Board of Directors (Board) Charter and Terms of Reference

Transcription

1 Board of Directors (Board) Charter and Terms of Reference 1. Reference This Corporate Governance document would be reviewed as and when necessary as the Board may deem appropriate to ensure its effectiveness This document which supersedes the previous version also contains the charter and the term of reference of the Board of Directors of AI Rajhi Banking and Investment Corporation (Malaysia) Bhd. (the Bank) is set out as a guide on the principles and operation of the Bank's Board of Directors (Board). 2. Corporate Governance Policy The Bank's corporate governance policy is formulated on the key fundamental concepts of responsibility, accountability and transparency. This governance policy contains broad guidance on board matters, management oversight, accountability and audit as well as transparency. This governance policy shall be in compliance with BNM Guidelines on Corporate Governance for Licensed Islamic Bank (GP1-i) and Section 53A of the Islamic Financial Services Act Charter The Board shall set the Bank's vision, strategy and corporate values. The Board shall adopt a sound corporate governance standards and practices to ensure that the Bank is managed safely and soundly where risk taking activities and business prudence are appropriately balanced to maximize shareholders' returns and protect the interests of all stakeholders. The Board's key roles include:- ensuring sound and prudent policies and practices of the Bank. The Board shall perform effective oversight for effective check and balance in the overall management of the Bank; responsible for proper s t e w a r d s h i p of the Bank; (iii) uphold its fiduciary responsibility to act in the best interest of the Bank, its shareholders and stakeholders; Product, Innovation & Digital Committee ( PDIC ), Term of Reference 1

2 (iv) continue to develop and maintain an appropriate level of expertise within the Bank as the Bank grows in size and complexity. 4 Terms of Reference The Terms of Reference of the Board of Directors shall include:- To review and approve strategies, business plans and significant policies and monitor management s performance in implementing them. To set corporate values and clear lines of responsibility and accountability that shall be communicated throughout the Bank. (iii) To ensure competent management. The Board should ensure the effective process to select and appoint key senior management, approve succession planning policy and monitor senior management s performance on an ongoing basis. (iv) To ensure the operations of the Bank are conducted prudently and within the framework of relevant laws and policies. (v) To ensure that the Bank establishes comprehensive risk management policies, processes and infrastructure to manage the various types of risks. (vi) To establish and institute comprehensive policies, processes and infrastructure to ensure Shariah compliance in all aspects of the Bank s operations, products and activities. (vii) To set up an effective internal audit department, staffed with qualified internal audit personnel to perform internal audit functions covering the financial, management and Shariah audit. (viii) To establish procedure to avoid conflict of interest and selfserving practices including dealings of any form with related entities. (ix) To ensure the interest of the depositors and investment account holders are protected. Product, Innovation & Digital Committee ( PDIC ), Term of Reference 2

3 (x) To establish and ensure the effective functioning of various board committees. (xi) To ensure that the Bank has a beneficial influence on the economic well-being of Malaysia and its community. (xii) To deliberate, review and approve on ALL financing, credit and investment related proposals and/or any variations to the terms and conditions including restructuring, rescheduling and their respective periodic reviews, that are escalated to the Board in line with the authority limits. Also included in the responsibilities are the deliberation, review and approval on ALL of (that are escalated to the Board in line with the authority limits): (a) (b) (c) The Bank s impaired, classified and watch-list financings, credits and investments. Financing, credit and investment related proposals and/or any variations to the terms and conditions including restructuring, rescheduling and its periodical review involving Connected Parties 1. Financing, credit and investment related provisioning and write offs. 5 Directors General Responsibilities and Obligations The Directors must be aware of its responsibilities and legal and fiduciary obligations under the laws, legal and fiduciary obligations under the laws, guidelines and regulations. A director's responsibilities will include (but not limited to):- at all times act honestly and use reasonable diligence in the discharge of his duties. act bona fide and in the interest of the Bank. (iii) be aware of the Bank's operating environment and promote sound and safety of the Bank and its stakeholders. (iv) contribute actively to the functions of the board. 1 References: 1) Bank Negara Malaysia Garis Panduan 6-i (GP6-i) (BNM/RH/GL/002-15) Guidelines on Credit Transactions and Exposures with Connected Parties for Islamic Banks and 2)applicable internal policies regarding Connected Parties. Product, Innovation & Digital Committee ( PDIC ), Term of Reference 3

4 (v) discharge his duties and responsibilities effective; and (vi) objectively question the management. Responsibilities of Independent Directors Independent directors shall ensure a strong element of independence on the Board and enhance accountability in the Board s decision making process. The responsibilities of an independent director shall include:- provide and enhance the necessary independence and objectivity of the Board; ensure effective checks and balances on the Board; (iii) mitigate any possible conflict of interest between the policy-making process and the day-to-day management of the Bank; (iv) constructively challenge and contribute to the development of business strategy and direction of the Bank; and 6 Functional Matrix Reporting (v) ensure adequate systems and controls to safeguard the interests of the Bank are in place. The Board shall ensure that it provides active oversight on the overall operations and performance of the Bank; The management shall remain accountable in the day to day management of the Bank and its business operations; (iii) The Board shall establish specialized board committees to oversee major functional areas which require in-depth consideration and delegate certain duties to the committees. The Board shall remain responsible for the decisions of the committees:- (a) Nominating Committee (b) Remuneration Committee (c) Risk Management Committee (d) Audit Committee (e) Shariah Committee Product, Innovation & Digital Committee ( PDIC ), Term of Reference 4

5 7 Composition of the Board The Board shall determine the appropriate size of the board for effective board deliberation. The Board shall consist of nonexecutive directors as well as independent directors. 8 General Oversight The Board shall ensure clear division of responsibilities, authority and accountability throughout the Bank. There are at least four (4) important forms of oversight:- Oversight by the Board; Oversight by individuals not involved in the day-to-day management of the different business areas; (iii) Direct line supervision of various business areas; and (iv) independent risk management, compliance and audit functions. 9 Appointment of Directors, Chief Executive Officer and Senior Management 10 Remuneration packages for Directors, Chief Executive Officer and Senior Management The Board shall ensure a formal and transparent process and policy for the appointment of directors, CEO and senior management. The Board shall establish a formal and transparent procedure for fixing the remuneration packages of directors, CEO and senior management and shall ensure that the remuneration policies and practices shall be in line with the Bank s ethical values, objectives and culture. 11 Board Meetings The Board shall meet regularly and be furnished with complete and timely information from the management to monitor the financial condition and deliberate important strategic issues. 12 Board Performance The Board shall implement a process through the Nominating Committee for an annual assessment of the effectiveness of the Board and performance of the CEO. 13 Conflict of Interest The directors, officers and employees of the Bank must conduct their business with highest level of ethical value. The Board shall establish procedure to address a conflict of interest situation and shall ensure that senior management implements policies to identify, prevent or appropriately manage and disclose potential conflicts of interest situations that may arise. The Board shall ensure that related party transactions are made on an arm s length basis and establish policies and procedures Product, Innovation & Digital Committee ( PDIC ), Term of Reference 5

6 for approving and monitoring these transactions. 14 Clear Separation of Shareholders and Management Function 15 Establishment of Robust Audit Requirements 16 Effective Communications with Shareholders and Stakeholders 17 Sound and Effective Corporate Governance 18 Accountability and Disclosure 19 Compliance Governance The Board shall ensure the clear separation between the shareholders and management function. The Board shall ensure robust auditing requirements and the auditor, Board and management shall maintain professional and objective relationships. The Board shall maintain an effective communication policy that enables the Board and management to communicate effectively with its shareholders, stakeholders and the public. The Board shall adopt comprehensive disclosure requirements to facilitate market discipline and sound corporate governance so that shareholders, stakeholders and market participants can effectively have an understanding of the financial and management position of the Bank. The Board shall be responsible for ensuring that the system for monitoring and control of the Bank s material risks and adequate and effective operational procedures, internal controls and systems are in place for assessing, measuring, controlling, monitoring and reporting of risks. The Board of Directors shall ensure, where applicable, the compliance and accountability to the following:- 1. Memorandum & Articles of Association; 2. Islamic Financial Services Act 2013; 3. BNM Guidelines (BNM Garis Panduan or GPs and Circulars); 4. Companies Act 2016; 5. Malaysian Code of Corporate Governance; 6. IFSB Guidelines and Standards; and 7. Other relevant laws and regulations currently being enforced. In the event of conflict, the Islamic Financial Services Act 2013 and the BNM GPs will prevail. -End of document- Product, Innovation & Digital Committee ( PDIC ), Term of Reference 6