Terms of Reference for the Board of Directors
1. Purpose of these Terms of Reference
These Terms of Reference set out the authority, responsibilities, and membership of the Board of directors of Creditbank sal (the Bank).
The Board comprises the directors of the Bank, and derives its authority to act from the Bank's Articles of Association, and other Lebanese laws and regulations governing companies and banks.
3. Role of the Board
The role of the Board is to provide strategic guidance for the Bank and effective oversight of its management.
4. Board composition
The Board will comprise directors with a broad range of commercial skills and experience, general understanding of banking activities, or with appropriate professional qualifications, and who are able to bring useful expertise to the Board's discussions and decisions.
Board Directors must have the ability and capacity to make meaningful contributions to Board strategy and policy and be able, through questioning and analysis of reports, to participate in the overseeing of the proper functioning of management.
The Board, is currently composed of 8 members including the non-executive and independent Members, and its size is determined in accordance with the Bank's constitutional documents and the repartition of the shareholding, and in a way to fulfill all regulatory requirements as to the composition of the Board Committees.
The Chairman of the Board will be elected by the Board in accordance with the Articles of Association for the same period as the Board’s mandate.
6. Board committees
The Board will establish committees as it considers appropriate to assist it in carrying out its responsibilities.
The Board shall, as a minimum, establish the following Board committees:
The Board may also appoint temporary committees.
- Board committee on Audit.
- Board committee on Risk Management.
- Board committee on Remuneration.
- Board committee on AML/CFT.
The function, roles, and responsibilities of each Board Committee are set as follows:
A. Audit Committee
• The Audit Committee reviews, and reports to the full Board on:
- the Bank's annual financial results prior to publication or distribution;
- the accounting judgments that are intrinsic to the financial statements;
- the accuracy of the financial statements and of the efficiency of the criteria adopted for reporting;
- the Bank's internal controls and, in consultation with management and the external auditors, the integrity of the Bank's financial reporting processes and controls;
- any significant findings of the external auditors together with management's responses;
- compliance with the Lebanese Central Banks circulars as well as the reports and circulars of the Banking Control Commission;
- the scope, results, and adequacy of the Bank's internal and external audits;
- any significant changes to the Bank's accounting principles, and any items required to be communicated by the external auditors;
- the objectivity and independency of both external and internal auditors;
- other non-audit work performed by the external auditors so as not to compromise the auditors' objectivity. Such non-audit work is to be disclosed in the annual report.
- the scope of the Audit Committee’s work also covers the bank’s subsidiaries in Lebanon and abroad. The Committee shall assist the Board of Directors in fulfilling its duties with regard to overview of the subsidiaries financial statements’ soundness and the capital adequacy and financial ratios in such a way as to assess the risks related to the investment, thus allowing the Board of Directors to mitigate such risks.
• The Audit Committee has the ability to obtain any information from management and to meet with any manager of the Bank.
• The Audit Committee has the ability to meet each of the Bank's external auditors and its internal auditors, without (other) management being present, at least once a year. The Bank considers that a strong and open relationship between the Audit Committee and these two audit functions is critical to the successful functioning of this important governance mechanism.
• The Audit Committee ensures a follow-up of the corrective suggestions mentioned in the external and internal audit reports.
• The Audit Committee ensures the efficiency and sufficiency of the regulations of procedures of the Internal Audit.
• The Bank recognizes that the Audit Committee does not substitute for the responsibilities of the Board of Directors or the Company's management for the supervision and adequacy of the Company's internal control systems.
B. Risk Management Committee
• Establishes and guides the Bank’s risk appetite/tolerances.
• Ensures that the bank implements sound risk management principles facilitating the identification, measurement, monitoring and control of risks.
• Monitors the Bank’s overall risk profile, ensuring that risks are maintained at prudent levels and are supported by adequate capital,
• Discusses Risk Management Policies and Limits and either approve them or recommend modifications to the Board of Directors.
• Reviews Risk Management Policies annually and where deemed necessary.
• Examines reports as submitted by ALCO, Committee on Operational Risk and Head of Risk Management concerning risks inherent in the Bank’s activities and abidance with related limits.
• Submits Policies, Limits, Risk Management Reports, etc. along with the committee’s recommendations and resolutions to the Board for endorsement.
C. Remuneration Committee
• Drafts the Remuneration Policy, and the Remuneration System and submits them both to the Board of Directors for approval.
• Drafts the Employees Performance Evaluation System, and submits it to the Board of Directors to be approved and adopted.
• Supervises the proper implementation of both the Remuneration Policy and Remuneration System.
• Reviews periodically, at least annually, the rules/principles on the basis of which the Remuneration Policy is implemented and to submit to the Board of Directors any related recommendations concerning the Policy modification and update.
• Assesses periodically the Remuneration Policy efficiency and effectiveness in order to ensure that its objectives are reached, and requests from the Senior Executive Management the information needed for the assessment.
• Evaluates the total granted remunerations, and compare them with the future expected revenues in order to avoid any likely negative results.
• Submits to the Board of Directors specific proposals about the Senior Executive Management remunerations.
• Makes sure that all BDL circulars related to Remunerations have been forwarded to all the employees of the bank and that the Remuneration Policy complies with BDL regulations.
• Verifies whether the disclosure principles adopted by the bank are consistent with the provisions of Articles 13 and 14 of the above mentioned Circular No 133.
D. The AML/CFT Board Committee
• To support the Board of Directors in its functions and supervisory role with respect to fighting money laundering and terrorist financing and understanding the related risks, and to assist it with making the appropriate decisions in this regard.
• To review, from a risk-based approach, the reports submitted by the Compliance Unit and the Internal Audit Unit on adopted procedures, unusual operations and high-risk accounts, regarding cash deposits and withdrawals, transfers, exemptions from filling Cash Transaction Slips (CTS) and the link between these operations and economic activities, and to also take the relevant decisions.
7. Delegation to management
The Chairman delegates to the General Manager the authority and power to manage the day to day business affairs of the Bank subject to such specific delegations and limits as set in the Lebanese governing laws and the Articles of Association. Also, the Chairman may delegate such authority and power to the Deputy General Managers as he shall determine from time to time.
The Board delegates to the Management Committees and to the Management Team necessary authority and power as he shall deem adequate.
8. Responsibility of the Board
The Board responsibilities are set in articles 42 and 43 of the Articles of Association. Moreover, the Board is responsible for:
• establish, review and monitor processes for corporate governance throughout the Bank, with due regard to all of the Bank's stakeholders and its role;
• build trust in the Bank through consistent behaviour, transparency and accountability;
• monitor and influence the culture, reputation and ethical standards of the Bank;
•Oversee the preparation and amendments of the Code of Corporate Governance, Code of Business Ethics and Business Conducts, the Terms of Reference of the Board and the Guide to Corporate Governance.
•Supervision of compliance with, and implementation of the Code.
•Submission of annual reports to the Annual General Assembly regarding the implementation of Corporate Governance principles.
• develop an in-depth understanding of each part of the Bank's business;
• review, approve and monitor the Bank's budget, business and strategic plans, and review the assumptions and rationale underlying them;
• make suggestions to the General Meeting concerning the Bank's capital structure;
• review, approve and monitor major investments and strategic commitments;
8.3 Reviewing Key Performance Indicators
• review business results and monitor budgetary control;
• review, approve and monitor any necessary corrective actions and processes;
8.4 Integrity of external reporting
• review and monitor the processes, controls and procedures which are in place to maintain the integrity of the Bank's accounting and financial records and statements;
• monitor and receive reports from the Audit Committee in relation to internal controls, compliance with prudential regulations and requirements, and internal and external audit reports;
• review and monitor the reporting to shareholders to ensure that it is objective, comprehensive and factual;
8.5 Risk management
• establish, monitor and review the risk management processes with the guidance of the Risk Management Committee;
• review and monitor processes for the maintenance of adequate credit quality;
• review and monitor processes for the documentation and regular review and updating of the Bank's risk profile;
8.6 Management oversight and executive review
• approve key executive appointments and monitor and review the business continuity plan;
• review and monitor the performance of the General Manager and senior management;
• approve all appointments of representatives within subsidiaries and other controlled entities;
8.7 Board performance
• monitor and review processes to assist directors in having sufficient time to devote to Board matters to ensure that they discharge their duties effectively; and
• review these Terms of Reference and their continuing adequacy from time to time.
9. Board meetings
Directors are expected to prepare adequately, attend, and participate at Board and committee meetings.
Directors will be provided with adequate materials on topics to be discussed at Board meetings sufficiently in advance of the meeting date.
9.2 Board agendas
Board agendas will be structured throughout the year to ensure that each significant responsibility of the Board is addressed.
As part of the agenda, the Board will review strategy and the achievement of financial and other goals. The Board will receive a detailed overview of the performance and significant issues, including risk factors of each business field.
The Board will receive from the General Management, on a regular basis, Key Performance Indicators and detailed financial reports; management will be invited to answer the Board’s inquiries thereto.
The Board will review the Bank's long-term strategic plans and the major issues that it expects the Bank to face in the future.
The Board will review the Internal Audit reports during at least one board meeting each year.
10. Directors' remuneration
The Annual General Meeting decides of the annual remuneration recommendations of directors.
All reasonable expenses induced by Directors in carrying out their duties as defined in the Lebanese governing law and the Article of Association will be covered by the Bank.
11. Independence of directors
A director will be considered to be independent for the purposes of service on the Board and Board Committees of the Bank if the director satisfies the standards adopted by the Board from time to time to assist it in its regular' independence' determinations. These standards will reflect appropriate independence requirements under best practice recommendations.
An independent director must be independent of management and free of any business relationship that could materially interfere with - or could reasonably be perceived to materially interfere with - the exercise of his objective and independent judgment.
12. Appointment and re-election of directors
All Board Directors are elected by the General Meeting amongst the shareholders holding at least 100 shares in accordance with applicable Lebanese laws and regulations and the Bank’s Articles of Association.
The Bank will provide a formal letter of appointment for each director setting out the key responsibilities and authorities as Director of the Board.
The process for re-election of a director is in accordance with the Bank's Articles of Association, which requires that a director's term of office shall be for three years, subject to re-election by the Annual General Meeting.
13. Performance and evaluation
The Board will annually review and evaluate the performance of the Board committees, the senior management of the Bank, the relationship between the Board and management, and matters of general corporate governance.
14. Access to management
In order to conduct properly their duties, Board Directors will have open access to Directors of management during scheduled Board sessions. In line with best practice, such access is exclusively limited to Boar meetings.
As an intrinsic part of the Board's responsibility of management oversight, Board committees, specifically, will have access to and mandatory meetings with individual senior management.
15. Board Secretary
All directors shall have direct access to the Board Secretary.
16. Code of Ethics
The Code of Ethics applies to all senior executives and employees of the Bank, as well as to directors, temporary workers and other independent contractors and consultants when engaged by or otherwise representing the Bank and its interests. In addition, this Board Terms of Reference also governs the conduct of the Board and each director.
17. Confidential information and Banking Secrecy
The internal control systems are monitored and employee integrity is fostered to ensure that banking secrecy is at all time fully respected and confidential customer information is not improperly disclosed outside the Bank or used for individual personal gain.
When the directors are serving on the boards of other companies and undertaking private transactions, they are to have regard to their confidentiality obligations at all times.
18. Conflicts of interest
Directors are expected to avoid any action, position or interest that conflicts with an interest of the Bank, or gives the appearance of a conflict.
A director who has a material personal interest in a matter that relates to the affairs of the Bank must give the Board of Directors notice of such interest. Such notice should be provided in writing to the Chairman and Board secretary, who are to ensure that the notice is brought to the attention of the other directors.
When a potential conflict of interest arises, the director concerned will take no part in discussions nor exercise any influence over other Directors of the Board.
Banking services may be provided to directors under terms and conditions that would normally apply to the public. The granting of banking facilities to a director is subject to the prior approval of the General Assembly according to all Lebanese applicable laws and regulations.
Moreover, any deal concluded between the Bank and the directors is subject to the prior approval of the General Assembly whether this deal is transacted directly or indirectly.
The Board and Bank’s external auditors shall establish a special report in this regard, and the General Assembly shall give its approval in light of these reports.
19. Shareholding requirements
Directors are required to hold at least 100 shares in the Bank.
20. Restrictions on share dealings by directors
All Directors, being shareholders, are subject to the terms contained in all applicable Lebanese laws and regulations on subscribing to and acquiring shares or other possible financial products of the Bank.
Directors must not trade in the shares of any other entity if inside information on such entity comes to the attention of the director by virtue of holding office as a director of the Bank.
The Board confirms that the Chairman, or any other person designated by the latter, is the sole spokesperson for the Bank. Individual Board Directors are expected to consult with the Chairman before any communication with various constituencies who are involved with the Bank that might engage it or interfere with its activity or affect its reputation.
22. Publicly available information
The following information will be made publicly available, and updated as required, by posting the material on the Bank's website:
This edition of Terms of Reference has been revised and approved by the Corporate Governance Board Committee on October 29, 2018.
- The Code of Corporate Governance
- The Guide to Corporate Governance
- The Terms of Reference for the Board of Directors.
- The Code of Ethics
- The names and details of the qualifications of the Directors of the Board;