directors’ handbook

HandbookOctober 2018

Directors’

2 3ASBB Directors’ Handbook 2018 ASBB Directors’ Handbook 20182 3ASBB Directors’ Handbook 2018 ASBB Directors’ Handbook 2018

4 5ASBB Directors’ Handbook 2018 ASBB Directors’ Handbook 2018

Contents


Section I: Corporate Governance Guidelines 91. Bank Overview 11

ASBB Corporate governance policy 11

Vision 11

Mission 11

2. ASBB Board of Directors 12

Mandate of the Board of Directors and Directors’ Roles and Responsibilities 12

Board Composition 13

Board Elections System 13

Board Meetings and Attendances 13

Induction and Orientation for New Directors 13

Code of Conduct 13

Evaluation of Board Performance 14

Remuneration of the Directors 14

Compliance 15

Internal control 15

3. Board Committees 15

Executive Committee 15

Audit and Risk Committee 16

Remuneration Committee 16

Nomination & Corporate Governance Committee 16

4. Shari’a Supervisory Board 16

5. Annual General Meeting 17

6. Management Committees 17

Credit / Risk Committee 17

Asset Liability Committee 17

Investment Committee 17

Technology Steering Committee 17

Social Responsibility Committee 18

7. Key policies of the Bank 18

Gifts and entertainment policy 18

Related party transactions 18

Employment of relatives 18

Conflict of interests management policy 18

Whistleblowing policy 19

Key Persons Policy 19

Delegation of Authority Limits 19

8. Disclosures 19

Section II: Board Charter 211. Mission 23

2. Authority 23

3. Secretary to the Board 23

4. Membership 24

5. Notice and Agenda of Meetings 25

6. Quorum and conduct of meetings 26

7. Decisions 26

8. Minutes of Meetings 26

9. Responsibilities of the Board 27

10. Responsibilities of the Chairman 30

11. Prohibition Against the Use of Insider Information 31

12. Other Matters 32

13. Confidentiality 32

Appendix A: Criteria for composition of the Board 33

Appendix B: Code of Conduct 34


Section III: Executive Committee Charter 351. Mission 37

2. Authority 37

3. Secretary 37

4. Membership 37


6. Quorum 38

7. Decisions 38


9. Responsibilities 39



Section IV: Audit and Risk Committee Charter 411. Mission 43

2. Authority 43

3. Membership 44

4. Secretary 44

5. Quorum 45


7. Decisions 45



10. Reporting Responsibilities 51



Section V: Remuneration Committee Charter 531. Mission 55

2. Authority 55

3. Secretary 55

4. Membership 55


6. Quorum 56

7. Decisions 57






Section VI: Nomination and Corporate Governance Committee Charter 611. Mission 63

2. Authority 63

3. Secretary 63

4. Membership 63


6. Quorum 64

7. Decisions 65





Section VII: Code of Ethics 69Purpose 71

Guiding principles 71

Scope 71

Compliance with Laws, Regulations, Rules and Policies 71

Appearance of Good Conduct and Avoidance of Conflicts of Interest 72

Dress Code 72

Employee Ethics 72

Employee Relations 73

Gifts and entertainment 73

Harassment 74

Health Concerns 74

Commitment to Excellence 74

Use of Technology and Assets at the Bank 74

Confidential Bank Information 74

Reporting violations 74

Retaliation 75

Violations 75

Changes to the Code of Ethics 75


Section VIII: Conflicts of Interests Management Policy 771. Purpose 79

2. Guidelines and objectives 79

3. Scope 79

4. Definitions 79

5. Policy on conflicts of interest management 80

6. Areas of conflicts 80

7. Application of the Policy 83

8. Breach 83

9. Amendments 83

Appendix A: Annual independence and conflicts of interest declaration 84

Section IX: Remuneration Policy for Board and Committees 891. Purpose 91

2. Scope 91

3. Remuneration structure 91

4. Roles and responsibilities 92

5. Communication of this Policy 93

6. Amendments 93

Section X: Board and Committee Performance Assessment Framework 951. Introduction 97

2. Board principles 97

3. Structure and rating of the questionnaire 98

4. Collective assessment of the Board 99

5. Collective assessment of the Committee 102

6. Self-assessment by individual Directors 103

Appendix A: Actions to resolve gaps identified 105

Section XI: Corporate Governance Officer – Terms of Reference 107


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Section I


Corporate Governance Guidelines


Al Salam Bank-Bahrain (“ASBB” or “the Bank”) was established on 19 January 2006 in the Kingdom of Bahrain with paid-up capital of BD120 million (US$ 318 million) and was the largest Initial Public Offering (IPO) in the Kingdom’s history with subscriptions reaching over BD 2.7 billion (US$ 7 billion). The Bank commenced commercial operations on 17 April 2006. ASBB was listed in Bahrain Bourse on 27 April 2006 and subsequently in Dubai Financial Market (DFM) on 26 March 2008.

Following a resolution of ASBB’s Extraordinary General Assembly meeting held on 4 May 2009, ASBB completed its merger with the Bahraini Saudi Bank (BSB) on 22 December 2011. On the 2nd of February 2014, Al Salam Bank-Bahrain and BMI Bank B.S.C (c) confirmed the conclusion of a business combinations between the two institutions after receiving the approval from their shareholders at their respective extraordinary general assembly meetings by way of exchanging 11 ASBB shares for each BMI Bank share wherein ASBB acquired 58,533,357 BMI Bank shares of BD1 each and issued 643,866,927 ASBB shares of 100 fils each. As of the 30th of March 2014, both Banks updated their respective CRs to give effect to the share swap and consequently BMI Bank became a wholly owned subsidiary of ASBB.

ASBB offers its customers a complete range of innovative and unique Shari’a-compliant financial products and services through its extended strong network of branches and ATMs utilizing the latest technologies to meet various banking requirements. In addition to its Retail Banking services, the Bank also offers Corporate Banking, Private Banking, Investment as well as Treasury services. The Bank’s high-caliber management team comprises of a highly qualified and internationally experienced professionals with proven expertise in key areas of banking, finance and related fields.

ASBB Corporate Governance Policy

The Bank aspires to the highest standards of ethical conduct: doing what it says; reporting results with accuracy and transparency and maintaining full compliance with the laws, rules and regulations that govern the Bank’s business.

The Board of Directors (“the Board) has adopted a Board of Directors Charter which, together with the Bank’s Memorandum and Articles of Association and the charters of Board Sub- Committees, provides the authority and practices for governance of the Bank.

Further, the Board has appointed a Corporate Governance Officer, in charge of the overall guidance and oversight of the Corporate Governance Framework of the Bank, in conjunction with the Board as well as the Nomination and Corporate Governance Committee.

Vision

To become a regional force in the Islamic financial services industry by providing differentiated Shari’a compliant products to focused segments.

Mission

• Become the “one-stop-shop” for Islamic financial products and services.

• Create a strong onshore presence in select countries.

• Develop a premier brand image as an Islamic Financial shaper.

• Achieve high returns for stakeholders based upon their specific risk appetite

1. Bank Overview

Corporate Governance Guidelines


The Board shall provide central leadership to the Bank, establish its objectives and develop the strategies that direct the ongoing activities of the Bank to achieve these objectives. Directors shall determine the future of the Bank; protect its assets and reputation. They will consider how their decisions relate to “stakeholders” and the regulatory framework. Directors shall apply skill and care in exercising their duties to the Bank and are subject to fiduciary duties. Directors shall be accountable to the shareholders of the Bank for the Bank’s performance and can be removed from office by them.

The primary responsibility of the Board is to provide effective governance over the Bank’s affairs for the benefit of its shareholders, and to balance the interests of its diverse constituencies, including its customers, correspondent, employees, suppliers and local communities. In all actions taken by the Board, the Directors are expected to exercise their business judgment in what they reasonably believe to be in the best interests of the Bank. In discharging that obligation, directors may rely on the honesty and professional integrity of the Bank’s Senior Management and, its external advisors and auditors.

Mandate of the Board of Directors and Directors’ Roles and Responsibilities

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 is also responsible for the consolidated financial statements of the Group. 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. The Board has delegated responsibility for overall management of the Bank to the Chief Executive Officer (“CEO”).

The Board reserves a formal schedule of matters for its decision to ensure that the direction and control of the Bank rests with the Board. This includes:

• Reviewing the strategic plan of the Bank;

• Performance reviews of the Senior Management (all approved persons)

• Performance assessment of the Board, Board Sub-Committees and the Shari’a Supervisory Board;

• Approving material acquisition and disposal of assets;

• Approving capital expenditure;

• Approving authority levels;

• Appointing auditors and, reviewing the financial statements and financing activities;

• Reviewing Corporate Governance Report

• Approving the annual operating plan and budget;

• Ensuring regulatory compliance;

• Reviewing the adequacy and integrity of internal controls; and

• Approving all policies pertaining to the Bank’s operations and functioning.

Board Composition

The Board consists of members of high-level professional skills and expertise. Furthermore, in compliance with the corporate governance requirements, the Board Committees consist of Directors with adequate professional background and experience. The Board periodically reviews its composition and the contribution of Directors and Committees. The appointment of Directors is subject to prior screening by the Nomination and Corporate Governance Committee and the Board of Directors, as well as approval by the Shareholders and the Central Bank of Bahrain. The classification of “executive”, “non-executive” and “independent non- executive” directors is as per definitions stipulated by the Central Bank of Bahrain.

2. ASBB Board of Directors


Each Director holds the position for three years, after which he must present himself to the Annual General Meeting of shareholders for re-appointment. The majority of ASBB Directors (including the Chairman and/or Vice Chairman) are required to attend the Board meetings in order to ensure a quorum.

Board Elections System

Article 26 of the Bank’s Articles of Association provides the following:

1. The Bank shall be administered by a Board of Directors consisting of not more than fourteen members and not less than five members. The Board’s term shall be three years which may be renewed.

2. Each shareholder owning 10% or more of the capital may appoint whoever represents him on the Board to the same percentage of the number of the Board members. His right to vote shall be forfeited for the percentage he has exercised to appoint his representative. If a percentage is left after exercising his right to nominate, he may use such percentage to vote.

3. Other members of the Board shall be elected by the Shareholders, at the Annual General Meeting, by a secret ballot.

The Board of Directors shall elect, by secret ballot, a Chairman and one or more Vice Chairman every three years. The Vice Chairman shall act for the Chairman during his absence or if there is any barrier preventing him.

Article 29 of the Article of Association covered the “Termination of Membership in the Board of Directors”. It provided the following:

A Director shall lose his office on the Board in the event that he:

1. Fails to attend four consecutive meetings of the Board in one year without an acceptable excuse, and the Board of Directors decides to terminate his membership;

2. Resigns his office by virtue of a written request;

3. Forfeits any of the provisions set forth in Article 26 of the Articles of Association;

4. Is elected or appointed contrary to the provisions of the Law; and

5. Has abused his membership by performing acts that may constitute a competition with the Company or caused actual harm to the Company.

Board Meetings and Attendances

The Board of Directors meets at the summons of its Chairperson or their Deputy (in event of his absence or disability) or at least two Directors. According to the Bahrain Commercial Companies Law and the Bank’s Articles of Associations, the Board meets at least four times a year. A meeting of the Board of Directors shall be valid if attended by half of the members in person.

Induction and Orientation for New Directors

When new Directors are appointed to the Board of the Bank, they shall be provided with an appointment letter and the Directors’ Handbook containing information relevant to the performance of their duties as members of the Board. The Handbook includes the Corporate Governance Guidelines, Charters of the Board and Committees, key policies, etc. The Board reserves a formal schedule of matters for its decision to ensure that the direction and control of the Bank rests with the Board. This includes:

Code of Conduct

• The Board has an approved Code of Conduct for ASBB Directors, as follows: To act with honesty, integrity and in good faith, with due diligence and care, in the best interest of the Bank and its stakeholders;

• To act only within the scope of their responsibilities;

• To have a proper understanding of the affairs of the Bank and to devote sufficient time to their responsibilities;


• To keep confidential Board discussions and deliberations;

• Not to make improper use of information gained through the position as a director;

• Not to take undue advantage of the position of director;

• To ensure his/her personal financial affairs will never cause reputational loss to the Bank;

• To maintain sufficient/detailed knowledge of the Bank’s business and performance to make informed decisions;

• To be independent in judgment and actions and to take all reasonable steps to be satisfied as to the soundness of all decisions of the Board;

• To consider themselves as a representative of all Shareholders and act accordingly;

• Not to agree to the Bank incurring an obligation unless he/she believes at the time, on reasonable grounds, that the Bank will be able to discharge the obligations when it is required to do so;

• Not to agree to the business of the Bank being carried out or cause or allow the business to be carried out, in a manner likely to create a substantial risk of serious loss to the Bank’s creditors;

• To treat fairly and with respect all of the Bank’s employees and customers with whom they interact;

• Not to enter into competition with the Bank;

• Not to demand or accept substantial gifts from the Bank for himself/herself or his/her associates;

• Not to take advantage of business opportunities to which the Bank is entitled for himself/herself or his/her associates;

• Report to the Board any potential conflicts of interests; and

• Absent themselves from any discussions or decision-making that involves a subject in which they are incapable of providing objective advice or which involves a subject or proposed conflict of interest.

The Directors’ adherence to this Code of Conduct is periodically reviewed. Additionally, this Code of Conduct shall be published in the Annual Report and on the Bank’s external website, with copies also available on request.

Evaluation of Board Performance

The Board has adopted a ‘Performance Assessment Framework’ designed to provide Directors with an opportunity to assess their performance on an annual basis. The self-assessment consists of three categories, such as:

• Assessment of the Board as a unit;

• Assessment of the Committee as a unit; and

• Self-assessment of individual Directors.

The results of the annual performance assessment shall be communicated to the Shareholders at the Annual General Meeting.

Remuneration of the Directors

Remuneration of the Directors as provided by Article 36 of the Articles of Association states the following:

“The General Assembly shall specify the remuneration of the members of the Board of Directors. However, such remunerations must not exceed in total 10% of the net profits after deducting statutory reserve and the distribution of dividends of not less than 5% of the paid capital among the shareholders. The General Assembly may decide to pay annual bonuses to the Chairman and members of the Board of Directors in the years when the Company does not make profits or in the years when it does not distribute profits to the shareholders, subject to the approval of the Minister of Industry and Commerce.”

The Board, based upon the recommendation of the Remuneration Committee and subject to the laws and regulations, determines the form and amount of director compensation subject to final approval of the


shareholders’ at the Annual General Meeting. The Remuneration Committee shall conduct an annual review of Directors’ compensation.

As per the Directors Remuneration Policy approved by the Shareholders, the structure and level for the compensation for the Board of Directors consist of the following:

1. Annual remuneration subject to the annual financial performance of the Bank and as per the statutory limitation of the law.

2. The total amount payable to each Board member with respect to Board and Committee meetings attended during the year.

The remuneration of the Board of Directors will be approved by the shareholders at the Annual General Meeting.

In addition to the above, Directors who are employees of the Bank shall not receive any compensation for their services as Directors and Directors who are not employees of the Bank may not enter into any consulting arrangements with the Bank without the prior approval of the Board. Directors who serve on the Audit and Risk Committee shall not directly or indirectly provide or receive compensation for providing accounting, consulting, legal, investment banking or financial advisory services to the Bank.

Compliance

The Bank has in place comprehensive policies and procedures to ensure full compliance with the relevant rules and regulations of the Central Bank of Bahrain and the Bahrain Bourse, the Dubai Financial Market, the Emirates Securities & Commodities Authority, including anti- money laundering, prudential and insider trading reporting. The Bank is in compliance with the High Level Controls “HC” Module issued by the Central Bank of Bahrain.

Internal control

Internal control is an active process that is continually operating at all levels within the Bank. The Bank has established an appropriate culture to facilitate an effective internal control process and for monitoring its effectiveness on a periodic basis. Every employee of the Bank participates in the internal control process and contribute effectively by identifying risk at an earlier stage and implementing mitigating controls at optimum cost. Residual risk is properly communicated to the Senior Management (i.e., approved persons) and corrective actions are taken.

Consistent with the industry’s best practice, the Board has established four Committees with defined roles and responsibilities. The Standing Committees of the Board are Executive Committee, Audit and Risk Committee, Remuneration Committee and, Nomination and Corporate Governance Committee.

Executive Committee

The Committee operates under the delegated authority of the Board and provides direction to the executive management on business matters, as delegated by the Board, to address matters arising between the Board meetings. The Committee is responsible for reviewing business matters concerning credit and market risks, strategy review and providing recommendation to the Board.

3. Board Committees


ASBB is guided by a Shari’a Supervisory Board consisting of five distinguished scholars. The Shari’a Supervisory Board reviews the Bank’s activities to ensure that all products and investment transactions comply fully with the rules and principles of Islamic Shari’a. Further, the Shari’a Supervisory Board shall review and vet the screening criteria for charitable donations/sponsorships as well as the sponsorship contracts.

The Shari’a Supervisory Board shall also ensure that an internal Shari’a audit function is in place and is adequately performing their duties as stipulated in the Shari’a Governance Module and AAOIFI Standards.

In addition, one designated member from the Shari’a Supervisory Board shall form part of the Nomination and Corporate Governance Committee to ensure that corporate governance related matters are in compliance with the Islamic Shari’a rules and guidelines.

The Board meets at least 4 times a year. Its members are remunerated by annual retainer fee and sitting fees per meeting attended, with travel expenses reimbursed as appropriate. Its members are not paid any performance-related remuneration.

Performance assessment of the Shari’a Supervisory Board is done on a self-assessment basis and submitted to the Board for their review and action.

4. Shari’a Supervisory Board

Audit and Risk Committee

The Committee’s responsibility to assist the Board in discharging its oversight duties relating to matters such as risk and compliance, including the integrity of the Bank’s financial statements, financial reporting process and systems, internal controls and financial controls. The Committee also, acts as a liaison between the external auditor, internal auditor and the Board. The Committee is also charged with the responsibility of handling whistleblowing complaints and monitoring related party transactions.

Remuneration Committee

The Committee’s role is to provide a formal and transparent procedure for developing a compensation policy for the Board, Chief Executive Officer and Senior Management (approved persons and material risk takers); ensures that compensation offered is competitive, in line with the market/peer group and consistent with the responsibilities assigned to employee. In addition, the Committee recommends to the Board special compensation plans, including annual performance bonus and short/long term incentives, to attract, motivate and retain key employees.

Nomination and Corporate Governance Committee

The Committee’s role is to evaluate and nominate candidates to the Board, as well as facilitate the assessment of performance of the Board, Committees and individual Directors. In addition, the Committee is responsible to ensure that Directors receive adequate training during the year so as to be able to perform their duties on the Board and the Committees they serve on. The Committee is also charged with the responsibility of ensuring that the Corporate Governance Framework of the Bank is adequate and in compliance with the prevailing regulations. The Committee liaises with the Bank’s Corporate Governance Officer to manage the governance related activities.


The Board of Directors report to the Shareholders on the performance of the Bank through the Annual General Meeting. The meeting shall be convened upon an invitation from the Chairman of Board, and be convened during the six months following the end of the Bank’s financial year.

All the Directors, especially the Chairs of the Board and Committees, at least one member of the Shari’a Supervisory Board and the external auditors shall be present at this meeting to answer questions from the Shareholder regarding matters within their responsibilities:

At a minimum, the Board shall report on the following to the Shareholders, for their approval, at the Annual General Meeting:

• Audited financial statements of the Bank;

• Related party transactions executed;

• Corporate governance report;

• Corporate social responsibility report;

• Performance assessment of the Board, Committees and individual Directors; and

• Remuneration for the Directors and the Shari’a Supervisory Board members.

5. Annual General Meeting

The Chief Executive Officer is supported by a number of management committees each having a specific mandate to give focus to areas of business, risk and strategy.

The various committees and their roles and responsibilities are:

Credit/Risk Committee

Recommending the risk policy and framework to the Board. Its primary role is the selection and implementation of risk management systems, portfolio monitoring, stress testing, risk reporting to Board, Board Committees, Regulators and Executive Management. In addition to these responsibilities, individual credit transaction approval and monitoring is an integral part of the responsibilities.

Asset Liability Committee

This Committee’s primary responsibility is to review the trading and liquidity policy for the overall management of the balance sheet and its associated risks.

Investment Committee

The role of the Committee is to review and approve all transactions related to corporate and real estate investments and monitoring their performance on an ongoing basis. In addition, the Committee is responsible to oversee the performance of the fund managers and recommend exit strategies to maximize return to its investors.

Technology Steering Committee

TSC oversees the information technology function of the Bank. It recommends the annual IT budget and plans, drawn up in accordance with the approved strategy for the Bank, to the CEO for submission to the Board of Directors for their approval. It supervises the implementation of the approved IT annual plan within set deadlines and budgetary allocations.

6. Management Committees


Social Responsibility Committee

This Committee oversees the Corporate Social Responsibility affairs of the Bank, managing donations and sponsorship requests, evaluating the proposals and allocating funds to causes that the Bank is committed to support, in line with the annual corporate social responsibility plan and the Corporate Social Responsibility Policy. Any exceptions to the approved plan are reviewed and recommended to the Board for approval. The Committee is also involved in the preparation of the Corporate Social Responsibility Report, which forms part of the Annual Report, detailing the donations and sponsorships made during the year.

The social causes that are supported by the Bank are:

• Medical assistance;

• Care for the less fortunate; and

• Cultural initiatives focused on preserving and promoting Bahraini traditions into the future.

In addition to the policies and procedures developed for each function in the Bank, following are the key policies which form part of the governance framework:

Gifts and entertainment policy

This policy outlines the procedures for both accepting and providing gifts or entertainment to external parties by the Directors / Shari’a Supervisory Board members and all employees of the Bank. The guidelines specify acceptable gifts/entertainment that may be accepted or provided and also lays down situations where prior approval is to be sought. All gifts/entertainment accepted and provided, regardless of their value, shall be communicated to the Human Resources Department.

Related party transactions

This Policy defines who are considered related parties, which includes both natural persons as well as legal entities and how to approach transactions with such related parties. This Policy is applicable to Directors / Shari’a Supervisory Board members and all employees of the Bank. The Corporate Governance Officer and the Audit and Risk Committee are responsible for overseeing and preparing a report on related party transactions executed during the year for reporting to the Shareholders at the Annual General Meeting by the Board.

Employment of relatives

This Policy defines who are ‘relatives’ and how to deal with employment of relatives of existing employees / Directors / Shari’a Supervisory Board members. The Bank is committed to protecting the Bank from conflict of interests that may arise from such appointment and has laid down procedures to handle such employments.

Conflict of interest management policy

This Policy defines the procedures for handling conflict of interests of a Director / Shari’a Supervisory Board member or Senior Management member. All individuals under the scope of the Policy shall submit an annual independence and conflict of interest declaration form to the Corporate Secretary, and refrain from discussions on the issues where they are conflicted. The Bank endeavors to mitigate conflicts at all times, and shall even consider excluding itself from an engagement or relationship, if conflicts that may arise due to the engagement or relationship cannot be mitigated.

7. Key policies of the Bank


Whistleblowing policy

This Policy details the procedures for a whistleblower to escalate a complaint to the designated authority and. procedures that are to be followed by the Audit and Risk Committee to ensure that a valid whistleblowing complaint is investigated properly and action taken appropriately, while protecting the whistleblower from any adverse reaction due to their complaint.

Key Persons Policy

This Policy defines who are ‘Key Persons’ and aims to prevent abuse of inside information by ensuring that the Key Persons are aware of the legal and administrative requirements regarding holding and trading of the Bank’s shares.

Delegation of Authority Limits

Approving limits for the Board, Board Committees, Shari’a Supervisory Board, Management Committees, Senior Management members and other designated individuals are incorporate into the Delegation of Authority Limits. The authorities are established for both financial and operational activities.

The Bank has a Disclosures Policy in place detailing the Bank’s internal as well as external communications and disclosures. The Board oversees the process of disclosure and communication with the internal and external stakeholders.

8. Disclosures


Boa

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Section II


Board Charter


1.1. The Board of Directors (“Board”) is appointed by the Shareholders of Al-Salam Bank Bahrain BSC (“ASBB” or the “Bank”) to oversee the Bank’s management and business affairs, and make all major policy decisions of the Bank.

1.2. The primary responsibilities of the Board include:

1.2.1. Providing central leadership to the Bank, establishing its objectives and developing strategies that direct the on-going activities of the Bank to achieve these objectives;

1.2.2. Determining the future of the Bank, and protection of its assets and reputation.

1.2.3. Accountability to the Shareholders of the Bank for the Bank’s performance;

1.2.4. Providing effective governance over the Bank’s affairs for the benefit of its Shareholders and, to balance the interests of its diverse constituencies, including its customers, correspondent, employees, suppliers, and local communities; and

1.2.5. Reporting results with accuracy and transparency, and maintaining full compliance with the laws, rules and regulations that govern the Bank’s business.

1.3. The management is responsible for implementation of decisions and strategies approved by the Board of Directors. The Board’s excessive involvement in routine operations of the Bank may undermine its responsibility as well as the management’s accountability.

2.1. The Board Charter, together with the Bank’s Memorandum and Articles of Association, and the charters of the Board committees authorizes the Board, within the scope of its responsibilities, to:

2.1.1. Perform activities within the scope of its Charter.

2.1.2. Engage independent counsel and other advisors, as it deems necessary to carry out its duties, provided such engagements are justifiable.

2.2. To the extent that there is any inconsistency between these terms of reference and Articles of Association, the Articles of Association will prevail.

3.1. The Board shall appoint a suitably qualified candidate as the Corporate Secretary who shall act as the Secretary of the Board. In the absence of the Corporate Secretary and due to the sensitivity of the matters discussed at the Board level, the Chairman shall appoint another appropriate Senior Management staff member, to be the Secretary.

3.2. The Secretary to the Board shall be accountable to the Board through the Chairman on all matters relating to his duties as a senior officer of the Bank.

3.3. The Secretary to the Board shall report to the CEO on all executive or administrative matters.

1. Mission

2. Authority

3. Secretary to the Board


Appointment

4.1. The Shareholders shall appoint members of the Board, consisting of not more than fourteen members and not less than five members. At least half of the Board shall be non-executive and at least three of those persons should be independent. Please refer to Appendix A for the criteria for composition of the Board.

4.2. Appointments to the Board shall be for a period of up to three years renewable, provided that one third of the Board members remain independent and non-executive. Any term beyond six years should be subject to rigorous review, and should take into account the need for progressive refreshing of the Board.

4.3. Written appointment agreements with each director shall be signed, which recites the director’s powers, duties, responsibilities and accountabilities and other matters relating to his appointment including his/her term, the time commitment envisaged, the committee assignment if any, his/her remuneration and expense reimbursement entitlement, and his/her access to independent professional advice when that is needed.

Independence

4.4. The Chairman of the Board shall be independent, or non-executive, in which case the Bank will have to disclose the same in their Annual Report. The Board shall elect the Board Chairman from amongst the members nominated for the Board. The role of the Chairman and Chief Executive shall not be exercised by the same person.

4.5. The Chairman shall not be a current or previous executive of the Bank, and shall be selected by the Board on the basis of the person’s competence, achievements and records as a leader.

4.6. An independent Director:

4.6.1. Is not a “controller” of the Bank i.e.:

• A chief executive or managing director of the Bank;

• A chief executive or managing director of another company of which the Bank is a subsidiary or associate;

• A person who (either alone or with an associate) is or would be a holder or proposed transferee of significant ownership (ten present or more) or controlling interests in the Bank; or

• A person (whether alone or with an associate) in accordance with whose instructions the directors of the Bank or persons who are controllers of the Bank are accustomed to act.

4.6.2. Is not an associate of a person who is employed by the Bank in an executive capacity.

4.6.3. Is not a former employee of the Bank until five years after employment, or any other material connection, has ended.

4.6.4. Is not a professional advisor to the Bank.

4.6.5. Does not own, directly or indirectly (including ownership by any family member or related person), 5% or more of the shares of any type or class of the Bank.

4.6.6. Did not make to or receive from the Bank, payments of more than BD31,000 or equivalent.

4.6.7. Is not a large depositor of or large borrower from the Bank (i.e. whose deposits or credit facilities exceed 10% of the capital base of the Bank).

4.6.8. Has no significant contractual or business relationship with the Bank, which could be seen to materially interfere with the person’s capacity to act in an independent manner.

4. Membership


4.6.9. Independence of judgment in decision making is expected from all of the Bank’s non-executive directors. The extent to which non-executive directors meet the above definition of independence will be reviewed regularly through the Bank’s conflict of interest and director evaluation processes.

Limitations

4.7. Each person serving as director must devote the time and attention necessary to fulfil the obligations of a director. Key obligations include appropriate attendance at the Board and an adequate review of preparatory material. Directors are also expected to attend the AGMs of the shareholders.

4.8. Board members must obtain permission from the Board of Directors before accepting any other bank directorship.

4.9. No Board member may have more than one directorship of a Retail Bank or Wholesale Bank. This means an effective cap of a maximum two Directorships of financial institutions inside Bahrain. Two Directorships of licensees within the same Category (e.g. Retail Bank) are not permitted.

4.10. A member of the Board should abstain from participating in discussions and decisions on matters involving him or herself to avoid any conflict of interest. Such matters, which result in a hanging vote, will be referred to the full Board for decision and approval.

5.1. The Board shall meet at least four times each financial year and shall be summoned by the Corporate Secretary at the request of the Chairman or at least two Board members. All Directors must attend the meetings whenever possible and the directors must maintain informal communication between meetings. The interval between two meetings shall not exceed four months.

5.2. The Chairman shall establish a schedule of meetings to be held over the course of the ensuing year. Each Board member is free to suggest items for inclusion on the agenda or to raise subjects that are not on the agenda for that meeting, subject to the provisions of the Memorandum and Articles covering Board of Directors’ meetings.

5.3. Directors may attend Board meetings through video or telephone conferencing. In addition, attendance through video or telephone conferencing must not exceed 50% of total Board meetings for one year.

5.4. Individual Board members must attend at least 75% of all Board meetings in a given financial year to enable the Board to discharge its responsibilities effectively.

5.5. Directors must step down if they are unable to attend four or more consecutive Board meeting without the approval of the Board.

5.6. Unless otherwise agreed, notice of each meeting confirming the venue, time and date, together with an agenda of items to be discussed, shall be issued by email with as much advance notice as possible to each member of the Board, and any other person required to attend, but at a minimum five working days before the meeting. Supporting papers shall be sent to the Board members and to the other attendees, as appropriate at the same time.

5.7. All the Directors and Chairpersons of Board Committees are expected to attend the Bank’s Annual General Meeting to respond to any relevant queries and questions raised by the shareholders regarding the activity of the Board.

5. Notice and Agenda of Meetings


6.1. Only members of the Board shall be entitled to attend Board meetings. However, members of management and other consultants/auditors may be invited to attend meetings at the request of the Board.

6.2. A meeting of the Board will not be valid unless attended by not less than half of the members, provided that the number of those present must not be less than three. 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 as specifically designated by the Board.

6.3. The Chairman is responsible for maintaining the quorum of the Board’s meetings.

6.4. The Chairman shall determine the degree of formality required at each meeting while maintaining the decorum of such meeting. In any event, the following general rules will apply:

6.4.1. The Chairman will ensure that all members are heard;

6.4.2. The Chairman will also retain sufficient control to ensure that the authority of the chair is recognised so that a degree of formality can be reintroduced when it is required to make progress;

6.4.3. The Chairman will take care that the decisions are properly understood and well recorded; and

6.4.4. The Chairman will ensure that the decisions and debates are completed with a reasonably formal resolution recording the conclusions reached.

6.5. Attendance and voting by proxy is prohibited at all times.

8.1. The Secretary shall minute in Arabic or English, the proceedings and resolutions of all Board meetings, including the names of those present and in attendance and names of absentees.

8.2. The minutes of the meeting shall be tabled and approved at the subsequent meeting.

8.3. The minutes shall be signed by the Board Chairman and members present at the meeting. Any member who objects to any resolution adopted by the Board, shall have their objection recorded in the minutes. Those members of the Board who sign the minutes of any meeting shall be answerable to the accuracy thereof.

7.1. The Board’s decisions shall be considered by a vote of the majority of the attending members. In case of an equality of votes, the Chairman shall have a casting vote.

7.2. Decisions of the Board may be made through circulation. In all such cases:

7.2.1. The Corporate Secretary shall ensure and confirm circulation of necessary information and documentation.

7.2.2. A decision through circulation will not be valid unless approved by majority of the responding members and responses have been received from majority of the members, and this shall be ratified in the minutes of the next Board meeting.

6. Quorum and conduct of meetings

8. Minutes of Meetings

7. Decisions


8.4. The Corporate Secretary shall ascertain, at the beginning of each meeting, the existence of any conflicts of interest and minute them accordingly.

8.5. Minutes of meetings shall be circulated promptly to all members of the Board vide email.

8.6. The Corporate Secretary shall maintain a Register to record all resolutions made by circulation.

8.7. In the event the Board identified an issue or action to be completed, the minutes of the meeting shall include a separate column for action dates and person responsible for that particular item. The Corporate Secretary shall follow-up with the concerned person about the progress or completion of the action, and update the Board accordingly.

The Board shall be responsible for:

Strategic Planning and Corporate governance

9.1. Reviewing annually the Bank’s business plans, inherent levels of risk in these plans, adequacy of capital to support the business risks, major capital expenditures, divestitures and acquisitions.

9.2. Adopting and reviewing annually the strategy of the Bank as well as monitoring the implementation of the strategy by the Management.

9.3. Ensuring that the systems and controls framework, including the Board structure and organizational structure of the Bank, is appropriate for the Bank’s business and associated risks.

9.4. Reviewing and approving the appointment and/or dismissal of the Corporate Secretary as well as the Corporate Governance Officer, including their annual performance assessments.

9.5. Reviewing and approving the Terms of Reference for the Corporate Secretary and Corporate Governance Officer.

9.6. Liaising with the Corporate Secretary to assess and document, on an annual basis, whether the corporate governance processes that it has implemented have successfully achieved their objectives and consequently confirm whether the Board itself is fulfilling its own responsibilities. Identifying any material deficiencies and problems and drawing up action plans and timetables for their correction. This may be discharged by one of the Board’s Committees.

9.7. Recommending to the Shareholders the Annual Corporate Governance Report of the Bank for approval.

Establishment of Committees

9.8. Establishing Committees and appointing Committee members after consultation with individual directors. The standing Committee of the Board are:

• Executive Committee;

• Audit and Risk Committee;

• Remuneration Committee; and

• Nomination and Corporate Governance Committee.

Each committee shall have its own written charter, which shall comply with the applicable corporate governance rules, and other applicable laws, rules and regulations. The charters shall set forth the mission and responsibilities of the committees as well as qualifications for committee membership, committee structure and operations and reporting to the Board.

9. Responsibilities of the Board


The terms of reference shall specify the frequency of the committee meetings. The Chair of each committee, in consultation with the appropriate members of the committee and senior management, shall develop the committee’s agenda. At the beginning of the year, each committee shall establish a schedule of major topics to be discussed during the year (to the degree these can be foreseen). The agenda for each committee meeting shall be furnished to all directors in advance of the meeting.

9.9. Establishing/maintaining additional Committees, as necessary or appropriate.

Shari’a Supervisory Board

9.10. Establishing a Shari’a Supervisory Board to ensure that any investment products, structures, financial services, and activities that the Bank is involved with are in conformity with the Islamic Shari’a.

9.11. Ensuring that the Shari’a Supervisory Board report administratively to the Board.

9.12. Recommending to the Shareholder at the Annual General Meeting, members for appointment to the Shari’a Supervisory Board for a three-year renewable term, after carrying out a background check and assessing the individuals against the following criteria:

• Has a clean background, good character and conduct, and not convicted previously of any moral turpitude, felony or criminal offence;

• Has competence, diligence, capability, and soundness of judgement;

• Has, at a minimum, a bachelor’s degree or its equivalent in Islamic Shari’a;

• Has a certified degree in Figh Al Muamalat (Islamic commercial jurisprudence) with strong understanding of Usul Al Figh (rules of Islamic jurisprudence);

• Has an adequate understanding of banking, Islamic finance and accounting; and

• Has an accumulated overall experience of at least seven years in Shari’a related scholarly pursuits (e.g. teaching, research, fatawa issuance, etc.).

9.13. Meeting the Shari’a Supervisory Board members, at least once every year, to discuss issues of common interest.

9.14. Obtaining the written approval from the Shari’a Supervisory Board on all matters pertaining to the Bank’s business and social events and activities to ensure that they are free of any Islamic prohibitions.

9.15. Deciding on the remuneration and benefits for the Shari’a Board members in accordance with the aggregate set by the Shareholders at the Annual General Meeting.

9.16. Reviewing the performance assessment report submitted by the Shari’a Supervisory Board. Where appropriate, considering nominations of new members to the Shari’a Supervisory Board or seeking the resignation of any member who fails to adequately meet the terms and conditions of their contract.

9.17. Approving the policy and procedures manual for the Shari’a Coordination and Implementation function after vetting by the Shari’a Supervisory Board.

9.18. Approving the policy and procedures manual of the internal Shari’a audit function after vetting by the Shari’a Supervisory Board and, the Audit and Risk Committee.

Succession planning and training

9.19. Ensuring that new Directors are provided with a structured orientation program including presentations by the Corporate Secretary - in consultation with Senior Management- on the Bank’s strategic plans, its significant financial, accounting and risk management issues, its compliance programs, its operations, its Code of Conduct, management structure and executive officers, and its internal and external auditors.


9.20. Ensuring that a continuing education program is in place for all the Directors.

9.21. Annually approving the successional planning recommended by the Nomination and Corporate Governance Committee.

Communication with Management

9.22. Communicating with the Chief Executive Officer (CEO) and the Management, either through the CEO and/or the Corporate Secretary. Direct communication, discussion, etc. with the Management is not encouraged to the extent possible, unless it is in the normal course of business of the respective Committees with such personnel.

Performance evaluation

9.23. Reviewing annually the performance of the Board, Committees, and the individual Directors. This review shall include an overview of the talent base of the Board as a whole as well as an individual assessment of each director’s qualification under corporate governance rules and all other applicable laws, rules and regulations regarding directors; consideration of any changes in a director’s responsibilities that may have occurred since the director was first elected to the Board and such other factors as may be determined by the Committee to be appropriate for review. Each Committee shall annually prepare an evaluation of its performance as provided in its charter.

9.24. Reporting to the Shareholders on the results of the evaluation of the Board, Committees and the individual Directors.

9.25. Annually evaluate the performance of the Chairman of the Board and the CEO in order to ensure that they are providing the best leadership for the Bank.

Remuneration

9.26. Approving the Remuneration Policy for the employees of the Bank on the recommendation of the Remuneration Committee.

9.27. Recommending to the Shareholders for approval the Remuneration Policy for the Directors.

9.28. Ensuring that Directors who serve on the Board do not, directly or indirectly, provide, or receive compensation for providing, accounting consulting, legal, investment banking or financial advisory services to the Bank.

9.29. Recommending to the Shareholders for approval the annual remuneration for the Board of Directors and Shari’a Supervisory Board.

Code of conduct and ethics

9.30. Adopting a Code of Conduct and Ethics, and other internal policies and guidelines designed to support the mission statement set forth above and to comply with the laws, rules and regulations that govern the Bank’s business operations. The Code of Ethics shall apply to all employees of the Bank and its subsidiaries, as well as to the Directors, Shari’a Supervisory Board members, temporary workers and other independent contractors and consultants when engaged by or otherwise representing the Bank and its interests.

Further, the Directors shall be bound by a Code of Conduct provided in Appendix B.


9.31. Approving the Related Party Transactions Policy which defines related parties, related party transactions and approval requirements for executing related party transactions.


9.32. Approving entering into agreements with related parties, after assessing the potential conflicts of interests and the safeguards for it, prior to implementation.

9.33. Ensuring that no Board member or Senior Management member has any interest, directly or indirectly, in transactions or contracts made for the account of the Bank, except with the authorization of the Shareholders, at the Annual General Meeting.

9.34. Reporting to the Shareholders at the Annual General Meeting of the transactions and contracts in which any Director or Senior Management member has an interest, in line with the requirement stated in the Related Party Transaction Policy.

Corporate social responsibility

9.35. Approving the Corporate Social Responsibility Policy which defines the social causes supported by the Bank and the guidelines to be followed by the Bank for disbursing donations and/or sponsorships.

9.36. Annually review and approve the budget and plan for corporate social responsibility activities.

9.37. Reviewing and approving any donation/sponsorship request in accordance with the delegation of authority limits and requests which do not fall under the categories mentioned in the Policy.

Conflicts of interests

9.38. Approving the Conflicts of Interests Management Policy which is applicable to the Directors and the Senior Management.

9.39. Reviewing declarations from the Directors, if they have any direct or indirect personal interest in matters brought before the Board. This declaration shall be recorded in the minutes and the interested Director shall not participate in the discussion or voting on the resolutions to be adopted in this respect.

Employment of relatives

9.40. Approving the Employment of Relatives Policy which defines the guidelines on relatives that can be hired or restricted from hiring by the Bank, and approval/reporting procedures for the same.

Directors’ and Officers’ liability

9.41. Reviewing the Directors’ and Officers’ liability insurance to indemnify the Directors and officers to the fullest extent permitted by the Law, and the Bank’s Memorandum and Articles of Association.

Reporting

9.42. Overseeing the process of disclosure and communications with the internal and external stakeholders.

9.43. Ensuring that reporting and disclosures requirement of relevant Regulators (such as the Central Bank of Bahrain, Ministry of Industry, Commerce and Tourism, etc.) are complied with.

The Chairman of the Board is expected to fulfil responsibilities such as:

10.1. Chairing all Board Meetings.

10.2. Acting as the primary spokesperson of the Board.

10. Responsibilities of the Chairman


10.3. Leading, guiding and mediating the actions of the board to ensure that the Board will properly and effectively discharge its duties.

10.4. Coordinating the agenda and information packages with the Corporate Secretary.

10.5. Ensuring that the Board provides leadership and vision to the Bank;

10.6. Ensuring that the Board is participating in setting the aims, strategies and policies of the Bank;

10.7. Ensuring that there is adequate monitoring of the pursuit and attainment of the goals and aims of the Bank;

10.8. Directing the Board discussions to effectively use time to address the critical issues facing the Bank;

10.9. Ensuring that directors are enabled and encouraged to play their due role in the meetings;

10.10. Ensuring that directors have adequate opportunities to express their views;

10.11. Ensuring that directors are provided with sufficient and timely information;

10.12. Ensuring that minutes properly reflect decisions;

10.13. Participating in the on-going development of the Board as a whole and directors individually; and

10.14. Upholding this Charter.

11.1. The Board shall ensure that policies are in place that prohibit insider trading.

11.2. Directors shall not, at any time, deal in any of the Bank’s securities or securities of any other listed company when they are in possession of unpublished price-sensitive information in relation to those securities.

11.3. Directors shall not deal in the Bank’s securities on considerations of short-term gains.

11.4. Directors shall not deal in any securities of Bank without first notifying the Board and receiving a form of acknowledgement. The Board shall notify the other Directors and receive a form of acknowledgement.

At a minimum, the Bank shall maintain a written record stating that the appropriate notification was given and acknowledged, which shall also serve as a written confirmation for the concerned director.

11.5. Directors shall not make any unauthorised disclosure of any confidential information, whether to co trustees or any other person. Directors shall not use confidential information for their benefit or the benefit of others.

11.6. Directors, Senior Management and associated persons shall not purchase or sell any securities of the Bank during “Closed Periods” as stipulated by the CBB Disclosure Standards.

11.7. The grant to Directors or Senior Management of an option to subscribe or purchase their issuer’s securities shall be regarded as dealing by them if the price at which the option may be exercised is fixed at the time of the grant. If an option is granted to directors or senior management on terms whereby the price at which the option may be exercised is to be fixed at the time of exercise, the dealing shall be regarded as taking place at the time of exercise.

11. Prohibition Against the Use of Insider Information


12.1. At least once a year, review its terms of reference to ensure it is operating at maximum effectiveness and recommend any changes it considers necessary to the Board for approval.

12.2. The Board may amend this Board of Directors Charter, or grant waivers in exceptional circumstances, provided that any such modification or waiver may not be a violation of any applicable law, rule or regulation and further provided that any such modification or waiver is appropriately disclosed.

13.1. Members of the Board and other persons who attend the Board meetings must maintain silence on all documents they receive, on the contents of deliberations and on all confidential information of the Bank, service providers and its clients, particularly operating and business information that are disclosed to them in the course of their work on the Board.

12. Other Matters

13. Confidentiality

11.8. The restrictions on dealings by Directors shall be equally applicable to any dealings by their spouses, or by or on behalf of any minor. It is the duty of the directors to seek avoidance of any restricted dealings at a time when they are not free to deal.

11.9. When Directors place investment funds under professional management where they retain or exercise influence, the investment managers shall be made subject to the same restrictions and procedures as the directors themselves in respect of proposed dealings in the Bank’s securities.

11.10. Directors who act as trustees of a trust should ensure that their co-trustees are aware of the identity of any company of which they are Directors, so as to enable the co- trustees to anticipate possible difficulties. Directors/trustees shall avoid acting in breach of trust and refrain from divulging or abusing confidential information.

11.11. Any Director who is a beneficiary, but not a trustee, of a trust which deals in the Bank’s securities shall ensure that the trustees notify him/her after they have dealt in such securities on behalf of the trust, in order that he/she in turn may notify the Bank. The beneficiary shall ensure that the trustees are aware of the companies on which he/she is a director.

11.12. All Directors and Senior Management shall abide by the Key Persons Policy of the Bank and shall be aware of the legal and administrative requirements for trading in the Bank’s securities.

11.13. A list of Directors and Senior Management dealing in the securities of the Bank since the date of the previous list shall be circulated to members of the Board or maintained in a register.


• One of the Board’s most important responsibilities is identifying, evaluating and selecting candidates for the Board of Directors. The Board will seek members from diverse professional backgrounds who combine a broad spectrum of experience and expertise with a reputation for integrity. Directors should have had experience in positions with a high degree of responsibility, be leaders in the companies or institutions with which they are affiliated and be selected based upon the contributions they can make to the Board.

• The factors to be considered by the Board in its review of potential candidates include:

— Whether the candidate has exhibited behaviour that indicates he or she is committed to the highest ethical standards and the values adhered to by the Bank.

— Whether the candidate has had broad business, governmental, non-profit or professional experience that indicates that the candidate will be able to make a significant and immediate contribution to the Board’s discussion and decision-making in the array of complex issues facing a financial services business.

— Whether the candidate has special skills, expertise and background that add to and complement the range of skills, expertise and background of the existing directors.

— Whether the candidate has had a successful career that demonstrates the ability to make the kind of important and sensitive judgments that the Board is called upon to make.

— Whether the candidate will effectively, consistently and appropriately take into account and balance the legitimate interests and concerns of all of the Bank’s shareholders and other stakeholders in reaching decisions.

— Whether the candidate will be able to devote sufficient time and energy to the performance of his or her duties as a director.

• The application of these factors involves the exercise of judgment and cannot be measured in any mathematical or routine way.

Appendix A: Criteria for composition of the Board


The Directors have adopted the following code of conduct in respect of their behaviour:

• To act with honesty, integrity and in good faith, with due diligence and care, in the best interest of the Bank and its stakeholders

• To act only within the scope of their responsibilities

• To have a proper understanding of the affairs of the Bank and to devote sufficient time to their responsibilities

• To keep confidential Board discussions and deliberations

• Not to make improper use of information gained through the position as a director

• Not to take undue advantage of the position of director

• To ensure his/her personal financial affairs will never cause reputational loss to the Bank

• To maintain sufficient/detailed knowledge of the Bank’s business and performance to make informed decisions

• To be independent in judgment and actions and to take all reasonable steps to be satisfied as to the soundness of all decisions of the Board

• To consider themselves as a representative of all Shareholders and act accordingly

• Not to agree to the Bank incurring an obligation unless he/she believes at the time, on reasonable grounds, that the Bank will be able to discharge the obligations when it is required to do so

• Not to agree to the business of the Bank being carried out or cause or allow the business to be carried out, in a manner likely to create a substantial risk of serious loss to the Bank’s creditors

• To treat fairly and with respect all of the Bank’s employees and customers with whom they interact

• Not enter into competition with the Bank

• Not demand or accept substantial gifts from the Bank for himself/herself or his/her associates

• Not take advantage of business opportunities to which the Bank is entitled for himself/herself or his/her associates

• Report to the Board any potential conflicts of interests

• Absent themselves from any discussions or decision-making that involves a subject in which they are incapable of providing objective advice or which involves a subject or a proposed conflicts of interest exist.

• The directors’ adherence to this Code of Conduct will be periodically reviewed. Additionally, this Code of Conduct should be published in the Annual Report or on the website, with copies also available on request.

Appendix B: Code of Conduct


Exec

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Section III


Executive Committee Charter


1.1. The Executive Committee (“ExCo” or the ‘‘Committee’’) is appointed by the Board of Directors (the “Board”) of the Al-Salam Bank Bahrain BSC (“the Bank”) to assist the Board in deciding on specific matters delegated to it and, make recommendations thereon.

2.1. The Board authorizes the Committee within the scope of its responsibilities to:



3.1. The Corporate Secretary or his/her nominee shall act as the Secretary of the Committee. In the absence of the Corporate Secretary and due to the sensitivity of the matters discussed at the Committee level, the Chairman shall appoint another appropriate Senior Management staff member, to be the Secretary.

1. Mission

2. Authority

3. Secretary

4.1. The Board shall appoint members of the Committee. The Committee shall consist of not less than three directors.

4.2. The CEO may not be a member of the Committee but shall be a permanent attendee of the ExCo meetings.

4.3. Appointments to the Committee shall be for a period of up to three years, and co- terminus with their tenure as a Board member, provided that the majority of the Committee members remain independent and non-executive. Any term beyond six years should be subject to rigorous review, and should take into account the need for progressive refreshing of the Committee.

4.4. The Chairman of the Committee shall be independent or non-executive. The Committee shall elect the Committee Chairman from amongst the members nominated for the Committee.

4.5. A member of the Committee should abstain from participating in discussions and decisions on matters involving him or herself to avoid any conflict of interest. Such matters, which result in a hanging vote, will be referred to the full Board for decision and approval.

4. Membership


5.1. The Committee shall meet at least four times a year and at such times as the Chairman of the Committee shall require. Meetings of the Committee shall be summoned by the Corporate Secretary at the request of the Committee Chairman.

5.2. Unless otherwise agreed, notice of each meeting confirming the venue, time and date, together with an agenda of items to be discussed, shall be issued by email with as much advance notice as possible to each member of the ExCo, and any other person required to attend, but at a minimum five working days before the meeting. Supporting papers shall be sent to the ExCo members and to the other attendees, as appropriate at the same time.

5.3. The Chairman of the Committee shall attend the Bank’s Annual General Meeting to respond to any relevant queries and questions raised by the shareholders regarding the activity of the Committee.

6.1. Only members of the Committee shall be entitled to attend Committee meetings. However, members of management and other specialists may be invited to attend meetings at the request of the Committee.

6.2. A meeting of the Committee will not be valid unless attended by not less than two or half of the members, whichever is greater. A duly convened meeting of the Committee 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 Committee as specifically designated by the Board.

6.3. The Chairman is responsible for maintaining the quorum of the Committee’s meetings.


7.1. The Committee’s decisions shall be considered by a vote of the majority of the attending members. In case of an equality of votes, the Chairman shall have a casting vote.

7.2. Decisions of the Committee may be made through circulation. In all such cases:

7.2.1. The Secretary of the Committee shall ensure and confirm circulation of necessary information and documentation.

7.2.2. A decision through circulation will not be valid unless approved by majority of the responding members and responses have been received from majority of the members, and this shall be ratified in the minutes of the next ExCo meeting.


6. Quorum

7. Decisions


8.1. The Secretary shall minute in Arabic or English, the proceedings and resolutions of all Committee meetings, including the names of those present and in attendance and names of absentees.


8.3. The minutes shall be signed by the Committee Chairman and members present at the meeting. Any member who objects to any resolution adopted by the ExCo, shall have their objection recorded in the minutes. Those members of the ExCo who sign the minutes of any meeting shall be answerable to the accuracy thereof.

8.4. The Secretary shall ascertain, at the beginning of each meeting, the existence of any conflicts of interest and minute them accordingly.

8.5. Minutes of Committee meetings shall be circulated promptly to all members of the Committee vide email and, once agreed, are made available to all members of the Board.

8.6. The Secretary shall maintain a Register to record all resolutions made by circulation.

8.7. In the event the Committee identified an issue or action to be completed, the minutes of the meeting shall include a separate column for action dates and person for that particular item. The Secretary shall follow-up with the concerned person about the progress or completion of the action, and update the Committee accordingly.

The Committee shall be responsible for:

9.1. Deputising the Board on matters pending decisions between Board meetings, the outcome of which would be binding on the Board.

9.2. Reviewing and recommending, as required, to the Board and the Audit & Risk Committee, the policies for risk, investments, financing and funding exposure.

9.3. Vetting and recommending to the Board strategic alliances and partnerships.

9.4. Reviewing and recommending relevant insurance cover for the Bank’s operations.

9.5. Reviewing and recommending on financial matters including budget, capital structure, equity and debt financing, capital expenditures, cash management, banking activities, investments, and significant purchasing activities, in accordance with the delegation of authority limits.

9.6. Reviewing and recommending proposals received from the Social Responsibility Committee, , in accordance with the delegation of authority limits.

9.7. Reviewing operating policies and procedures of the Bank, and recommending to the Board for approval, in accordance with the delegation of authority limits.

9.8. Recommending to the Board, the selection, retention or termination of the Company’s legal counsel and law firms, in accordance with the delegation of authority limits.

9.9. Considering and reviewing management’s operational reports and strategic developments.


9. Responsibilities


9.10. Approving proposals to establish new legal entities, where applicable and delegated by the Board.

9.11. Reviewing and approving credit, investments and market risk proposals within the Committee’s Board approved limit. Matters above the Committee’s limit will be recommended for Board decision making.

9.12. Reviewing management’s recovery procedures for problem facilities and requirements for provisioning. This may include evaluating proposed provisioning requirements and partial or full write offs.

9.13. However, the Committee does not have the power for:

9.13.1. Altering, amending or repealing the Articles or any resolutions of the Directors designating an ExCo;

9.13.2. Approving the establishment of special purpose vehicles created for asset backed lending operations;

9.13.3. Declaring any dividend or making any other distribution to the Shareholders of the Bank; or

9.13.4. Appointing any member of the ExCo.

9.14. The ExCo may make recommendations to the relevant Committees or the Board on the matters mentioned in 9.13.

10.1. At least once every year, review its terms of reference to ensure it is operating at maximum effectiveness and recommend any changes it considers necessary to the Board for approval.

11.1. Members of the ExCo and other persons who attend the ExCo meetings must maintain silence on all documents they receive, on the contents of deliberations and on all confidential information of the Bank, service providers and its clients, particularly operating and business information that are disclosed to them in the course of their work on the ExCo.

10. Other Matters

11. Confidentiality


Aud

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Section IV


Audit and Risk Committee Charter


1.1. The Audit and Risk Committee “A&RC” is appointed by the Board of Directors to assist the Board in discharging its oversight duties relating to:

With regards to its Audit and Compliance related duties:

1.1.1. Ensuring the integrity of the Bank’s financial statements and financial reporting process, and the Bank’s systems of internal accounting and financial controls;

1.1.2. Facilitating the annual independent audit of the Bank’s financial statements, the engagement of the external auditors and the evaluation of the external auditors’ qualifications, independence and performance;

1.1.3. Recommending the appointment of the internal auditor and the regular review of the internal audit function;

1.1.4. Ensuring compliance by the Bank with legal and regulatory requirements, including the Bank’s disclosure controls and procedures;

1.1.5. Recommending the appointment and compensation and maintaining oversight of the performance of the Bank’s external auditor; and

1.1.6. Ensuring compliance with the Bank’s Code of Ethics.

With regard to its Risk related duties:

1.1.7. Reviewing and monitoring the risk framework which encompasses credit, market, operational, liquidity, strategic and reputational risk.

1.2. Whilst the A&RC has the responsibilities and powers set forth in this Charter, it is not the duty of the Committee to plan or conduct audits or to determine that the Bank’s financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles and applicable rules and regulations.

1.3. In performing its duties, the A&RC will maintain effective working relationships with the Board of Directors, management and the external and internal auditors. To perform his/her role effectively, each A&RC member will continue to develop and maintain his/her skills and knowledge, including an understanding of the Bank’s business, operations and risks.

2.1. The Board authorises the A&RC within the scope of its responsibilities to:


2.1.2. Engage independent counsel and other advisors, as it deems necessary to carry out its duties.

2.1.3. Have unrestricted access to management, employees and relevant information

2.1.4. Establish procedures for dealing with concerns of employees regarding accounting, internal controls or auditing matters.

2.1.5. Establish procedures for receipt, retention and treatment of complaints received by the Bank regarding accounting, internal controls or auditing matters.

2.1.6. Be directly responsible for the selection, appointment, remuneration, retention and oversight of the external auditor, subject to ratification by the Board and shareholders.

2.1.7. Recommend to the Board all audit engagement fees and terms as well as review policies for the procurement of non-audit services by external auditors.

1. Mission

2. Authority


2.1.8. Investigate any activity within its terms of reference and in the context of investigation:

• Seek any information that it requires from any employee of the Bank. All employees are directed to cooperate with any request made by the Committee.

• Obtain outside legal or independent professional advice and such advisors may attend meetings as necessary

• Call any employee to be questioned at a meeting of the Committee as and when required.

3.1. The Board shall appoint the A&RC. All members of the Committee shall be non- executive directors of the Bank and it shall consist of not less than three members of which majority must be independent including the Chairman. The members of the Committee should not have any conflict of interest with any other duties they might have for the Bank.

3.2. The Chairman of the Board and Chief Executive Officer shall not be members of the Committee.


3.4. The Chairman of the Committee shall be independent. The Committee shall elect the Committee Chairman from amongst the members nominated for the Committee.


3.6. The Committee members must have sufficient technical expertise to enable the committee to perform its functions effectively. Technical expertise means that members must have recent and relevant financial ability and experience, which includes:

3.6.1. An ability to read and understand corporate financial statements including the Bank’s balance sheet, income statement and cash flow statement and changes in shareholders’ equity;

3.6.2. An understanding of the accounting principles which are applicable to the Bank’s financial statements;

3.6.3. Experience in evaluating financial statements that have a level of accounting complexity comparable to that which can be expected in the Bank’s business;

3.6.4. An understanding of internal controls and procedures for financial reporting; and

3.6.5. An understanding of the audit committee’s controls and procedures for financial reporting.


3. Membership

4. Secretary


5.1. Only members of the A&RC shall be entitled to attend A&RC meetings. However, members of management, representatives of internal and external auditors and other specialists may be invited to attend meetings at the request of the A&RC.

5.2. A meeting of the Committee will not be valid unless attended by not less than half of the members. Attendance of meetings may be by physical appearance or through video/teleconferencing. A duly convened meeting of the Committee 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 Committee.



6.1. The Committee shall meet at least four times a year, and where appropriate, should coincide with key dates in the Bank’s financial reporting cycle. Meetings of the Committee will preferably be held prior to meetings of the full Board. Meetings of the Committee shall be summoned by the Corporate Secretary at the request of the Committee Chairman, or at the request of the internal or external auditors of the Bank.

6.2. Unless otherwise agreed, notice of each meeting confirming the venue, time and date, together with an agenda of items to be discussed, shall be issued by email with as much advance notice as possible to each member of the A&RC, and any other person required to attend, but at a minimum five working days before the meeting. Supporting papers shall be sent to the A&RC members and to the other attendees, as appropriate at the same time.

6.3. External auditors shall be invited to meet the A&RC at least twice a year, with once in the absence of Management.

6.4. Chairman of the Committee shall attend the Bank’s Annual General Meeting to respond to any relevant queries and questions raised by the shareholders regarding the activity of the Committee.

6.5. Formal meetings of the A&RC are the heart of its work. However, they will rarely be sufficient. It is expected that the Committee Chairman, and to a lesser extent other members, shall keep in touch on a continuing basis with the key people involved in the Bank’s governance including the Board Chairman, the Chief Executive Officer, the Chief Financial Officer, the Chief Operating Officer, the Chief Risk Officer, the external auditors and the Chief Audit Executive.

5. Quorum





7. Decisions


8.1. The Secretary shall minute in Arabic or English, the proceedings and resolutions of all meetings of the Committee, including recording the names of those present and in attendance.


8.3. The minutes shall be signed by the Committee Chairman and members present at the meeting. Any member who objects to any resolution adopted by the A&RC, shall have their objection recorded in the minutes. Those members of the A&RC who sign the minutes of any meeting shall be answerable to the accuracy thereof.


8.5. Minutes of Committee meetings shall be circulated promptly to all members of the Committee and, once agreed, are made available to all members of the Board.



The Committee should be responsible for:

Review of Accounting, Financial Practices and Integrity of Financial Reporting

9.1. Reviewing and discussing with management, and the external auditor the interim and annual audited financial statements in both draft and final form.

9.2. Monitoring the integrity of the financial statements of the Bank. The Committee shall also review any other financial information contained in other documents.

9.3. Holding direct responsibility for resolution of disagreements, if any between management and the external auditor regarding financial reporting, which have been brought to its notice by the management or the external auditor.

9.4. Reviewing and challenging where necessary:

9.4.1. whether the Bank has followed appropriate accounting policies and made appropriate estimates and judgements, taking into account the views of the external auditor;

9.4.2. alternative treatments of financial information within generally accepted accounting principles;

9.4.3. the consistency of, and any changes to, accounting policies both on a year on year basis and across the Bank;


9. Responsibilities

7.2.2. A decision through circulation will not be valid unless approved by majority of the responding members and responses have been received from majority of the members, and this shall be ratified in the minutes of the next A&RC meeting.


9.4.4. significant adjustments resulting from the audit;

9.4.5. management’s assessment of the effectiveness of the Bank’s internal control structure and procedures for financial reporting; and

9.4.6. regulatory and accounting initiatives, and their effect on the Bank’s financial statements.

Review of Internal Controls and Risk Management

9.5. Reviewing and approving the appointment and dismissal of the Chief Risk Officer (CRO), who shall report directly to the Committee.

9.6. Formally evaluating the performance of the CRO, following the guidelines set forth by the Bank for evaluating the performance of other approved persons.

9.7. Keeping under review the effectiveness of the Bank’s internal controls and risk management systems.

9.8. Reviewing and approving the statements to be included in the Annual Report concerning internal controls and risk management.

9.9. Receiving and discussing reports from management on an annual and/or as-needed basis relating to:

9.9.1. compliance at the Bank (including anti-money laundering, regulatory and fiduciary compliance);

9.9.2. significant reported ethics violations;

9.9.3. fraud and operating losses;

9.9.4. technology and information security; and

9.9.5. the Bank’s insurance.

9.10. Reviewing and supervising the operation of the Bank’s Code of Ethics.

9.11. Ensuring compliance with the Bank’s Key Persons Policy, by those defined in the Policy.

9.12. Reviewing annually the Bank’s Business Continuity Planning document to ensure it is adequate and relevant for current operations.

9.13. Reviewing periodically with management, including the General Counsel and the external auditors any correspondence with, or other action by, regulators or governmental agencies, including any material legal affairs of the Bank and the Bank’s compliance with applicable laws and reporting requirements.

9.14. Overseeing and monitoring the risk management framework that reflects the best practices in the industry, as proposed by senior management covering credit risk, market risk, operational risk, liquidity risk as well as strategic and reputational risks.

9.15. Ensuring appropriate policies, controls and measures are in place to support the risk framework and to provide appropriate oversight to management to ensure adequate conformance to them.

9.16. Demonstrating to the Central Bank of Bahrain that the Bank’s operations, individually and collectively are measured, monitored and controlled by appropriate, effective and prudent risk management systems commensurate with the scope of the Bank’s activities.

9.17. Reviewing management risk reports to assess the performance of management in monitoring and controlling credit and market risk to ensure that the credit, investment and treasury strategies and policies approved by the Board are adhered to and implemented in practice and are effective and consistent with the Bank’s risk appetite.

9.18. Reviewing management’s recovery procedures for problem and defaulted financing facilities an requirements for provisioning.

9.19. Evaluating proposed provisioning requirements and partial or full asset write-offs.


9.20. Reviewing and discussing possible improprieties in financial reporting or other matters, and ensuring that arrangements are in place for independent investigation and follow up regarding such matters. This would include review and discussion of fraud events and all significant fraud risk issues reported to it by Management/Internal Audit/Compliance.

9.21. Discussing with management the Bank’s major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Bank’s risk assessment, risk management policies and control and governance processes.

9.22. Obtaining updates/reports from management on the effectiveness of internal controls over operational and other risks.

9.23. Ensuring that senior management have put in place appropriate systems of control for the business of the bank and the information needs of the Board; in particular, there must be appropriate systems and functions for identifying as well as for monitoring risk, the financial position of the bank, and compliance with applicable laws, regulations and best practice standards. These systems must produce information on a timely basis.

Whistleblowing Program

9.24. Reviewing the Bank’s arrangements for its employees to raise concerns, in confidence, about possible wrongdoing in financial reporting or other matters. The Committee shall ensure that these arrangements allow proportionate and independent investigation of such matters and appropriate follow up action.

9.25. Reviewing the whistleblowing complaints/allegations received by the designated contact on a quarterly basis.

9.26. Substantiating whistleblowing complaints/allegations reported by the Designated Contact and deciding on the course of action.

9.27. Depending on the nature of investigation required, approve the internal or outsourced team to perform the investigation.

9.28. Reviewing the investigation report submitted and deciding on the course of action to be taken, and informing the Board, if necessary.

9.29. Communicating to the Designated Contact and Whistleblower, on the decision taken on the complaint allegation after investigation, to be updated in the whistleblowing log.


9.30. Reviewing and recommending to the Board, for submission to the Shareholders for approval, the Related Party Transactions policy for the Bank.

9.31. Approving related party transactions, as per the delegated authority in the policy, once assured that the transaction does not pose a conflict of interest.

9.32. Reviewing the related party transactions details that will be incorporated in the Annual Report of the Bank.

9.33. Ensuring that the external auditors perform their obligations towards related party transactions during their audit.

Review of Internal Audit

9.34. Monitoring and reviewing the effectiveness of the Bank’s internal audit function in the context of the Bank’s overall risk management system.


9.35. Reviewing and assessing the annual internal audit plan, and any material changes to such plan.

9.36. Meeting with the Chief Audit Executive at least once a year (if deemed necessary), without management being present, to discuss his/her remit and any issues arising from the internal audits carried out. In addition, the Chief Audit Executive shall be given the right of direct access to the Chairman of the Board and to the Committee.

9.37. Reviewing and approving the appointment and dismissal of the Chief Audit Executive, who shall report directly to the Committee.

9.38. Reviewing and discussing the internal audit findings that have been reported to management, management’s responses and the progress of the related corrective action.

9.39. Be directly responsible for resolution of disagreements, if any, between management and the Internal audit function, which have been brought to its notice by the management or the Chief Audit Executive.

9.40. Reviewing and approving the Internal Audit Charter prepared by the internal audit function and any revisions to such charter.

9.41. Reviewing and approving the Internal Audit Manual prepared by the internal audit function and any revisions to such manual.

9.42. Reviewing and discussing the budget allocated to the internal audit function where necessary and required.

9.43. Formally evaluating the performance of the Chief Audit Executive, following the guidelines set forth by the Bank for evaluating the performance of other approved persons.

9.44. Commissioning an independent external quality assurance review of the internal audit function, once every five years.

Review of Shari’a Internal Audit

9.45. Providing consultation to the Shari’a Supervisory Board for the appointing the Head of Internal Shari’a Audit Function.

9.46. Communicating regularly with the Head of Internal Shari’a Audit Function and reviewing periodic reports submitted to the Committee.

9.47. Recommend to the Board for approval the policy and procedures manual of the Shari’a internal audit function.

9.48. Reviewing the independence assurance report issued by the Independent External Shari’a Compliance Auditor, on an annual basis, prior to submission to the Shari’a Supervisory Board.

Review of Compliance

9.49. Reviewing and approving the appointment and dismissal of the Head of Compliance, who shall report directly to the Committee.

9.50. Formally evaluating the performance of the Head of Compliance, following the guidelines set forth by the Bank for evaluating the performance of other approved persons.

9.51. Reviewing the effectiveness of the system for monitoring compliance with legal and regulatory requirements and the results of management’s investigations and follow- up (including disciplinary action) of any fraudulent actions or non-compliance. Ensure that the Bank communicates with shareholders and relevant stakeholders (internal and external) openly and promptly, and with substance of compliance prevailing over form.


9.52. Reviewing and discussing the budget allocated to the Compliance function where necessary and required.

9.53. Reviewing and approving the Compliance and Anti Money Laundering (AML) policy and revisions thereto, presented to the Committee by the Compliance and AML function.

9.54. Obtaining updates (when applicable) from management and Bank’s legal counsel regarding compliance matters, which may have a material impact on the Bank’s financial statements or compliance policies.

9.55. Reviewing the findings of any examinations by regulatory agencies.

Review of External Audit

9.56. Considering and making recommendations to the Board, to be put to shareholders for approval at the Annual General Meeting, relating to the appointment, re- appointment and removal of the Bank’s external auditor. The Committee shall oversee the selection process for new auditors and, if an auditor resigns, the Committee shall investigate the issues leading to this and decide whether any action is required.

9.57. Overseeing the relationship with the external auditor including (but not limited to):

9.57.1. Recommending to the Board of their remuneration, whether fees for audit or non-audit services, and that the level of fees is appropriate to enable an adequate audit to be conducted;

9.57.2. Approving the terms of engagement and the scope of the audit;

9.57.3. Assessing annually their independence and objectivity taking into account relevant professional and regulatory requirements and the relationship with the auditor as a whole, including the provision of any non-audit services;

9.57.4. Satisfying itself from information provided that there are no relationships (such as close family, employment, investment, financial or business) between the auditor and the Bank (other than in the ordinary course of business);

9.57.5. Assessing annually their qualifications, expertise and resources and the effectiveness of the audit process;

9.57.6. Monitoring the auditors’ compliance with relevant ethical and professional guidance on the rotation of audit partners and other requirements; and

9.57.7. Prior approval of the employment of former employees of the Bank’s auditor.

9.58. Meeting regularly with the external auditor at least twice a year, and at least once a year in the absence of executive management, to discuss their remit and any issues arising from the audit.

9.59. Reviewing and approving the annual audit plan and ensure that it is consistent with the scope of the audit engagement.

9.60. Approving the non-audit services policy for the Bank documenting the prohibited and pre-approved non-audit services that may be provided by the external auditors.

9.61. Ensuring that the external auditors do not carry out any non-audit services which may affect their impartiality or independence.

9.62. Reviewing the letter of representation requested by the auditors in order to note any nonstandard representation required by the auditor.

9.63. Reviewing the management letter and management’s response to the auditor’s findings and recommendations.


9.64. Reviewing the difficulties encountered in the course of the audit work, including any restrictions on the scope of activities or access to requested information, any significant disagreements with management and communications between the audit team and the audit firm’s regional or international office with respect to difficult auditing or accounting issues presented by the engagement.

9.65. Ensuring that the external auditors attend the Annual General Meeting to read their report to the Shareholders and answer their questions and queries regarding the financial statements for the year end.

10.1. The A&RC Chairman shall report formally to the Board on its proceedings after each meeting on all matters within its duties and responsibilities.

10.2. The Committee shall make whatever recommendations to the Board it deems appropriate on any area within its remit where action or improvement is needed.

10. Reporting Responsibilities

11.1. Have access to sufficient resources in order to carry out its duties, including access to the Bank secretariat for assistance as required;

11.2. Be provided with appropriate and timely training, both in the form of an induction programme for new members and on an ongoing basis for all members;

11.3. Give due consideration to laws and regulations;

11.4. Be responsible for co-ordination of the internal and external auditors;

11.5. Oversee any investigation of activities which are within its terms of reference and act as a court of last resort; and

11.6. At least once every year, review its terms of reference to ensure it is operating at maximum effectiveness and recommend any changes it considers necessary to the Board for approval. The terms of reference must be available to all internal stakeholders and, in certain circumstances, such as listed entities, to external stakeholders.

12.1. Members of the A&RC and other persons who attend the A&RC meetings must maintain silence on all documents they receive, on the contents of deliberations and on all confidential information of the Bank, service providers and its clients, particularly operating and business information that are disclosed to them in the course of their work on the A&RC.

11. Other Matters

12. Confidentiality


Rem

uner

atio

n C

omm

ittee

C

hart

er

Section V


Remuneration Committee Charter


1.1. The Remuneration Committee (“RC” or the ‘‘Committee’’) is appointed by the Board of Directors (the “Board”) of the Al-Salam Bank Bahrain BSC (“the Bank”) to assist the Board in discharging its oversight duties relating to:

1.1.1. Reviewing the Bank’ remuneration policies, which must be approved by the Board and be consistent with the corporate values and strategy of the Bank;

1.1.2. Reviewing and approving a formal and transparent procedure for developing a remuneration policy for the Board Chairman, Directors, the Chief Executive Officer (CEO) and, Material Risk Takers and Approved persons as per CBB guidelines;

1.1.3. Making recommendations regarding remuneration policies and amounts to the whole Board, covering Board remuneration and, employee salaries and benefits; and

1.1.4. Ensuring that Board remuneration offered is competitive, in line with the market/peer group, consistent with the responsibilities assigned and based on the member’s attendance and performance.

1.2. The Committee shall recommend to the Board for approval, the remuneration policy and special compensation plans, including annual bonus schemes, share option plans and staff savings schemes across the Bank, which attract, retain and motivate high caliber employees and yet not be excessive to the extent that the Shareholders’ interest is compromised.

2.1. The Board authorizes the Committee, within the scope of its responsibilities, to:


2.1.2. A decision through circulation will not be valid unless responses are received from all the members of the Committee and approved by majority of the responding members.


4.1. The Board shall appoint members of the Committee. All members of the Committee shall be independent directors otherwise they shall be non-executive directors of the Bank of whom a majority should be independent and it shall consist of not less than three members.

1. Mission

2. Authority

3. Secretary

4. Membership


4.2. The CEO may not be a member of the Committee but may be invited to present to the Committee if so directed by the Committee’s Chairman.

4.3. Appointments to the Committee shall be for a period of up to three years and co- terminus with their tenure as a Board member, provided that the majority of the Committee members remain independent and non-executive. Any term beyond six years should be subject to rigorous review, and should take into account the need for progressive refreshing of the Committee.

4.4. The Chairman of the Committee shall be independent, or non-executive, in which case the Bank will have to disclose the same in their Annual Report. The Committee shall elect the Committee Chairman from amongst the members nominated for the Committee.

4.5. Members of the RC must be independent of any risk taking function or Committee(s).


5.1. The Committee shall meet at least twice a year and at such times as the Chairman of the Committee shall require. Meetings of the Committee will preferably be held prior to meetings of the full Board. Meetings of the Committee shall be summoned by the Corporate Secretary at the request of the Committee Chairman.

5.2. Unless otherwise agreed, notice of each meeting confirming the venue, time and date, together with an agenda of items to be discussed, shall be issued by email with as much advance notice as possible to each member of the RC, and any other person required to attend, but at a minimum five working days before the meeting. Supporting papers shall be sent to the RC members and to the other attendees, as appropriate at the same time.

5.3. The Chairman of the Committee shall attend the Bank’s Annual General Meeting to respond to any relevant queries and questions raised by the shareholders regarding the activity of the Committee.






6. Quorum





7.2.2. A decision through circulation will not be valid unless approved by majority of the responding members and responses have been received from majority of the members, and this shall be ratified in the minutes of the next RC meeting.



8.3. The minutes shall be signed by the Committee Chairman and members present at the meeting. Any member who objects to any resolution adopted by the RC, shall have their objection recorded in the minutes. Those members of the RC who sign the minutes of any meeting shall be answerable to the accuracy thereof.





7. Decisions


The Committee shall be responsible for the design, implementation and supervision of the remuneration policy of the Bank. In particular, RC shall be responsible for:

9.1. Designing all the elements of remuneration including fixed salary, allowances, benefits and variable pay scheme for all levels of employees in the Bank. In designing the Remuneration Policy, the RC shall consider, the business strategy of the Bank, the regulatory pronouncements of the Central Bank of Bahrain and the Labour Law for the Private Sector Law No.36 of 2012 of the Kingdom of Bahrain. The CEO and the Senior management (all approved persons) can only provide inputs regarding remuneration as and when requested by RC, which will be responsible for:

9. Responsibilities


10.1. At least once a year, review its terms of reference to ensure it is operating at maximum effectiveness and recommend any changes it considers necessary to the Board for approval.

10. Other Matters

• Finalizing the Remuneration Policy for employees and recommending to the Board for approval; and

• Finalizing the Remuneration Policy for Directors and submitting it to the Board for seeking approval from the Shareholders.

9.2. Obtaining approval of the Board of Directors and subsequently the Shareholders on the Remuneration Policy adopted by the Bank;

9.3. Approving the Remuneration Policy and remuneration for Approved Persons and Material Risk-Takers (MRT);

9.4. Approving targets and associated risk parameters, and variable pay for achieving the set target for each performance period;

9.5. Approving total variable remuneration to be distributed, considering the total remuneration including salaries, fees, expenses, bonuses and other employee benefits at the end of the performance period based on the evaluation of actual performance as against the target for the performance period and approve variable compensation to each of the approved persons and MRTs;

9.6. Monitoring and reviewing the remuneration system on a regular basis to ensure the system operates as intended;

9.7. Undertaking stress testing of the variable pay on a periodic basis to ensure that the variable pay scheme does not affect the Bank’s solvency and risk profile, and its long term objectives and business goals;

9.8. Undertaking back testing to adjust for ex-post risk adjustments to the variable pay paid in earlier years; and

9.9. Recommending Board Member remuneration based on their attendance and performance and in compliance with Article 188 of the Bahrain Commercial Companies Law, 2001.9.2.2 determine the policy for, and scope of, pension arrangements for each executive director.

9.10. Determining the policy for the disclosure of directors’ remuneration.

9.11. Ensuring effective policies and processes are in place to ensure that contractual term on termination, and any payments made, are fair to the individual and the Bank.

9.12. Ensuring remuneration polices do not result in failure or misconduct being rewarded.

9.13. Agreeing the policy for authorizing claims for expenses from the CEO, Chairman of the Board and directors.

9.14. Establishing the selection criteria, selecting, appointing and setting the terms of reference for any remuneration consultants who are appointed to advise the Committee.

9.15. Performing any other duties or responsibilities expressly delegated to the Committee by the Board from time to time.


11.1. Members of the RC and other persons who attend the RC meetings must maintain silence on all documents they receive, on the contents of deliberations and on all confidential information of the Bank, service providers and its clients, particularly operating and business information that are disclosed to them in the course of their work on the RC.

11. Confidentiality


Nom

inat

ion

and

Cor

pora

te

Gov

erna

nce

Com

mitt

ee

Cha

rter

Section VI


Nomination and Corporate Governance

Committee Charter


1.1. The Nomination and Corporate Governance Committee (“NGC” or the ‘‘Committee’’) is appointed by the Board of Directors (the “Board”) of the Al-Salam Bank Bahrain BSC (“the Bank”) to assist the Board in discharging its oversight duties relating to:

1.1.1. Identifying individuals qualified to become the members of the Board of Directors and recommending the Board nominees at the next Annual General Meeting;

1.1.2. Developing and recommending changes from time to time in the Bank’s corporate governance policy framework, including changes that the Committee believes is required in the management structure, or job descriptions. The framework must be reviewed at least once a year.

1.1.3. Liaising with the Corporate Governance Officer (CGO) to ensure effective implementation of the Corporate Governance framework and preparation of the annual Corporate Governance Report.

1.1.4. Recommending to the Board on individuals nominated for senior management (all approved persons) vacancies, including the Chief Executive Officer.

1.1.5. Developing a succession plan for management, which shall include replacement of Officers in emergencies or when vacancies arise due to unexpected circumstances.

1.1.6. Establishing a scope of authorities for each vacancy to retain the necessary responsibilities, powers, qualifications and other related matters.

1. Mission

2.1. The Board authorizes the Committee within the scope of its responsibilities to:



2. Authority


3. Secretary

4.1. The Board shall appoint members of the Committee. All members of the Committee shall be independent directors otherwise they shall be non-executive directors of the Bank of whom a majority should be independent and it shall consist of not less than three members. Considering that the Committee will be responsible to discuss corporate governance matters that may include compliance with Islamic Shari’a rules and guidelines, the identified Shari’a Supervisory Board member shall also be a member in the NGC.

4. Membership

Nomination and Corporate Governance

Committee Charter


4.2. The CEO may not be a member of the Committee but may be invited to present to the Committee if so directed by the Committee’s Chairman.


4.4. The Chairman of the Committee shall be independent. The Committee shall elect the Committee Chairman from amongst the members nominated for the Committee.


5.1. The Committee shall meet at least twice a year and at such times as the Chairman of the Committee shall require. Meetings of the Committee will preferably be held prior to meetings of the full Board. Meetings of the Committee shall be summoned by the Corporate Secretary at the request of the Committee Chairman.

5.2. Unless otherwise agreed, notice of each meeting confirming the venue, time and date, together with an agenda of items to be discussed, shall be issued by email with as much advance notice as possible to each member of the NGC, and any other person required to attend, but at a minimum five working days before the meeting. Supporting papers shall be sent to the NGC members and to the other attendees, as appropriate at the same time.

5.3. The Chairman of the Committee shall attend the Bank’s Annual General Meeting to respond to any relevant queries and questions raised by the shareholders regarding the activity of the Committee or the Corporate Governance framework of the Bank.






6. Quorum





7.2.2. A decision through circulation will not be valid unless approved by majority of the responding members and responses have been received from majority of the members, and this shall be ratified in the minutes of the next NGC meeting.

7. Decisions

The Committee shall be responsible for:

Nomination:

9.1. Ensuring a formal and transparent Board nomination process is in place.

9.2. Evaluating the balance of skills, knowledge and experience on the Board, before appointment is made by the Board, and, in the light of this evaluation, preparing a description of the role and capabilities required for a particular appointment. In identifying suitable candidates, the Committee shall consider candidates on merit and against objective criteria, taking care that appointees have enough time available to devote to the position. The Committee shall also consider candidates from a wide range of backgrounds.

9. Responsibilities



8.3. The minutes shall be signed by the Committee Chairman and members present at the meeting. Any member who objects to any resolution adopted by the NGC, shall have their objection recorded in the minutes. Those members of the NGC who sign the minutes of any meeting shall be answerable to the accuracy thereof.







9.3. Ensuring that all candidates recommended to become Board members must be notified to the Central Bank of Bahrain (CBB) prior to their appointment and, approved by the CBB.

9.4. Reviewing whether candidate directors are ‘fit & proper’, as part of the evaluation.

9.5. Identifying and nominating, for the recommendation of the Board to the Shareholders, candidates to fill Board vacancies as and when they arise.

9.6. Ensuring that on appointment to the Board, non-executive directors receive a formal letter of appointment setting out clearly what is expected of them in terms of time commitment, Committee service and involvement outside Board meetings.

9.7. Reviewing regularly the structure, size and composition (including the skills, knowledge and experience) required of the Board compared to its current position and make recommendations to the Board with regard to any changes.

9.8. A directorship may be renewed once for a maximum period of three years. Boards must disclose the length of time served by individual directors. Boards must publicly disclose why they would not choose to follow this guidance if they choose to allow a director to serve a total of more than six years.

Succession planning, training and evaluation

9.9. Recommending to the Board, the composition and responsibilities of Board committees and the Chair and members of each committee. This shall include advising the Board on committee appointments, removal from committees or from the Board, rotation of committee members and Chairs and committee structure and operations.

9.10. Reviewing candidate nominated for senior management (approved persons) positions and ensuring that they have the necessary integrity, technical and managerial competence and experience.

9.11. Reviewing annually the succession planning, and replacing key executives when necessary, and ensuring appropriate resources are available, and minimising reliance on key individuals.

9.12. Giving full consideration to succession planning for directors (in particular the Chairman and the CEO) and other senior management (approved persons). In the course of its work, take into account the challenges and opportunities facing the Bank and identify the skills and expertise needed on the Board in the future.

9.13. Facilitating the performance evaluation of the Board and Committees on an annual basis, in line with the performance assessment framework. The results of the evaluation should be communicated to the Shareholders at the Annual General Meeting.

9.14. Ensuring all Directors complete the mandatory training hours, as required by the CBB, annually.

9.15. Ensuring that each new director receives a formal tailored induction, updated regularly, which includes presentation by senior management on the Bank’s strategic plans, significant financial, accounting and risk management issues, compliance programs, Code of Conduct, management structure and executive officers and, internal and external auditors.

9.16. Ensuring that all Directors remain updated on their roles and responsibilities, and are informed of the changes and trends in economic, political, social, financial, regulatory and legal climates and corporate governance practices.

9.17. Ensuring proper training on Sharia principles are provided to the Sharia Supervisory Board and all relevant staff in the area of Sharia Compliance complying with AAOIFI’s Governance Standards for Islamic Financial Institutions.


Corporate governance

9.18. Recommending to the Board, appointment of a suitable candidate as the Corporate Secretary and CGO for the Bank, and the job description for the positions.

9.19. Overseeing and monitoring the implementation of the governance policy framework by working together with the CGO, and the Shari’a Supervisory Board.

9.20. Providing the Board of Directors with reports and recommendations based on its findings in the exercise of its duties.

9.21. Reviewing the annual Corporate Governance Report prepared by the CGO, and recommend to the Board for approval.

9.22. Ensuring that all weaknesses identified during governance audits by, the Bank’s internal audit team or external auditors or relevant Regulators, are rectified immediately.

9.23. Ensuring that the Board and employees of the Bank are provided with training on Corporate Governance, on an annual basis.

9.24. Reviewing on an annual basis the Bank’s compliance with the respective corporate governance rules and regulations issued by the Ministry of Industry, Commerce and Tourism, and the CBB, and ensure that proper action is taken to implement the necessary measures to close any gaps identified.

9.25. Reviewing on an annual basis the Bank’s compliance with the Board and Board Committees’ approved charters.

9.26. Reviewing on an annual basis the Shari’a Supervisory Board’s compliance with its approved Charter.

9.27. Reporting formally to the Board on its proceedings after each meeting, on all matters within its duties and responsibilities.

9.28. Recommending to the Board, whatever recommendations it deems appropriate, on any area within its remit where action or improvement is needed.

9.29. Receiving reports from the Shari’a Supervisory Board, regarding outstanding unresolved matters relating to non-compliance with Shari’a Supervisory Board’s Fatwas.

10.1. At least once every year, review its terms of reference to ensure it is operating at maximum effectiveness and recommend any changes it considers necessary to the Board for approval.

10. Other Matters

11.1. Members of the NGC and other persons who attend the NGC meetings must maintain silence on all documents they receive, on the contents of deliberations and on all confidential information of the Bank, service providers and its clients, particularly operating and business information that are disclosed to them in the course of their work on the NGC.

11. Confidentiality


Cod

e of

Et

hics

Section VII


Code of Ethics


Purpose

The Bank’s Code of Ethics (‘Code’) have been established to provide the framework for maintaining the highest standards of professional conduct. The Code are statements of the Bank’s values and ethical standards.

The Bank requires all of its Directors, Shari’a Supervisory Board members, and employees to adhere to the Code. The guide is followed to protect the Bank’s most valuable asset the ‘Reputation of the Bank and its subsidiaries’.

Guiding principles

The Code endorses the following principles:

• Sustain Islamic practice, and use Shari’a law to guide banking activities.

• Ensure the Bank’s continuous success through compliance with all applicable laws, regulations, and Bank policies by Directors, Management and employees.

• Display of the highest sense of integrity to guide every decision and ensure proper conduct.

• Display honesty, trust, and fairness in the daily work, actions and relationships with and on behalf of the Bank.

• Avoid situations with conflicting interests where the Directors, Management or employees personal interests or the interests of their family, may conflict, or appear to conflict with the interests of the Bank or its customers.

• Practice competitive market processes of high integrity for long-term sustainability of the Bank.

• Ensure protection of the Bank assets, including facilities and equipment.

• Establish controls to protect the Bank and develop mechanisms to protect the rights of the various stakeholders.

• Display professionalism in all dealing and uphold dignity of others through respect.

• Conduct professional and personal activities enhancing public trust and confidence.

• Raise red flags by notifying Management immediately through established controls by the Bank to report violations or possible violations when observed.

• Adhere to the Bank’s Code with utmost sincerity and diligence.

Scope

The Code applies to the Bank’s Directors, Shari’a Supervisory Board members, Senior Management and employees and others who work or act, on a permanent or temporary basis (‘staff’), advisors and consultants for and on behalf of the Bank.

Compliance with Laws, Regulations, Rules and Policies

It is the duty of all Directors, Management and employees to understand and comply with the laws, regulations and policies and procedures of the Bank that apply to his/her job, during and after the term of employment.

Conducting political activities either (verbal or written) or religious discussions during work hours at the Bank premises and/or while representing the Bank in business trips, training courses, seminars, workshops, gathering etc, are prohibited.

Furthermore, although the National Charter guarantees certain rights of the individual, it is against Bank policy to use (in or outside the premises and during or after working hours) using any of the Bank’s property in promoting, expressing or conducting any political activities, nor is it permissible to wear the Bank uniform during such political activities; or to use any of the Bank communications media to perpetuate political views or convey information of such nature.


As a multicultural organization, the Bank encourages harmony and expression of mutual respect among its staff. In this regard, employees must refrain from discussing religious and political topics which might cause offense or increase sensitivities among colleagues. While the foregoing does not provide an exhaustive list; the Bank expects all staff members to adhere to the spirit of the Code and to apply general sense while conducting themselves.

Adherence to the laws, regulations and rules outlined in the Code is essential as the Bank’s reputation, liability as well as personal liability is at risk. Any questions regarding legal responsibility should be directed to the Human Resources Department. For the rules and regulations of the Information Technology Department, please refer to the Bank’s Information Security Policy.

Appearance of Good Conduct and Avoidance of Conflicts of Interest

The Bank staff are under a duty to act, at all times, in the best interest of the Bank and to avoid any conflicts of interest which may arise during the course of business with the Bank. Conflict may arise when an individual’s private interest interferes with the interests of the Bank. Any situation in which the consequences of an individual’s actions may make working at the Bank difficult to perform objectively and effectively should be avoided. The Bank has defined and outlined the various conflicts of interests in its Conflicts of Interest Management Policy. Conflicts may arise when the staff:

• Places his/her own self-interests or interests of others over the Bank’s interest in their official capacity;

• Discloses confidential information and data of the Bank, which may be detrimental to the Bank’s reputation and financial situation;

• Uses the Bank’s assets and resources for personal interests; and

• Does not disclose direct or indirect common interest with the Bank and participates in the Bank’s matters (either by expressing opinion or voting on any subjects presented to the Board).

Refer to the Conflicts of Interest Management and Disclosure policies for more details.

Dress Code

All staff at the Bank are expected to wear the national dress or formal attire, upholding traditional values in the office.

Female employees are obliged to comply with the dress code of the Bank. This should reflect in formal and presentable Islamic attire, in which the hair should be covered in entirety with a headscarf and the remainder of the body should be covered in an acceptable Islamic attire during working hours. Refer to the dress code detailed in the Human Resources Policy Manual, for further information.

Employee Ethics

The Bank staff should conduct themselves appropriately and display honesty and civility while dealing with other Bank staff, customers and clients; respect customs, practices and reasonable ambition of other people; and refrain from anything that will/might undermine or is prejudicial or be harmful to the Bank’s reputation or compromise its employee’s ability to carry out their duties without constraints.

The Bank is committed to honest and ethical conduct, which includes, ethical handling of actual or potential conflicts of interest between personal and professional relationships, which may be detrimental to the Bank shareholders and investors.

The Bank recognizes the importance of developing strong business relationships with clients, customers and other stakeholders. Engagements to develop business should be in compliance with the rules and regulations and protect the Bank’s image. Refer to the Gifts and entertainment policy for further information.

Directors and Management are required to represent and serve all shareholders, and other stakeholders, rather than concentrating on the interest of a specific group and safeguard interests of the Bank.


With regards to financial integrity, employees are:

• Never to deliberately make a false or misleading entry in a report or record;

• Never to allow data or information leakage of any form, unless otherwise authorized,;

• Never to sell, transfer or dispose of the Bank’s assets without proper documentation and authorization;

• Constantly cooperate with the internal and external auditors of the Bank.

• Never to use personal hedging strategies or remuneration and liability linked insurance to undermine the risk alignment effects embedded in their remuneration arrangements. In addition to the responsibilities incumbent on each individual, every staff is required to:

• Speak up if unsure about the proper course of action to follow;

• Alert Human Resources and/or their direct manager if someone acting on behalf of the

Bank is or may be doing something that infringes and violates the Code of the Bank.

Directors, Senior Management and employees involved in the processing of investment transactions (including without limitation sourcing, recommending, approving or placing) shall declare in writing their investment dealings or interest in the proposal under consideration. The onus of such disclosures shall rest upon the respective member(s) and any non-disclosure that is subsequently identified or that comes to the attention of the Bank shall render the member liable to termination and legal proceedings by the Bank in accordance with the laws of Kingdom of Bahrain and/or any other applicable law(s) and jurisdictions’.

Employee Relations

The Bank is committed to promoting a diverse and inclusive working environment, and encourages understanding and respect of individuality and creativity that each staff uniquely brings to the Bank. Staff at the Bank are hired on the basis of ability and merit and evaluated in a fair and consistent manner.

In line with the Bank policy, of being on equal opportunity firm and as part of Corporate Governance requirements, the Bank adopts a policy of not employing relatives of employees, Directors and Shari’a Supervisory Board members, up to the following degrees;

• Spouses including divorced;

• Mother/father/mother in law or father in law;

• Brothers and sisters, half-brothers/sisters, including siblings;

• Children, including step children

• Guardianships;

• Nephews and nieces

• Employee’s / Director’s son in law or daughter in law

In case an employee marries another employee member, the Bank has the right to take appropriate actions to protect the interest of the Bank.

Existing employees must alert the HR of any relatives, or relationship, of other employees or candidates being interviewed. False declaration shall be subject to disciplinary action.

Gifts and entertainment

The Bank recognizes that providing or accepting gifts and entertainment to external parties help develop business relationships. However, it is important to be cautious while offering or accepting gifts and entertainment, as the impropriety can create a position of obligation for the recipient, thus impacting the Bank’s image. All Directors, Shari’a Supervisory Board members and employees should abide by the Gift and Entertainment Policy while providing and/or accepting gifts.


Harassment

The Bank is committed to ensure an environment which encourages the fair and

humanly beneficial treatment of all staff. The Bank seeks to ensure that all staff enjoy a healthy working environment which is free from all forms of discrimination or harassment.

The Bank prohibits discrimination against any staff on the basis of race, sex, colour, age, religion, disability or national origin. All recruiting, hiring, training and promotion decisions should comply with the principle of equal employment opportunity.

It is the responsibility of each member of staff to uphold the Bank’s commitment to create a harassment free working environment and to conduct themselves in a courteous manner, under which impolite language in any form is unacceptable.

Health Concerns

All Bank staff should avoid performing any act(s) or posing any sort of threat to themselves that may be threatening to the health of the public, other employees, customers and clients.

Commitment to Excellence

All Bank staff should:

• Represent the Bank with dignity and in a respectful manner.

• Strive for continuous improvement and maximum efficiency in their job.

• Work with others to achieve the common goal of service quality.

• Carry out responsibilities in a careful, diligent and ethical manner and shall comply with all applicable laws, rules and regulations.

• Devote all time and attention during the working hours to discharge the duties according to the best of their ability.

Use of Technology and Assets at the Bank

Mobile phones have become invaluable aids to communication. It might be essential for some employees to conduct their work by using their mobile phone. Personal calls for emergencies or important matters may be made during work hours. However, the use of mobile phones and the Bank’s desk phones should be kept to a minimum. While using mobile phones, consideration for other staff should be prioritized (e.g. use of ringing styles set to beep once, vibration or silent).

It is the responsibility of every Bank staff member to properly use all facilities, property and equipment of the Bank. The responsibility includes protecting the Bank property from loss, theft, abuse and unauthorized use. Staff of the Bank must maintain the legitimate use of all equipment for business purposes.

Confidential Bank Information

Refer to the Confidentiality and Proprietary Information Statement.

Reporting violations

Should any member of staff know of, or suspect a violation of any kind, illegal activity, or violation of any rule, regulation of the Bank or Code, it is his/her duty to report his/her concerns through the Bank’s Whistle Blowing Policy (Refer to the Whistle Blowing Policy for escalation procedures). Human Resources Department should be contacted in such instances. All reports should be treated with confidentiality and would be treated in good faith.


Retaliation

The Bank protects those who report a suspected violation or provide information relevant to an investigation of any conduct, which the individual reasonably believes to be a direct or indirect violation of the Code, applicable laws, regulations or rules, against any retaliation or discrimination. Refer to the Whistle Blowing Policy for further details.

Violations

Violations or suspected violations of the code would undergo an investigation by the Human Resources Department. Disciplinary action may include termination of employment, referral for criminal prosecution and/or reimbursement to the Bank of any losses or damages resulting from violations to the Code. All Bank staff, other than its legally authorized signatories (under the Bank’s rules and regulations), are forbidden from signing cheques on behalf of the Bank.

Disciplinary action will be subject to Labour Law guidelines and may be publicized within the Bank to deter future violations.

Changes to the Code of Ethics

The Code shall be reviewed by the Human Resources Department once every year and any updates or changes to the provisions of the Code shall be reviewed by the Audit and Risk Committee and recommended to the Board for approval. All Directors, Shari’a Supervisory members and employees shall be informed of any such changes or updates immediately. Additionally, any updates or changes to the provisions of the Code must be publicly disclosed in a prompt manner.

Certify that the above declaration is correct in every respect.

(First Name) (Last Name) (Signature) (Date)


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Section VIII


Conflicts of Interests Management Policy


• The Conflicts of Interests Management Policy (“Policy”) for Al Salam Bank Bahrain B.S.C. (“ASBB” or the “Bank”) is a formalized document outlining measures to avoid or identify the existence of any conflict of interest, and to manage and disclose such conflicts.

• The purpose of developing this Policy is to set the process, procedures and internal controls to facilitate compliance with the Policy as well as to highlight the consequences of non- compliance with the Policy by the Bank’s Directors, Shari’a Supervisory Board members and Senior Management (all approved persons), and other representatives.

1. Purpose

• The Bank has set its business policies, procedures and general management disciplines that operate and combine to fulfil the requirements of the Corporate Governance framework. This policy works in support of those policies, procedures and disciplines.

• This Policy is by no means an exhaustive analysis addressing every conflict of interest situation that might arise. The Policy provides a guide as to what constitutes a conflict of interest, the processes and procedures that are in place in order to facilitate compliance and, the consequences of non-compliance.

2. Guidelines and objectives

The Policy is intended to assist the following persons in making the right decisions when confronted with potential conflict of interest issues:

• Shareholder of above 5% of the voting capital of a Bank;

• Board of Directors

• Senior Management; and

• Other form of significant participation to the Board.

3. Scope

• Conflict of Interest: A Conflict of Interest can be defined simply as “A situation where the interests of one party differ from the interests of another party”. Within the context of the Directors and Senior Management of the Bank, this can present itself in a number of different ways that can be categorised into two broad types – commercial and personal:

— Commercial Conflicts of Interest: A Commercial Conflict of Interest arises when the business places its commercial interests ahead of the customer interests or it affects its business relationships in a negative way.

— Personal Conflicts of Interest: A Personal Conflict of Interest arises when an individual in professional capacity places his/her own benefit over the Bank’s interest which may be detrimental to the Bank.

4. Definitions


• Duty of Loyalty: The duty of loyalty includes a duty not to use property of the Bank for his/her personal needs as if it was his/her own property, not to disclose confidential business information or use it for his/her personal profit, not to take business opportunities of the Bank for himself/herself, not to compete in business with the Bank, and to serve the Bank’s interest in any transactions with the Bank in which he has a personal interest.

• The Board shall ensure that policies are in place that prohibit (or strictly limit) potential conflicts of interest, in cases such as:

— Related party transactions;

— Potential misuse of corporate assets; and

— Possible use of privileged information for personal advantage.

• A member of the Board or any manager should not have any interest whether directly or indirectly in transactions or contracts made for the account of the Bank, except with an authorization of the Annual General Meeting, as detailed in the Related Party Transactions Policy.

• A Director or Management personnel should be considered to have a ‘personal interest’ in a transaction with the Bank if:

— He/she themselves;

— A member of his/her family (i.e. spouse, father, mother, sons, daughters, brothers or sisters); or

— Another company, of which he/she is a director or controller,

— Is a party to the transaction or has a material financial interest in the transaction.

For the Directors or Senior Management personnel of the Bank, the major areas where a conflict of interest may arise are confidentiality, inside information, other external Directorships or appointments; transactions with the Bank and gifts and hospitality.

Confidentiality and inside information

• Background

— Ensuring and respecting the confidentiality of information pertaining to the Bank is an extremely important issue from both a legal/regulatory perspective. As a general rule, all Bank information is confidential and should not be disclosed to third parties. There are, however, exemptions to this such as relaying information pursuant to a request by the Bank’s Shareholders or a law enforcement body in the case of a criminal investigation (on receipt of a Court Order).

— The Bank is therefore required to have in place, processes and controls which will restrict access to confidential information, both externally and internally.

5. Policy on conflicts of interest management

6. Areas of conflicts


• Policy

— Directors can ask for access to the Bank’s information, provided that such information is required for the proper performance of their duties.

— Members of the Board are entitled to receive details of all activities if and when requested by them in their capacity as a Director through the Corporate Secretary. The Board shall be given access to the Management, resources and information to act in the interest of the Bank. A formal request should be made to the Corporate Secretary to facilitate the process.

Other Directorship and appointments

• Background

— Potential conflicts of interest may arise when Directors hold other appointments which are external to the Bank. A Director is expected to be independent to act in the best interest of the Shareholders of the Bank. Where a Director holds Directorships, appointments or is remunerated in entities where the Bank has a business relationship, this will be perceived as having a conflict of interest.

— External appointments are defined as any executive or non-executive Directorships or Corporate Secretary appointments in any external entity not part of the Bank, appointments to the public office, partners in external partnerships; or any position which can influence the decision making process of an entity that is not part of the Bank. This appointment may or may not receive a form of remuneration.

• Policy

— All Directors should disclose all external appointments to the Corporate Secretary.

— Annually, the Corporate Secretary will require confirmation from every Director (via the Annual Independence and Conflicts of Interests Declaration Form – Appendix A) that they have disclosed all external appointments and notify the Chairman if there had been any additions/changes to their external appointments since the previous meeting.

— The Corporate Secretary is responsible to inform the Board Chairman of any Board members who are ‘interested directors’ and, have an actual or potential’ conflict of interest in an agenda item for discussion and, therefore, should be excluded from discussions/resolutions relating to such items. The affected Director may be asked to excuse himself from the room.

— The Director who has conflicts of interest with respect to any transaction, which comes to Board for voting, must abstain from voting, and such abstention should be minuted accordingly.

Transactions with the Bank

• Background

— Any personal transactions made by a Director/Management with the Bank, which is not included within the general provisions of the letter of appointment or responsibilities may lead to a perceived impairment in the Directors/Management decision making, especially for non-executive Directors who are deemed independent from Management of the Bank.

— Transactions made between the Directors and the Bank, which are not on an ‘arm’s length’ basis (market terms) may enforce the perception that the independence and objectivity of the Director’s decision making are impaired.


• Policy

— Directors should make a record of all transactions made with the Bank which are not normally expected within the Directors’ appointment contract or responsibilities.

— Directors need to perform an assessment on each transaction to determine whether the Directors’ objectivity is impaired, especially if the transaction is not on an ‘arm’s length’ basis.

— No Director/Senior Management may have a personal interest either directly or indirectly in the transactions or contracts concluded for the Bank’s account without an authorisation by the Board and Shareholders (Annual General Meeting).

— The Chairman of the Board shall communicate to the General Meeting, when it is convened, the result with respect to the transactions and contracts in which any Director has a personal interest. Such communication shall be accompanied by a special report from the auditor and the Bank shall disclose such transactions in its financial statements in accordance with applicable accounting standards and regulations.

— The Board shall also ensure that any decisions to enter into transactions under which Board members or any member of Management would have conflicts of material interest are formally approved by the full Board.

— If a Director is uncertain whether a transaction will impair the perceived objectivity and independence of the Director, the Director should contact the Board Chairman for clearance prior to performing the transaction.

— A Director must declare to the Board of Directors any personal interest (whether direct or indirect) that he/she may have in any matter, transaction or contract with the Bank or brought before the Board. Such declarations shall be recorded in the Minutes of Board meeting and the interested Director shall not participate in the debate or voting on the resolution to be adopted in regard to the matter in which he has personal interest and if he/she shall so vote, his vote shall not be counted. The affected Director may be asked to excuse himself from the room. Such interested Director may be counted however for constituting the necessary quorum for the meeting.

— Violation of such restriction shall result in claiming compensation from the member for the damages caused to the Bank. The said provision will not apply to ordinary transactions that the Bank enters into with its customers and those made by way of public bidding, however, it may be exempted from this restraint if the member has submitted the best offer.

— Annually, the Director/Senior Management personnel is required to list all material transactions with the Bank in the Annual Independence and Conflict of Interests Declaration Form included in Appendix A.

Gifts and entertainment

• Background

— Any gift or entertainment of significant value offered or received by Directors/Management should be reported immediately to the Board of Directors.

— Directors/Management should not accept a gift of any value from a customer if he has reason to believe that the customer expects or would be entitled to expect favoured treatment in return.

— Similarly, providing gifts or entertainment on behalf of the Bank to influence a business relationship in favour of the Bank is prohibited unless it is of nominal value and prior approval has been taken.

— Refer to the Gifts and Entertainment Policy for more details.


• Identification

— It is the responsibility of all Directors/Management to identify Conflicts of Interest.

— Once a Conflict of Interest has been identified, it must be recorded. Annually, Directors/Management are required to sign a declaration declaring that to the best of their knowledge, they are unaware of any other instances of actual or potential conflicts of interest other than those that have already been made aware to the Corporate Secretary. A pro-forma of the Annual Independence and Conflict of Interest Declaration is included within Appendix A.

— Responsibility to collate the completed annual declarations rests with the Corporate Secretary.

— The following criteria of likelihood and seriousness should be used to assist in assessing the severity of the conflict of interest.

• Managing

— Strategies to manage conflicts should be considered on a case by case basis. The choice of strategies will be dependent on the operating environment, legislative requirements and practical solutions. Often a combination of strategies will be required.

— If the conflict cannot be managed, the Bank should consider excluding itself from participating in the engagement or relationship that may lead to the conflicts of interest.

• Monitoring

— The Director/Management along with Corporate Secretary must monitor the conflicts of interests and ensure mitigation or removal of the conflicts expediently.

• Resolution

— The Board has ultimate responsibility for ensuring that the solution is appropriate to the conflicts of interest. Confirmation that the solution has been implemented and tested must be provided to the Board.

• Escalation

— In the event that the Director/Management and the Corporate Secretary are unable to agree on an issue such as, planned actions, the Director/ Management and or the Corporate Secretary must escalate the issue to the Board.

Failure to disclose the conflict of interest causing damage to the Bank shall result in claiming compensation from a Director or Senior Management personnel.

This Policy is subject to an annual review and any amendment to the Policy shall be approved by the Board.

7. Application of the Policy

8. Breach

9. Amendments


This Annual Independence and Conflicts of Interest Declaration shall be circulated to the Board of Directors in December every year, and shall be filled and submitted to the Corporate Secretary in January. The conflicts captured, if any, shall be presented to the Board in the meeting subsequent to the submission of the forms.

Director: Declaration year: Number of years on ASBB Board

(The name of the Director)

(Year which the Director is declaring independence and Conflicts of Interest.)

(Number of years served on the Board of ASBB)

1. Compliance When answering these questions, please remember to take into consideration as appropriate your immediate and close family. If you answer “No” to any of the questions, please provide an explanation in the text box below.

1.1 I confirm that I have read and understood the Directors Conflicts of Interest Policy.

Yes No

1.2 I confirm that I have complied with ASBB’s general confidentiality requirements as outlined in the Conflicts of Interest Policy as outlined in Section 6 of this policy.

Yes No

1.3 I confirm that I will inform the Corporate Secretary of any future changes which affect the responses I have given in this form.

Yes No

1.4 If you have answered ‘No’ to any question above, please provide details below:

2. Transactions with ASBB (Bank’s products or services) or other related entities Please list out transactions carried out with ASBB (if any) during the year. (including direct/indirect or beneficial holding or position held in ASBB Group related entities such as affiliates, subsidiaries, related parties, special purpose vehicles, and project companies).

Date of Transaction Nature Entity Transacted

With Comments Amount

Appendix A - Annual independence and conflicts of interest declaration


3. Director/ Secretary to the Board Appointments

3.1 Do you hold any Directorships including non-executive Directorships, or act as a Secretary to the Board other than for ASBB? If yes, please answer 3.2 Yes No

3.2 Please provide details of any Director/Secretary to the Board appointments below and confirm that you currently hold these appointments.

Name of Entity Position Rationale Position still held?

Yes / No

Yes / No

Yes / No

Yes / No

Yes / No

4. Family Members

4.1 Are any of your family members employed in ASBB Group related entities including affiliates, No subsidiaries, associates, related parties, special purpose vehicles and project companies?

If yes, please provide the details below.

Yes No

No. Name of Family Member Entity Employed With Position

5. Conflicts of Interest

5.1 Are any of your family members party to transaction or have a material financial interest in a transaction with the Bank? Yes No

5.2 Do you have any ongoing conflicts of interest that have been notified to the Secretary to the Board?

If yes, please provide details belowYes No

Notification Date Description Status


6. Fit and Proper

FINANCIAL SOUNDNESS

Have you, within the last 10 years:

6.1 Been the recipient of a court judgement against you about a debt or made any compromise arrangement with your creditors? Yes No

6.2 Been declared bankrupt or been the subject of a bankruptcy court order or has a bankruptcy petition ever been served on you? Yes No

6.3 Signed a trust deed for a creditor, made an assignment for the benefit of creditors, or made any arrangements for the payments of a composition of creditors?

Yes No

CONVICTIONS OR CIVIL LIABILITIES

NOTE: Minor Road Offences that did not lead to a disqualification or prison sentence may be excluded.

Have you:

6.4 At any time pleaded guilty or been found guilty of an offence? Yes No

6.5 Found guilty in a civil action by any Court or competent jurisdiction on an offence relating to fraud? Yes No

6.6 Within the last 5 years been the subject of any civil action which resulted in a finding against you by a court, or a settlement being agreed, in respect of any matter relating to your professional or business activities?

Yes No

6.7 Ever been disqualified by a court from being a director, or from acting in the management or conduct of the affairs of any company? Yes No

6.8 If you have answered ‘Yes’ to any question above, please provide details below:


PERSONAL INTEGRITY, HONESTY AND GOOD REPUTATION

Have you:

6.9 Been refused the right or been restricted in the right to carry on any trade, business or profession by any authority or licensing body? Yes No

6.10 Been the subject of an investigation into allegations of misconduct or malpractice? Yes No

6.11 Been the subject of disciplinary procedures by a professional body resulting in a finding against you? Yes No

6.12 Been reprimanded, excluded, disciplined or publicly criticised by any professional body to which you belong or have belonged? Yes No

6.13 Been refused entry to or excluded from membership of any profession or vocation? Yes No

6.14 Been dismissed from any office (other than as auditor) or employment or requested to resign from any office, employment or partnership? Yes No

6.15 Been reprimanded, warned about future conduct, disciplined or publicly criticised by any regulatory body, or any officially appointed enquiry concerned with the regulation of a financial, professional or other business activity?

Yes No

6.16 Been the subject of a court order at the instigation of any regulatory body, or any officially appointed enquiry concerned with the regulation of a financial, professional or other business activity?

6.17 Are you currently undergoing investigation or disciplinary procedures as described in the questions above?

6.18 If you have answered ‘Yes’ to any question above, please provide details below:

7. Declaration and Signature

I confirm that I have at all times since ( date ) been in compliance with ASBB’s Conflicts of Interest Policy (Except where disclosed within this form) and remain so as of the date of signing.

Director: Date:

(Signature of the Director) (Signature Date)


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Section IX


Remuneration Policy for Board and Committees


1.1. The Remuneration Policy (“Policy”) for Board and Committee of Al Salam Bank Bahrain B.S.C. (“ASBB” or the “Bank”) outlines the remuneration structure for the Board of Directors and the Committees, in compliance with the Commercial Companies Law Article 188, the Central Bank of Bahrain (CBB) Rule Book (Volume 2) and the Bank’s Articles of Association.

1.2. The purpose of developing the Policy is to remunerate the Bank’s Directors fairly and responsibly and promote transparency in remuneration practices in the Bank.

1.3. The Board, based upon the recommendation of the Remuneration Committee (“RC”) and subject to the laws and regulations, determines the form and amount of Director compensation.

1.4. The Policy aims:

1.4.1. To instill good corporate governance as well as sustained and long-term value creation for Shareholders to ensure that the Bank is able to attract, develop and retain high-performing and motivated executives in a competitive market.

1.4.2. To guide the RC in making recommendations to the Shareholders for the Directors remuneration on the basis of their attendance and performance.

1. Purpose

3.1. The remuneration paid to the Directors shall consist of the following components:

3.2. The maximum annual remuneration paid by the Bank will be in line with the Commercial Companies Law Article 188 and will be capped in any financial year to 10% of the Net profit after deducting the legal reserves and distributing a profit of not less than 5% of the Bank’s paid-up capital.

3.3. In the years where the Bank has not generated any profits it will comply with the approval requirements of Article 188 of the Company Law where the general assembly may decide to pay the remuneration to the chairman and members of the board; after securing approval from the Ministry Industry, Commerce and Tourism (MOICT).

Remuneration type Particulars Amount (BHD)

Attendance fee for Board meeting Paid for each Board meeting attended by the Director 2,500

Attendance fee for Committee meeting Paid for each Committee meeting attended by the Director 2,500

Travel and accommodation expenses Included in the sitting fees -

Annual remuneration fee Subject to annual financial performance of the Bank -

3. Remuneration structure

2.1. The Directors’ remuneration policy applies to all Directors of the Bank (including Executive, Non- executive and Independent) and, the Board and Board Sub-Committees.

2. Scope


3.4. Board remuneration will be approved by the Shareholders at the Annual General Meeting.

3.5. Non-executive Directors receive Director fees for services rendered, which includes annual remuneration, attendance fees and travel expenses for Board and Board Committee meetings.

3.6. Executive Directors, if any, who are employees of the Bank shall not receive any compensation for their services as Directors. Typically, they do not receive fees as they receive salaries and other payments benefits such as:

3.6.1. Salary, bonuses and performance-related payments;

3.6.2. Expense allowances; and

3.6.3. Contributions paid under any pension scheme.

3.7. Non-executive Directors, who are not employees of the Bank should not enter into any consulting arrangements with the Bank without the prior approval of the Board.

3.8. Directors who serve on the Audit & Risk Committee should not directly or indirectly provide or receive compensation for providing accounting, consulting, legal, investment banking or financial advisory services to the Bank.

3.9. Independent Directors will not receive additional remuneration from the Bank apart from Director’s fees and are not allowed to participate in the Bank’s share option or performance related pay scheme. They will not be a member of the Bank’s pension scheme.

3.10. The basic fee of a Board member is set at a level that is on par with the rest of the market and reflects the qualifications and contribution required in view of the Bank’s complexity, the extent of the responsibilities and the number of Board meetings.

3.11. The Board of Directors Report to the Annual General Meeting of Shareholders must include a comprehensive account of all payments (total amount) made to the Board Members during the financial year.

4.1. Shareholders: This Policy is subject to approval by the Shareholders in the Annual General Meeting.

4.2. Board: The Board of Directors must ensure:

4.2.1. Annual monitoring of compliance with the remuneration policy and submit any policy adjustments at the Annual General Meeting for approval.

4.2.2. Remuneration Directors based on their attendance and performance.

4.3. RC: The RC shall annually review (and seek expert advice when required) and make recommendations to the General Assembly on the Board and Committee remuneration as follows:

4.3.1. In proposing the amounts to the Annual General Meeting, the RC will ensure:

• Board Members do not receive remuneration if shareholders are not paid a minimum of 5% of the Bank’s capital as dividends during a particular year.

• The proposed Board Member remuneration shall not exceed 10% of the net profit after deducting the legal reserves and distributing a profit of not less than 5% of the Bank›s paid-up capital.

• Total Remuneration per member is calculated based on the number of Board meetings attended by the member during the course of the year:

4. Roles and responsibilities


5.1. This policy will be made available to all Directors through the Directors Hand Book upon their appointment to directorship.

6.1. This Policy is subject to annual review and any amendment shall be recommended by the Board for Shareholders’ approval.

a. Board Members attending minimum four meetings during the year will be entitled to full remuneration.

b. Board Members failing to attend at least four meetings during a year are entitled to a pro rata share of the full remuneration based on the number of meetings attended out of four.

c. Members of the Board Committees will receive remuneration for Committee meetings based on attendance.

5. Communication of this Policy

6. Amendments


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Section X


Board and Committees Performance

Assessment Framework


1.1. Board assessment and evaluation is an integral part of the corporate governance structure. The Board and Committee effectiveness assessment process is designed to provide Directors with an opportunity each year to examine how the Board is operating, and to make suggestions for improvement.

1.2. The Charters for the Board and Committees are used as a basis for the assessment process. This process is designed primarily to provide constructive input for the improvement of the Board ‘as a whole or as a unit’, Committee ‘as a whole or as a unit’ and to evaluate each Director performance as a member of the unit and also give the members an opportunity to comment on the performance of the Chairperson and respective sub-Committees.

1.3. The Board/Board Committee Performance Evaluation Guide provides a framework for:

1.3.1. Assessment of the Board as a unit;

1.3.2. Assessment of the Committee as a unit; and

1.3.3. Assessment of individual Directors.

1.4. The assessment is done through an annual self-assessment process.

1.5. The Nomination and Corporate Governance Committee (“NGC”) is responsible for developing the framework for self-assessment of the Board and Board Sub- Committees for review and approval of the Board collectively.

1.6. The evaluation will be used to assess the Board and Committee effectiveness and support in identifying the need for:

1.6.1. A revised mix of skills/experience on the Board/Committee;

1.6.2. Board/Committee training and/or professional support;

1.6.3. Replacement of individual members whose contribution is deemed inadequate; and

1.7. Additionally, the Bank may undertake an annual review and certification process to assess and report on the effectiveness of its governance procedures internally or through the assistance of external governance consultants.

Note: The performance evaluation of the Shari’a Supervisory Board shall be conducted by the Board annually.

1. Introduction

2.1. The Board or the NGC, undertake a formal and rigorous annual evaluation of its own performance and that of the Committees and individual directors.

2.2. The Chairman will act on the results of the performance evaluation by recognizing the strengths and addressing the weaknesses of the Board and, where appropriate, proposing new members be appointed to the Board or seeking the resignation of directors.

2.3. The non-executive directors, led by the senior independent director, will be responsible for the performance evaluation of the Chairman, taking into account the views of executive directors.

2.4. The annual performance evaluation process will be coordinated by the corporate Secretary or any other individual designated by the board.

2. Board principles

Board and Committees Performance

Assessment Framework


2.5. The Board reserves the option of conducting the assessment in-house or engaging external; support to bring objectivity and facilitate the process. It is often very difficult to self-diagnose and identify weaknesses, and an external board governance consultant can provide objectivity, whilst also sharing ideas and assisting the Bank’s Board in developing an effective improvement program, particularly the first time that the Board assessment is conducted.

2.6. The evaluation process will be used constructively as a mechanism to improve the Board/Committees effectiveness, maximize strengths and tackle weaknesses.

2.7. The results of Board/Committee evaluation will be shared with the Board/Committee as a whole whilst the results of individual assessments will remain confidential between the Chairman and the Board.

2.8. The Bank shall keep full minutes of all committee meetings, which shall record the decisions and their rationales. It is of utmost importance that any concerns or dissenting views raised by any member are discussed and minuted as the minutes would also facilitate the performance evaluation of the Board/Committee, Chairpersons and individual members.

3.1. The questionnaire is structured in three parts:

3. Structure and rating of the questionnaire

A Assessment of the Board as a unit Each Director will evaluate the Board as a whole

B Assessment of the Committee as a unit Each Director will evaluate the Committee as a whole

C Assessment of individual Directors Each Director will do a self-evaluation

Scale Assessment Criteria – Questionnaire 4 and 5

3 Outstanding

2 Good

1 Need Improvement

Scale Assessment Criteria – Questionnaire 6

3 Agree

2 Neither agree or disagree

1 Disagree


4. Collective assessment of the Board

No DescriptionRating

Comments1 2 3

A. Strategic roles and responsibilities

1All Board members are aware of their respective Roles and responsibilities as a Board member/Committee member

2The Board is aware of the Bank’s values, mission, vision, strategic and business plans and adheres to laws and regulations

3 The Board has a long-term strategic vision with defined key milestones to review progress

4

The Board has an established succession plan that considers the appointment, training and fixing of the CEO’s and senior management positions

5 The Board considers shareholder value in its decision-making process

B. Operational roles and responsibilities

1 Board has set clear operational objectives for every member

2 Performance measures are defined and linked to the Banks strategy

3Board is aware of the Banks operations

4 Board reviews the Banks operational plans at regular intervals

5 Board is updated about the implementation of the strategy by the Management in a timely manner

6 The Board has implemented a robust internal control system to identify and mitigate risks

7The Board reviews the quality of Bank’s financial reporting, internal control and audit functions periodically

8The Board conducts assessments to check the independence and objectivity of the internal and external auditors

9

The Board assesses and approves the audit plan and assess internal audit’s progress against the plan to track the progress and also the implementation against the findings



Comments1 2 3

C. Management roles and responsibilities

1 Board maintains a healthy relationship with management

2 Board communicates openly with the management team

3Board members are informed by the management team on all issues in a timely manner

4 Management consults the Board at regular intervals

5The Board evaluates the executive and senior management’s performance using pre-defined KPIs

D. Meeting management

1 Board meetings are scheduled at appropriate intervals to address key issues affecting the Bank

2 Annual calendar of Board meetings is communicated in advance

3Board receives the agenda and supporting materials on time, and the supporting materials are substantial to make good decisions

4

Board/Committee meetings are conducted in a manner that ensures open communication, meaningful participation and timely resolution of issues

5 All members participate actively and come well-prepared for the meetings

6All Board members are given an opportunity to voice their opinion, especially Non-executive directors

7Sufficient time is spent on discussion of strategic, capital budgets, market trends and key issues of the Bank rather than day-to-day activities

8Board meeting are commenced and concluded on time, giving appropriate time for every item on the agenda



Comments1 2 3

D. Meeting management

E. Board composition

1 Board maintains a healthy relationship with management

2 Board communicates openly with the management team

3Board members are informed by the management team on all issues in a timely manner

4 Management consults the Board at regular intervals

F. Resources and training

1 Board meetings are scheduled at appropriate intervals to address key issues affecting the Bank

2 Annual calendar of Board meetings is communicated in advance

3Board receives the agenda and supporting materials on time, and the supporting materials are substantial to make good decisions

4

Board/Committee meetings are conducted in a manner that ensures open communication, meaningful participation and timely resolution of issues

5 All members participate actively and come well-prepared for the meetings

6All Board members are given an opportunity to voice their opinion, especially Non-executive directors

9 Independent directors are encouraged to schedule separate meetings by the Chairman

10Board/Committee members receive well drafted, clear, consistent and complete Minutes of each meetings on time

11 Resolutions are properly followed up and reviewed in subsequent Board meetings


5. Collective assessment of the Committee


Comments1 2 3

A. Evaluation parameters

1 There are sufficient number of Committees formed by the Board

2 Consists of members who possess the right skills and abilities

3 Members understand the goals and purpose of their committee

4 Meetings are held regularly and with appropriate frequency

5 Members receive the meeting agenda and materials in advance

6 Length of the committee meetings is appropriate and respectful of the agenda

7 The minutes of the meeting are accurate and reflect the discussion

8 Adequate time is allowed to discuss important matters

9 Important and meaningful issues are confronted during the meetings

10 Collective judgements are made on important matters

11 Adequate time is spent on committee responsibilities by members

12 Internal and external resources are engaged to carry out duties whenever necessary

13 Orientation training is provided to new members

14 Highlights and reports to the Board important issues faced in a clear manner

15 Committee has provided excellent recommendations to the Board


6. Self-assessment by individual Directors


Comments1 2 3

A. Roles and responsibility as a Board / Committee member

1 There are sufficient number of Committees formed by the Board

2 Consists of members who possess the right skills and abilities

3 Members understand the goals and purpose of their committee

4 Meetings are held regularly and with appropriate frequency

5 Members receive the meeting agenda and materials in advance

6 Length of the committee meetings is appropriate and respectful of the agenda

7 The minutes of the meeting are accurate and reflect the discussion

8 Adequate time is allowed to discuss important matters

9 Important and meaningful issues are confronted during the meetings

10 Collective judgements are made on important matters

11 Adequate time is spent on committee responsibilities by members

12 Internal and external resources are engaged to carry out duties whenever necessary


B. Roles and responsibilities as a Chairman (Board Chairman / Committee Chairman)

1

Is able to lead the Board/Committee effectively especially in compliance performance responsibilities – encouraging contribution from all members

2 Is knowledgeable about the Bank and Board matters

3 Monitors compliance with approved policy

4 Is competent to manage any conflict arising amongst members

5 Enhances the public image of the Bank

6 Ensures that Board/Committee decisions are implemented properly

7 Manages time well in chairing meetings

8 Establishes agendas for the meetings

9 Encourages wider and deeper discussions of critical topics

10Works with Board/Committee Chairpersons to align the work of committees with the organizations vision and goals

11Regularly reviews the Bank’s progress and performance either as a whole or in the respective area

12 Liaisons between the members, management and shareholders effectively


Comments1 2 3


Appendix A: Actions to resolve gaps identified

Gaps Identified Priority Proposed Actions Timing / Sequence

1.

2.

3.

4.

5.

6.

106 107ASBB Directors’ Handbook 2018 ASBB Directors’ Handbook 2018 Cor

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Section XI


Corporate Governance Officer - Terms of Reference


Al Salam Bank - Job Description

Job Title Corporate Governance Officer Role Code

Department

Reports to Board of Directors

Reportees

1.

2.

3.

Basic Purpose of the Role:

The Corporate Governance Officer (CGO) will provide the overall guidance and oversight of the corporate governance framework of the Bank, in conjunction with the Board and the Nomination and Corporate Governance Committee (“NGC”).

The CGO will communicate and coordinate with the Ministry of Industry, Commerce and Tourism (MOICT) and the Central Bank of Bahrain (“CBB”) to ensure that the Bank’s corporate governance framework is in line with the regulatory requirements and necessary submissions to the Regulators are made on time.

The CGO is accountable to the Board for maintaining an effective corporate governance structure at the Bank, and is the primary source of information to the Board regarding the corporate governance affairs of the Bank.

Basic Purpose of the Role:


Job Responsibilities

No Major Tasks and Responsibilities Performance Measures % Time Spent

1

Liaise with the regulators to submit reports, as per the regulatory requirements, in a timely manner and fulfil ad-hoc requests by the regulators.

2Keep abreast of any updates to the regulation or circulars issued by the CBB.

3Monitor the implementation of the Bank’s corporate governance framework and practices and provide periodic updates to the NGC.

4

Maintain an appropriate framework linking the Bank’s statutory requirements to its corporate policies and procedures to ensure accountability and transparency, legislative compliance and alignment with strategic direction.

5Delegate tasks to specific individuals, as applicable, clearly defining their roles and responsibilities.

6

Liaise with relevant departments to prepare the annual Corporate Governance Report (to be included in the annual report) and submit to the NGC for recommending to the Board for approval.

7

Ensure that the Annual General Meeting’s (AGM) agenda includes corporate governance and attend the AGM to answer any questions on corporate governance.

8Provide the Board with updates on the governance aspects of the Bank, at every Board meeting.

9Ensure that the Board is immediately informed about regulatory violations in relation to corporate governance requirements, if any.

10Maintain a register of person and entities who are classified as related parties.


Job Responsibilities

No Major Tasks and Responsibilities Performance Measures % Time Spent

11

Routinely monitor and update the register as and when new related parties are identified, or existing related parties no longer fall under that category.

12Ensure all transactions with related parties are approved by the appropriate authorities.

13Liaise with the internal audit team to ensure independent governance audits are conducted, and rectify the reported findings.

14

Facilitate annual training to the Board and employees, on the corporate governance best practices to increase their awareness and ensure compliance.

15Disseminate (as appropriate) all decisions of the NGC and the Board, and facilitate reporting back on actions taken.

16Attend all Board and Board Committee meetings, and meet with the Chairpersons, as required.

17Ensure that the Board is furnished with relevant informative reports for decision-making purposes with regard to corporate governance

18

Implement a robust framework to evaluate the adequacy and effectiveness of the Bank’s procedures and systems for ensuring compliance with legal and regulatory requirements (relating to corporate governance) and internal policies including risk management and compliance.


Major Accountabilities

• Ensure full compliance with the Corporate Governance guidelines, with no penalties/reprimands for violations.

• Ensure that there is increased awareness among the Board and employees about governance best practices.

• Ensure there is effective co-ordination and assistance in the formation, review and implementation of governance projects within the Bank.

• Ensure timely submission of reports to the regulators (MOICT and CBB).

• Ensure timely submission of updates to the Board on governance matters.

• Provide quality support to the Board and Board Committees, as required.


Job Requirements

Educational Qualifications

• Bachelor’s degree in business, public administration, law or public policy.

Experience• Minimum of 10 years’ experience in compliance function or legal function in

the Middle East.

Skills & Abilities

• Sound understanding of corporate governance regulations and best practices.

• A high level of proficiency with both spoken and written English and Arabic

• Flexible, self-starting, service oriented attitude

• Multitasking, time management skills and MS Office software essential

• Strong interpersonal skills

• Highly organized and self-motivated

• Ability to take, transcribe, and type complex, technical, and confidential dictation accurately and rapidly, and to compose effective and accurate correspondence.

• Ability to maintain strict confidentiality; ability to exercise discretion and use appropriate judgment when dealing with sensitive situations.

• Ability to deal with sensitive matters, involving the Board and Senior Management.

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