During FY2014, 21 meetings of the Board of Directors were held, each lasting about three and a half hours on average. Attendance percentages are shown in Table 2 attached to this report.
Since the beginning of 2015 up to the date of approval of this report, four Board meetings have been held, including the one during which the report was approved. The number of Board meetings in 2015 is expected to be in line with last year.
In fulfilment of the obligations established for listed issuers by Article 2.6.2 of the Market Regulations of Borsa Italiana S.p.A., the Board of Directors annually approves the Corporate Events Calendar to be notified to Borsa Italiana for disclosure to the public, within the deadline of 30 (thirty) days after the end of the previous corporate financial year.
In particular, the Calendar specifies, within the framework of Board meetings established for the new financial year, the dates fixed for the approval of draft financial statements, interim financial reports and quarterly reports, as well as the date scheduled for the Shareholders’ Meeting for the approval of the Annual financial statements.
The ‘Regulations on the convening and functioning procedures of Board of Directors’ Meetings’, whose latest update was made on 27 March 2014, establish that:
- The documentation supporting discussion of agenda items is sent by e-mail or fax, or saved in the shared network folder made available to each Director and Statutory Auditor by the end of the third working day before the date fixed for the meeting, except urgent cases when documentation is made available by the end of the day before the meeting and in any case as soon as possible;
- Such documentation is sent or made available, on the Chairman’s order, by the Bank’s Corporate Affairs Department;
- When the Chairman deems it advisable due to the topics and related resolution involved – also in order to avoid abusive disclosure of confidential information, possible given the means of communication instruments used and quite apart from the intentions of those concerned – the briefing documentation can be provided directly at the meeting, advising Directors and Statutory Auditors of this beforehand by the deadline indicated above so that, if they deem it appropriate, they can in any case have access to the information at the Company’s registered office by the end of the day before the meeting and in any case as soon as available.
The methods and terms for sending the documentation to the Board as described above were complied with in the normal manner during the course of 2014, whilst the Chairman never saw the need to present information directly during the Meetings.
The evaluations which emerged during the annual self-assessment of the Board of Directors (concluded during the meeting of 3 February 2015) concerning the planning of the Board’s meetings, the comprehensiveness of the agenda and the contents of the informative note conveyed prior to the meetings, the participation in said meetings and the management and execution of duties, as well as the precision of the minutes drawn up, are all considered satisfactory as a whole.
Pursuant to the Articles of Incorporation, Board meetings are attended by the General Manager in a consulting role. The Board of Directors chose the Corporate Affairs Office to be the office responsible for carrying out the duties that the Articles of Incorporation entrusts to the Secretary of the Board of Directors. In addition, pursuant to the aforesaid ‘Regulation’, the Chairman can invite to attend Board meetings managers or other employees of the Company or other parties or external advisors whose presence is deemed useful by the Chairman in relation to the matters to be addressed.
During 2014, meetings were also attended by the Head of the Corporate Affairs Office or other Members of this office, together with:
- The Corporate Financial Reporting Officer and the Investor relator, above all where documents containing financial information were put to the Board;
- The Heads of the Customer and Debtor Areas (or other Members of these offices), to aid the Board in the assessment of assignment dossiers;
- The Head of the Legal Area to report on any complaints and claims;
- The Head of the Organization & Information Systems Area, the Head of Planning and Management Control and the Head of the NPL Area, when topics addressed concerned related activities and responsibilities.
Lastly, the Internal Auditing Officer, the Chief Risk Officer and the Compliance and Anti-money Laundering Officer directly illustrate their reports and work plans to Directors, in accordance with the current supervisory regulations enacted by the Bank of Italy.
Pursuant to Article 14 of the Articles of Incorporation, besides the attributions that, mandatorily, cannot be delegated, the matters reserved to the exclusive prerogative of the Board of Directors include:
- Adaptations of the Articles of Incorporation to regulatory requirements;
- Strategic guidelines and operations, as well as business and financial plans of the Group;
- Purchase and disposal of equity investments, companies and/or company branches leading to changes in the group, or investments or disinvestments exceeding 1% (one percent) of the shareholders’ equity reported in the Company’s latest financial statements approved.
Over 2014, the Board of Directors approved numerous documents with the aim of adapting to the Bank of Italy’s Amendment no. 15 of 2 July 2013 to its Circular 263 of 27 December 2006. Amongst these were, in particular, the necessary updating of its General Regulations, its Group Regulations, the Regulation Governing Control Functions, the Risk Appetite Framework, Guidelines for the Internal Control System and the Policies Governing Management of the Main Corporate Risks. On the basis of strategic indications, dimensional objectives and additional qualitative-quantitative elements of the Industrial plan, the ICAAP Report and a document setting out the attention and alarm limits for the main risk indicators are drawn up and approved on a yearly basis.
The Board assesses the overall trend of operations at least once every three months, specifically during the analysis of the financial reports required by Art.154-ter of the CFA and upon receiving a quarterly informative note (tableau de bord) prepared by the Risk Management Office which summarizes, on a time to time basis, the overall trend of operations, both in terms of results and risks taken. In said document, which is forwarded to the Bank of Italy after it has been put to the Board, the main parameters are examined from an objective/final balance/deviation standpoint and in terms of the resulting impacts with regards to management manoeuvres.
The Board of Directors also examined, on a quarterly basis, a document comparing the objectives of the Business plan with the results effectively achieved.
The Board also assesses on an ongoing basis, as part of its handling of matters for which it is responsible, the appropriateness of the Bank’s organizational, administration and general accounting set-up. The suitability of the Bank’s subsidiary’s organizational, administration and general accounting set-up is evaluated by the Board of Directors by means of certain corporate governance and control tools, chief among them the ‘Group Regulations’ which lay out the roles of the Parent company and its subsidiaries, as well as defining management/coordination activities in both the strategic management and control field and the technical-operational field.
Description of the organisational model of the Group’s Internal Control System and the variation of the activities carried out by the Group’s control units (that is in the scope of management and coordination by the Parent company over its subsidiaries) is contained in the Document on the Internal Control System of the Company and the Group – Guidelines and in the Regulations Governing Control Functions, all updated during the same Board meeting that approved the present report.
Pursuant to the provisions of the Articles of Incorporation highlighted earlier, the Board has the prerogative of prior review and approval of the transactions of the Issuer and its subsidiaries, when such transactions are of significant importance in strategic, economic, equity or financial terms. In such cases the following procedure is applied: the Board of Directors gives a mandate to the C.E.O. to perform a feasibility study of the transaction, in order to assess its risks and opportunities. This study must contain all the parameters necessary to permit knowledgeable decision-making by the Board of Directors. The Board, after having reviewed the feasibility study, can either approve the transaction or ask for further in-depth analysis.
The Board has not established general criteria to identify transactions of significant strategic, economic, equity or financial importance for the Bank. The reason is due to the fact that the present arrangement of the Banca IFIS Group’s governance documentation (with special reference to documents concerning strategic planning and risk policies) already performs this function, including, at any given time, significant transactions.
The Board examined the issue of general criteria to identify transactions with associated parties of significant strategic, economic, equity or financial importance for the Bank when it approves the ‘Procedure for Transactions with Associated Parties’.
As previously stated, the Board of Directors, during its meeting of 13 February 2015, and also in light of the provisions and instructions provided by the Bank of Italy, concluded its annual evaluation on the functioning of the Board and its Committees as well as on their size and composition. This evaluation process was carried out by means of distributing a questionnaire, in the weeks prior, which varied according to the role of the person due to complete it (e.g. the Chairman, Members of Internal Committees etc.).
This evaluation was carried out taking into account the usual elements, such as Members’ professional characteristics and experience, both managerial and general, as well as their seniority in office, also with a view to preparing the opinions to be expressed to the shareholders on those figures whose presence in the Board is deemed appropriate.
With regards to the methods used for the evaluation process, first of all the Chairman chose the person within the Bank to manage this process as he fits the criteria set by the Bank in the Regulations governing the Self-assessment Process. In carrying out this process, the subject selected was assisted by an external professional, Ferdinando Parente of the company Parente & Partners Srl.. The consultancy offered by the latter aimed mainly at lending support in the drawing up of the Internal Self-assessment Regulations for Corporate Bodies (approved by the Board of Directors of 18 December 2014), then in preparing the questionnaire and defining the quantitative and qualitative assessment criteria for the Board of Directors to use and later to help in the ensuing self-assessment of whether each Member meets the relative requisites.
After having prepared the questionnaire, the external professional provided support during the following phases of the self-assessment process:
- Initial paperwork: by helping to gather the information and data on which the assessment was based, also through interviews with the Board Members involved;
- Processing: by helping to analyse the information acquired and to present the results;
- Officialising the results of the process within a specific document.
The questionnaire used contained a general section which aimed at assessing the Board of Directors as a whole, and another more specific section concentrating on the competences of the individual Members in order to establish if distinct knowledge/competences existed in the Bank’s Board.
Specifically, the questionnaire contained the following sections:
- Qualitative composition of the Board of Directors;
- Quantitative composition of this Board;
- Working principles of the same;
- Role of the Board of Directors in a strategic scope;
- Degree of involvement of the Board of Directors in the definition of risk propensity and the preparation of suitable information on risk performance;
- Information flows and circulation of information;
- Evaluation of the remuneration and incentive system for Board Members;
- Evaluation of the Board of Directors’ Chairman;
- Self-assessment of the Board of Directors’ Chairman;
- Evaluation of the Chief Executive Officer;
- Self-assessment of the Members of the Committees set up within the Board of Directors.
The information gathered, through the compilation of said questionnaire are evaluated by the Board and the overall results help to define the actions to be taken to resolve any weak points identified.
A further questionnaire on the competences of each individual Director is foreseen. Specifically, this questionnaire aims to assess if certain knowledge and skills exist within the Board of Directors from the viewpoint:
- Of laws and regulations applying to the activities carried out;
- Of specific areas ensuring the sound and prudent management of the Bank.
The questions contained in the questionnaire required an answer in the form of a rating from 1-5 where one is the poorest assessment and five is the best.
The evaluation expressed by the Directors on the existence and variety of necessary competences was highly positive, in that all the areas assessed received a good, or at least sufficient, rating.
Given that the Board of Directors’ qualitative/quantitative composition is apt in terms of the Board’s complexity and the duties it is required to carry out and is also suitably mixed in its composition to guarantee multiple approaches, for the next renewal of the Board the possibility of increasing the number of Board Members whilst respecting its balance (as per Article 147ter of the CFA) is being considered.
The Shareholders’ Meeting has not authorized any exceptions to the ban on competition envisaged by Article 2390 of the Italian Civil Code.