Corporate Governance Policies

PURPOSE:  Is to formulate the policies with definition, evaluation, follow-up, control and announcement of the Corporate Governance of the Bank.

SCOPE:  Entire Bank

DEFINITION:

Bank: First State Trust BANK A.S.
Top Management: Refers to Board of Directors and Top Level Management.
Top Level Management: Defines General Manager and Assistant General Managers, managers of Internal Systems departments and managers of departments, who are in the same hierarchical level as the Assistant General Manager or in higher level positions in terms of authorities and duties, even if they are employed under different titles.


Corporate Governance: Refers to Top Management’;s administration of the bank in compliance with declared objectives, laws, and resulting regulations, the articles of association, internal bank regulations, and Banking Ethical Rules, in a manner which protects the rights and benefits of shareholders and depositors.
Key Personnel: Any personnel whose absence would interrupt activities.

DOCUMENT:

  • First State Trust Bank Ethical Principles
  • Personnel’;s Commitment Related to Compliance with First State Trust Bank Ethical Rules

IMPLEMENTATION:

1. INTRODUCTION

1.1. Main objectives of Corporate Governance Policies are: to limit economic risk, to protect the Bank’;s reputation, and to define responsibilities. Corporate Governance is supported by a set of principles, which are designed to ensure transparency and thereby to protect shareholders, to carry out clean and open information distribution, and to ensure a high level of balance among the Top Management, and among the owners of the Bank. Such principles also create a basis for other issues such as: the authority to make decisions.
1.2. The Bank’;s Vision, Mission and Ethical Principles to be adopted should be determined by the Board of Directors and announced to the public using appropriate communication channels.
1.3. Basic concepts of Corporate Governance are equality, transparency, accountability and responsibility.
• Equality; means that the bank’;s management treats equally all shareholders and other stakeholders in all its activities and prevents possible conflicts of interest,
• Transparency; means that all bank related financial and non-financial information is announced to the public in a timely, correct, complete, comprehensible, interpretable, and easily accessible manner. Information, which has a commercially secretive nature or classified and is not disclosed to the public, is excluded,
• Accountability; refers to the responsibility of the members of the Board of Directors for issues relating essentially to the Bank’;s incorporated body and consequently to its shareholders,
• Responsibility; means compliance of all the Bank’;s activities carried out by its management with the regulations and legislations, with the articles of association, and with internal banking regulations.
1.4. The Bank’;s Top Management manages the Bank in compliance with objectives, laws and resulting regulations, articles of association, internal banking regulations, and Banking Ethical Rules, in a manner which protects the rights and benefits of shareholders, depositors, and other stakeholders.
1.5. The Top Management monitors the Bank’;s risk profile and ensures that the capital level is adequate for the risk undertaken.
1.6. The Bank prepares the human resource plan related to key managers, who may quit their work and thus cause interruption in the Bank’;s activities. 
1.7. The Bank determines the acceptance criteria related to employment and promotion of all personnel.
1.8. The Bank pays utmost attention to its social responsibilities by complying fully and ethically with regulations related to the environment, consumers, and public health, and by disclosing such policies to the public.
1.9. The Bank provides sufficient information to shareholders to attend a General Assembly Meeting. This information should include date, time and the issues listed in the meeting agenda. The Bank makes sure that sufficient time is allocated for shareholders to prepare for a General Assembly Meeting.

2. MANAGEMENT OF THE BANK

2.1. Board of Directors


2.1.1 The Bank determines the composition of the Board of Directors based on qualifications including capability, age and experience. In order to enhance knowledge and objectivity (from a non-executive perspective) in the Board of Directors, at least 3 members should be “independent” (a member of the Board of Directors is considered to be an “independent” when he or she meets the conditions which are indicated in The Regulation on Internal Systems of the BDDK.)
2.1.2 The operations of the bank and the bank’;s financial strength are the responsibilities of the Board of Directors. The Board of Directors ensures that management’;s priority is to protect the benefits of shareholders, depositors, creditors, personnel and other partners.  This should be done under the framework of the Bank’;s principles of prudence, laws, legal regulations and internal policies.
2.1.3 The Bank’;s Board of Directors meetings are to be held at least four times annually. In order to be able to have all issues thoroughly discussed during the meetings, agendas are prepared in a way to highlight all essential matters.
2.1.4 According to United State Law, the Chairman of the Board of Directors, elected by the Board, represents the Bank. The Chairman’;s responsibilities are:
• To lead the Board of Directors, to confirm that the Board of Directors has fulfilled all of its duties and responsibilities, to ensure appropriate planning of the agenda of the Board of Directors, to ensure that meetings are effective and that the time spent by the Board of Directors is used in a productive manner.
• To make announcements for meetings of the Board of Directors, to manage such meetings and to accept the agenda.
• To ensure that Members of the Board of Directors are informed accurately and in a timely manner.
• To ensure that non-executive Members of the Board of Directors act in an effective manner.
2.1.5 The Vice Chairman is appointed by the Board to act as Chairman during meetings in the event the Chairman is absent.
2.1.6 One of the main responsibilities of the Members of the Board is to make sure to be informed about national and international developments impacting the Bank and the United State banking sector. To that end, the Bank ensures to provide appropriate briefings to the Members of the Board upon their demands.
2.1.7 The Members of the Board of Directors should spend sufficient time to carry out their work in the Bank, to participate in the meetings of the Board of Directors, and to fulfill their duties in a cautious manner, according to the Bank’;s corporate governance policies.
2.1.8 Members of the Board of Directors should make certain that safe and sound operations are conducted in the Bank and further ensure that their relations with all the regulatory authorities are cordial.
2.1.9 Members of the Board of Directors should practice their duties without bowing to pressure and should evaluate information in a comprehensive and impartial manner, without accepting any material benefit.
2.1.10 Members of the Board of Directors, who have no executive duties, should refrain from participating in the Bank’;s daily management, and should only provide assistance to strengthen the financial position of the Bank.
2.1.11 The Board of Directors should regularly evaluate the efficiency of its own management including the assignment and election of members and, in the case of deficiencies and weaknesses, implement the necessary changes and or address correctional proposals to the General Assembly.
2.1.12 The Board of Directors interrogates the Bank’;s Top Management, gives impartial advice and takes independent decisions.
2.1.13 The Board of Directors ensures that the activities, which may cause conflicts of interest, be carried out independently of the Bank.
2.1.14 The Board of Directors establishes the strategies that determine the Bank’;s permanent activities.
2.1.15 The Board of Directors is responsible for the timely evaluation of problems related to institutional values and ethical rules, and for preventing bribery, impropriety and non-ethical attitudes.
2.1.16 The Board of Directors follows-up on the compliance of the Bank’;s activities with the Laws, articles of association and policies which are established through internal regulations, and takes, whenever necessary, precautionary measures without delay and, if possible, before the problem arises. 
2.1.17 The Board of Directors ensures that the Bank has appropriate levels of accountability for staff and departments. Appropriate processes are set to maintain checks and balances.
2.1.18 The Board of Directors, in general, set forth in a written form the policies and appropriate strategies related to each type of risk and risk levels which the Bank can withstand.  This includes the implementation of appropriate procedures and allocation of authority of risk limits for the departments, managers and / or personnel.


2.2. Top Level Management

2.2.1 Top Level Management executives are assigned to areas in which they possess the necessary expertise and to carry out their duties in a fair, transparent, and responsible manner.
2.2.2 Top Level Management follows-up and re-evaluates at least once a year the important changes which occur in the business activities and, if needed, carries out studies accordingly and proposes to the Corporate Governance Committee the related amendments in order to monitor and maintain the adequacy and appropriateness of  the Corporate Governance Policies.
2.2.3 Top Level Management ensures that transactions are carried out in line with the mission, vision, targets and policies of the Bank, and acts according to financial and operational plans which are approved by the Board of Directors, and while fulfilling its duties, should comply with laws, regulations, articles of association and other internal policies, and regulations.
2.2.4 Top Level Management bears in mind the rights of the customers and protects their interest when marketing the Bank’;s products and services.
2.2.5 Top Level Management takes all the necessary precautions to have good and fair relationships established between the Bank and its customers and ensures that parties act according to the terms of the agreements concluded between the concerned parties.
2.2.6 Top Level Management is responsible to establish an efficient internal control system under the guidance and supervision of the Board of Directors.
2.2.7 The Bank managers do not use information, which they have received during their course of business at the Bank, for their personal benefit or for the benefit of other parties, do not disclose false and misleading information, do not spread out news, and do not make any interpretations.

3. COMMITTEES OF THE BOARD OF DIRECTORS

3.1. General Principles


3.1.1 The Board of Directors is ultimately responsible for the execution of the Bank’;s activities. In order to increase efficiency while adhering to banking regulations, Board Committees are established with specific objectives, authorities, responsibilities and privileges described in the Committee’;s rules and regulations. The Board’;s Committees regularly report to the Board of Directors.
3.1.2 The Board of Directors ensures that all studies, analyses and findings carried out by the Committees are put in written form and recorded.
3.1.3 All Board Committees have direct access to the Management.
3.1.4 The Board of Directors may combine duties of committees in the event that it considers it would be appropriate within the framework of the banking laws and regulations.


3.2. Audit Committee


3.2.1 The Bank ensures that Internal Systems Departments report to the Board of Directors through the Audit Committee and Internal Auditors are assigned to evaluate and improve the Bank’;s operations and the effectiveness of risk management, control and governance processes.
3.2.2 The Bank establishes an Audit Committee consisting of independent members who are experienced and competent in their assigned roles.
3.2.3 The Audit Committee ensures the establishment of communication channels to facilitate the declaration of improprieties directly to its members, to the Internal Control Department, or to the auditors.
3.2.4 The Audit Committee abides by the duties and responsibilities mentioned in the Banking Law and other related laws and regulations.
3.2.5  The Audit Committee, in addition to the evaluation of the objectivity of external auditors, forwards suggestions to the Board of Directors about the assignment and dismissal of external inspectors, their fees and other terms related to their agreements.
3.2.6 The Audit Committee may ask for any kind of information from management and may request that any manager or Board Member attend the Committee’;s meetings.
3.2.7 The Board of Directors acknowledges that the Audit Committee is neither an alternative to the Board of Directors nor to the Bank’;s Management concerning the responsibility of monitoring the sufficiency of the Internal Control System.


3.3. Corporate Governance Committee


3.3.1 The Corporate Governance Committee follows-up on the compliance of the Bank with the Corporate Governance Policies.  It requests studies on such a subject, evaluates the efficiency of the Board of Directors including the process for the renewal and change of its members, and submits proposals to the Board of Directors.
3.3.2 The Corporate Governance Committee consists of a minimum of two independent Members of the Board of Directors.
3.3.3 The Corporate Governance Committee determines whether Corporate Governance Policies are applied in the Bank or not. If they are not applied, it further determines the reasons and conflicts of interest if any, which have occurred due to the failure of fully complying to such principles, and makes proposals to the Board of Directors to remedy this failure.
3.3.4 The Corporate Governance Committee coordinates the relationship process with shareholders.

4. ETHICAL PRINCIPLES

4.1. TURKLANDBANK Ethical Principles are subject to the approval of the Board of Directors. All Bank personnel sign the “Personnel Commitment Related to Comply with First State Trust Bank Ethical Rules” document and pledge to adopt First State Trust Bank Ethical Principles.

5. SALARY POLICIES

5.1. The Board of Directors ensures that salaries, to be given to its members, the Top Level Management and other authorized personnel, are appropriate and in-line with the Bank’;s ethical values, internal considerations and the overall Bank’;s performance.
5.2.  Daily attendance allowance, which will not exceed the salary, may be given to Members of the Board of Directors. Salaries given to Members of the Board of Directors are determined by the General Assembly of Shareholders.
5.3. Employment of personnel and promotions are based on objective criteria. Top Level Management applies and controls Human Resources procedures such as; general policy and employment, education/training, evaluation, consultancy, promotion, indemnity and discipline.
5.4. Personnel, upon employment, undergo an orientation program and benefit from a continuous education/training program. Top Level Management regularly reviews the programs which are prepared in order to increase the technical and managerial skills of personnel.
5.5. When performance related salary programs are established for Top Level Management and for executive members, increases in salary should be considered in order to encourage further improvement in the long-term profitability of the Bank.  Such increases should be based on objective criteria and commensurate with the title and work responsibilities of the individuals.
5.6. Informative meetings are held with personnel related to matters such as; salaries, career, education, health and other employee benefits. An exchange of opinions is established by using an open internal communication medium. Decisions and developments related to personnel are announced through appropriate communication channels.
5.7. The Bank ensures a secure working environment, which is continuously improved for the well being of its employees.
5.8. The Bank does not discriminate with regard to race, religion, language and gender of its personnel, and takes precautionary measures to ensure that human rights are respected and that all employees are protected against physical, mental and emotional abuse within the Bank.

6. TRANSPARENCY

6.1. General Principles


6.1.1 The Bank ensures that shareholders, depositors, market participants and the public are clearly informed about the Bank’;s organizational structure and objectives.
6.1.2 The Audit Committee reviews the independent audit firm’;s evaluations of the Bank’;s adherence to accounting laws and other related regulations and legislations.
6.1.3  The Audit Committee makes sure that the Bank’;s financial statements are true and comprehensive,  and are prepared in compliance with the Laws and other regulations and legislations, and if not, discuss those instances with the auditors.
6.1.4  The Bank presents information to the public use to assist persons and corporations to decide, in a timely,  comprehensible, impartial, and easily accessible manner, by means of active usage of the Bank’;s internet site.
6.1.5  Authorization and risk management processes shall be documented and shall be brought up in a transparent manner to the auditing authorities.
6.1.6 Top Level Management is responsible for the determination of risks related to the Bank’;s entire activities and the Board of Directors is responsible for the approval and the supervision of risk related policies.
6.1.7 Internal Audit carries out regular inspection activities, examines whether these activities comply with the laws and regulations, and evaluates risks which arise due to such activities. Frequency of such inspections is determined according to established risk level.
6.1.8  The Bank, to the extent of Basel II 3rd structural pillar, provides qualitative and quantitative information to the public about its capital structure, capital adequacy, and the relevant risks combined with an objective evaluation.
6.1.9  The Bank ensures equal treatment of all shareholders, including minorities and foreigners.
6.1.10  The Bank provides detailed information to the public through its internet site (as listed below). In case the Corporate Governance Committee decides, additional information may be announced to the public.

  • Structure of the Board of Directors and Top Level Management,
  • Shareholder structure,
  • Structure of the organization,
  • Annual report,
  • Articles of Association,
  • Vision,
  • Mission,
  • Credit Rating reports.

6.2. Related Party Transactions


6.2.1 In the event it is required to submit to the General Assembly of Shareholders for approval according to the law, all transactions, which are conducted between the Bank and Members of the Board of Directors or with their close acquaintances, and which cover regular banking operations, or transactions which are booked under similar terms and conditions with 3rd parties (unrelated persons) and the bank, should be first approved by the Board of Directors. Members of the Board should promptly inform the Board of Directors about such transactions.


6.3. Conflict of Interest


6.3.1 Members of the Board of Directors and the personnel of the Bank should refrain from work, duties and activities outside the Bank which could create conflict of interest, would be perceived as inappropriate, or would jeopardize the Bank’;s reputation and integrity. Every bank personnel, while they carry out their duties, should refrain from all activities and partnerships which would be in conflict, or seem to be in conflict with the interest of the bank, its customers or its shareholders.
6.3.2 Since it is not possible to estimate all potential conflicts which may arise, all bank personnel should be cautious about potential conflicts, should submit such conflict cases to the attention of the Top Level Management, the Corporate Governance Committee or to the attention of the Board of Directors, and, if possible, should refrain from such inappropriate activities. If a conflict is inevitable, then such situation should be managed by taking into consideration moral principles, and ethics, while avoiding the creation of an inappropriate image for the Bank.

 
 
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