Corporate Governance

1. Statement on corporate governance

Sparebanken Møre complies with the Norwegian Code of Practice for Corporate Governance of 2014. There are no significant differences between the Code and how it is complied with at Sparebanken Møre. In the case of a savings bank, adaptations have been made based on the fact that a savings bank is a self-owning institution, and that the management structure and the composition of the management bodies are different to those of limited companies. In addition, it has been taken into consideration the savings banks’ special relationship with the local communities, and the savings banks’ corporate social responsibility. Reference is made to the Board of Directors' report for 2014 concerning further information about the bank's CSR policy.
 

The Group has drawn up both a code of ethics and guidelines for corporate responsibility based on its core values: "Committed, close and sound". These core values should be reflected in every point of contact Sparebanken Møre has with the market, customers and other surroundings. More detailed descriptions of the individual core values can be found on the Group's website.
 

Deviations from the Code: None

 

2. Operations

Sparebanken Møre was formed on 1 April 1985 by the merger of a number of banks in Møre og Romsdal. In subsequent years more banks in Møre og Romsdal have joined Sparebanken Møre. The banking history of the merged savings banks can be traced back to 1843.
 

The bank's objectives are to promote savings by accepting deposits from an indeterminate group of customers, provide financial services to the public, corporate and public sectors, and to safely manage the funds entrusted in accordance with the legal regulations which at any time apply to banks. The bank can also provide investment services and associated services in accordance with the provisions of the Securities Trading Act.

Sparebanken Møre is a one-stop provider of services in the areas of financing, deposits and investments, payment systems, financial advice, personal portfolio management, insurance and real estate brokerage.

The complete text of its articles of association can be found on the Group's website: www.sbm.no.
 

Sparebanken Møre carries out a comprehensive, annual strategy process that defines the Group's long-term goals and direction. Current long-term strategic plan, "Møre 2018", was adopted by the Board of Directors in August 2014, and the implementation of the work on the measures in the strategic plan is already well commenced.
 

The strategy and goals in the long-term strategic plan is within the framework laid down by Sparebanken Møre's articles of association. Sparebanken Møre intends to maintain its position as the number one bank for retail customers in Møre og Romsdal, as well as for small and medium-sized companies. Sparebanken Møre should also be an attractive partner for larger companies and the public sector. Sparebanken Møre shall strive for a healthy financial structure and financial strength, as well as strong profitability. Financial performance targets are presented in Sparebanken Møre's annual report and Sparebanken Møre's Pillar 3 document, which are available from the bank's website. Throughout the year, information and guidance is provided to the market and other interested parties through stock exchange notice and accounting presentations regarding the strategic objectives and the development in relation to these.
 

Deviations from the Code: None

 

3. Equity capital and dividends

Sparebanken Møre's primary capital and related capital are composed on the basis of a number of considerations. The most important considerations are the Group's size, Møre og Romsdal's internationally orientated industry and commerce, a stable market for long-term funding when needed, and the goals of the long-term strategic plan. In its annual evaluation of its management and control systems, which includes capital requirement assessments, the so-called ICAAP, the Group focuses heavily on ensuring its primary capital is suitable for its goals, strategies, risk profile and regulatory requirements. The Group`s capital situation is continuously monitored throughout the year via internal calculations and reporting.
 

The dividend policy of Sparebanken Møre has been constant the last years and states the following:

”Sparebanken Møre’s aim is to achieve financial results which provide a good and stable return on the bank’s equity. The results shall ensure that the owners of the equity receive a competitive long-term return in the form of dividends and increase in the value of the equity capital.

 

The equity owners’ share of the net result being set aside as dividend funds, will be adapted to the bank’s equity capital situation. Sparebanken Møre’s allocation of earnings shall ensure that all equity owners are guaranteed equal treatment.”

The Board of Trustees may authorise the Board of Directors to pay dividend based on the last approved financial statement. Such an authorisation will thus be embedded in the dividend policy of Sparebanken Møre and the rationale for proposing such an authorisation specifies among other how the authorisation reflects the dividend policy.
 

The Board of Directors in Sparebanken Møre can be granted authorisations by the Board of Trustees to increase capital and/or buy back its own equity certificates (ECs). Board authorisations to increase capital will be restricted to defined purposes and such authorisations must be limited and last no longer than until the next ordinary meeting of the Board of Trustees. Authorisation for purchasing own equity certificates is normally renewed on the Christmas meeting of the Board of Trustees in December and is normally limited for one year at a time. 
 

Deviations from the Code: None

 

4. Equal treatment of EC holders and transactions with related parties

The bank is keen to further develop the relationship of mutual trust which has been established between Sparebanken Møre and its most important interest groups. In view of this, a great deal of emphasis is placed on openness in relation to all interested parties in the market. This includes both those who provide the bank with equity and funding, and those who need to maintain a relationship with the bank in other ways.
 

All EC holders shall be treated equally and have the same opportunity to influence the bank. The Board's contact with investors normally takes place via the executive management team. All ECs have the same voting rights. The bank complies with Financial Institutions Act's rules regarding ownership and voting limitations insofar as the provisions apply to savings banks with ECs. EC holders usually have preferential rights when equity is increased unless special circumstances indicate that these should be waived. Such waivers must be justified and the justification published as a stock exchange notice in connection with the capital increase. 
 

The bank's transactions involving its own ECs usually take place via the stock exchange. ECs are bought back at the current market price.
 

The Group's code of ethics contains rules for how any conflict of interest shall be handled in transactions with related parties. The rules apply to officers and employees of the Group. "Instructions for the Board of Sparebanken Møre" contains special rules relating to the situations where board members themselves or their related parties, have direct or indirect interests. Board members must notify the Board also if they directly or indirectly have material interest in any agreement to be entered into by the bank.
 

Should material transactions take place between the Sparebanken Møre Group and EC holders, board members, executive employees or their related parties, the Board shall ensure that a valuation is obtained from an independent third party except in cases which have been discussed and voted on by the Board of Trustees.
 

Deviations from the Code: None

 

5. Free tradability

Sparebanken Møre's ECs are listed on the Oslo Stock Exchange and are freely tradable. The articles of association contain no restrictions concerning tradability.
 

Deviations from the Code: None

 

6. General meeting (Board of Trustees)

A savings bank is basically a self-owned institution and the management structure and composition of controlling bodies differ from those of private limited companies, cf. section 7 of the Savings Banks Act concerning the bodies a savings bank must have. Sparebanken Møre complies with this provision of the Savings Banks Act and this therefore represents a deviation from the Code of Practice.
 

After completing the election in 2015, the bank's Board of Trustees consists of 44 trustees with 16 deputy trustees. The Board of Trustees consists of four groups and will after the election in 2015 have the following distribution; customers with 13 trustees and 4 deputy trustees, the public sector with 7 trustees and 4 deputy trustees, equity certificate holders with 13 trustees and 4 deputy trustees and employees with 11 trustees and 4 deputy trustees.
 

Notice and agenda to the meetings of the Board of Trustees are made available to the members on the bank's website at least 21 days before the day of the meeting of the Board of Trustees. In addition, the notice and agenda will be published on the Oslo Stock Exchange. A member of the Board of Trustees, or others who by law shall receive such documents, can still demand to receive paper documents concerning matters to be discussed in the Board of Trustees.
 

The Board of Trustees cannot make decisions on any matters other than those which have been specifically listed in the notice convening the meetings. The proposed resolutions and supporting documentation which have been made available on the bank's website and Oslo Stock Exchange should be sufficiently detailed and comprehensive enough to allow members of the Board of Trustees to properly consider the matters which are going to be discussed and voted on.
 

Members of the Board of Directors, Control Committee and Nomination Committee, as well as the External Auditor shall attend the meetings of the Board of Trustees. The Chairman of the Board of Directors and the CEO is obliged to attend the meetings of the Board of Trustees. The Chairman of the Board of Trustees shall chair meetings. Alternatively in his or her absence the Deputy Chairman shall perform this task.
 

Deviations from the Code: Minor deviations as the governance structure and composition of governing bodies in a savings bank differs from corporations.

 

7. Nomination committees

The different elections of elected representatives in the bank are run according to principles set forth in the bank’s articles of association. The preparations necessary for these elections are made by special nomination committees for customer-elected members and EC holder-elected members. The Board of Trustees' Nomination Committee shall make the necessary preparations for the election of the Chairman and Deputy Chairman of the Board of Trustees, the Chairman, Deputy Chairman and other members and deputy members of the Board of Directors, exclusive employee representatives, election of Chairman, Deputy Chairman, members and deputy members of the Control Committee, as well as Chairman, members and deputy members of the Nomination Committee. Guidelines for the Nomination Committee of the Board of Trustees are prepared and adopted by the Board of Trustees.
 

The Board of Trustees shall elect a nomination committee from among the members of the Board of Trustees. After completing the election in 2015, the Board of Trustees' Nomination Committee shall consist of 4 members and 4 deputy members, and all the groups represented on the Board of Trustees shall be represented. Members are elected in terms of 2 years. The members from the Nomination Committee shall insofar it is feasible reflect the geographical distribution within the municipalities in which the savings bank works. Furthermore, the principle of independence and impartiality of the relationship between the Nomination Committee and the ones to be elected is emphasized. Information about who the members of the Nomination Committee are is available on the bank's website.
 

The Board of Trustees' Nomination Committee has access to the competence which is needed related to the tasks for which the committee is responsible for. The Committee has the opportunity to draw on resources in the bank, or to seek advice and recommendations from sources outside the bank. The CEO attends the Board of Trustees Nomination Committee's first meeting and otherwise upon request. The Chairman also attends a meeting with the Board of Trustees Nomination Committee during the committee work process. In the Board of Trustees' Nomination Committee process, reviews of the Boards evaluation of its own work are included.  
 

The Nomination Committee for electing customer-elected members for the Board of Trustees shall be composed of customer-elected members of the Board of Trustees. This committee shall consist of 4 members and 4 deputy members.
 

The Nomination Committee for electing EC holder-elected members for the Board of Trustees shall be composed of EC holder-elected members of the Board of Trustees. This committee shall consist of 3 members and 1 deputy member. Most of the people elected members of the Board of Trustees from among EC holders are also among the bank's larger EC holders.
 

Each committee's recommendations are justified. The recommendations are available for a gathered Board of Trustees at least 21 days before the Board of Trustees election meeting, refer to paragraph 6.
 

Deviations from the Code: None

 

8. Corporate assembly and Board of Directors, composition and independence

Please refer to point 6 for information about the composition of a savings bank's bodies. The Board of Directors consists of 7 members and 4 deputy members, elected by the Board of Trustees. One of the members shall be elected from among the bank's employees. All board members shall be independent of the bank's day-to-day management and important business connections. The Chairman and Deputy Chairman of the Board of Directors shall be elected by the Board of Trustees in a special election. All members shall be elected for terms of 2 years, and all deputy members for terms of 1 year. Half of the elected members retire every year. Outgoing members and deputy members may be re-elected. An elected member of the Board can not have this official duty for a continuous period longer than 12 years, or have confidence in this office for more than 20 years all together.
 

When selecting the board members, effort is made to achieve continuity and independence, in addition to a balanced composition. The Board's overall composition of expertise, capacity and diversity is emphasized.
 

The annual report contains further information about board members, including the ECs owned by each member. Sparebanken Møre does not have a programme for the purchase of ECs by board members.
 

Deviations from the Code: None

 

9. The Board of directors' work

The Board of Directors shall manage the bank`s operations. The Board is responsible for the safe and prudent management of all funds controlled by the bank. The Board shall ensure that the operations of the bank are properly organised, and is responsible for ensuring the accounting and management of assets being subject to satisfactory control. The Board also stipulates the bank's rules and regulations relating to the granting of credit.
 

The Board of Directors' responsibilities and duties are set forth in "Instructions for the Board of Directors of Sparebanken Møre". The instructions are regularly revised. "Instructions for the CEO" have also been adopted. These instructions form the basis for the established division of responsibilities and duties between the Board and the CEO.
 

The Chairman of the Board shall, by the end of May each year and in consultation with the CEO, set out a proposed annual plan for the Board's work for the coming year with a particular emphasis on targets, strategy and implementation, including a meeting schedule and the main items on the agendas of board meetings for the next calendar.
 

Each year, the Board evaluates its own methods and professional competence to see if improvements can be made.
 

The Board sets out Sparebanken Møre's overall long-term financial targets. These are set forth in the Group's strategic plan. The details of this plan are carried forward in a joint process involving the Board and the bank's executive management team. In this way, the Board ensures the bank being managed in such a way that the overall agreed targets are met. Among these are the long-term, stable target of a return on equity of minimum 10 % and the aim of ensuring the bank's EC holders receive a return on their investment which corresponds to Sparebanken Møre's dividend policy. Financial strength of the Group is also significantly emphasized in this context.
 

For cases in which the Chairman of the Board or another board member is regarded as disqualified in relation to matters that are going to be discussed and voted on, the Chairman of the Board or other board member shall take no part in such discussions and voting. Nor shall the supporting documentation be provided to the member. For cases in which the Chairman of the Board is deemed disqualified, the discussion and voting shall be chaired by the Deputy Chairman of the Board.
 

Sparebanken Møre has established an Audit Committee. The committee's members are elected from among the board members, and it consists of a total of 3 people. The Audit Committee's purpose is to conduct more thorough assessments of defined focus areas and report the results to the Board. The Audit Committee shall ensure the institution has independent and effective external and internal auditors and satisfactory financial statement reporting and risk management routines that comply with all pertinent laws and regulations. The Audit Committee has brought together the expertise necessary to ensure the Committee`s responsibilities, taken into account the bank's organisation and activities. Independence is maintained in accordance with the recommendation.
 

Further, an own Risk Committee is established in accordance with applicable regulations. The Committee members are elected of and among the Board members, and consist of a total of 3 people. In order to achieve efficiency in the Risk Committee's tasks, and to ensure interaction and synergies with the Audit Committee, members of the two committees are the same people. The Risk Committee shall consider whether the pricing of Sparebanken Møre’s products reflects the associated risk. Where this is not the case, the Committee shall ensure that the Board is presented to proposals for improvement. Further, the Committee shall amongst other contribute to the Board monitoring and managing the bank and the Group's overall risk in a good way and contribute to the Board regularly assessing whether the bank’s governance and control arrangements are adapted to the risk level and scope of the business.
 

Sparebanken Møre has established a Compensation Committee. Refer to paragraph 12 for more information.
 

Separate board-approved instructions are prepared for the subcommittees of the Board. The instructions are revised regularly.
 

Deviations from the Code: None

 

10. Risk management and internal control

Sparebanken Møre assumes an overall risk management process as the basis for its internal control. This is laid down in the bank's board approved "Risk Policy". To perform a comprehensive risk management, Sparebanken Møre uses the global standard COSO internal control model.
 

Board adopted "General guidelines for the management and control of Sparebanken Møre" has laid down the premise that individual managers of the Group must ensure possessing adequate knowledge of all material risks within their own area of responsibility, such that the risk can be managed in a proper financial and administrative manner. In the "Instructions for the Board of Directors of Sparebanken Møre" the Board`s role, the importance of the Board`s work, as well as form, content and implementation is defined. This also includes risk management via both its management function and its supervisory function. Special instructions have also been drawn up for the Group's Audit Committee, in addition to an own instruction for the Compensation Committee.
 

The Board ensures that risk management and internal control in Sparebanken Møre are adequate and systematic, and that they have been established in compliance with laws and regulations, articles of association, ethical guidelines, instructions, and external and internal guidelines. The Board shall lay down principles and guidelines for risk management and internal control for the various levels of activity pursuant to the risk bearing capacity of the Bank and the Group, and assure themselves that the strategies and guidelines are being communicated to the employees. The Board shall systematically and regularly assess the strategies and guidelines for risk management. Furthermore, the Board shall monitor and periodically assess the effectiveness of the Group's overall management and control, including taking account of internal and external influencing factors. The latter point especially applies in the case of changes in economic cycles and macroeconomic general conditions.
 

In order to ensure that Sparebanken Møre's risk management and internal control are carried out satisfactorily, the Board continuously receives various types of reports throughout the year from Sparebanken Møre's control bodies, including the Risk Management and Control Department, the Compliance Department, and internal and external auditors. The Board actively participates in the annual ICAAP via its implementation in the long-term strategic plan. The Board revises and approves all the bank's general risk management documents at least once a year. Every year during the 4th quarter, the CEO reports on the structure and efficiency of the Group's internal control.
 

Both the Board's annual report and the annual financial statements otherwise contain further information about Sparebanken Møre's risk management and internal control.
 

Deviations from the Code: None

 

11. The Board of Directors' remuneration

The remuneration of the Board of Directors is determined by the Board of Trustees. The board members' remuneration is not dependent on the result, and is entirely restricted to ordinary board member remuneration, possibly additional fee for participation in the Audit Committee, Risk Committee and Compensation Committee.
 

Normally the board members do not have assignments for Sparebanken Møre beyond their board work. In cases where companies in which board members have connections to undertake tasks for Sparebanken Møre, the entire board is informed. Fees for such services must be approved by the Board. If remuneration has been paid in addition to normal directors' fees, such remuneration is disclosed in the notes to the annual report.
 

Deviations from the Code: None

 

12. Remuneration of senior executives 

Regulations on compensation arrangements, including for banks, came into force on 1 January 2011. The regulations implement the decisions in CRD III regarding good compensation procedures to reduce excessive risk taking and promote sound and effective risk management in financial companies.
 

All companies with more than 50 employees or total assets exceeding NOK 5 billion must have a separate remuneration committee/ compensation committee. In companies with total assets less than NOK 100 billion, the committee may consist of all, or part of the Board of Directors. Sparebanken Møre has established such a compensation committee, elected by and among the board members. The Board is responsible for approving and maintaining the remuneration policy for Sparebanken Møre, as well as evaluate and monitor the effects of the remuneration policy. The practicing of the remuneration scheme is to be reviewed at least once a year by an independent body, and a separate report on the annual review must be prepared. In Sparebanken Møre the report of the practice of the remuneration scheme is prepared by the Group's internal auditor, BDO.
 

Sparebanken Møre does not have incentive based compensation (commission) for any of the bank`s employees.
 

There has been established a collective bonus scheme, with an equal calculation principle for all employees, truncated in relation to employment or work percentage during the year. The CEO is not included in this scheme. Size of the bonus depends on the Group's overall achievement in relation to the long-term strategic plan.
 

Each employee may in addition receive an extra payment based on individual achievement in relation to the employee`s individual action plan. Variable one-time remuneration of senior executives, employees with work tasks of significant importance to the bank's risk exposure, and employees with supervisory tasks shall as a general requirement be based on a combination of assessment of the employee concerned, the business unit of the employee and the bank as a whole. The basis for determining the variable one-time remuneration shall be risk-based results.
 

For senior executives, etc. as mentioned in the paragraph above, some hold positions that are not directly related to income generating units. For these people, fulfilment of established management agreements for the division/section, are greater emphasised. The results achieved over a period of two years are emphasised. In the assessments, as far as possible, the return on equity for the past two years is taken into account.
 

For senior executives, etc. who work in income generating units, the financial targets defined in Sparebanken Møre’s balanced scorecard, and the fulfillment of these during the last two years, shall be greater emphasized than for people who do not work directly in result generating units. Also for these employees, fulfilment of the achievements of the individual and the division/section’s established management agreements, shall be applied in the assessments beyond the financial sizes of the numbers in the balance scorecard. The balance scorecard contains several indicators which are directly related to risk related results.
 

Minimum 50 per cent of the general bonus to all employees is given in the form of equity certificates from Sparebanken Møre (MORG). The allocation is given from Sparebanken Møre’s own holdings of Equity Certificates corresponding to market value on the settlement date. These equity certificates can not be disposed freely by the individual earlier than 1 year after the allocation (see below concerning special rules for senior executives, etc.).
 

For senior executives, etc. also minimum 50 per cent of the general bonus is given in the form of MORG. For these people, the equity certificates can not be disposed freely by the individual earlier than evenly over a period of three years.
 

Variable one-time remuneration to employees who are not senior executives etc. shall consist of 50 % MORG if the variable one-time remuneration equals NOK 50 000 or more. These equity certificates shall be kept at least 1 year before disposal.
 

Variable one-time remuneration to senior executives etc. shall, regardless of the amount, consist of  50 % MORG. These equity certificates can not be disposed freely by the individual earlier than evenly over a period of at least 3 years. If there are negative developments in Sparebanken Møre’s results, or separately in the senior executive employee’s business unit, the approved variable remuneration may be reduced during the subsequent three years after receiving the variable remuneration. Any severance upon termination of employment shall be adjusted according to the results achieved over time. Lack of results should not be rewarded. Senior executives etc. shall not have agreements or assurances which ensure elimination of achievement conditional remuneration.
 

Determination of salary for the CEO is decided by the Board of Directors in a board meeting. The Board is informed of the remuneration to the employees who report to the CEO.
 

Separate guidelines for the remuneration scheme of Sparebanken Møre is prepared and presented to the Board of Trustees. The Board annually presents a statement concerning salary as a separate issue for the Board of Trustees.
 

Deviations from the Code: None

 

13. Information and communication

Guidelines for the reporting of financial and other information are established, and these are approved by the Board of Directors.
 

Sparebanken Møre attaches a great deal of importance to the provision of correct, relevant and up-to-date information about the Group's development and results, which shall establish trust in relation to the investor market. Through its annual and interim reports, the bank seeks to achieve the required openness about all the most important factors relating to its development. This is done in order that all market participants may be able to form as correct a picture as possible of the bank’s situation. In addition, members of the bank’s executive management team give special presentations, both locally and in Oslo, in connection with the publication of Sparebanken Møre's annual and interim results. This information is also made available to the whole market on the bank's website, as well as publication on the Oslo Stock Exchange.
 

The annual and interim reports are available in English for Sparebanken Møre's international contacts. The bank’s larger banking connections abroad are kept informed on a regular basis, including through outreach in which Sparebanken Møre's financial statements and development are among the topics discussed. A special investor relations plan concerning which investors we should contact, and when and how this should be done, is drawn up every year.
 

Information about the bank's ECs, dividend policy and financial calendar can be found in both annual reports and on the bank's website.
 

Deviations from the Code: None

 

14. Corporate takeovers

Sparebanken Møre is a self-owned institution that cannot be taken over by an acquisition. Structural changes require the consent of the authorities. Permission must be sought from the FSA for acquisitions of ECs that result in ownership stakes of more than 10 per cent of the equity owner’s capital.
 

Deviations from the Code: Because of statutory restrictions on ownership of savings banks this point represents a deviation from NUES's Code of Practice.

 

15. Auditor

The Board of Trustees chooses auditors and fixes the auditor's remuneration.
 

The Bank's external auditor, EY, is the auditor of both the Parent Bank and the Group's subsidiaries. The auditor draws up a schedule for the coming year's auditing work each year. The auditor presents the plan to the Audit Committee and in a board meeting. The Audit Committee's and the Board’s annual plan contains an annual meeting with the auditor which the bank's executive management team does not attend. The Audit Committee/Board also meets with the auditor to discuss the auditor’s views on the bank’s risk areas, control routines and accounting principles. At such meetings, the external auditor would make the board members aware of any areas which would benefit from an improvement in overall quality levels, and present proposed improvements. The external auditor attends all meetings in the Audit Committee, as well as all board meetings that deal with the bank’s annual report and accounts, and reviews all areas in which the board members need to be informed of any significant circumstances.
 

The auditor shall every year present an overview of billed/accrued fees which is split into ordinary auditing fees and other services. The Board of Trustees assess annual external auditor's fees.
 

The Board has established guidelines for management's use of the auditor for non-audit services.
 

Deviations from the Code: None