Set out below are some of the significant risks facing the Group that were considered by the Committee in 2015. Further detail on the Group’s principal risks can be found in the Risk Overview on pages 50 to 53.
Risks were carefully mitigated through rigorous risk and project management disciplines to ensure safe implementation. Significant risks Board Risk Committee review
Credit risk The Committee monitored retail credit risk performance against the Group’s risk appetite metrics and policies. The Committee considered the quality of lending and detailed reports on exposures to concentrated areas. These reviews led to the Committee approving changes to Group policy or risk appetite to reduce exposure in these regions.
Operational risks The Committee received regular updates across operational risk including change programme management, incident management, outsourcing management and IT resilience including financial crime. The Committee monitors risks inherent with major outsource providers and received regular updates on their performance and resilience.
The Committee continued to oversee the delivery of the Group information security programme to mitigate the threat of cyber attack.
The Committee also received the annual report from the Money Laundering Reporting Officer which concluded that all core elements of Virgin Money’s anti-money laundering framework are in place and operating effectively.
Conduct risk and compliance The Committee received regular detailed updates from management on regulatory developments and upstream risk. The Committee assessed the impact of those developments on the Group’s balance sheet, operational processes, systems and controls.
Funding and liquidity risk The Committee reviewed and challenged the current and forecast funding and liquidity positions. The Committee considered reports on funding sources to ensure a prudent mix was maintained within risk appetite and policy limits. Balance sheet growth has been supported by the establishment of an MTN programme in April 2015. This enhanced the Group’s funding mix to support growth and diversified its investor base.
Capital The Committee monitored, reviewed and challenged management reports concerning the quality of the capital
base and the forecast capital position considering the projected capital resources to ensure that the Group complies with current regulatory capital requirements and is well positioned to meet future requirements. The Committee also reviewed the results of the PRA UK Variant Stress Test scenarios published during the year. In addition, the Committee focused on specific scenarios designed by management.
Colin Keogh
Chair, Board Risk Committee 1 March 2016
Membership and meetings
Independent Meetings attended/ held in 20151 Committee Chair Marilyn Spearing (appointed 1 January 2016)2 Yes 7 (7) Committee membersNorman McLuskie Yes 7 (7)
Geeta Gopalan (appointed 25 June 2015)
Yes 2 (2)
Former Committee members
Sir David Clementi (retired 21 May 2015)
No 4 (4) Olivia Dickson
(retired 31 December 2015)3 Yes 7 (7) 1 Number of meetings held during the period the member held office.
2 Ms Spearing was appointed as Chair of the Committee from 1 January 2016, having being a member since January 2014.
3 Mrs Dickson retired from the Board and as Chair of the Committee on 31 December 2015.
Chair’s overview
I became Chair of the Remuneration Committee on 1 January 2016, following Olivia Dickson’s retirement from the Board on 31 December 2015. On behalf of the Committee, I would like to thank Olivia for the contribution made with regard to remuneration matters in preparation for the Group’s listing and first year as a listed company. I look forward to continuing to work with my colleagues during 2016.
I am pleased to report that good progress continues to be made on remuneration matters and their governance over the past year, despite the challenges of a continually changing regulatory environment. In my view, and as confirmed by the Board Effectiveness Evaluation, the Committee met its key objectives and carried out its responsibilities effectively.
2015 was a busy year for the Committee, as a result of a full remuneration agenda and the development of a robust reward framework in the form of the Directors’ Remuneration Policy for 2015 and the Group-wide Internal Remuneration Policy for all colleagues. Both policies are designed to mitigate key regulatory and people risks associated with reward decisions and support sustainable growth, consistent with the risk appetite framework agreed with the Board.
We were delighted that 99.4% of our shareholders approved our first one-year Directors’ Remuneration Policy, which was subject to a binding vote at our 2015 AGM. The implementation section of the Directors’ Remuneration Report, along with the statement by the Chair of the Committee, also achieved an advisory 99.9% vote in favour. While the outcome of this resolution is not binding on the Group, it is of key importance to the Committee that its decisions are supported by the Group’s shareholders. We look forward to presenting our new policy for approval at the 2016 AGM. If the new policy is approved, it will apply for a maximum of three years from the date of the AGM.
In January 2016 we consulted with a number of our major shareholders to gather their views on remuneration and, in particular, the key changes arising from the new policy. We also consulted with our main regulators, the FCA and PRA, throughout the year regarding our new policy. We are grateful for the supportive feedback we have received from all parties.
During 2015, the Committee has continued to strive to ensure that the remuneration policies and practices detailed in the Directors’
Remuneration Policy and Directors’ Remuneration Implementation Report fairly reward our Directors, support the delivery of the Group’s strategy and the creation of shareholder value. As a result we hope you will support the resolutions relating to remuneration at the 2016 AGM.
The Committee dedicated significant time in 2015 and early 2016 to assessing the impact of ongoing changes to the regulatory environment concerning remuneration, in particular the implications of the PRA’s deferral requirements on variable remuneration and considering the new European Banking Association (EBA) guidelines on sound remuneration policies issued in December 2015.
The Committee also approved the continued appointment of PwC as Committee advisers until the 2016 AGM, when PwC is to be put forward as the Group’s new auditor. Subject to the shareholders approving the appointment of PwC, Deloitte will act from May 2016 as sole advisor to the Committee (in addition to its current role advising management). The Committee is comfortable that appropriate controls are in place to avoid any compromise to PwC’s independence during this transitional period. The Committee would like to thank PwC for their significant contribution
“We continue to strive to ensure that our remuneration policies and practices fairly reward our Directors and colleagues, support the delivery of the Group’s strategy and the creation of shareholder value.”
Marilyn Spearing