BOP’s Code of Corporate Governance

The purpose of Bank of Palestine’s (BOP) Code of Corporate Governance (Code) is to summarize the bank’s key corporate governance policies and provisions. By adopting this Code, BOP confirms its commitment to demonstrably lead and promote good corporate governance throughout the bank’s departments and activities. BOP understands corporate governance as a set of policies, systems and processes for the direction and control of companies, involving a set of relationships between the company’s shareholders, board and executive bodies for the purpose of creating long-term shareholder value.

In order to foster the confidence of its shareholders, employees, investors, and the general public, this Code goes beyond the established legal and regulatory framework by the Palestine Capital Markets Authority (PCMA), Palestinian Monetary Authority (PMA), and embraces internationally recognized corporate governance principles and practices.

  • Accountability: This Code ensures BOP’s accountability to all shareholders and guides the company’s board in the important setting strategy function, and guiding and monitoring the company’s management.
  • Fairness: BOP obligates itself to protect shareholder rights and ensure the equitable treatment of all shareholders, including minority shareholders. All shareholders are to be granted effective redress for violation of their rights through the board.
  • Transparency: BOP is to ensure that timely and accurate disclosure is made on all material matters regarding the corporation, including the financial situation, performance, ownership and governance of the company, in a manner easily accessible to interested parties.
  • Responsibility: BOP recognizes the rights of other stakeholders as established by laws and regulations, and encourages cooperation between the company and stakeholders in creating sustainable and financially sound enterprises.

I: Board Governance

BOP strives to maintain an effective, professional, and well-functioning board of directors given its key role for ensuring corporate governance in the Bank’s departments and activities.

The Board shall bear overall accountability for the performance of Bank of Palestine.

The Board is elected by shareholders to oversee and guide management with the ultimate goal of creating long-term shareholder value for the Bank, while taking into account the interest of its stakeholders.

Members of the board act in good faith, with due care and in the best interest of the company and all its shareholders–and not in the interests of any particular shareholder–on the basis of all relevant information. Each director is expected to ensure full commitment to the director duties, attending all board and applicable committee meetings.

The number of Directors shall be between seven and thirteen; each director will be elected to serve a term of four years, which can be renewed. There is no maximum limit on the number of terms a director may serve, rather reappointment shall be based on the director’s continued ability to perform the necessary director duties and maintain sufficient objectivity.

The board’s composition (competencies, skills and appropriate mix) is such that it is adequate for oversight of duties, and the development of the company’s direction and strategy. Each individual member of the board shall have the experience, knowledge, qualifications, expertise and integrity necessary to effectively discharge board duties and enhance the board’s ability to serve the long-term interests of the company and its shareholders.

To ensure the impartiality of decisions and to maintain the balance of interests among various groups of shareholders, at least 25 percent of the board members are independent directors. BOP has established board committees. All committees have charters containing provisions on the scope of authority, competencies, composition, working procedures, as well as the rights and responsibilities of the committee members. All Directors are subject to re-election by the shareholders at the annual general assembly meeting at least every four years.

The HR and Corporate Governance Committee shall oversee the non-executive director remuneration policy for the Bank. The remuneration policy shall seek to attract, motivate, reward, and retain directors of high integrity and superior ability who are focused on enhancing and maintaining the long-term shareholder value. Further, the remuneration policy shall be such that it does not jeopardize a director’s independence or encourage unjustified short-term risk taking.

The board meets according to a fixed schedule, which enables it to properly discharge its duties. As a rule, the board shall meet no less than six times a year.

II: Management Control Practices

BOP strives to maintain sound management control frameworks to ensure integrity of its operations and provide assurance to its shareholders and stakeholders. BOP shall place great importance on risk management and it is the board of directors that is tasked with ensuring that appropriate risk management systems are established.

BOP shall place great importance on internal control and its board of directors is charged with ensuring the Bank has an effective framework of internal control. BOP shall have an internal auditor, who is a part of the Internal Audit and Inspection Department that provides assurance to the board as to the effectiveness of the company’s internal controls. BOP shall have an active compliance department that ensures proper compliance with all applicable external laws and regulations as well as internal codes and policies.

BOP shall engage a publicly recognized, licensed and independent auditing firm, which is fully independent from the company, the company’s management, and major shareholders.

III: Shareholder rights

BOP ensures that all shareholders have the right to participate in the governance and the earned profits of the Bank.

BOP’s Articles of Association include particular provisions about the conduct of the general assembly. BOP shall have a system of registering shareholder complaints and effectively solve them.

BOP’s directors and employees shall understand this Code as their joint obligation, and accordingly, obligate themselves to ensure that its provisions and its spirit are adhered to and acted upon throughout the company. Board members and executives shall not divulge or use confidential or insider information about the company and shall comply with the insider trading policy. All BOP directors and employees are expected to act ethically at all times and to acknowledge their adherence to the BOP Code of Ethics.

A potential conflict of interest exists if the company intends to enter into a transaction with a related party. When such a conflict exists, members of the board and management shall disclose information about the conflict of interest to the board, and shall abstain from deliberating and voting on such issues.

The audit committee shall resolve any such conflicts. Unless required to do so by law, no board member or employee shall, during his or her membership on the board or afterwards, disclose any information of a confidential nature regarding the business of the company and/or any companies in which it holds a stake, that came to his or her knowledge in the capacity of his or her work for the company and which he/she knows or should know to be of a confidential nature.

A board member shall not use such confidential information for his or her personal benefit.

IV: Transparency and Information Disclosure

BOP strives to maintain a high standard of corporate transparency to its shareholders and stakeholders, including timely and accurate information disclosure. BOP’s policy is to disclose all material information, including the financial situation, performance, ownership and the governance structure of the company to its shareholders and the broader public as appropriate.

The company shall publish a comprehensive annual report that includes a corporate governance section. The company shall also strive to disclose its corporate governance practices, corporate events calendar and other material information on its internet site in a timely manner.

V: Corporate Social Responsibility

BOP is committed to making a positive difference in the communities in which we live and work.

Corporate Social Responsibility is the commitment of business to contribute to sustainable economic development – working with employees, their families, the local community and society at large to improve the community at large according to the board of directors approved strategy.

BOP fully considers social, cultural, environmental, governmental and economic factors when evaluating development opportunities.

Responsibilities of the Board

The Board shall bear overall accountability for the performance of Bank of Palestine.

The Board is elected by shareholders to oversee and guide management with the ultimate goal of increasing long-term shareholder value for the bank, while taking into account the interest of its stakeholders.

The following functions are the common recurring activities of the Board in carrying out its guidance and oversight responsibility.

• Reviewing, approving, and monitoring BOP’s long-term strategic objectives and business plans of the executive management.

• Monitoring the overall performance of the Bank and progress towards its strategic objectives.

• Assessing the major risks facing the bank’s executive management and the steps taken by management to monitor and control such risks.

• Setting the level of ‘Risk Appetite’ of the Bank and ensuring there is a culture of risk management through the organization.

• Overseeing the integrity of the financial statements, ensuring compliance with legal and regulatory requirements, the performance, qualifications, and independence of the external auditor, and the performance of the internal audit function.

• Reviewing and approving major business transactions, including significant credit decisions, capital allocations and expenditures, in line with the approved chart of authorities.

• Overseeing investment and financing activities of the bank and making major investment and financing decisions.

• Overseeing and approving the human resource policies, and framework and Corporate Governance of the Bank.

• Selecting and recommending Director Nominees for election by Shareholders.

• Selecting, developing, and evaluating potential candidates for senior executive officer positions and overseeing the development of senior executive officer succession plans.

• Determining remuneration policies for board of directors and senior executives.

• Evaluating the overall performance and effectiveness of the Board and its members and taking corrective actions as needed.

• Overseeing the bank’s corporate governance framework and ensuring compliance with agreed policies and provisions.

• Ensuring proper shareholder relations are maintained, shareholder rights are protected, and shareholder meetings are conducted in accordance with applicable laws and regulations.

• Ensuring stakeholder interests are considered and the bank conducts its business in a socially responsible manner to the extent practical.

Board Committees

Committee Members:

  • Dr. Hani Nigim - Chairman of the Committee
  • Mr. Mohammed Nafez Hirbawi
  • Mrs. Lana Abu Hijleh

The role of the Committee is to assist the board in overseeing the bank's financial controls with particular emphasis on:

(a) The integrity of internal controls and financial reporting.

(b) The qualification and independence of the bank's external auditor.

(c) The performance of the bank's internal audit and compliance functions and of its external auditor. In order to fulfill its role, the Committee shall have the following authorities and responsibilities:

• Review Internal Control systems of the bank.

• Reviewing the reports of the Inspection and Audit department, internal auditor, and compliance control department including financial and non-financial issues, remedial procedures and means of controlling the risks faced by the bank.

• Reviewing accuracy of financial statements provided to the board, shareholders and other users.

• Reviewing the bank’s commitment to laws and regulations of the PMA, the Board, and other regulations applicable in Palestine.

• Reviewing the external auditing plan and verifying that the plan includes all activities of the bank.

• Ensuing the accuracy and integrity of accounting and compliance with laws and regulations applicable to the activities of the bank.

• Developing disclosure and transparency standards and submitting them to the board for approval.

• Reviewing notes mentioned in the PMA’s reports and offering recommendations to Board on the appropriate remedial steps.

• Coordinating with Risks Management Committee to present the financial statements of the bank.

• Studying the financial system employed at the bank and making recommendations to improve it and guarantee that they fairly represent the situation and that no false data are reported.

• Putting in place a system that allows employees to report secretly on fears of potential violations and in a manner that makes it possible to investigate them independently and follow them up without supervisors penalizing them or colleagues looking down at them. The audit committee shall monitor the implementation of these procedures.

• Acting as a liaison between the board of directors and the external auditor, the board of directors and the internal auditor and between the internal and external auditors.

• Following up on the bank’s adherence to its internal code of professional conduct and adherence to external laws and regulations.

• Informing the board of directors of issues that require its immediate intervention and offering recommendations on the appropriate remedial steps.

• The audit committee shall submit reports to the board of directors on all matters that fall within its scope of work thereby enabling it to carry out its function of monitoring the management of the bank and submitting to shareholders and investors factual and documented information.

Committee Members:

  • Mr. John Khoury - Chairman of the Committee
  • Mr. Mohammed Nafez Hirbawi
  • Mrs. Lana Abu Hijleh

The role of the Committee is to assist the Board of Directors of BOP in fulfilling its oversight responsibilities with regard to:

(a) The risks inherent in the business of the company and the control processes with respect to such risks.

(b) The assessment and review of credit, market, and operational risks.

(c) The risk management activities of the bank and its subsidiaries.

In order to fulfil its role, the Committee shall have the following authorities and responsibilities:

• Approve the overall risk management policies and ensure there is an effective Enterprise Risk Management framework in place to proactively identify, measure, mitigate, and monitor all types of risk in the bank and to promote continuous dialogue about risk management throughout the organization (i.e., promoting a ‘Risk Culture’).

• Determine the overall ‘Risk Appetite’ of the bank and ensure the overall risk profile and tolerances are in line with the agreed appetite.

• Obtain assurance from the executive management and internal auditing that the risk processes and systems are operating effectively, with sound controls, and compliance with approved policies.

• Obtain assurance that the bank is complying with applicable laws and regulations regarding all risk management policies and procedures.

• Review the bank’s capital adequacy and provisions to ensure they are in compliance with regulatory guidelines and in line with the risk profile of the bank.

• Review reports on a quarterly basis or on a needs basis from the executive management on the status of the bank’s risk portfolio, highlighting key risk areas, trends, forecasts, and management actions being taken to address particular issues.

• Review significant risk exposures and the steps management has taken to monitor, control, and report all types of risk, including, credit, market, operational, fiduciary, liquidity, compliance, reputational, strategic, and all other types of internal/external risk impacting the bank.

• Provide guidance to management, as needed, to help them improve their risk management practices and/or mitigate particular risks, including the existence of qualified personnel at the management level to carry out risk management activities effectively.

• Report to the board on a regular basis of the status of the bank’s risk portfolio and immediately inform the board of any substantial changes to the bank risk portfolio status.

• Review the appointment, responsibilities, performance, and replacement of the Chief Risk Officer and monitor effectiveness of the Risk Management departments in general.

• Support the Audit Committee’s efforts (with the help of Credit Risk Officer) to monitor and evaluate, as mandated by the PMA, “guidelines and policies to govern the process by which risk assessment and management is undertaken.”

Committee Members:

  • Mr. Maher J. Farah - Chairman of the Committee
  • Mr. Hashim Shawa
  • Mr. Faysal Ghazi Shawa
  • Mr. Abdullah Al-Ghanim
  • Mr. Tareq Aggad

The role of the Committee is to assist the Board of Directors of BOP in fulfilling its oversight responsibilities for the investment assets of BOP as:

(a) The Committee is responsible for formulating the overall investment policies of BOP, subject to approval by the Board.

(b) Establishing investment guidelines in furtherance of those policies.

In order to fulfil its role, the Committee shall have the following authorities and responsibilities:

• Viewing all reports and studies related to the current bank investments status, conditions of local and international financial markets and all the data that enable the committee to perform its duties in a professional and efficient manner.

• Periodically informing the board of the bank’s investment portfolios status, and informing it, without delay, of any substantial changes to such investments status.

• Developing, reviewing and periodically updating the bank investment policy, and ensuring that it complies with the effective laws and regulations, and with the banking standards; the committee shall then present its output to the board for approval. Such policy must clearly specify a mechanism for taking investment decision, and ceilings on powers and the different positions.

• Approving particular investment transactions that are beyond the management’s authorities and submitting to the full board recommendations on particular investment decisions that is beyond the committee powers.

• Ensuring that the executive management adheres to implementing the investment decisions, and the ceilings and powers determined by the committee.

Committee Members:

  • Mr. Faysal Ghazi Shawa - Chairman of the Committee
  • Mr. Hashim Shawa
  • Mr. Maher J. Farah
  • Mr. Tareq Aggad

The role of the Committee is to assist the Board of Directors of BOP in fulfilling its oversight responsibilities with regard to:

  • Reviewing all credit reports and studies on a regular basis.
  • Informing the board about the quality and the size of the credit portfolio. The committee is responsible to monitor watch list loans, non-performing loans and the amount of provisions taken to face any future losses. Any material changes to the quality of the credit portfolio will be immediately sent to the Board.
  • Developing the credit policies, collaterals, credit limits to credit committees that will be consistent with the current laws, PMA instructions, Risk Committee recommendations to be approved at the end by the board. The committee is  responsible to regularly review and update credit policies according to the changes in the economic and political conditions.
  • Approve the marketing plan for credit products.
  • Study and review credit applications for approval that exceed the executive credit committees limits after the recommendations of all executive credit committees
  • Monitor non-performing loans and developing plans to reduce them. Providing assurance to the board that Provisions for doubtful debt is sufficient and meeting PMA requirements.

Committee Members:

  • Mr. Tareq Shaka - Chairman of the Committee
  • Dr. Hani Nigim
  • Mrs. Lana Abu Hijleh

 

The role of the Committee is to oversee

(a) The bank’s corporate governance framework.

(b) Director nomination process, director and executive remuneration policies, board and executive evaluation processes.

(c) Succession planning, board education, and the bank’s human resources policies.

In order to fulfil its role, the Committee shall have the following authorities and responsibilities:

• Review and approve major HR policies to ensure they are fair, competitive, complete, and in the best long-term interest of BOP.

• Help oversee major changes and improvements in the HR function to ensure it is effectively serving as a strategic partner in the organization;

• Develop for the board’s approval and annually review the chart of authorities and delegation of authorities to management;

• Consider possible conflicts of interests of directors and any related party transactions of directors and make relevant proposals to the board in accordance with the BOP’s corporate governance code;

• Review any change in status (including fulfilment of independence requirements)and professional affiliation of current directors and make relevant proposals to the board in accordance with the company’s corporate governance code;

• Oversee the development and implementation of a board induction process for new directors and a programme of continuing director development as needed;

• Review corporate governance policies and practices throughout the company and make relevant proposals to the board to improve their effectiveness.