SICO’s Corporate Governance framework comprises Board and Committee Charters; Code of Business Conduct; operational policies and procedures; internal controls and risk management systems; compliance procedures; delegated authority limits (DAL); internal and external audit; effective communications and transparent disclosure; and measurement and accountability.
Code of Business Conduct
SICO conducts itself in accordance with the highest standards of ethical behaviour. A Code of Conduct for SICO Staff has been developed to govern the personal and professional conduct of all employees. The Code of Conduct outlines areas of conflict of interest; confidentiality; fair and equitable treatment; ethics and acting responsibly, honestly, fairly and ethically; and managing customer complaints. A Whistleblowing Policy and Procedures is included within the Code of Conduct for SICO Staff.
Compliance and Anti-Money Laundering
As a licensed conventional wholesale bank and listed company, SICO has in place comprehensive policies and procedures to ensure full compliance with the relevant rules and regulations of the Central Bank of Bahrain and the Bahrain Bourse. The Bank has an independent Compliance Unit in keeping with Basel and CBB guidelines. The Compliance Unit acts as the coordinator for all matters relating to regulatory reporting and other requirements.
Anti-money laundering measures are also an important area for the Compliance Unit, with a designated Money Laundering Reporting Officer (MLRO) and Deputy MLRO. The Bank has documented anti-money laundering and combating the of terrorism procedures in conformity to the regulatory requirements in the Kingdom of Bahrain. SICO has implemented a risk-based automated transaction monitoring system, which further enhances the Bank’s anti-money laundering measures in line with the regulations of the CBB.
SICO conducts all communications with its stakeholders in a professional, honest, transparent, understandable, accurate, and timely manner. Main communication channels include an annual report, corporate website, and regular announcements in the appropriate local media. To ensure disclosure of relevant information to all shareholders on a timely basis, the Bank publishes its annual report and the previous ten years’ financial statements on the corporate website.
Remuneration of Board Members and Senior Management, and Fees Paid to External Auditors
The remuneration paid to Board members and senior management personnel are disclosed in Note 26 to the Consolidated Financial Statements. The information on fees paid to External Auditors for audit and other services will be available to the CBB and shareholders upon request, provided such disclosure does not impact the interest of Bank.
Compliance with the CBB’s High Level Controls Module
Every conventional bank licensee is expected to comply with rules and guidance mentioned in the High Level Control Module issued by the CBB under Rulebook Volume 1. Any non-compliance with the HC Module must be explained by disclosures in the annual report to shareholders and the CBB.
SICO is in compliance with HC Module except for the following:
HC-1.4.6 & HC-1.4.8, which stipulate that the chairman of the Board of Directors should be an independent director, SICO Chairman Shaikh Abdulla bin Khalifa Al Khalifa is considered an Executive Director as he represents SICO’s major shareholder. However, this does not compromise the high standards of corporate governance as the Bank follows strict policies to manage conflict of interest in Board decisions.
HC-1.8.2, HC-4.2.2 and HC-5.3.2, states that the Corporate Governance Committee, Nomination Committee and Remuneration Committee must include only 3 independent directors. The Chairman of the Nomination, Remuneration and Corporate Governance Committee is an independent director; however, the remaining two members are executive directors. The bank is of the opinion that this does not compromise the high standards of corporate governance as the bank has implemented measures to manage potential conflict of interest.
HC-6.5.49, stipulates that every 5 years, the audit committee must commission an independent external quality assurance review of the internal audit function. Currently, SICO plans for the same before the end of 2019.
HC-6.6.4 requires all bank licensees to appoint a Head of Risk Management function with direct reporting to the Board and administrative reporting to the CEO and HC 6.6.13 requires this appointment to be approved by the Bank’s Audit Committee. As the Bank did not have a designated Head of Risk Management, we are currently in the process of appointing the same with the approval of the CBB.
HC-6.6.14 & HC-6.6.15 requires all bank licensees to establish a Board risk committee composed of at least 3 independent members. During 2018, SICO did not have a separate Board risk committee and the risk management department was directly reporting to the full Board. The topic was discussed at the NRCG and Board meeting held in November 2018, and the Bank’s Board has decided to merge the risk committee with the Board Audit Committee.
HC-6.6.16 and HC-6.6.17 requires that the Board of all bank licensees must have a risk appetite statement document which establishes the individual and aggregate level and types of risk that the bank is willing to assume in order to achieve its business objectives. During 2018, the Bank did not have a formal risk appetite document however the Bank has in place various risk policies and investment guidelines which define the risk appetite of the Board. The Bank is in the process of formulating a risk appetite statement as required under the CBB rules.
HC-6.6.33 and HC-6.6.34 requires that the Bank’s risk management framework is subject to independent review by a third party other than external auditor when there are material changes in the rulebook or in the business conducted by the Bank. Given the material changes in the rulebook for risk management requirements during 2018, the Bank is required to have an independent review of its risk management framework. The Bank shall conduct an independent review by the consultant in due course.