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Board Charter

1.0  Overview

1.1 The purpose of the Board Charter is to outline the principal role of the Board of Directors (Board), the demarcation of the roles, functions, responsibilities and powers of the Board, various Board Committees of the Bank and matters reserved for final decision-making or pre-approval by the Board; and the policies and practices of the Board in respect of matters such as conflicts of interest and convening of Board meetings.

1.2 This Charter further defines the specific responsibilities of the Board of Directors, in order to enhance coordination and communication between the Chief Executive and the Board and more specifically, to clarify both Board and Management accountability for the benefit of the Bank and its shareholders.

2.0   Board’s Role, Authority and Composition

2.1 Role of the Board

2.1.1 The principal role of the Board is to oversee the implementation of the Bank’s strategic initiatives and its functioning within the agreed framework, in accordance with relevant statutory and regulatory structures. The Board ensures the adequacy of financial and operational systems and internal control, as well as the implementation of corporate ethics and the code of conduct.

2.1.2 The Board has delegated responsibility for overall management of the Bank to the Chief Executive.

2.1.3 The Board reserves a formal schedule of matters for its decision to ensure that the direction, management and control of the Bank rests with the Board. This includes strategic issues and planning, performance reviews, material acquisition and disposal of assets, capital expenditure, authority levels, appointment of auditors and review of the financial statements, financing and borrowing activities including annual operating plan and budget, ensuring regulatory compliance and reviewing the adequacy and integrity of internal controls.

2.1.4 All policies pertaining to Bank’s operation and functioning are to be approved by the Board.

2.1.5 The Board is responsible to decide and circulate the agenda for the Annual General Meetings of the shareholders.

2.1.6 The Board must ensure equitable treatment to the minority shareholders.

2.2 Authority

2.2.1 The Board of Directors is the ultimate decision making body of the Bank except for matters reserved for the shareholders of the Bank.  

2.2.2 Consistent with the Board’s power to delegate to the Management the day-to-day operation of the Bank’s business, the Board shall exercise judgment in establishing and revising the delegation of authority for Board Committees and Management. This delegation could be for   authorisation of expenditures, approval of credit facilities and for other corporate actions.  Such delegation may be approved and expressed under various policies of the Bank. The thresholds for the identified authorities will depend upon the operating requirements of the Bank.

2.2.3 The issues of major capital expenditure, divestitures, mergers and acquisitions, certain strategic investments would be within Board’s authority.

2.2.4 The recommendations of the Committees will be referred to the Board.  In the event that the Board is unable to approve a decision of the Committee, the matter will be referred back to the Committee for further consideration.

2.2.5 The Board has full authority to seek any information it requires from the Management or any employee of the Bank.

2.2.6 The Board reports to and is accountable to the shareholders of the Bank.


2.3 Board Appointment and Remuneration

2.3.1 Directors will be issued with Letters of Appointment.

2.3.2 The form and amount of Director compensation is determined by the Board based on the Directors Compensation Policy.

2.4 Board Composition and Skills

2.4.1 The Board composition will be guided by the Bank’s Memorandum of Association and Articles of Association and shall presently comprise of 12 members.

2.4.2 The definitions of ‘executive directors’, ‘non-executive directors’ and ‘independent non-executive directors’, shall carry the same meanings as that defined (from time to time) by the Central Bank of Bahrain. The present definition as per the Rulebook is reproduced in Appendix 1.

2.4.3 The Board of the Bank recognises the need for composition of the Board to reflect fair mix of independence, skills and expertise; and facilitate objectivity in decision making. High levels of professional skills and appropriate personal qualities are pre-requisite for directorships.

2.4.4 Candidates for the Board shall be considered by the Nomination and Remuneration Committee, and recommended to the Board for onward recommendation to the shareholders for appointment, at their next general meeting, in accordance with the qualifications acceptable by the Board taking into consideration the overall composition and diversity of the Board and areas of expertise that new Board members might be able to offer. 

2.4.5 Appointment of Directors is subject to prior CBB approval.


2.5 Other Board Memberships

2.5.1 No Board member may have more than one Directorship of a Retail Bank or a Wholesale Bank. This would mean an effective cap of a maximum of two Directorships of financial institutions inside Bahrain. Two Directorships of licensees within the same Category (e.g. ‘Retail Bank’) would not be normally permitted. Bank may approach the Central Bank for exemption where the Directorships concern banks or financial institutions within the same group.

2.5.2 The number of other company boards on which a Director may serve shall be subject to a case-by-case review by the Nomination and Remuneration Committee, in order to ensure that each Director is able to devote sufficient time to perform his or her duties as a Director.


3.0   Principal responsibilities of the Board, the Chairman and the Chief Executive

The key responsibilities of the Board, the Chairman and the Chief Executive are outlined in Appendix 2.


4.0 ELECTION OF DIRECTORS, BOARD MEETINGS, RIGHTS OF DIRECTORS:

4.1 Election:

4.1.1 Directors will be elected/appointed by the shareholders at the Annual General Meeting.

4.1.2 Experts who are non shareholders or promoters of the Bank may also be elected as Director.

4.2 Board Membership and Tenure:

Pursuant to the Bank’s Memorandum of Association and Articles of Association, all Directors must retire at least once every three (3) years but shall be eligible for re-election, if recommended by the Board, for a further three-year period.

4.3 Filling of Vacancies on the Board of Directors:

If the office of one of the Board members becomes vacant, he shall be replaced by the member next to him in the number of votes in the latest elections of the Board. The new member shall complete the unexpired term of his predecessor. In other than this case, the Board shall elect by secret ballot a member to replace him from among the candidates nominated by two of the Board members at least until the next meeting of the general assembly. If the vacant offices are equal to one-fourth of the original offices, the Board of Directors shall invite the ordinary general assembly to convene within two months from the date of the last office becoming vacant to fill them. If the vacant offices exceed more than half the number of the Board members, the Board shall be deemed dissolved and new elections shall be called for to elect a new Board of Directors for the company.

4.4 Board Attendance:

All Board members must attend majority of Board meetings within a calendar year and Board membership may be terminated if they are unable to attend three consecutive Board meetings (without lawful excuse notified in writing to the Board).


4.5 Appointment of Board Secretary:

The appointment and removal of the Board Secretary is subject to the approval of the Board. The Board recognises the fact that the Board Secretary should be suitably qualified and capable of carrying out the duties required of the post.

4.6 Meetings and Quorum:

4.6.1 Board meetings will be conducted at least on a quarterly basis (minimum four) and Board Committees will meet as often as required.

4.6.2 The Board Secretary shall prepare and distribute a timetable for the meetings.

4.6.3 Meetings may also be held through video/tele-conferencing facility.

4.6.4 At least seven Directors (including the Chairman and/or Deputy Chairman) are required to attend the Board meetings in person in order to ensure a quorum.

4.6.5 The Chairman will chair all sessions of the Board. In absence of the Chairman at a meeting, the Deputy Chairman will chair the meeting.

4.6.6 The Chief Executive will be a permanent invitee in all Board and its sub-committee meetings. 

4.6.7 The Head of Internal Audit or any other member of the Executive Management may be invited to attend for particular items within their responsibility. The Board may also invite external parties such as the auditors, solicitors and consultants as and when the need arises.

 4.7 Voting Rights:

4.7.1 A duly convened meeting of the Board at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretions vested in or exercisable by the Board.

4.7.2 Any attendee who is not a member of the Board shall not vote on any matter coming before the Board for a vote.

4.7.3 All decisions of the Board will be based on a simple majority of the members present at the meeting in person or by proxy. In the event of a tie, the Chairman or in his absence, the Deputy Chairman of the Board will have a casting vote.

4.7.4 The Board may adopt resolutions by correspondence, including mail, electronic or fax correspondence, provided that in order for resolutions taken in this manner to be valid, they shall be approved by all the members. Any member to whom a proposed resolution is sent and who fails to respond within three working days following the date on which the proposed resolution is sent to him shall be considered to have approved the resolution.


4.8 Meetings and agenda:

4.8.1 The Board of Directors shall meet at the summons of its Chairman or his Deputy or if requested to do so by at least two Directors. A meeting of the Board of Directors shall be valid if attended by not less than seven Directors in person.

4.8.2 The notice of a Board meeting should be given in advance of the meeting. The Chairman, Chief Executive and Board Secretary shall undertake the primary responsibility of preparing the Board’s agenda. The agenda should include matters specifically reserved for the Board’s decision.

4.8.3 Save in urgent cases, as a matter of best practice and to allow sufficient time for Directors to consider the information, the Board Secretary shall provide the members with an agenda and any necessary documentation as early as possible and in general, at least seven days before a meeting takes place. Where there is a need to table a report, a brief précis of findings and/or recommendations should be presented.


4.8.4 A record of Board submissions and papers, and of materials presented to the Board, shall be maintained and held by the Board Secretary together with minutes of meetings. All such records are accessible to members.

4.8.5 Directors shall have complete access to the Bank’s Executive Management through the Chief Executive or through the Board Secretary as per arrangement consented by the Chief Executive.


4.9 Independent Professional Assistance:

The Board members are entitled to obtain independent professional advice relating to the affairs of the Bank or to their individual responsibilities as members subject to approval by the Board. 


4.10 Director’s Professional Development:

4.10.1 The Board is required to be up to date with current business, industry, regulatory and legislative developments and trends that will affect the Bank’s business operations.

4.10.2 Immediately after appointment, the Bank will provide a formal induction, if necessary.

4.10.3 Meetings will also be arranged with Executive Management and the Bank’s auditors. This will foster a better understanding of the business environment and markets in which the Bank operates.

4.10.4 A continuing awareness program is essential and it may take many different forms, through distribution of publications, workshops, presentations at Board meetings and attendance at conferences encompassing topics on directorship, business, industry, regulatory developments.

5.0 Code of Conduct, Conflicts of Interest, Insider Trading

5.1 The members of the Board should ensure that they conduct their affairs with a high degree of integrity, taking note of applicable laws, codes and regulations.

5.2 The Board has approved a Code of Conduct for Directors. The Board has also approved the Code of Ethics for Executive Management and members of staff of the Bank. ‘A separate Whistle Blowing Policy’ covering Directors and all the staff of the bank is adopted’. The Code of Conduct binds signatories to the highest standard of professionalism and due diligence in discharging their duties. The Codes outline areas of conflict of interest, confidentiality and responsibilities of the signatories.

5.3 A Director shall declare to the Board any personal interest, whether direct or indirect (of ‘connected persons’), he may have in matters brought before the Board. This declaration shall be recorded in the minutes and the interested Director shall not participate in the debates or voting on the resolutions to be adopted in this respect.

5.4 The Chairman of the Board shall communicate to the Annual General Meeting, when it is convened, the result with respect to the significant transactions and contracts in which any Director has a personal interest. Such communication shall be accompanied by a special report from the External Auditor.  The Bank shall disclose such transactions in its financial statements/Annual Report.

5.5 All Board members and members of Executive Management must declare in writing all of their and of their ‘connected persons’ holding and interests in BBK and other entities, annually in the form and manner as provided in the Insider Trading Procedure. 

5.6 The Bank has established Insider Trading Procedures, consistent with the CBB guidelines,  to ensure that the Insiders are aware of the legal and administrative requirements regarding holding and trading in the Bank’s securities, with the primary objective of preventing abuse of inside information. The responsibility for ensuring compliance with Insider Trading procedure is entrusted to the Insider Committee of the Board.  The procedural details and requirements are contained in the Insider Trading Procedure.

5.7 All Directors (individuals and institutions who nominate Directors along with their ‘connected persons’) are considered as ‘Insider’. The definition of ‘Insider’ is included in Appendix 1.

5.8 Bank protects members of the Board by insuring them against personal liability as per the Directors' Compensation Policy through a comprehensive Liability Insurance cover.


6.0   Board resolutions and minutes

6.1 The Board Secretary shall minute the proceedings and resolutions of all Board and its Committee meetings.

6.2 Minutes will be tabled for circulation for endorsement at the subsequent meeting by the Board Secretary and approved by the Chairman of the Board of Directors and the members present at the meeting.

6.3 A Director who objects to any resolution adopted by the Board shall have his objection recorded in the minutes.

6.4 All resolutions by circulation should be tabled at the subsequent Board meeting for ratification.


7.0   Board and Committee evaluation

7.1 The Board shall perform a self-evaluation on an annual basis. The Board shall annually review its Charter and its own effectiveness; and initiate suitable steps for any amendments.

7.2 The Board will also review self-evaluations of the Board Committees and consider appropriately any recommendations arising out of such evaluation.


8.0   Communication with Shareholders

8.1 The Bank has an open policy on communication with its stakeholders. The Bank has an approved ‘Disclosure Policy’ which is consistent with Basel II requirements.

8.2 The Board will ensure that the Annual General Meeting (AGM) is conducted in an efficient manner and serves as a crucial mechanism in active shareholder communications. Key ingredients behind this include the supply of comprehensive timely information to shareholders and the encouragement for their active participation in the AGM.

8.3 Shareholders are invited by the Chairman to attend the AGM. The Chairman and other Directors attend the AGM and will be available to answer any questions.

8.4 The Bank is at all times mindful and conscious of its regulatory and statutory obligations regarding dissemination of information to its stakeholders.

8.5 A suitable section on the website may be separately considered to provide appropriate and useful information to the shareholders.

8.6 Bank would advise the Bahrain Stock Exchange issues relating to the shareholders and it would be posted on the Bulletin Board of the exchange.

8.7 Shareholders Meeting

a. The ordinary General Meeting of the shareholders will be summoned by the Chairman of the Board of Directors at the time and place as decided by the Board of Directors subject to provisions of the law in this respect. The Ordinary General Meeting will be held at least once in every financial year with in three months following the end of the financial year of the company. The Board of Directors may summon the Ordinary General Meeting at any time if requested to do so by the Auditors or a number of shareholders representing 10% of the capital of the company provided that they shall have serious cause for such request.

b. The Auditor may summon the Ordinary General Meeting in the cases as per provisions of the Law.

c. The Ministry of Commerce may summon the General Meeting to convene on the lapse of one month following the date fixed for convening such meeting without a meeting being convened, or if the number of members of the Board of Directors falls below the required quorum for holding the Board’s meetings, or at the request of a number of shareholders representing 10% of the capital of the Company provided that they shall have reasonable grounds justifying such request.

d. The Minister of Commerce may by resolution summon the General Meeting to convene whenever he deems that there are reasons requiring such action.

9.0      External Transparency

9.1 The Bank provides information on all events that merit announcement, either on its website – www.bbkonline.com – or through newspapers, stock exchanges and other channels.

9.2 The Bank’s three-year financials are posted on the website together with the last two years’ financials in Bank’s Annual Reports.

9.3 The Bank uses a bulletin board for communicating with its staff on general matters and sharing information of common interest and concern.

9.4 The Annual Report will contain a separate section on Corporate Governance and Disclosures, which will cover details on the number of Board meetings, information on Directors, Board Committees and other related information.  The Chairman’s Report in the Bank’s Annual Report may review major events during the past financial year and the outlook for the future.

9.5 On an annual basis, the Bank will submit, as an attachment to the year-end quarterly Prudential Information Returns (PIR), a report recording the meetings during the year by the Board as per the requirement of the Central Bank of Bahrain.

9.6 The remuneration paid to the Chairman and members of the Board may be published in the Annual Report.


10.0 Conclusion

10.1 This Board Charter had been developed with the intention of providing an informative written reference for Board members and for others who work with the Board.  The provisions in this document are consistent with the regulatory requirements under the Central Bank of Bahrain Rule Book and with best market practice. Although this document sets forth the key principles under which the Board operates; it is a statement of intention.  Accordingly, it is a working document that can change from time to time as the Board considers appropriate and as circumstances and conditions change. 

10.2 This document is not intended to supersede the requirements under Bank’s Memorandum of Association and Articles of Association. In the case of a conflict between this document and the Memorandum of Association and Articles of Association, the provisions in the Memorandum of Association and Articles of Association will govern, unless and until the relative provisions are duly amended through appropriate corporate action.

 

Appendix 1

Definitions

1.        Directors: 
           
The Directors must be identified in the annual report as executive, non-executive, and independent non-executive, as follows, as per
           CBB Rule Book:

a) Executive Director (or 'Managing Director' under the Commercial Companies Law ') - A person who is involved in the day-to-day management and/or is in full-time employment of the bank and/or any of its affiliates or subsidiaries or parent companies. An Executive Director may not occupy the post of 'Chairman';

b) Non-Executive Director - A person not involved in the day-to-day management and/or is not a full-time salaried employee of the bank and/or any of its affiliates, or subsidiaries or parent companies;

c) Independent Non-Executive Director - A non-Executive Director (as defined above), who also: 

  • Is not a 'controller' of the bank (see Note 1).
  • s not an Associate (see Note 2) of a Director or a member of ‘senior management’ (see Note 3) of the bank.
  • Is not a professional advisor to the bank or group (A partner or member of ‘senior management’ of an accountancy or law firm
          that provides services to the bank would not be perceived by the Central Bank as an independent non-Executive Director).
  • Is not a large depositor with, or large borrower from the bank (i.e. whose deposits or credit facilities exceed 10% of the capital
          base of the bank).
  • Has no significant contractual or business relationship with the bank or group which could be seen to materially interfere with the
         person's capacity to act in an independent manner.

  • Note 1

    A controller of a conventional bank licensee is a natural or legal person who either alone, or with his associates:

    (a) Holds 10% or more of the shares in the licensee, or is able to exercise (or control the exercise of) 10% or more of the voting power in
           the licensee; or

    (b) Holds 10% or more of the shares in a parent undertaking of the licensee, or is able to exercise (or control the exercise of) 10% or more
          of the voting power in the parent undertaking; or

    (c) Is able to exercise significant influence over the management of the licensee or the parent undertaking.

    Note 2

    "Associate" includes:

    (a) The spouse or child of a controller;

    (b) An undertaking of which a controller is a Director;

    (c) A person who is an employee or partner of the controller;

    (d) If the controller is a corporate entity, a Director of the controller, a subsidiary of the controller or a Director of any subsidiary undertaking
         of the controller.

    Note 3

    ‘Senior Management’ as per CBB would mean ‘Executive Management’ of the Bank, which is defined below.


    2.   Executive Management

    The definition of Executive Management for the purpose of this document is as adopted by the Nomination and Remuneration Committee.

    ‘Executive Management’ shall mean Chief Executive, General Managers, Assistant General Managers (or equivalent), Direct reports of the CE at senior manager level and higher, General Managers of wholly owned subsidiaries, Head of Internal Audit and the Board Secretary.

    3.  Insiders:

    “Insider” as per CBB Rule Book means any person who has obtained inside information;


    (a) By virtue of his employment or profession;
    (b) Being an officer or shareholder of the issuer of the securities; or
    (c) Through illegal means.

    A person may be an insider if he is already aware that such information is classified as inside information even though none of the above applies to him.

    All persons who have access to or come into possession of material inside information before its public release are considered insiders. Such persons include controlling shareholders, “directors and senior management”, officers and employees, and frequently should also include any officials of the CBB and the Exchange who have access to such information, outside attorneys, accountants, auditors, underwriters, investment bankers, public relations advisers, advertising agencies, consultants and other independent contractors. The husbands, wives, immediate families and those under the control of insiders may also be regarded as insiders. Where acquisition or other negotiations are concerned, the above relationships apply to other parties to the negotiations as well.


    4.  Board Secretary

    Also assumes responsibilities of Company Secretary under current Bank structure and therefore the term ‘Board Secretary’ will refer to Board and Company Secretary as one role.

     

    Appendix 2
    Principal responsibilities of the Board

    Governance

    • Approve the Bank’s corporate governance framework and ensure it conforms to best practices and regulatory and statutory requirements.
    • Approve the organisational/management structure and responsibilities.
    • Provide effective oversight over Management’s activities.

    Strategic

    • Approve the vision and strategy proposed by Management.
    • Approve Management’s long term corporate strategy and performance objectives and ensure appropriate resources are available.
    • Review the bank's business plans and the inherent level of risk in these plans.
    • Assess the adequacy of capital to support the business risks of the bank.
    • Appropriately disseminate strategic plan of Bank.

    Performance Measurement Systems

    • Approve performance objectives and performance measurement systems.
    • Review the performance of Board, Board Committees and Executive Management.

    Business Decisions

    • Approve and monitor the progress of material financial restructurings, including mergers, acquisitions, divestitures and acquisitions, annual budgets, dividends etc. affecting the balance sheet.
    • Approve financings and changes in authorised capital. 
    • Approve entering into, or withdrawing from, businesses or service lines.

    Human Resources

    • Define the goals and objectives of the CE and Executive Management and review performance at least annually.
    • Ensure that succession programs and plans are in place.

    Financial Performance

    • Approve the annual budget and targets, annual financials and interim results and monitor financial performance.
    • Ensure financial results are reported fairly and in accordance with IFRS.
    • Recommend to shareholders the Annual Report / financial statements released by Management and ensure that any reports issued by the Bank, including the financial statements, present a ‘true and fair’ view of its position and performance.

    Compliance

    • Ensure the Bank operates at all times within applicable laws and regulations, including an effective Code of Conduct and Anti Money Laundering and Countering Financing of Terrorism policies.
    • Ensure that the Bank’s policies and procedures manuals comply with all government and regulatory requirements covering all operations.

    Communications

    • The Board should ensure that there is an agreed communications strategy and procedure including agreement about appropriate channels and spokespersons.
    • Develop and implement an investor relations programme or shareholder communications process for the Bank.

    Risks

    • Approve the risk parameters / policies and the Bank’s risk appetite.
    • Ensure principal risks are identified and Management has implemented appropriate systems to manage these risks.

    Internal Controls

    • Assess the adequacy of the systems of risk management, internal control, control environment and legal compliance.

    Delegation of Authority

    • Approve the delegation of responsibilities and authorities to Board Committees and to Executive Management; and reserve certain powers for the Board.

     

    External Auditors

    • Recommend the appointment of the external auditors (and the remuneration payable); to the shareholders and seek their no objection

    Reporting to Shareholders

    • Report annually to the Shareholders on the Board’s stewardship for the preceding year.

    Litigation

    • Monitor litigation that may have a material impact on the Bank.

    Appropriation of Profit

    • Recommend to shareholders on appropriation of profit, payment of dividend, allocation to reserve account, donations and remuneration to Directors.

    Succession Planning

    • Determination of a succession plan for CE and Executive Management.

    Principal Responsibilities of the Chairman

    The Chairman is responsible for the overall leadership and efficient functioning of the Board of Directors. The Chairman of the Board shall have the following duties:

    • Maintain a role in recommending the skills and experience that the Board should contain and exhibit , for its effective operation;
    • Encourage active engagement and participation by all members of the Board;
    • Ensure that new Directors participate in a full, formal and tailored induction program;
    • Identify the development needs of the Board as a whole to enhance its overall effectiveness as a team;
    • Promote the highest standards of corporate governance;
    • Ensure the long-term sustainability of the Bank
    • Ensure the continual improvement in quality and caliber of the Executive Management;
    • Establish a close relationship of trust with the Chief Executive and the Executive Management, provide support and advice while respecting their executive responsibility;
    • Meet regularly with the Chief Executive to discuss issues of importance and to ensure the effective alignment of goals of Executive Management with that of the Board;
    • Provide coherent leadership to the Bank including, in conjunction with the Chief Executive, representing BBK with customers, suppliers, governments, financial institutions, the media, the community and the public;
    • Set the Board’s agenda;
    • Ensure that Directors receive accurate, timely and clear information to enable the Board to take sound decisions, monitor effectively and provide advise to promote the success of BBK;
    • Ensure clear structure for the effective running of the Board Committees.

    Principal Responsibilities of the Chief Executive

    The Chief Executive is responsible for the day-to-day management, operations and administration of the Bank.  The Chief Executive shall have the following duties:

    • Implement, manage and administer corporate business strategy with the aim of executing the business plans and budgets of the Bank;
    • Manage the overall human resources and skills/competencies pool to ensure the effective and efficient running of the Bank;
    • Represent BBK with customers, suppliers, governments, financial institutions, the media, the community and the public;
    • Formulate and recommend strategic objectives and plan of action for continuously enhancing shareholders’ value to Board of Directors;
    • Ensure adherence to policies and procedures, applicable regulations and laws, and monitoring exceptions and serious deviations,;
    • Manage the Assets and Liabilities of the Bank in accordance to Board policy and regulatory requirements;
    • Manage the risk portfolio of the Bank.

     

     

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