CORPORATE GOVERNANCE IN SPAREBANK 1 NORD-NORGE
9. The work of the board of directors The Board's function
The Board manages the Bank's operations in accordance with the applicable law, Articles of Association and any other rules and regulations introduced by the Super- visory Board. The Board is responsible for ensuring the Bank's available resources are managed in a prudent and appropri- ate manner. The Board also has an obligation to ensure that all accounting and manage- ment of assets and liabilities are satisfact- orily supervised.
In addition, the Board has the following main responsibilities: • To appoint the chief executive • To provide instructions for the
day-to-day management of the Bank • To determine the Bank's strategy,
budget, market-related and organisational targets
• The Board appoints and dismisses the manager of the internal audit department
The Board normally holds twelve meetings a year.
Qualification/disqualification
The Board's members are defined as pri- mary insiders and must comply with the Bank's rules and regulations for acquiring equity certificates in the Bank and banks in the SpareBank 1 Alliance. The same applies to the purchasing of shares in companies that are customers of the Bank.
In the case of discussions concerning com- mitments involving companies in which a board member has an interest or holds a position, the member in question must de- clare himself/herself disqualified and with- draw from the meeting. Board members and executive personnel must inform the Board if they have, directly or indirectly, a significant interest in an agreement ente- red into by the Bank.
Evaluation of the Board
Each year, the Board conducts a self-eva- luation of its work with regard to compe- tence, working methods, the way in which it deals with the matters presented to it, meeting structure and the way in which various tasks are prioritised.
Remuneration Committee
SpareBank 1 Nord-Norge's Remuneration Committee consists of the chairman of the Board and two board members.
The Bank's company secretary fulfils the function of secretary. The committee's mandate is to • prepare and present proposals
concerning the remuneration of the chief executive
• prepare and present proposals concerning the statement on the fixing of the salaries and other remu- neration of executive personnel in line with the Financial Institutions Act, section 15-2, ref. the Public Limited Liability Companies Act, sections 5-6 (3) and 6-16a
• prepare matters for the Board relating to the remuneration arrange- ments pursuant to the regulations relating to remuneration arrangements in financial institutions
The Board has stipulated the Remunera- tion Committee's mandate.
The committee convenes when it deems it necessary, but at least once a year. Audit Committee
The Audit Committee's duties pursuant to section 8-18 of the Financial Institutions Act are to a. prepare the Board's follow-up
of the financial statements reporting process
b. monitor the systems for internal control and risk management, as well as the Bank's internal audit if such a function has been established c. issue a statement on
the choice of auditor
d. maintain ongoing contact with the Bank's elected auditor about the auditing of the annual financial statements e. evaluate and monitor the auditor's
independence, ref. the Auditors Act, chapter 4, especially including the degree to which services other than auditing that are provided by the audi- tor or audit firm constitute a threat to their independence
Section 8-19, letter b, of the Financial In- stitutions Act is regarded as being satisfied by the Risk Committee's mandate and the Audit Committee receives the Risk Com- mittee's review for their information. The committee's duties
include the following:
• Assessing and making recommendations to the Board in relation to the election of an external auditor, and recommending to the Board, for their approval, the external auditor's remuneration. • Following up and monitoring the audi-
tor's or the audit firm's independence, with a particular focus on the provision of additional services, ensuring that the external audit acts independently, and discussing the scope and plan for the audit work with the auditor. • Supervising the process of compiling and
presenting the financial statements. • Examining the statutory auditing of
the annual financial statements and the consolidated financial statements, including reviewing and assessing the Group's interim and annual financial statements reporting with a special focus on:
- changes in accounting policies and accounting practices
- important discretionary valuations and estimates
- significant adjustments as a result of requirements and recommendations from the auditor
- compliance with laws, regulations and accounting standards
• Reviewing and discussing points where the auditor disagrees with the mana- gement and/or where a high degree of uncertainty has been pointed out by
the auditor and/or other matters that the auditor wants to discuss.
• Assessing other matters as determined by the Board and/or the Audit Committee itself, or that the auditor wishes to discuss.
The Audit Committee convenes as often as it finds necessary, but at least four times a year. A meeting and work plan is prepared for the committee each year. This must be approved by the Board.
Risk Committee
The committee has the following duties: • Ensuring that the Bank has good
systems for internal control and risk management, and that the compliance function and internal audit function satisfactorily.
• Ensuring that the risk management is in line with best practice and the Board's level of ambition.
• Making recommendations to the Board concerning the Group's overall risk strategy, including assessing the Group's risk capacity and willingness, and advising the Board on establishing a framework for future risk exposure, including ensuring a satisfactory risk and capital assessment process (ICAAP). • Supervising that the Group's capital
adequacy is satisfactory and striving for optimum capital allocation within the Group's adopted strategy. • Following up the Group's funding
strategy, including monitoring and checking the factors that directly and/or indirectly affect the Bank's funding and refinancing risk. • Ensuring that the IRB system is well
integrated into the organisation and that it satisfactorily calculates risk levels and capital requirements. • Monitoring the degree to which
the prices the institution charges customers for products reflects the risk the institution is carrying and, if the opposite is true, recommending improvements. • Assessing the extent to which the
remuneration arrangements take suf- ficient account of risk, capital, funding and earnings.
• Ensuring that the Group has satisfactory contingency plans. • Assessing and making recommendations
to the Board concerning the election of the internal auditor. Assessing the internal auditor's annual plan and remuneration and making recom- mendations to the Board about approving these.
• Ensuring that the Group has good systems and processes for internal control and compliance, and ensuring that these function effectively. • Assessing other matters as determined
by the Board and/or the Risk Committee itself, or that the internal auditor wishes to discuss.
• Staying up-to-date and providing advice to the Board in relation to current and future amendments to laws and regulations.
The Risk Committee comprises three mem- bers of the Board. They must be independent according to the definition in the Norwegian Code of Practice for Corporate Governance. The Remuneration Committee convenes as often as it finds necessary, but at least four times a year. A meeting and work plan is prepared each year. This must be ap- proved by the Board.
Reporting
The Board receives periodic reports on the following:
• Financial performance • Market trends
• Management, personnel and organisational development • Development of the overall risk situation
and the Bank's risk exposure
In addition to the above, there will be peri- odic presentations of the Bank's scorecard, which contains financial, organisational, mar- ket-related and quality-related targets.
Central business and other related areas are looked at least once a year with the evalu- ation and determination of limits and guide- lines.
The Board's fees
The Board's fees are a fixed annual amount that is set by the Bank's Supervisory Board. No other fees are paid in addition to this. Internal audit
The internal audit is a tool the Board and executive management team uses to en- sure that the risk management process is result-oriented, efficient and functions as intended. Ernst & Young are responsible for providing internal audit services to the Group. The services cover the Parent Bank, subsi- diaries subject to the Regulations on Risk Management and Internal Control and ot- her subsidiaries. The internal audit's main task is to confirm that the established in- ternal control functions as intended and ensure that the established risk manage- ment measures are sufficient in relation to the Bank's risk profile.
The internal audit reports to the Board every quarter, which adopts annual plans and budgets for the internal audit. Reports and recommendations issued by the audit department concerning improvements to the Bank's risk management are continu- ously reviewed and implemented.
A revision plan is prepared. This is discus- sed with the executive management team, considered in the Risk Committee and ap- proved by the Board. The audit's risk as- sessments determine which areas will be reviewed.
Special audit reports are prepared and con- tain results and proposed improvements. These are presented to the responsible ma- nager and the Group's executive manage- ment team. A summary of the reports is sent every quarter to the Risk Committee and the Board. Any consultancy work is carried out within the standards and recommendations that apply for internal auditors (IIA/NIRF).
Risk management section
This function is independent of the custo- mer units and bears overall responsibility for comprehensive risk management, in- ternal control and compliance with rules and provisions, including responsibility for the Group's risk models and the further de- velopment of effective risk management systems.
Deviations from point 9 of the Code of Practice: None