Apart from standard and regular agenda items, the key activities of the Board committees in 2016 are set out below, with a focus on the high-priority items. The Committee memberships in the section that follows are as at 31 December 2016.
|Directors’ Affairs Committee|
|Wendy Lucas-Bull (Chairman)||Attendees:|
|Colin Beggs||David Hodnett (until August 2016)|
|Mohamed Husain||Jason Quinn (from September 2016)|
|Paul O’Flaherty (from October 2016)||Maria Ramos|
- our Group governance structure, focusing on non-executive director succession planning and appropriate skill sets;
- membership of the Group and subsidiary boards and committees to establish and maintain optimal size, composition, independence, tenure, skills, gender and diversity;
- matters of reputational risk including the South African Competition Commission regarding breaches in Competition Law relating to foreign exchange trading of the South African rand and the South African Public Protector’s provisional report relating to the Bankorp matter;
- matters arising from inappropriate conduct and other control failures, and the actions taken by management in response;
- matters pertaining to regulatory engagement and regulatory commitments;
- progress on the Board/corporate governance objectives;
- board and committee attendance;
- findings and actions from the Board and Board committee evaluation (including a peer review);
- training for the main boards, committees and the subsidiary boards;
- executive director succession plans;
- the repositioning of the Actuarial Committee and the introduction of the Audit, Risk and Compliance Committee at the level of the Absa Financial Services Board; and
- the governance arrangements relating to the separation from Barclays PLC.
- the appointment of the new chairman to Barclays Bank Kenya;
- the appointment of trustees for the Pension Fund Trust and Absa Foundation Trust;
- fees for non-executives on subsidiary boards; and
- the prescribed officers for disclosure purposes.
Recommended to the Board:
- the appointment of new independent directors Daisy Naidoo and René van Wyk;
- the appointments of Jason Quinn as the Financial Director and Peter Matlare as the Deputy Chief Executive Officer for Rest of Africa Banking;
- the appointment of Paul O’Flaherty as chairman of Group Remuneration Committee, Yolanda Cuba as chairman of Board Finance Committee and Jason Quinn as chairman of the Models Committee;
- board committee membership changes;
- competence of the Group Company Secretary;
- its committee terms of reference and related role profiles;
- the securities dealing code; and
- 2016/2017 Board fees, which were approved by shareholders at the 2016 annual general meeting.
The Committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference and, having regard to the Board evaluation, is satisfied with the performance of the Board and its committees. The Committee’s focus for 2017 includes regulator, investor and broader stakeholder relationships, and the continued strengthening of the skill sets and diversity of the major boards within the Group.
|Group Audit and Compliance Committee|
|Colin Beggs (Chairman)||Mandatory Invitees:||Attendees:|
|Alex Darko||Ashok Vaswani||Chief Internal Auditor|
|Daisy Naidoo (from May 2016)||David Hodnett (until August 2016)||Chief Risk and Controls Officer|
|Mohamed Husain||Jason Quinn (from September 2016)||Chief Risk Officer|
|Paul O’Flaherty (from February 2016)||Maria Ramos||Head of Compliance|
|Trevor Munday (until May 2016)||Wendy Lucas-Bull||Head of Operational Risk|
- the Group’s progress on the preparation for IFRS 9 (accounting for financial instruments), including addressing data requirements, retaining skilled resources and assessing macroeconomic factors in advance of the parallel run in 2017 and implementation in 2018;
- the financial implications of the separation arrangement with Barclays PLC;
- the creation of a centralised fraud risk management function with strategic and operational capabilities, as well as the use of data analytics to improve collaboration between cyber, information and fraud risk;
- progress on financial focus areas including the alignment of the annual financial reporting processes across Africa and auditor transition to KPMG in 2017;
- progress on compliance with the National Credit Regulator’s affordability regulations;
- the stability in the payments and settlements area; and
- the Group’s tax rate and tax philosophy.
- the Group’s control environment, including the process of separation from Barclays PLC;
- impairments in credit portfolios, given the evolving macroeconomic environment;
- progress against the six-monthly internal audit plan, the resourcing of the function, and audit outcomes;
- the outcomes of regulatory engagements and the role of compliance in combined assurance coverage, the resourcing of the function and progress against their six-monthly compliance plans; and
- the ongoing migration of the Group’s systems to a dedicated data centre in South Africa, and projects relating to in-country data centre requirements across the Rest of Africa.
- the fit and proper status of the outgoing and incoming Financial Director and the Finance, Internal Audit and Compliance functions;
- the Group’s anti-money laundering policy;
- management’s assessment of the performance and independence of the External Auditors for the 2015 reporting period;
- the audit fees and fees for non-audit services for 2016; and
- the incentive pool in the context of financial performance, as recommended by the Group Remuneration Committee.
Recommended to the Board:
- the full-year and interim financial statements;
- dividends to shareholders;
- investment valuations;
- solvency and liquidity of the Group and of Absa Bank on a quarterly basis; and
- the Group and Absa Bank as a going concern for the twelve months following year end.
The Committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference and remains satisfied with the overall control environment, including those aspects supporting the financial statements for 2016, as confirmed by internal and external audit. In 2017, the Committee will continue monitoring further improvements in identified areas including cybercrime, financial crime and fraud.
View the full Group Audit and Compliance Committee statement within our consolidated and separate financial statements.
|Group Risk and Capital Management Committee|
|Trevor Munday (Chairman)||Attendees:|
|Colin Beggs||Chief Internal Auditor|
|David Hodnett (until August 2016)||Chief Risk Officer|
|Jason Quinn (from September 2016)||Head of Compliance|
|Maria Ramos||Group Treasurer|
|Mark Merson||External auditors|
|Paul O’Flaherty (from February 2016)|
- the risk implications of the separation from Barclays PLC relating to technology and brand;
- the transitional outsourced arrangements with Barclays PLC in light of its sell-down;
- the corporate insurance coverage which was previously brokered through Barclays PLC;
- the Group’s strategic perspective of shadow banking, the extent of our involvement and the potential impact thereof;
- management actions when risk appetite limits are breached;
- the impact of recommended dividends on the Group capital and liquidity position;
- market development of total loss-absorbing capacity for globally systemically important banks;
- cyber risk updates, issues and developments;
- updates on business continuity management metrics and business programmes;
- the embedment of the risk data aggregation and reporting framework for Basel Committee on Banking Supervision (BCBS) 239;
- legal risk updates and certain forensic investigations in the Group;
- the structural hedge programme in place for a portion of Absa Bank’s liabilities;
- stress testing for the integrated planning (budgeting) process for 2017; and
- the recent developments with regards to the Basel III net stable funding ratio.
- the risk profile report dealing with (i) the economic environment; (ii) key risk issues and related lead and lag indicators; (iii) risk appetite and utilisation; (iv) all the principal risk categories; and (v) legal risk;
- current and projected Group capital and liquidity levels, and supported management’s initiatives to optimise capital, risk-weighted assets and liquidity; and
- feedback on model risk and related projects.
- the results of certain annual stress testing required for submission to the South African Reserve Bank;
- the risk and capital management disclosures for the risk management reports, integrated report and the financial results booklets;
- the outsourced arrangements with third parties including the implementation aspects of using cloud technology supported by the Information Technology Committee; and
- the Group’s (i) contingency funding plan; (ii) capital risk and liquidity risk frameworks and policies; (iii) liquidity risk appetite; and (iv) market risk frameworks.
Recommended to the Board:
- the annual review of the enterprise risk management framework;
- the additional capitalisation of Absa Bank for preference share funding transactions;
- the appropriation of profits for Barclays Africa and Absa Bank for regulatory purposes;
- management’s annual internal capital adequacy assessment process (ICAAP) report for submission to the South African Reserve Bank;
- the updated recovery plan for submission to the South African Reserve Bank;
- taking up a collateral liquidity facility from the South African Reserve Bank from 2017 to meet Basel III liquidity requirements;
- the issuance of Tier 2 capital (subordinated debt) at Group level under the domestic medium-term notes (DMTN) programme for investment in Absa Bank;
- medium-term risk review and stress testing results, including management’s assessment of risk appetite and financial volatility for 2017;
- medium-term capital plans (2017 – 2021), capital target ranges (2017), leverage ratio target (2017) and the economic capital target coverage ratio (2017) after taking into account the capital plan assumptions including dividends, cost of capital, regulatory constraints, stress scenarios, Basel III amendments and peer analysis;
- medium-term funding plan (2017 – 2021); and
- the Group’s and Absa Bank’s cost of equity 2017.
The Committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference, and remains comfortable with the Group’s levels of risk, capital and liquidity. The Committee’s 2017 focus areas include the current and projected levels of capital of all regulated entities within the Group considering Basel III and the European Union’s Capital Requirement Directive IV; stress testing in the context of changing economic conditions; further embedding cybercrime mitigation processes and the execution of our separation from Barclays PLC.
|Group Remuneration Committee|
|Mohamed Husain (Chairman) (until September 2016)||Attendees:|
|Paul O’Flaherty (Chairman) (from October 2016)||Maria Ramos|
|Alex Darko||Chief Executive: Human Resources|
|Mohamed Husain||Head of Reward|
2016/2017 remuneration structure, policy, governance and philosophy including:
- the proposed incentive funding approach/methodology with a focus on the executive team; and
- updates on role-based pay, material risk takers and the European Banking Authority and Prudential Regulatory Authority guidelines and statements on compensation;
- the Group Chairman’s performance review of the Chief Executive Officer, and the Chief Executive Officer’s performance reviews of our two Deputy Chief Executive Officers, Financial Director and other Executive Committee members;
- proposals for senior hires and terminations, providing approvals as per the Committee’s mandate;
- updates from the management’s Remuneration Review Panel on risk, compliance and conduct-related incidents, and the resulting impact on remuneration;
- updates on pensions and benefits across the Group;
- regular reports from risk and finance and considered the implications for remuneration related decisions;
- reports on subsidiary entities pertaining to pay and benefits;
- peer local and international trends in disclosure of executive pay;
- the optimal way in which to disclose pay and links to performance; and
- reports from external advisers on trends in compensation practices, impact of King IV, and industry approaches.
Responded to investor feedback on:
- our remuneration disclosures by further enhancing our remuneration report in line with best practice; and
- the absence of significant long-term incentives and the related performance conditions. We intend to grant forfeitable performance shares under our Long-Term Incentive Plan with a mix of financial and non-financial performance targets.
- vesting outcomes for the 2013 Long-Term Incentive Plan awards after considering the achievement of the performance targets as at 31 December 2015, for vesting in October 2016;
- compensation for all Executive Committee members;
- the salary mandates for bargaining unit and non-bargaining unit employees;
- the remuneration report for inclusion in the 2016 Integrated Report; and
- following consideration of proposals, lock-in awards for select senior management in response to the Barclays PLC sell-down.
Recommended to the Board:
- proposed 2016 incentive pools, projected 2016 total compensation costs and compensation ratios; and
- final 2015 incentive pools; and
- the compensation for the Chief Executive Officer and other executive directors.
The Committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference and with the status of remuneration and incentives in the Group. Considerable time was spent on refining the link between pay and performance and, together with the Ad hoc committee, considering the separation from Barclays PLC and, how best to retain key senior management during this process. The Committee’s focus in 2017 will be on (i) introducing appropriate performance conditions linked to our Long-Term Incentive Plan to ensure alignment with our shareholders’ interests; and (ii) adopting King IV principles relating to remuneration.
|Social and Ethics Committee|
|Mohamed Husain (Chairman)||Attendees:|
|Francis Okomo-Okello||David Hodnett|
|Maria Ramos||Peter Matlare (a member until his appointment as Executive Director)|
|Wendy Lucas-Bull||Chief Executive: Human Resources|
|Chief Executive: Marketing and Corporate Relations|
|Group General Counsel|
- regular updates on conduct and reputation risks, as well as regulatory and general developments that could influence conduct risk management;
- key organisational health indicators such as ethics management, talent attraction and acquisition, employee turnover and wellness, human resource-related process improvements, learning and development, employee relations, diversity and inclusion;
- regular updates on leadership, as well as talent management, disability initiatives, and learnership programmes;
- the outcomes of the employee opinion and culture surveys;
- feedback on customer complaints and other satisfaction metrics;
- updates on advertising approach, sponsorship portfolio and related spend;
- updates on the Group’s environmental impact, including energy and water usage, carbon emissions, construction waste and confidential waste;
- the promotion of equality and our BEE scorecard, in the context of the Employment Equity Act, the Broad-Based Black Economic Empowerment Act, and related regulatory landscape;
- the mapping of sustainability frameworks (including the principles set out in the United Nations Global Compact and the Organisation for Economic Co-operation and Development recommendations regarding corruption), and agreed on the approach for participation in environmental, social and governance frameworks and related reporting;
- the progress of the execution of the Shared Growth plan, which focuses on citizenship initiatives and spend, education and skills, community enterprise development and financial inclusion; and
- the outcome of assurance activities performed on conduct and ethics by Internal Audit and Compliance.
- the status of premises’ health and safety and remediation thereof, and the assurance-related activities;
- initiatives to improve service delivery by the human resources function; and
- customer and client engagement and retention, complaints trends and root cause analysis in specific business areas together with activities in place to address these matters.
The Committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference and particularly with the embedment of conduct risk management within the Group, the status of the organisational health indicators, and the impact on our culture and Values. The Committee’s focus areas for 2017 remain conduct risk, stakeholder engagement, Shared Growth, labour and employment matters, employee wellness, health and safety, as well as diversity and inclusion. Changes as a result of King IV will also be incorporated in the work of the Committee.
|Information Technology Committee|
|Patrick Clackson (Chairman)||Attendees:|
|Alex Darko||Chief Information Officer|
|Ashok Vaswani||Chief Operating Officer|
|David Hodnett||Chief Risk Officer|
|Jason Quinn (from September 2016)|
- the systems and technology estate of the Group;
- the anticipated impacts arising from Barclays PLC sell-down;
- management’s actions to improve stability of the Group’s payments systems and core infrastructure and platforms in operations outside South Africa; and
- execution progress of our new digital strategy, which aims to strengthen the Group’s position as a recognised digital retail bank in Africa, and noted the delivery of the first Barclays Accelerator programme.
- ongoing progress of disaster recovery and data centre migration in South Africa, and separately in the Rest of Africa, having regard to regulatory requirements for in-country processing;
- the progress of the infrastructure remediation in Rest of Africa;
- innovation and change initiatives, and focused on reducing the application portfolio, moving applications to more efficient platforms and the continuous engineering of processes, applications and development;
- the implementation of our cybersecurity strategy to contain the impact of cybercrime on our systems and our customers’ and clients’ accounts;
- systems availability and stability, their impact on customers, clients and employees, and our ability to respond to incidents; and
- strategic IT investment spend and benefits, as well as management’s efforts to reduce the cost-to-income ratio of our IT function.
- the second and third phase of adopting cloud computing technology, moving to live transaction data being housed in the cloud.
The Committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference, particularly having regard to the significant oversight on key areas of business-as-usual technology operations and innovative transformation activities. The 2017 focus will remain on infrastructure, cybersecurity, system availability and stability, disaster recovery, digital transformation and innovation.
|Board Finance Committee|
|Trevor Munday (Chairman) (until September 2016; remains a member)||Attendees:|
|Yolanda Cuba (Chairman) (from October 2016; previously a member)||David Hodnett (until August 2016)|
|Colin Beggs||Jason Quinn (from September 2016)|
|Mark Merson||Maria Ramos|
|Mohamed Husain (until September 2016)|
Considered and assessed:
- the planning costs relating to the Barclays PLC sell-down; and
- the progress of the property consolidation strategy upgrades throughout the portfolio.
- the results announcements and profit commentaries to the market within parameters set by the Board in February and July; and
- various acquisition, disposal and supplier contracts in accordance with its mandate, notably the acquisition of the property on which the Absa Bank Auckland Park (Johannesburg) call centre is situated.
Recommended to the Board:
- the Group’s revised annual short and medium-term budgets for 2016, and then for 2017;
- the revised strategy to enter the Nigerian market with the new focus on establishing, as a single entity, an issuing house, underwriter and investment adviser, and with a banking entity to follow provided the prevailing regulatory and economic conditions are supportive of such entry;
- additional capitalisation of Absa Bank to facilitate preference share funding transactions in Absa Bank;
- together with the Group Risk and Capital Management Committee, the taking up of a collateral liquidity facility from the South African Reserve Bank pursuant to the Basel III liquidity requirements; and
- the separation contributions to be made by Barclays PLC to Barclays Africa and the analysis of other financial implications of the sell-down for the Group and Absa Bank.
The Committee is satisfied that it has fulfilled its responsibilities, in accordance with its terms of reference, and will continue acting on its mandate and provide robust challenge to management on the setting of budgets and on investments and disposals.
|Concentration Risk Committee|
|Trevor Munday (Chairman)||Other quorum members:|
|Colin Beggs (until October 2016)||Chief Credit Officer|
|Daisy Naidoo (from May 2016)||Chief Risk Officer|
|Jason Quinn (from September 2016)|
|Paul O’Flaherty (from February until October 2016)|
- levels of wholesale credit, including material concentrations, watch list clients as well as sector and geographic trends;
- key sectors through regular updates including agriculture (primary and secondary), banking, mining and metals, retail, and public sector;
- Barclays Africa commercial property finance and prime services businesses;
- the impact of Brexit and a possible sovereign downgrade in South Africa;
- forex rate risk;
- country limits for our Rest of Africa portfolio;
- wholesale credit risk appetite; and
- stress triggers, stress losses, and mandate and scale.
Recommended to the Board:
- credit facilities to clients above 10% of the Group’s qualifying capital and reserves.
The Committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference and that all regulatory requirements were met with regard to large exposures. The Committee continued its analysis of key sectors with several deep dives in areas experiencing economic pressure. The Committee will continue undertaking industry and product-specific reviews taking changing economic conditions into account, and will continue assessing the risk profile of the Group’s large exposures to ensure that such exposures are managed within risk appetite.
|David Hodnett (Chairman) (until September 2016; remains a member)||Attendees:|
|Jason Quinn (Chairman) (from October 2016)||Chief Risk Officer|
|Maria Ramos||Head: Model Risk Management|
|Chief Executive: CIB|
|Chief Executive: RBB|
|Chief Executive: WIMI|
- the list of models within the scope of the Committee’s mandate.
- the governance of models including the embedment of the model risk policy and the results and levels of model validation coverage;
- the reporting of relevant risk metrics and the impact of Basel Committee on Banking Supervision (BCBS) 239; and
- the development of IT infrastructure to support the governance of models and model data.
- the Group’s regulatory capital, economic capital, impairment and other Group-level material models in accordance with the model risk policy and based on the recommendations of the independent validation unit; and
- the implementation of appropriate post-model adjustments.
The Committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference, and in particular, with the progress made during the year. It will continue monitoring further embedment of the model risk policy and compliance with regulatory standards set by the South African Reserve Bank and other regulators. The membership will change from 2017 to include the Chief Risk Officer, with the business segment chief executives becoming invitees.
|Ad hoc committee|
|Wendy Lucas-Bull (Chairman)||David Hodnett|
|Colin Beggs||Jason Quinn|
|Mohamed Husain||Maria Ramos|
|Paul O’Flaherty||Chief Risk Officer|
The Ad hoc committee was established to advise management in relation to the sell-down and to make recommendations to the relevant Board committees and the Board regarding all aspects of the sell-down and the separation process.
Considered and recommended to the Board and relevant Board committees:
- the overall quantum of the separation payments from Barclays PLC, the tax and accounting implications thereof, and the timing of the flow of funds;
- application to the relevant regulators including proposed terms and conditions forming part of that application;
- requirements relating to the transitional services arrangements with Barclays PLC including outsourcing arrangements;
- the impact of separation on Barclays Africa’s technology architecture, resilience, and competitiveness;
- merits of the alternative shareholding structures and any risk arising therefrom;
- risks arising from the sell-down including potential brand change; and
- impact on our leadership structures and remuneration arrangements necessary for the retention of skills.