S T O P A N S K A B A N K A AD S K O P J E CORPORATE GOVERNANCE CODE OF STOPANSKA BANKA AD - SKOPJE Skopje, April 2013 Page 1 of 12 1
On the basis of Article 26 of the Statute of Stopanska Banka AD Skopje (A.D. No. 248/12.12.2012, revised text) and Part III of the Decision on the basic principles of corporate governance in a bank ("Official Gazette No. 159/2007), the Shareholders Assembly of Stopanska Banka AD Skopje on the meeting held on 22.05.2013, passed I. INTRODUCTION CORPORATE GOVERNANCE CODE OF STOPANSKA BANKA AD - SKOPJE STOPANSKA BANKA AD - SKOPJE (hereinafter Bank ), recognizing corporate governance efficiency as a key condition of the Bank s stability and successful work on the financial market, as well as the importance of high standards of corporate governance and business ethics for the successful conduct of its business, and being aware of its liability to shareholders and stakeholders, with a view to improving, safeguarding and protecting their interests, adopts this Code of Corporate Governance (hereinafter the Code ). This Code was developed on the basis of the OECD (Organization for Economic Cooperation and Development) Principles of Corporate Governance, (2004), the Basle Committee on Banking Supervision recommendations on Enhancing Corporate Governance in Banking Organizations (1999), the Banking Law, the Company law and Bank Statute. Corporate governance refers to the general management of the Bank by the General Meeting of Shareholders and the Supervisory Board, which includes the totality of their relations with the Board of Directors of the Bank and other stakeholders (employees, creditors, depositors, other customers, partners, counterparties, banking regulation and supervision agencies, governmental authorities, and public authorities) with regard to: - defining strategic goals for the Bank and an effective governance system; - creating work incentives in order that the governing bodies and employees of the Bank carry out all the necessary actions towards achieving the strategic goals of the Bank; - achieving a balance of interests between shareholders, members of the Supervisory Board and Board of Directors of the Bank, and other stakeholders; and - compliance with the laws, the Statute of the Bank, and other internal documents, as well as the professional ethics principles and international best practises. This code contains provisions regulating at least the following: - Procedure for convening the Meeting of Shareholders, the voting procedures, shareholder's rights, including the right of the minority shareholders; - Cooperation between the Supervisory Board and the Board of Directors, the type, the deadlines and the manners in which the Board of Directors submits information and documents to the Supervisory Board and the procedure in cases of conflict of interest. - The obligations and responsibilities of the Supervisory Board, the Board of Directors and other bodies and the manner they operate in; - The criteria and the rules for appointing members of the Supervisory Board and the manner in which they receive their remuneration; Page 2 of 12 2
- Collective responsibility of the Board of Directors for financial and key nonfinancial statements; - Improvement in accounting standards; - Efficient cross-border shareholder participation in the running of the bank based on modern IT tools; - Adoption of prudential rules based on the Basel II model (minimum regulatory capital, regular dialogue with supervisors, transnational regulatory burdens) - Criteria and rules for appointing members of the Board of Directors of the Bank, the members of the Audit Committee, the members of the Risk Management Committee and other Bank bodies; - The role, the meaning and the operating area of the internal audit, the external audit, inspection, risk management, financial analysis and the organizational part competent for performing the compliance function; - Enhanced transparency and disclosure obligations, with a focus on the production of reliable financial statements. II. BASIC PRINCIPLES OF CORPORATE GOVERNANCE CODE With a view to upgrading its corporate governance policy, the Bank declares its commitment to the following basic principles of corporate governance. Principle of Guarantee of Shareholders Rights and Interests Principle of Ownership Structure Transparency and Information Openness Principle of Efficient Governance Principle of Distribution of Authority between Governing Bodies and Effective Control Principle of Effective Interaction with Employees and Fair Remuneration Principle of Effective Control of Financial and Economic Activities Principle of Observance of Laws and Ethic Standards Principle of Social Responsibility and Development of Partnership relations with Shareholders and Stakeholders. III. IMPLEMENTATION OF THE BASIC PRINCIPLES OF THE CODE 3.1. Principle of Guarantee of Shareholders Rights and Interests The Bank shall guarantee all its shareholders an opportunity to exercise their rights as stipulated by laws, the Statute of the Bank and the Rules of Procedure of the Shareholders Assembly. All shareholders have equal rights and shall be treated equally. The Bank shall guarantee its adherence to the one share/one vote principle. Page 3 of 12 3
The Shareholders Assembly shall work at meetings - Annual Shareholders Assembly Meeting or Extraordinary Shareholders Assembly Meeting. The Shareholders Assembly Meetings shall be convened and held within time periods stipulated by Company law. The Shareholders Assembly Meetings may be convened through invitation to all shareholders or by publishing a public call to the shareholders at least in one daily newspaper. The period from the day the public call was published, i.e. the day the invitation was sent until the day of holding the Meeting may not be longer than 50 days neither shorter than 21 days from the date of the Shareholders Assembly Meeting. The Shareholders Assembly may work (quorum for work), when authorized participants who hold at least majority of the total number of the voting shares are present or represented at the Meeting. The decisions of the Shareholders Assembly shall be passed by majority of the voting shares present or represented at the Shareholders Assembly Meeting, unless the laws or this Statute stipulate greater majority or other conditions in relation to the majority for passing decisions of the Shareholders Assembly. The decisions of the Shareholders Assembly, including the decisions on appointment or dismissal of Supervisory Board members, shall be passed by public voting. The Bank adheres to the principal of protection of minority shareholders rights. The minority shareholders shall be provided with all legally prescribed and necessary information regarding Bank operations through the office of the Investor Relation Officer. All shareholders and especially minority shareholders are encouraged to exercise their right to information in regular, at least quarterly manner. The Bank undertakes all activities, on a best effort basis, to provide to all shareholders but particularly the minority shareholders the possibilities to exercise their rights to include items and propose decisions on the agenda for an shareholders assembly meeting, to ask question before and during the shareholders assembly meeting and all related rights, in accordance with applicable regulative and international best practises. The role of the Investor Relation Officer shall be performed by the Bank Secretary. 3.2. Principle of Ownership Structure Transparency and Information Openness Pursuant to legal and statutory requirements the Bank shall submit information about its shareholders, as well as shareholders shareholders to relevant institutions and to the public. Information pertaining to securities issued by the Bank shall also be disclosed on the Bank web-site in amounts, at times, and according to a procedure established by law. Page 4 of 12 4
The Bank shall continuously improve it s adherence to the principle of enhanced transparency and disclosure obligation, particularly paying attention to preparing and disclosing reliable financial statements. The Bank shall disclose its audited financial statements in full and in due time on its web site. The Bank shall endeavour to provide its shareholders, investors, and other stakeholders with free and easy access to Bank information, its key operating results, plans, and development prospects. In disclosing Bank information, a reasonable balance shall be maintained between information transparency, operational interests of the Bank, and compliance with relevant laws. 3.3. Principle of Efficient Governance The Bank shareholders and Supervisory Board shall establish strategic objectives and set of corporate values that shall be communicated within the Bank and to the public. The governance policy of the Bank shall aim at achieving its long-term strategic goals, continuous improvement of its financial performance indicators, and the appreciation of Bank assets. The target values of Bank performance indicators, as recommended by the Basel Committee on Banking Supervision, shall be set by the Supervisory Board of the Bank on an annual basis. The Bank shall establish system of prudential rules based on the Basel II model (minimum regulatory capital, regular dialogue with supervisors, trans-national regulatory burdens). The Supervisory Board shall supervise the operations of the Board of Directors, shall determine the division of responsibilities between the members of the Board of Directors, approve the policies for conducting financial activities and supervise their implementation. The Supervisory Board shall be responsible for the stability and efficiency of the Bank and for the protection of the Banks depositors, as well as to ensure good practice and management and timely and accurate financial reporting to the Central Bank. The Supervisory Board s rights and responsibilities in more detailed manner are determined by the Law, the Bank Statute and the Rules of Procedure of the Supervisory Board. The Board of Directors shall manage and represent the Bank and shall be responsible for the implementation of the decisions of the Shareholders Assembly and the Supervisory Board. Page 5 of 12 5
The Board of Directors rights and responsibilities in more detailed manner are determined by the Law and the Bank Statute. The manner of operation of the Board of Directors is regulated with rules of Procedure passed by the Board of Directors and approved by the Supervisory Board. The rights and responsibilities of the Audit Committee, Risk Management Committee and Credit Committees are determined by the Bank Statute. The Bank Supervisory Board and the Board of Directors shall cooperate on a permanent basis. The cooperation between the Supervisory Board and the Board of Directors should particularly refer to the following: - defining the Bank's business objectives; - strategies for undertaking and management of risks; - the Bank's risk profile; - policies for fulfilment of the business objectives and the objectives relative to the Bank's risk profile. The Board of Directors shall report to the Supervisory Board at least on a monthly basis through submitting a monthly Board of Directors Report on the financial and commercial operations of the Bank. The report contains short info on macroeconomic movements in the reported period, info on key performance indicators, evaluation of budget/target achievements, and info on major risk factors and report on operations in the reported period. The Board of Directors members are encouraged to establish frequent communication with the Supervisory Board. At least once per year the Board of Directors shall submit a report to the Supervisory Board on the layout and the efficiency of the internal control system. If a member of the Board of Directors deems that the decisions adopted by the Board of Directors conflict the business objectives, strategies and policies of the Bank, and conflict the responsibilities and the tasks of this body envisaged in the Banking Law and the Bank's internal acts, he shall state his opinion in writing together with appropriate explanation and the same shall be in full presented in the Minutes of that BoD meeting. If a member of the Supervisory Board considers that the decisions adopted by the Supervisory Board conflict the business objectives, strategies and the policies of the Bank, as well as the responsibilities and the tasks of this body, stipulated in the Banking Law and the Bank's internal acts, he shall state his opinion in writing together with appropriate explanation, which is enclosed in the minutes from the meeting of the Supervisory Board. The Supervisory Board shall submit annual report on its operations to the Shareholders Assembly Meeting. Page 6 of 12 6
The Supervisory Board Annual Report shall contain the data on the following: - the manner the supervisory function is performed; - the cooperation with the Board of Directors; - the internal organization and structure of the Supervisory Board; - possible conflict of interests and the manner in which it was resolved; - the results from assessing its own operations, by individual members and collectively; - presence of each person member on the meetings of the Bank's Supervisory Board, and - performing other operations, according to the law. The Bank acknowledges the crucial importance of the appropriate qualifications of the members of the Bank s bodies, particularly those of the Supervisory Board. The members of the Supervisory Board shall be appropriately qualified, and shall understand their role in the corporate governance of the Bank and shall be capable of actual assessment of the Bank s operations. The members of the Supervisory Board are appointed by the Shareholders Assembly. The proposals to the Shareholders Assembly are given by the Nomination Committee. The Nomination Committee is established by the Supervisory Board and consists of three members from the Supervisory Board members, out of which one is the independent member. The main task of the Nomination Committee is to propose candidates for the Supervisory Board, including the Chairman. When making the nomination the Nomination Committee shall take into consideration the legal requirements and appropriate qualifications for membership and independency stipulated by law and this Code and applicable contractual obligations. Appropriate qualifications for a Supervisory Board member with regard to this principle shall mean: - university degree, at a minimum; - knowledge of the regulations in the banking and/or finance area and knowledge of the financial industry and environment the Bank operates in; - experience contributing to stable, safe and efficient management and surveillance of the Bank operations. With regard to this principle, the member of the Supervisory Board should: - be honest, competent, capable of giving independent assessment and have strong personal integrity; - understand his/her role in the corporate governance and fulfil his/her supervisory role efficiently; - know the Bank's risk profile; Page 7 of 12 7
- know the regulations and take care of establishing and maintaining professional relations with the Central Bank and other competent supervisory and regulatory institutions, of the Bank or of the NBG Group; - demonstrate loyalty and care for the Bank; - avoid conflicts of interest, or possible conflicts of interest; - devote enough time for active fulfilment of his/her obligations; - assess the functioning of the Bank's Board of Directors at least once a year, with the Bank's business policy and operating plans being the initial basis. The written statement on the assessment results shall state the opinion for the fulfilment of the plans and the areas, or the parts of the plans that can be implemented more efficiently. Also, according to the remuneration policy and practices, the written statement shall note possible rewarding of the Bank's Board of Directors; - assess the efficiency of its own operation, identify the weaknesses in the Supervisory Board activities and propose amendments on a periodical basis; - hold regular meetings with the Board of Directors, Risk Management Committee, Audit Committee and the Bank's Internal Audit Department.; - give proposals for good corporate governance; - take no participation in everyday management of the Bank. Appropriate criteria for independency with regard to this principle, apart from the ones prescribed by Law, shall mean: - not being an executive or managing director of the Bank or an associated company, and not having been in such a position for the previous three years; - not being an employee of the Bank or an associated company, and not having been in such a position for the previous three years; - not receiving, or having received, significant additional remuneration from the Bank or an associated company apart from a fee received as independent member; - not being a controlling shareholder or a shareholder with a shareholding of more than 5%, or a director or executive officer of such a shareholder; - not having, or having had within the last year, a significant business relationship with the Bank or an associated company, either directly or as a partner, shareholder, director or senior employee of a body that has such a relationship; - not being or having been within the last three years, a partner or employee of the current or former external auditor of the Bank or an associated company; - not having served on the board as a non-executive director for more than seven terms. - not being a close family member (relative in first level in vertical or horizontal line) of an executive or managing director of persons in the situations described above. Page 8 of 12 8
- As well as not having any other relationship with the Bank and/or the associated companies that could interfere with the exercise of independent judgment in carrying out their responsibilities When appointing members of the Board of Directors and other Bank bodies, the relevant authorities shall consider, apart from the legal requirements, that the proposed member has appropriate qualifications, personal characteristics, experience and integrity to contribute in the best possible manner to the successful operation of the Board of Directors and any other relevant body. 3.4. Principle of Distribution of Authority between Governing Bodies and Effective Control. The distribution of authority between Bank bodies as established by law and the Statute of the Bank and determination of their competence and accountability ensure the delimitation of general management, which is performed by the shareholders and the Supervisory Board, and the management of day-to-day operation of the Bank, which is carried out by the Board of Directors and Bank s Organizational units Managers. The procedures of establishing of the bodies of the Bank and the accountability of the Supervisory Board to the Shareholders Assembly shall ensure the effective performance of the Bodies of the Bank. The tasks, authority, establishing procedure, and internal enactments of the bodies of the Bank shall be established by the Statute of the Bank, as well as with other relevant Rules of Procedure. The Supervisory Board shall determine the procedure for approval of outsourcing services/activities to external suppliers. 3.5. Principle of Effective Interaction with Employees and Fair Remuneration The Bank, recognizing that investment in qualified personnel and management structure is the basis of its long-term success shall form a team of professionals and take constant care of personnel development, motivation, social safety, and commitment to corporate values. The remuneration to the Supervisory Board member is determined by the Shareholders Assembly and includes a monthly remuneration fee. The Supervisory Board and the Board of Directors should be certain that the remuneration policy and the appropriate procedures are in line with the corporate culture, the long-term objectives and the strategy, as well as with the control surrounding of the Bank. The remuneration policy shall be approved by the Shareholders Assembly if it provides receiving remuneration in form of shares or other rights enabling acquiring shares. Page 9 of 12 9
The Remuneration Policy shall contain rules and criteria for determining the variable amount of the compensation, the annual bonuses and the other non-monetary benefits. When defining the policy for rewarding the members of the Board of Directors, the following criteria shall be taken into consideration: - the volume of the competencies of each member of the Board of Directors; - their success in performing the function as members of the Board of Directors; - the volume of operations and the Bank's financial standing; - the complexity in the Bank management, having in mind the volume and the complexity of the activities and its organizational structure; - the implementation of the strategy and the annual plan of activities; - the economic conditions the Bank acts under. The Supervisory Board shall establish and appoint the members of the Remuneration Committee. The Remuneration Committee shall be comprised of three Supervisory Board members, the majority of whom should be from the independent members including its Chairman. The Remuneration Committee shall adopt a Procedure regulating its operations At least one member of the Remuneration Committee should have sufficient expertise and professional experience concerning risk management and control activities, specifically with regard to the mechanism for aligning the Remuneration Policy with the Bank s/ risk and capital profiles. The Annual Report on the Bank's operation also contains data on the remuneration policy of the Bank's Board of Directors, pertaining at least to the following elements: variable and fixed compensation in place, including also the approval of annual bonuses, the basic remuneration criteria, the total amounts of the wages of the members of the Supervisory Board and the Board of Directors and of other persons with special rights and responsibilities performing management in the Bank, as well as the total amount of extended loans and other forms of exposures and other assumed liabilities to these persons. The Bank is committed to continuous training of the members of the Board of Directors and all bank employees. 3.6. Principle of Effective Control of Financial and Economic Activities The Shareholders Assembly shall establish an Audit Committee, with members and authorities stipulated by Law. The Audit Committee shall help the Supervisory Board to control and validate its accounting and financial reports, continuously improve its accounting standards, and to assess the performance of the independent auditor and the effectiveness of the Bank internal controls. Page 10 of 12 10
To audit and validate its annual financial reports the Bank shall annually hire a licensed professional and independent audit company that has no conflict of interest with the Bank or its shareholders. The audit company shall be approved by the Shareholders Assembly. The preparation and fair presentation of financial and key non-financial statements lies within the Board of Directors, as a collective. The responsibility of the independent Audit Company is to give opinion of the financial statement based on the performed audit, thus putting independent controlling mechanism in place. The Bank shall have an Internal Audit Division performing the Internal Audit Function of the Bank that is an independent and objective, assurance and consulting activity designed to ensure compliance with the policies and procedures so as to add value and improve the organization s operational effectiveness. It helps the organization accomplish its objectives by (a) bringing a systematic, disciplined approach in evaluating the effectiveness of risk management, control and governance processes, (b) recommending appropriate measures to improve their efficiency and effectiveness and (c) monitoring the implementation of corrective actions. The Bank shall maintain and develop a Risk Management function which analyzes the effectiveness of existing methods of identifying, measuring (evaluating), and optimizing the Bank s exposure levels and develops the new ones on an ongoing basis. The Bank performs its function under the supervision of the Central Bank as banking supervisory authority of the country. 3.7. Principle of Observance of Laws and Ethic Standards The Bank shall operate in strict compliance with local laws and regulations, generally recognized principles of law, internal regulations, best banking practises and shall be governed by the highest principles of corporate and business ethics. The Bank shall establish and develop the Compliance Function that shall be responsible for the identification and monitoring of the possible risks from the non-compliance of the Bank s operations with the applicable regulations. Relevant procedures for prevention and combating of money laundering and terrorism financing are in place, as well. The Board of Directors shall approve and implement a written policy to ensure a constant and efficient Compliance Function and shall establish a system which shall ensure its appropriate implementation in the Bank operations. The Code of Ethics approved by the Supervisory Board, shall determine the work standards of the Bank and the standards of behaviour of its employees, aimed at increasing the profitability, financial stability and efficiency of the Bank and promoting the highest ethic behaviour of the Bank employees. The Code of Ethics comprises generally binding rules of conduct, which apply to all Bank employees irrespective of their level of job, including members of the Board of Directors and constitutes an integral part of their employment contracts. Page 11 of 12 11
3.8. Principle of Social Responsibility and Development of Partnership relations with Shareholders The Bank shall uphold the main principles of corporate social responsibility of business and promote the economic growth of the country. The Bank acknowledges its responsibility to shareholders for its performance, to customers for the quality of its banking services, to business partners for the proper performance of its obligations, and to society and the state for respect of individuals and their rights and freedoms, and its contribution to the development of the country economy. The Bank shall take an active part in discussing legislative initiatives aiming to improve banking practices, corporate governance, and other spheres of social life. The Bank, recognizing the importance of maintaining and developing stable relations with stakeholders in shaping its corporate governance strategy, shall build its relations with customers, creditors, business partners, and government employees on the principles of mutual trust and respect, straight dealing, professionalism, inviolability of obligations, full disclosure of relevant information, and the precedence of negotiation and compromise over court proceedings. IV. FINAL PROVISIONS This Code shall come into effect on the date of its approval by the Shareholders Assembly. By entering into force of this Code the Corporate Governance Code A.D. No. 212/27.05.2012 shall cease to be valid. Guided by the interests of its shareholders, creditors, customers, business partners, and counterparties, the Bank shall continuously monitor the compliance of its activities with provisions of this Code. The Bank shall be reviewing this Code on an annual basis. A.D. No. 22.05.2013 S k o p j e SHAREHOLDERS ASSEMBLY Chairman, Page 12 of 12 12