5th Principle: Committees Formed by the Board
| No: 42081293 | Date(g): 30/6/2021 | Date(h): 21/11/1442 | Status: In-Force |
| The formation of Board committees ensures and supports the effectiveness of decision-making to achieve the objectives of the financial institution in accordance with the best practices and specialized technical standards. It also assists the Board to perform its duties and responsibilities, contributes to the effectiveness of performance and to reviewing and monitoring the financial institution’s businesses on a regular basis. Committee members may be appointed from within or outside the Board. The formation of these committees shall not relieve the Board of its responsibilities, and it shall observe the following: | ||
| 69. | A member may preferably not be a member of more than two committees. | |
| 70. | A member shall attend committee meetings regularly and may do so by using technological means. For a meeting to be valid, it shall be attended by half the members. All decisions shall be made by the majority vote of members; in case of a tie, the chairman of the committee shall have the casting vote. The opinion of a dissenting member shall be recorded in the meeting minutes. Members may not cast their votes by proxy. | |
| 71. | A member shall act in good faith, and with due diligence and care for the benefit of stakeholders. He shall perform his duties aloof from any external influence, whether from inside or outside the financial institution. He shall not give precedence to his personal interests or the interests of persons whom he represents over those of the financial institution, shareholders and other stakeholders. | |
| 72. | Each committee shall have a secretary from among its members or from outside. A committee secretary may preferably not serve as the secretary of another committee, and he shall have the necessary qualifications, skills and abilities to perform the following tasks, as a minimum: | |
| a. | Record committee meetings and draft minutes therefor, taking into account to submit the drafts to the members to express their opinions thereon before signing same; | |
| b. | Prepare and submit committee reports to the Board and retain same; | |
| c. | Inform committee members of meeting dates well in advance of the specified date. | |
| 73. | The number of committees to be formed by the Board shall be determined pursuant to the nature of operations and the size of the financial institution, in addition to the relative experience and qualifications of the Board members. These committees shall comprise the following, among others: | |
• The Executive Committee
| 74. | This committee shall consist of no less than three and no more than five members, and it may not be chaired by the CEO. |
| 75. | The committee shall hold no less than six meetings per year; the risk manager or any person whom the committee deems necessary may be invited to attend committee meetings without having the right to vote on committee decisions. |
| 76. | The committee chairman shall submit a report to the Board on any important issue, and shall, upon consultation with the Chairman of the Board, determine the items to be included in the Board meeting agenda, in addition to any subjects not falling within the competence of other committees. |
| 77. | The Board shall determine committee powers and responsibilities, and shall monitor the implementation thereof. |
• The Audit Committee
| 78. | This committee shall be composed of no less than three and no more than five members, all of whom shall be non-executive members, including at least one independent member.4 It shall be chaired by an independent member, and the number of the members from outside the Board shall exceed that of the members from within the Board. This committee may not be chaired by the Chairman of the Board. | |
| 79. | The General Assembly shall, upon a recommendation of the Board, approve committee work regulations, provided that it comprises its work controls and responsibilities, procedures for appointing its members, their membership term, and their remuneration. | |
| 80. | Committee members shall have academic qualifications and professional experience in auditing and risk management, including knowledge of accounting and auditing standards, ability to understand financial reports, and understanding of the laws, regulations and instructions issued by the relevant agencies. | |
| 81. | The number of meetings to be held by the committee shall depend on the size of the financial institution and the scope of the tasks assigned thereto, provided that it holds no less than four meetings per year, in addition to any other meetings to be held when required. The committee may invite to its meetings any employee to discuss with him the topics raised therein; this invitation shall include the CEO and the internal and external auditors. The minutes of committee meetings shall be distributed to all members, who shall be entitled to request the committee for clarification of any issues. | |
| 82. | The committee shall have the competence to monitor the financial institution’s work, verify the integrity and impartiality of its reports and financial statements, and ensure the availability of internal control systems therein. Committee tasks shall include the following: | |
| a. | Financial Reports | |
| - | Examine the quarterly and annual financial statements of the financial institution before submitting same to the Board, and provide its opinion and recommendation thereon, in order to ensure their integrity, fairness and transparency; | |
| - | Provide its technical opinion - at the request of the Board - on whether the Board report and the financial statements of the financial institution are fair, balanced and understandable, and contain information that allows shareholders and investors to assess the financial position of the financial institution, its performance, business model, and strategy; | |
| - | Examine any important or unfamiliar issues contained in the financial reports; | |
| - | Scrutinize any issues raised by the financial manager or the auditor of the financial institution; | |
| - | Examine the accounting estimates pertaining to significant issues contained in the financial reports. | |
| - | Examine the accounting policies applied by the financial institution, and provide its opinion and recommendation thereon to the Board. | |
| b. | Internal Audit | |
| - | Examine and review the financial institution’s internal and financial control systems and risk management system; | |
| - | Examine the internal audit reports and follow up on the implementation of corrective measures with regard to the remarks contained therein; | |
| - | Monitor and oversee the performance and activities of the internal auditor and the internal audit department of the financial institution, in order to ensure the availability of the necessary resources and their effectiveness in performing the activities and tasks assigned thereto; | |
| - | Submit a recommendation to the Board to appoint/terminate the service of the manager of the internal audit unit or department or the internal auditor and propose his remuneration; | |
| - | Evaluate the effectiveness and efficiency of internal controls, policies and procedures, the reporting mechanism and the extent of compliance therewith, and provide recommendations for improvement thereof. | |
| c. | The Auditor | |
| - | Submit a recommendation to the Board to nominate/dismiss auditors, determine their fees and evaluate their performance, after verifying their independence and reviewing the scope of their work and the terms of their contracts; | |
| - | Verify the auditor's independence, objectivity and fairness, and the effectiveness of audit activities, taking into account the relevant rules and standards; | |
| - | Review and provide its opinion on the auditor’s plan and activities for the financial institution, and ensure that he does not provide any technical or administrative works beyond the scope of audit work; | |
| - | Respond to the queries of the financial institution's auditor; | |
| - | Examine the auditor's report and comments on the financial statements and follow up on the procedures taken in connection therewith. | |
| d. | Compliance | |
| - | Review the findings of the reports made by supervisory authorities, and ensure that the financial institution has taken the necessary measures with regard thereto; | |
| - | Report to the Board any issues that it deems necessary to take action on, and provide recommendations as to the procedures to be taken in connection therewith; | |
| - | Ensure the financial institution's compliance with the relevant laws, regulations, policies and instructions, and take the necessary measures to improve the financial institution’s level of regulatory compliance. | |
• The Nomination and Remuneration Committee
| 83. | This committee shall consist of no less than three and no more than five members, including at least two independent members. It shall be chaired by an independent member, and shall not be chaired by the Chairman of the Board. | |
| 84. | The General Assembly shall, upon a recommendation of the Board, approve the committee work regulations, provided that they include its working rules and procedures, tasks, procedures for appointing its members, and their membership term and remuneration. | |
| 85. | The committee shall be in charge of identifying and proposing candidates for selection as members of the Board and the executive management, and preparing a clear policy for the remuneration of said members, as per the relevant Central Bank instructions. | |
| 86. | The committee shall hold no less than two meetings per year, wherein to examine and evaluate members' performance, nominate new members, and discuss the policy for remunerations and incentives. | |
| 87. | Committee tasks shall include the following: | |
| a. | Coordinate with the Human Resources Department to develop the replacement and succession policy, and ensure the executive management’s compliance therewith; | |
| b. | Establish a record of the qualifications and skills of Board members in order to identify the additional skills required to activate the role of the Board and ensure its implementation of its tasks and responsibilities; | |
| c. | Ensure that the remuneration amount is consistent with the prevailing local norms and control systems, and is appropriate to achieve the shareholders’ interests and the financial institution's long- term strategic goals, and ensure that the incentive system is reviewed periodically and that it does not encourage participation in high-risk operations to achieve short-term profits, in addition to its agreement with the risk policy of the financial institution approved by the Board. | |
• The Risk Committee5
| 88. | This committee shall be composed of no less than three and no more than five members, three of whom shall be non-executive members, and it shall not be chaired by the CEO. | |
| 89. | Committee members shall have an appropriate level of knowledge of risk management, and shall include an expert in cyber and technical risks. | |
| 90. | The financial institution’s risk manager shall report to the Board through the risk committee, which shall have to submit its opinion on the risk management reports to the Board. | |
| 91. | The committee shall hold at least four meetings per year, and it may invite the risk manager to attend its meetings without being a member therein. | |
| 92. | Committee tasks shall comprise the following: | |
| a. | Develop a comprehensive risk management strategy and policies, in line with the nature and size of the financial institution’s activities, and taking into account cyber and technical risks, ensure their implementation, and review and update same pursuant to the internal and external changes that occur to the financial institution; | |
| b. | Determine and maintain an acceptable risk level to which the financial institution may be exposed, and ensure that the financial institution does not go beyond said level; | |
| c. | Verify the feasibility of the financial institution's successful continuation of its activities, and identify the risks that threaten its existence over the following twelve months; | |
| d. | Oversee the financial institution’s risk management system, and evaluate the effectiveness of the systems and mechanisms for identifying, assessing and monitoring the risks that may endanger the financial institution so as to determine areas of inadequacy therein; | |
| e. | Reassess the financial institution's ability to bear and be exposed to risks on a regular basis, for example, by conducting stress tests; | |
| f. | Prepare and submit to the Board detailed reports on exposure to risks and the proposed steps to manage these risks; | |
| g. | Provide recommendations to the Board as per the appointment/termination of service of the manager of the risk unit or department; | |
| h. | Provide recommendations to the Board on risk management-related issues; | |
| i. | Ensure the availability of adequate resources and systems for risk management; | |
| j. | Review the organizational structure of risk management and provide recommendations thereon prior to approval thereof by the Board; | |
| k. | Verify the independence of the risk management staff from business departments; | |
| l. | Ensure that the risk management staff are aware of the risks threatening the financial institution, and endeavor to raise awareness of a culture of risks; | |
| m. | Review any issues raised by the audit committee that may affect the financial institution’s risk management. | |
4 As for banks, all committee members shall be independent.
5 In finance companies, this committee is referred to as the "Risk and Credit Management Committee".