems are in place to ensure the effective discharge of all of the Board s responsibilities. 4. Appointing, Monitoring and Compensating Senior Management The Board must ensure management of the highest caliber is appointed and supervised. The Board will assess the CEO s performance against objectives established by the Board in co-operation with the CEO and will assess his or her contribution to the achievement of the corporate strategy. This assessment will be the basis for CEO remuneration. 2 As described in OSFI s Corporate Governance Guideline 3 This would include Acts such as the Proceeds of Crime; Privacy, etc.

3 The Board will understand and approve incentive based compensation plans to ensure that there is an alignment of risk and reward; and that the incentive programs do not reward undue risk taking. The Board will set a compensation philosophy for the Bank. It will ensure that the compensation for the CEO and senior management is appropriate in relation to the organizational needs and sector comparables. 5. Succession Planning for Senior Management and Oversight Functions The Board will ensure that the Bank has in place programs to develop management and must also provide for the orderly succession of management and the heads of oversight functions (such as Risk and Internal Audit). 6. Mandate, Resources and Budgets for the Oversight Functions The Board will ensure though their questioning of management and the heads of oversight functions, that appropriate resources (including financial) are available for oversight. The Board will ensure the mandates for the oversight functions are appropriate in light of the Bank s activities and in light with the Risk Appetite Framework. 7. External Audit Plan, Fees, and Scope of Engagement The Board has the responsibility for ensuring that the financial performance of the Bank is reported to the shareholder on a timely, regular and accurate basis, in accordance with International Financial Reporting Standards. In addition, an effective Board will utilize the following standards: Communications The Board has the responsibility for timely reporting to the regulator and shareholder of any developments that have a significant and material impact on the value of the Bank s assets. The Board has responsibility for reporting annually on its stewardship for the preceding year. To fulfil its responsibilities, the Board relies on Senior Management to provide it with sound advice on the organizational objectives, strategy, structure and significant policies. The Board relies on the objective advice of the oversight functions which help the Board to fulfil its role of stewardship and oversight of the operations by validating whether the internal controls are effective and whether the institution s operations, results, and risk exposures are reliably reported. Governance Practices The Board is responsible for ensuring its own effectiveness. This will include ensuring proper understanding of duties, responsibilities of individual directors, the Board as a whole and each committee, that independent judgment 4 is exercised in decisioning at the Board table. 4 Independent of management

4 The Board is responsible for ensuring its own succession, training and development, including the establishment of criteria for selection of Directors, access to effective orientation programs, and ongoing training and development initiatives. The Board should regularly conduct a self-assessment of the effectiveness of Board and Board Committee practices, occasionally with the assistance of independent external advisors. The Board will consult with, and provide advice to, the Shareholder on nominees for the Citizens Board with respect to needs for particular skills, experience and attributes. Other Functions In addition to the duties set out above, the Board has specific duties relating to the administration of the Bank. These duties are outlined in the policies of the Board and are taken from regulations and legislation and other pertinent guidelines 5. Directors must ensure that they are knowledgeable of the governing policies set by the Board and are responsible for ensuring the policies are updated and duties are executed. Other specific functions are as follows: 1. Call shareholder meetings as required; 2. Appoint the External Auditor and fix Auditor s remuneration; 3. Ensure the External Auditor is provided full information and full cooperation; 4. Oversee the business and affairs of the Bank; 5. Ensure compliance with the Bank s articles and bylaws, 6. Approve payments to the shareholder; 7. Approve the annual operations budget and any major changes thereto; 8. Approve all significant capital expenditures; 9. Approve all significant corporate decisions; 10. Receive and/or approve the reports of the Internal and External Auditors; 11. Approve the financial statements of the Bank; 12. Elect all Board Officers of the Bank and its subsidiary, and appoint the other Officers in conjunction with the CEO; 13. Receive reports from the CEO on operations and strategies and financial results; 14. Receive reports from management as to compliance with various regulatory requirements (including but not limited to the Bank Act) Authorize Officers of the Bank to sign documents and take financial action on behalf of the Bank, and make banking arrangements; 16. Authorize the CEO to appoint employees to various positions and to fix their salaries 17. Review compliance by the CEO of his actions within the requirements of the Board policies; 18. Serve individually as advisors to the CEO and with his or her approval, to other employees of the Bank; 19. Make bylaws; and transact any other business. 20. Execute specific duties as articulated in governing policies set by the Board. 5 For example, OSFI Guidelines 6 See summary of Bank Directors Duties as prepared by McCarthy Tetrault by letters dated January 30, 2003, March 15, 2004, December 31, 2004

5 Reliance on Management and Oversight Functions The Board can expect: Management will provide it with sound advice on the organizational objectives, strategy, structure and significant policies; Management will set out and analyze options for the Board, identify potential trade-offs of each option, and make and support recommendations; Management will ensure that the information and material presented to the Board is relevant, timely, and packaged in a manner that enables the Board to focus on key issues and to make informed decisions; Management to provide assurances to the Board that policies, processes and controls are adequate, that they are operating appropriately, and that risk is appropriately controlled; Oversight functions to help the Board fulfil its role of stewardship and oversight of the operations by validating whether the controls within its business units are effective and whether the institution s operations, results and risk exposures are reliably reported. Approved by the Board: May 29, 2015 Supersedes: May 29, 2014

6 Following are the major items to be addressed at the quarterly meetings Quarter Big Topic Items Management Governance Items Q1-February Review and discuss year end CEO Performance Year end and financial results objectives for next year Performance on Strategic Plan Targets & Audited Financial Statements review and approve from Board Committees for meetings Industry Happenings Report Ethical Policy receive from parent Board. Q2-May Performance on Strategic Plan Targets & Financial Results and year to date forecast from Board Committees for meetings Update of Board and Committees Terms of Reference Board Committees Composition and Chairs Senior Management Succession Planning Annual Regulatory Filings Required Annual Waiver and Resolutions Vancity Group Board Signing Authority Policy - receive Meeting schedule for following year

7 Quarter Big Topic Items Management Governance Items Q3-July Performance on Strategic Plan Targets & Financial Results and year to date forecast from Board Committees for meetings Q4-November Business Plan, Capital Plan, and Budget Performance on Strategic Plan Targets & Financial Results and year to date forecast from Board Committees for meetings Affirm the officers of the Bank and Trust (including functional positions)