- Decision on conscientious behavior of members of a bank governing bodies
Decision on conscientious behaviour of members of a bank governing bodies, issued by the Banking Agency of the Republic of Srpska on 25.07.2017 (published in the “Official Gazette of the Republic of Srpska”, number 75/17) defines the rules of procedure for members of those bodies in the Republic of Srpska, as well as the criteria related to determining conflicts of interest and establishment of specialized boards of a bank.
- Rules of conscientious behaviour (basic and additional)
Basic rules of conscientious behaviour of members of governing bodies of a bank
A member of any bank governing body is obliged to act in accordance with the highest professional and ethical standards of bank management, acting in the interest of the bank and preventing to the highest extent decision-making based on personal interests. He/she is obliged to promote culture through his/her behaviour, giving the highest priority to professional, fair and conscientious conduct of business activities at all organisational levels, and clearly defined, transparent and consistent lines of responsibility and authority within the organisational structure.
Members of a bank governing bodies are obliged to apply professional and ethical management standards in order to achieve a balance between the interest of the bank, its bodies, clients, creditors, shareholders, employees, supervisors, regulators and other stakeholders.
A member of the Board of Directors and a member of the Supervisory Board must perform his/her duties professionally and conscientiously, with an obligation to establish procedures and mechanisms for disposing of privileged information for his/her account and account of third parties.
In the course of performance of their duties and responsibilities, members of boards are obliged to cooperate with each other in the best interests of the bank.
In the event that the bank is a member of a banking group, the Supervisory Board of the bank, in addition to the responsibility for the compliance of the business strategy, the objectives, the risk taking strategies, risk management policies and procedures, with the legal and subordinate regulations, also has the responsibility for controlling compliance with the objectives, strategies and policies adopted at the level of that particular banking group. Members of the Supervisory Board shall be jointly and severally liable for any damage arising as a result of taking or not taking certain actions or failure to fulfil their responsibilities, unless they prove that while performing their duties of supervision of the bank management they acted conscientiously and in accordance with professional and ethical standards prescribed by the by-laws of the Banking Agency of the Republic of Srpska.
A member of a board must have the necessary knowledge and experience to make independent assessments and decisions in the best interest of the bank. In doing so, the member is required to take into consideration all available information that may have influence on decision-making process.
The Supervisory Board of a bank shall have at least one-third of its members independent of the bank, i.e. members who have no direct or indirect qualified participation in the bank or who are not members of the banking group to which the bank belongs, but also not members of the Board of Directors of the bank or any of its affiliated companies for at least five years, then who are not employed in the bank or in its affiliated company for at least three years, do not receive any other payment from the bank other than remuneration for work in the Supervisory Board, and finally who are unrelated to the bank on any other basis which could prevent an objective and impartial supervision of the bank’s work or its administration.
The remuneration of the members of the Supervisory Board of the Bank must be consistent with the bank’s compensation policy and should not stimulate the members of the Supervisory Board to make decisions that may encourage them to take any risk that exceeds the level of acceptable bank risk.
Additional rules of conscientious behaviour of members of a bank governing bodies
The Board of Directors regularly, comprehensively and in due course reports to the Supervisory Board on issues related to bank operations, risk profile of the bank, implementation of adopted policies, possible deviations from established business policy goals and other issues from its jurisdiction. The Supervisory Board of the Bank has the right and the obligation to request additional explanations and reports from the Board of Directors regarding all relevant business issues of the bank and its affiliates.
Members of the Supervisory Board are required to devote sufficient time to carry out their duties. During their mandate, they are required to develop and improve the necessary collective and individual knowledge, skills and professional knowledge, through further education in areas that are relevant for the efficient and quality performance of their duties.
Once a year, the Supervisory Board of the bank shall conduct a self-assessment of its adequacy and assessment of its activities, the work of the Supervisory Board as a whole and the work of its individual members, potential conflicts of interest of individual members, functioning of its boards and cooperation with the Board of Directors. In accordance with the results of the self-assessment, the Supervisory Board should define possible measures to improve efficiency in terms of composition, education, dynamics of holding sessions and attendance at the same, necessary information, preparation for sessions and the like.
An annual report on its work the Supervisory Board shall submit to the Bank’s Annual General Meeting and the that report specifies precisely and credibly the activates performed during the year, and in particular the activities related to: supervising the operations of the bank and its management, assessing the management’s report, assessing the internal audit report and the report of the audit committee, etc.
1.2. Specific tasks of members of the Supervisory Board
The Supervisory Board of the bank is making a proposal for a business policy, but prior to that assess whether it enables the implementation of the bank’s business strategy.
The Supervisory Board adopts a proposal of a financial plan which has to be consistent with the bank’s business strategy and policy.
In addition, the Supervisory Board should ensure the independency of control functions, i.e. it is obliged to establish their functioning separately from the business processes and activities in which the risk arises.
- Decision on
assessment of members of a bank governing bodies
- General provisions
Decision on the assessment of members of a bank governing bodies issued by the Banking Agency of the Republic of Srpska on 25.07.2017 (published in the Official Gazette of the Republic of Srpska, No. 75/17), provides:
- criteria and procedures for the assessment of the proposed and elected, i.e. appointed members of the governing bodies in terms of whether they have good reputation and sufficient experience to perform the function they are appointed to;
- the measures applied by the bank in cases where the members of those bodies are uneligible to perform the function they are appointed to;
- procedure of the Banking Agency of the Republic of Srpska when issuing their consent for those members of the bank governing bodies.
- Request for assessment
The bank has the primary responsibility for conducting initial and continuous assessment of the members of its bodies. All relevant and available information must be taken into account for the assessment of members, regardless of when and where the same originated.
Assessments of those members must be completed before the same assume his/her function, as well as once a year for the previous year of performing the function as a member of the bank governing body. When assessing individual members, the bank carries out an assessment of the body as a whole. The assessment procedure and its results must be adequately documented.
If the bank concludes that the person is not eligible for election, i.e. appointment after the assessment, that person cannot be elected, i.e. appointed. However, if the member is already elected or appointed, the bank shall take appropriate measures to ensure dismissal of the same or to ensure the measures that will enable the eligibility of that particular member. If the bank concludes on the basis of a re-assessment that a member of the body is no longer eligible, it is obliged to take appropriate measures. These measures may include: the replacement of certain members of the bank governing body, i.e. their dismissal; training of an individual member or all members of that body and other appropriate measures to ensure satisfactory collective accreditation of the bank’s body.
- Procedure of the Banking Agency
The Banking Agency shall issue a prior consent for the appointment of the president and members of the Board of Directors and the Supervisory Board of the bank if it considers that the proposed candidates fulfill the conditions prescribed by the Banking Law of the Republic of Srpska and bylaws of the Banking Agency, for which the Banking Agency has determined that the bank adequately carried out its assessment of the candidates, and that they are able to demonstrate that they will provide a legitimate, safe and stable operation of the bank, i.e. will effectively supervise the business operation of the bank.
Author: Aleksandar Sajic
E-mail: [email protected]