Corporate Governance Statement

The Board of Directors (the “Board” or “Directors”) of APS Bank plc (the “Bank”) is committed to uphold the highest standards of corporate governance and to promote the Bank’s culture, values and behaviours. The Board sets the Group’s strategy and objectives, and oversees and monitors internal controls, risk management, principal risks, governance and viability of the company. The Annual Report includes the extent to which the Bank has adopted the ‘Corporate Governance Guidelines for Public Interest Companies’ (the “Guidelines”) as well as the effective measures taken to ensure compliance with such Guidelines, and this in the interest of portraying to the stakeholders the commitment to excellence in corporate governance.

 

Guideline 1: The Board

The Board promotes the well-being of the Bank and is responsible for its long-term success by upholding strong principles of general governance, and ensuring its proper administration, management and the general supervision of its affairs. The Board is committed to continually improving its practices so that it can effectively discharge its role and responsibilities as the Bank’s needs evolve.

An overview of the Board’s composition and evolving key governance practices follows.

During the year under review, the Board continued to embrace the principles enunciated in the Board Charter, which serves as a guidance to the Board and its Committees in the exercise of their responsibilities. The Charter elaborates on the duties of the Directors and sets out in detail the key governance principles adopted by the Bank and the manner in which the Directors are expected to execute their powers and responsibilities, covering such areas as independence, conflicts of interest and conduct and performance at meetings.

As at the date of this Statement, the Board is composed of nine non-executive Directors, including the Chairman. Biographies for each Director and membership of the various Board Committees can be found on pages IV to V. Details of their other significant appointments are also set out. The Board seeks to have an appropriate mix of skills, expertise and experience to enable it to deal with current and emerging opportunities and issues and to effectively review the performance of management. In the process, due regard is given to diversity in its widest sense.

The Board delegates specific responsibilities to Committees, which are explained in more detail hereunder.

The Board is assisted by a full-time Company Secretary which position, following a recent review of the Bank organogram, is now separate and independent from other management bodies, covering also Corporate Governance and Investor Relations. All Directors have access to the Company Secretary. The Company Secretary works closely with the Chairman to ensure effective functioning of the Board and appropriate information flows between the Board and its Committees. The Company Secretary also facilitates Board induction and Directors’ professional development.

Guideline 2: The Chairman of the Board

The Chairman is appointed from amongst the Directors, by the largest shareholder holding at least thirty-three per cent of the ordinary issued share capital of the Bank. The Chairman is responsible for leading the Board and setting its agenda for meetings, ensuring that the Directors receive precise, timely and objective information so that they can properly execute their duties, while encouraging their active engagement at meetings and on issues of a complex or contentious nature. The Chairman holds a non-executive independent function. His role is separate and distinct from that of the Chief Executive Officer with a clear division of responsibilities.

The Chief Executive Officer (CEO) is responsible for the running of the Bank’s business and leads the Management Team which comes together to communicate, review and agree on issues and actions of Group-wide significance, with the exception of those matters reserved for the Board or specifically delegated by the Board to its Committees. He is also responsible for the recruitment and appointment of Senior Management, after consultation with the Governance & Conduct Committee.

Guideline 3: The Directors

The Bank’s Articles of Association contain detailed provisions as to the manner of appointment and retirement of Directors. Directors hold office from the close of the Annual General Meeting at which they are appointed until the end of the subsequent General Meeting, at which they become eligible for re-election.

Each Director is expected to be an active participant in a Board that functions effectively as a whole. The Board balances longer-serving Directors, and newer Directors with fresh insights. The Directors combine broad business and commercial experience with independent and objective judgement and they provide independent challenge to the executive. All Directors hold office in a non-executive capacity while they also actively participate in Board Committees. All Board Directors have exposure to good corporate governance practices and are committed to acting ethically.

In terms of the ‘Evaluation Policy and Procedure’, at least once a year an evaluation is carried out to assess the Board’s performance and that of its individual Directors in accordance with best practice and guidelines issued by the European Banking Authority. The evaluation of a Director’s performance is an integral part of the process for recommending or otherwise a Director’s continuation in office. In 2019 an External Evaluation of the Director’s individual and collective suitability was undertaken. Independent specialist overseas evaluators carried out one-to-one meetings with each Director over a span of two days. The evaluation considered the knowledge, skills and experience of Directors, the composition of the Board, Board Committee Meetings, remuneration and succession planning. The results were presented at the following Board Meeting and a report circulated to the Directors. The Directors considered this exercise - a first for the Bank - to have been a very useful experience. A set of recommendations were devised which form the basis of the Director’s Training Plan for 2020 and the Governance & Conduct Committee’s Work Plan for 2020.

Guidelines 4 and 5: The responsibilities of the Board and Board meetings

The Board conducts itself in a manner which ensures effective execution of its functions to set strategy and formulate policy as well as to exercise stewardship and oversight.

The Board meets regularly, typically on the last Thursday of the month and meetings are preceded by a more casual, offsite gathering on the eve of each meeting, usually over dinner, where Directors have the opportunity to discuss the Agenda informally. In addition to scheduled meetings, additional meetings of the Board and its Committees were held on an ad hoc basis to deal with time-critical matters. During the year under review, the Board met 14 times, three meetings of which were held on an ad hoc basis. Directors are knowledgeable of their expected time commitment towards the Bank. During 2019, all meetings were attended by the large majority of Directors andthe average rate of attendance was of 89%. Where a Director is unable to attend there is the possibility to appoint the Chairman or another Director to act as alternate.

The Board approves and oversees the implementation of the Bank’s strategic objectives and sets the Bank’s risk tolerance through policy approval. Board agendas invariably include discussions and decisions on strategic matters, detailed update presentations by the Chief Executive Officer, Chief Financial Officer, Chief Risk Officer, Chief Strategy Officer and other members of the executive management team, as appropriate. Structured reporting from the Committees and Subsidiaries are a regular feature of each Board Meeting. The CEO is invited to attend all Board meetings, and other senior executives attend Board meetings throughout the year, as required, with regard to their specific area of responsibility. This provides the Board with an opportunity to engage directly with Senior Management on key issues. After each Board Meeting, minutes are drawn up by the Company Secretary and circulated to all Directors. Minutes faithfully record the attendance of Directors at said Meetings, conflicts raised, matters discussed, the considerations made and decisions taken.

In 2019, in addition to its scheduled meetings, the Board also met with the Management Team in July for the annual Business Plan Off-Site Workshop, which included particular focus on the Bank’s purpose and longterm future, agility, customer-centricity, technology and innovation. In October, the Board held a Business Plan & Budget Review Off-Site Meeting with the Management Team looking into the Bank’s main priorities for the updated 2020-2022 Plan and strategic initiatives for the same period.

During the year under review the Board also continued to strengthen its oversight of the Bank’s subsidiary, ReAPS Asset Management Limited, with additional reporting obligations implemented at Board level.

Committees

In order to provide effective oversight and leadership, the Board has established a number of Board committees with particular responsibilities. Each Committee has its own Terms of Reference, setting out the Committee’s mandate, scope and working procedure. Minutes are kept of all the business transacted in the course of Committee meetings. All Directors have access to Committee papers and Minutes, which are also tabled at Board meetings. Committee Chairs report on Committee business at the subsequent Board meetings, also through written briefs.

An infographic of the organisational structure is provided below.

 

 

BOARD COMMITTEES

 

AUDIT

  • Monitors the financial reporting process, including the audit of the annual accounts and review of any interim reporting.
  • Reviews proposed transactions by the Bank with related parties and oversees the standards / performance of the Internal Audit Unit, whilst approving and monitoring its Audit Plan.
  • Monitors the effectiveness of the internal control environment and accounting framework.
  • Reviews the external auditor’s independence, in particular the provision of additional services to the Bank, and liaises between external auditors, internal audit, the Board and Management.

 

GOVERNANCE & CONDUCT

  • Acts as first point of reference on Board governance policies and procedures, codes of conduct and conflicts of interest.
  • Oversees the structure and performance of the Bank’s Committees, whilst itself performing the function of Nomination Committee.
  • Steering the process of Directors’ evaluation, both individually and collectively as a Board.
  • Considers and approves senior executive appointments and assesses the performance of the CEO.
  • Oversees the brand, valued behaviours and reputation of the Bank, by covering the review of brand positioning, the Bank’s culture, compliance with stated values and reputational risk management.

 

RISK

  • Recommends the Bank’s risk profile and proposes the risk appetite statement for approval by the Board of Directors.
  • Periodically reviews the Bank’s risk management framework.
  • Reviews strategic decisions, including new products and markets, acquisitions, and disposals, from a risk perspective while it keeps sight of regulatory and market developments and how these can impact on the Bank’s risk appetite.
  • Approves risk policies, limits and delegations, including those of the Credit Committees.
  • Has a wide mandate for risk oversight, including credit risk, market risk, operational risk, technology / cyber risk, concentration risk, liquidity risk as well as compliance matters.
  • Considers impairment and provisioning recommendations as prepared by Management and recommends them for adoption.
  • Draws up risk reports in the financial statements and assists in the process of compilation of reports such as ICAAP, ILAAP and Recovery Plans.

 

BOARD CREDIT (BCC)

  • Reviews credit applications and approves credit limits for customers and transactions, within the parameters set by the Board in terms of the credit policy procedures.
  • Receives and reviews updates/amendments to approved facilities and approves, or delegates approval, for deviations as the case may be.
  • Considers and advises the Risk Committee on credit limits and / or any matter for approval (e.g. country, geographic, segment limits) when this is required according to the Bank’s Credit Policy.

 

TECHNOLOGY & INNOVATION

  • Oversees management with regard to IT-related risks, security and business continuity plans.
  • Intervenes with the Board to secure sponsorships and support for the main IT strategic decisions & projects.
  • Provides strategic leadership through a steady flow of innovative ideas that will serve as a catalyst for innovation at the Bank as well as monitoring IT project implementation.

 

REMUNERATION

  • Responsible for informing, advising and supporting the Board of Directors on the design, revision and implementation of the Remuneration Policy.
  • Responsible for considering specific remuneration arrangements and schemes.

 

MANAGEMENT COMMITTEES

 

ASSETS-LIABILITIES (ALCO)

  • Generally responsible for the asset liability management (‘ALM’) strategy, policy, surveying of market developments, including the Bank’s Base Rate and funding strategy.
  • Monitors interest rate, liquidity and currency risks and determines treasury strategy accordingly.
  • Focuses on liquidity management and contingency planning, determines the liquidity strategy.
  • Optimises capital allocation in terms of ALM strategy and regulatory requirements.
  • Instigates the development of new treasury (funding and lending) products and approves and monitors the Bank’s Funds Transfer Pricing (FTP) framework and its components, monitors implementation and reviews results.
  • Regularly appraises Bank performance in terms of ALM strategy.

 

EXECUTIVE (EXCO)

  • Acts as consultative body and advisor to the CEO on matters such as strategy, operations and business.
  • Reviews and debates relevant items before consideration by the Board / Board Committees and escalates key issues.
  • Focuses on the four Ps, namely Performance, Products, Projects and People, and these four broad areas describe adequately the coverage of this Committee.
  • Approves capital commitments and transactions within its delegated authority and recommends for Board approval the annual capital and revenue budgets, monitors KPIs, KRIs and financial performance on an ongoing basis.
  • Has first line of oversight of the control frameworks, receiving and considering reports of operational reports, including serious service / product complaints and / or incidents.

 

MANAGEMENT CREDIT (MCC)

  • Receives and reviews credit applications and approves credit limits for customers and transactions, within the parameters set by the Board in terms of the credit policy and procedures.
  • Refers and recommends to the BCC limit applications where these exceed its MCC limits. The Committee receives and reviews updates / amendments to approved facilities and approves, or delegates approval, for deviations as the case may be, and considers and advises the BCC on credit limits and / or any matter for approval that is within its BCC competence.

 

COMPLIANCE

  • Ensures that prescribed regulations, rules, policies, guidelines and procedures are being followed and also anticipated in advance.
  • Acts as a decision point for business acceptance, on-boarding and dismissal of customers, in line with the Bank’s on-boarding and exit policies.
  • It ensures that the Bank’s Compliance function takes a holistic as well as balanced view of compliance risk.
  • The Compliance Committee reports to the Risk Committee.

 

MANAGEMENT (MANCO)

  • Reports into the EXCO, with which it also works very closely especially because all members are common. Meetings of the Managament Committee are characterised by their regular frequency, tour-de-table style and informality, which serves to instill a high degree of communication and collaboration between the members.
  • The Management Committee brings together the senior levels of management, essentially Chief Officers, Heads and Senior Managers, in a weekly forum where all members share updates about their respective areas of responsibility, work plans as well as matters or items of significant interest.

 

 

 

Guideline 6: Information and professional development

The high standards of continuing professional development embedded in the Bank’s culture run across the entire organisation and include the Board.

The Directors have access to a wide range of briefing and training sessions and other professional development opportunities. Internal and online training relevant to the business of the Bank is also provided. Directors undertake the training they consider necessary to assist them in carrying out their duties and responsibilities as Directors. Directors may also request individual in-depth briefings from time to time on areas of particular interest. Directors are also invited to visit key operational facilities. During 2019, bespoke training was arranged for the Directors on a range of subjects to enhance their knowledge, including, EU regulations pertaining to significant institutions, the future of banking, open banking, cyber security and correspondent banking.

Upon appointment, all Directors are offered familiarisation of the Bank by the Chairman and CEO, co-ordinated by the Company Secretary and tailored to suit the requirements of the individual concerned. This includes providing an overview of the Bank’s Memorandum and Articles of Association, Board Charter and key policies and practices relevant to the Board. The induction programme also includes briefings from the various members of the Management team.

Access to the services and resources of the Bank, including, where necessary, independent professional advice at the Bank’s expense, are also available.

Guideline 7: Relations with shareholders and other stakeholders

In 2019, the Board dedicated time to engage with its shareholders and other stakeholders, as part of its commitment to promote effective channels of communication. This ensures a flow of communication about the Bank’s strategy and updates on performance.

The table below identifies the Bank’s key stakeholders and how both the Bank and the Board engaged with them throughout 2019 (more information is available in the Annual Report). The aim of these engagements is to nurture relationships with stakeholders which in turn helps the Board as it strengthens the business and helps to deliver a positive result for all stakeholder groups.

 

KEY STAKEHOLDERS & REASON FOR ENGAGEMENT AND KEY PRIORITIES FOR 2019

SHAREHOLDERS:

Meetings with shareholders are conducted in a structured manner, with meetings held separately with the main shareholders, namely AROM Holdings Limited (Archdiocese of Malta), the Diocese of Gozo and the Metropolitan Chapter, as well as with their financial advisers. Collective shareholders’ meetings were also held, including the Bank’s Annual General Meeting.

BUSINESS CLIENTS, POTENTIAL NEW CLIENTS, FINANCIAL ADVISERS:

The Bank engages with business clients, potential new clients and financial advisers to ensure strong relationships are maintained allowing its vision, business model and modus operandi to be communicated, with emphasis on strategy and delivery.

EMPLOYEES:

Employee engagement is measured through the PEAKON platform introduced in 2019. An overview of key findings from the first PEAKON survey was presented to the Board and improvement areas identified. This led to a number of action points developed to address the priority issues. Meetings with employees are a constant feature of the Management’s agenda, from weekly Unit / Departmental meetings to Townhalls, where all staff are invited. These further promote the full engagement of employees with the Bank scoping both short term targets and longer term strategic goals.

RELEVANT INFORMATION PROVIDED TO STAKEHOLDERS:

1. FINANCIAL REPORTING

Annual financial reporting takes place after each Annual General Meeting to shareholders and stakeholders who are invited for the Presentation of the Financial Results. This presentation

is one particular opportunity where the stakeholders are also invited to receive a detailed appraisal of the Bank’s performance and outlook for the current year. As from 2019, the Bank also started publishing unaudited half-yearly financial results.

2. PRESS RELEASES

The Bank issues Press Releases on a regular basis in order to inform its clients and other stakeholders about developments and news. Vast use of social media has helped to increase the reach and speed of communication.

3. WEBSITE

The Bank’s website (www.apsbank.com.mt) is the platform through which interested parties may have access to Bank information. The Annual Report, information on the Bank and its Directors and press releases are also accessible from the website.

 

Guideline 8: Conflicts of interest

Each Director is expected to act to the highest standards of ethical behaviour and fiduciary duties. The Directors are aware of their obligation to avoid conflicts of interest and their responsibility to act in the interest of the Bank and its shareholders as a whole irrespective of which shareholder nominated him / her to the Board.

The Board Charter contains specific sections dealing with conflicts of interest, starting with the general precept that Directors should take all reasonable steps to avoid such situations. However, from time to time, actual or potential conflicts of interest may arise in which case it needs to be ensured that these are managed properly by the Board and the interested Director, as also provided in the amended Conflicts of Interest Policy. Directors are required to inform the Board of any matter that may result or has already resulted in a conflict of interest. A record of such declaration is entered into the Bank’s minute book and the said Director is precluded from voting in any resolution concerning a matter in respect of which he / she has declared a direct or indirect interest or asked to absent himself / herself when the conflicting matter is discussed.

Guideline 9: Corporate social responsibility

The Board of Directors encourages that sound principles of corporate social responsibility are adhered to and integrated into the core business ethos of the Bank and embedded into the Bank’s day-to-day culture and operations. As a result, the Bank is a prominent supporter of various CSR initiatives at both national and community level aimed at contributing to economic, societal, environmental and cultural development. Through its endorsement of such programmes, the Bank promotes positive social change as well as a sense of common good. During 2019, the Bank scaled up its CSR programme and details of the main activities are elaborated upon in a dedicated part of the Annual Report. In particular, the Bank organised the first ever Malta Sustainability Forum on the 14 November 2019 attracting 350 delegates and 20 local and international speakers. The Forum was a unique opportunity to bring the topic of sustainability at the forefront of the agenda of the Maltese Islands, raise awareness, facilitate exchange between the different stakeholders and encourage the “Thinking Citizen” to get into action and make conscious decisions towards a more sustainable life.

 

March 2020

Copyright © 2017 APS Bank plc
APS Bank plc is regulated by the Malta Financial Services Authority as a Credit Institution under the Banking Act 1994 and to carry out Investment Services activities under the Investment Services Act 1994. The Bank is also registered as a Tied Insurance Intermediary under the Insurance Distribution Act 2018.