Corporate governance

The new Norwegian Financial Institutions Act entered into force on 1 January 2016 and superseded the Savings Bank Act and the old Financial Institutions Act, among other legislation. As part of the work to adapt to the new legislation, Sparebanken Møre’s Articles of Association were amended with effect from 1 January 2016. The amendments to the Articles of Association included renaming of the Bank’s supreme body, the Board of Trustees, to the General Meeting, and the abolition of the Control Committee scheme. In the account below, references are made to the Financial Institutions Act instead of the Savings Bank Act and the old Financial Institutions Act, and the term ‘General Meeting’ is used instead of the term ‘Board of Trustees’.

1. Corporate governance report

Sparebanken Møre follows the Norwegian Code of Practice for Corporate Governance of 2014. There are no significant differences between this code of practice and the way in which it is complied with in Sparebanken Møre. Minor adaptations have been made on account of the fact that a savings bank is a self-owning institution, and that the management structure and the composition of the management bodies differ from those of limited companies. In addition, consideration must be given to the Bank’s special relationship with the local community, and the Banks’ corporate social responsibility. Reference is also made to the Board of Directors' Report for 2015 regarding a more detailed account of Sparebank Møre’s fulfilment of its corporate social responsibilities.

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 must be reflected at all interfaces that Sparebanken Møre has with the market, customers and the surroundings. More detailed descriptions of the core values can be found on the Group's website.

Deviations from the code of practice: 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 objects of Sparebanken Møre are to promote savings by receiving deposits from an unspecified group of depositors; to provide financial services to the public, business community and public sector; and to manage the funds controlled by the Bank in a prudent manner in accordance with statutory rules that apply to savings banks. The Bank may 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 within 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 annually carries out a comprehensive strategic process that defines the Group's long-term goals and direction. The current long-term strategic plan, "Møre 2019", was adopted by the Board of Directors in August 2015, and the implementation of the work relating to the initiatives that were adopted in this plan is already well under way.

The strategy and objectives set out in the long-term strategic plan fall within the framework of Sparebanken Møre’s Articles of Association. Sparebanken Møre shall maintain its position as the number one bank for retail customers from Møre og Romsdal, as well as small and medium-sized businesses. Sparebanken Møre shall also be an attractive partner for larger businesses and the public sector. The Bank shall aim for a solid financial structure and solvency, along with strong profitability. The Bank’s 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. During the year, information and guidance are given to the market and other stakeholders via stock exchange notices and accounts presentations concerning the Bank’s strategic objectives and developments in relation to these objectives.

Deviations from the code of practice: None

 

3. Company capital and dividend

The composition of Sparebanken Møre’s capital is determined on the basis of a number of considerations. The most important of these considerations are the Group's size, Møre og Romsdal's internationally orientated industry and commerce, a stable market for long-term funding as required, and the goals of the long-term strategic plan. In its annual evaluation of its management and control systems, which includes capital adequacy assessments (known as ICAAP), the Group focuses heavily on ensuring that its primary capital is suitable for its goals, strategies, risk profile and regulatory requirements. The Bank’s capital situation is continuously monitored throughout the year via internal calculations and reporting.

Sparebanken Møre’s dividend policy has remained firm in recent years and is as follows:
"Sparebanken Møre’s aim is to achieve financial results which provide a good and stable return on the Bank’s equity capital. The results shall ensure that the equity owners receive a competitive long-term return in the form of cash dividends and capital appreciation on the equity.

Theequity owners' share of the annual profits set aside as dividend funds shall be adjusted to the Bank’s equity situation.

Sparebanken Møre’s allocation of earnings shall ensure that all equity owners are guaranteed equal treatment."

The General Meeting can authorise the Board to distribute dividends on the basis of the most recently approved annual financial statements. Any such authorisation will be anchored in Sparebanken Møre’s dividend policy, and the justification for the recommendation for such authorisation will state, among other things, how the authorisation reflects this dividend policy.

Sparebanken Møre’s Board can be authorised by the General Meeting to increase capital and/or buy back its own equity certificates. Board authorisations to increase capital are restricted to specific defined purposes, and such authorisations must be limited and last no longer than until the next Ordinary General Meeting. Authorisation to purchase the Bank’s own equity certificates is normally renewed at the General Meeting in December, and is thus normally limited to one year at a time.

Deviations from the code of practice: None

 

4. Equal treatment of EC holders and transactions with close associates

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, strong emphasis is placed on transparency in relation to all stakeholders in the market. This includes both those who provide the Bank with equity share capital 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 the provisions of the Financial Institutions Act regarding ownership and voting limitations insofar as the provisions apply to savings banks with ECs. EC holders usually have preferential rights when equity share capital 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 concerning how conflicts of interest are to be handled in transactions with close associates. These rules apply to elected representatives and employees within the Group. "Instructions for the Board of Directors of Sparebanken Møre" set out specific rules linked to the handling of matters where board members, or their associates, have personal direct or indirect interests. Board members must also notify the Board if they either directly or indirectly have a material interest in an agreement which is 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 close associates, the Board shall ensure that a valuation is obtained from an independent third party except in cases that have been discussed and voted on by the General Meeting.

Deviations from the code of practice: 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 of practice: None

 

6. General Meeting

A savings bank is essentially a self-owning institution and the management structure and the composition of the management bodies differ from those of limited companies; see Chapter 8 of the Financial Institutions Act concerning governing bodies. Sparebanken Møre complies with the provisions of the Financial Institutions Act, and this represents a deviation from the code of practice.

The Bank’s supreme body is the General Meeting. Sparebanken Møre’s General Meeting consists of a total of 44 members with 16 deputies elected by four groups in accordance with specific provisions in the Articles of Association. Sparebanken Møre’s General Meeting is composed as follows: 13 members with four deputy members are elected by and from amongst the customers, 13 members with four deputies are elected by EC holders, seven members with four deputies are elected by the social function (Møre og Romsdal County Council), and 11 members and four deputies are elected by and from amongst the employees.

Notices convening meetings and case documents for the General Meeting are made available on the Bank’s website at least 21 days before the meeting is scheduled to be held. Notices convening meetings and case documents are also published on Oslo Stock Exchange. Members of the General Meeting, or anyone else who must receive such documents by law, may nevertheless have the documents sent to them. 

The General Meeting cannot make decisions on any matters other than those which are specifically listed in the notice convening the meetings. Proposals for decisions and case enclosures which are made available on websites and via Oslo Stock Exchange must be sufficiently detailed and comprehensive to enable the General Meeting’s members to reach a decision concerning the matters that are to be considered.

Members of the Board, the Control Committee (being disbanded in 2016), the Nomination Committee and the external auditor participate at General Meetings. The Chairman of the Board and the CEO have an obligation to attend the General Meeting.

The Chairman of the General Meeting shall chair meetings. Alternatively in his or her absence the Deputy Chairman shall perform this task.

Deviations from the code of practice: Minor deviations, as the management structure and the composition of the management bodies in a savings bank differ from those of a limited company

 

7. Nomination committees

The Bank's Articles of Association set out provisions concerning nomination committees.

The General Meeting’s Nomination Committee is elected by the General Meeting and consists of four members with four deputies elected from amongst the members of the General Meeting. The Nomination Committee includes representatives from all groups who are represented in the General Meeting. In addition, the members shall insofar as is feasible reflect the geographical distribution within the municipalities in which the savings bank operates. Emphasis is also placed on the principle of independence and qualification in the relationship between the Nomination Committee and those who are to be elected.

The CEO participates in the Nomination Committee’s first meeting and otherwise upon request. The Chairman of the Board also participates in a meeting with the Nomination Committee during the committee’s work process. The Nomination Committee receives the Board’s evaluation of its own work.

The General Meeting’s Nomination Committee carries out preparations for the election of the Chairman and Deputy chairman of the General Meeting, the chairman, deputy chairman and other members and deputies of the Board excluding the employee representatives, election of the chairman, deputy chairman and members and deputies of the Control Committee (being disbanded in 2016), and the election of the chairman, members and deputies of the Nomination Committee. Guidelines for the Nomination Committee have been prepared and adopted by the General Meeting.

Customer-elected members of the General Meeting elect their own Nomination Committee, which carries out preparations for the election of representatives to the General Meeting by the customers. This committee has four members and four deputies.

Members of the General Meeting elected by EC holders also elect their own Nomination Committee, which is responsible for preparations for the EC holders’ election of members to the General Meeting. This committee has three members and one deputy.

Members of the Nomination Committees are elected for terms of two years. The recommendations of the individual committees are justified. The recommendations of the General Meeting’s Nomination Committee are made available to the General Meeting at least 21 days before the elections are scheduled to be held by the General Meeting; see Article 6.

A statement of the members of the Nomination Committee is available on the Bank’s website.

Deviations from the code of practice: None

 

8. Corporate assembly and Board, composition and independence

Savings banks do not have a corporate assembly. Please refer to point 6 for information on the composition of a savings bank's bodies.

The Board consists of seven members and four deputies elected by the General Meeting. 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 are elected by the General Meeting through specific elections. All elected members are elected for terms of two years and all deputies for terms of one year. Of the elected members, three come up for re-election in one year, and four members come up for re-election during the following year. Members and deputies who are up for election can be re-elected. An elected member of the Board cannot hold this position for a continuous period of more than 12 years, or hold this position for more than 20 years in total.

In connection with the election of the Board’s members, continuity, independence and a balanced composition are sought insofar as is possible. Emphasis is placed on the Board’s total composition in terms of competence, capacity and diversity.

The Annual Report contains further information about board members, including the number of ECs held by each member. Sparebanken Møre does not have a programme for the purchase of ECs by board members.

Deviations from the code of practice: None

 

9. The work of the Board

The Board leads the work of the Savings Bank. The Board is responsible for the safe and prudent management of all funds controlled by the Savings 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 are subject to satisfactory control. The Board also stipulates the Bank's rules and regulations relating to the granting of credit.

The Board’s responsibilities and duties are set out 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 CEO.

The Chairman of the Board shall, by the end of May 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 out 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 is managed in such a way that the overall agreed targets are met. These include the long-term, stable target of a return on equity of at least 10 percentage points, and the aim of ensuring that the Bank's EC holders receive a return on their investment in accordance with Sparebanken Møre's dividend policy. A focus on good solvency within the Group is also emphasised in this context.

In cases where 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. Case memoranda are not presented to this member. In cases where 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 three board committees elected by and from amongst the Board’s members. These are the Audit Committee, Risk Committee and Compensation Committee (Remuneration Committee). Instructions have been prepared for these board committees and adopted by the Board. The instructions are regularly revised.

Both the Audit Committee and the Risk Committee have three members. In order to streamline the tasks of the committees and ensure interaction and synergies between the committees, the members of the two committees are the same people. The committees possess the expertise necessary to perform their duties based on the Bank’s organisation and operations. Independence is ensured in accordance with the code of practice.

The Audit Committee shall ensure that 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 Risk Committee shall assess whether the pricing of Sparebanken Møre’s products takes into account the associated risk. Where this is not the case, the committee must ensure that a proposal is presented to the Board for measures to rectify the situation. The committee must also contribute to ensuring that the Board monitors and manages the Bank and the Group’s collective risk in a satisfactory manner, and contribute to ensuring that the Board regularly assesses whether the Bank’s management and control arrangements are appropriate for the level of risk and the scope of the business.

The Compensation Committee (Remuneration Committee) is referred to in point 12 of the report.

Deviations from the code of practice: None

 

10. Risk management and internal control

Sparebanken Møre uses a holistic risk management process as the basis for its internal control. This is stated in the Bank’s "Risk Policy", as adopted by the Board, and elsewhere. In order to carry out holistic risk management within Sparebanken Møre, the global internal control standard COSO model is used.

The "Overall guidelines for management and control within Sparebanken Møre" states that, as a general rule, each manager in the Group must ensure that they possess adequate knowledge of all material risks within their own area of responsibility, such that the risk can be managed in a financially and administratively prudent manner.

The "Instructions for the Board of Directors of Sparebank Møre" defines the Board's role and the importance, form, content and implementation of the Board's work. This includes risk management via both its management function and its supervisory function. Separate instructions have also been prepared for the Group’s Audit Committee and Risk Committee, along with separate instructions for the Compensation Committee (Remuneration Committee).

The Board shall ensure that risk management and internal control processes within Sparebanken Møre are adequate and systematic, and that these processes have been established in compliance with laws and regulations, articles of association, 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 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.

To ensure that Sparebanken Møre's risk management and internal control processes are carried out satisfactorily, the Board continually receives various types of reports throughout the year from Sparebanken Møre's control bodies, including the Risk Management Department, Compliance, 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 fourth 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 of practice: None

 

11. The Board's remuneration

The remuneration of the Board is determined by the General Meeting. The Board members' remuneration is not dependent on the result, and is entirely restricted to ordinary board member remuneration, plus any additional fees for participation in the Audit Committee, Risk Committee and Compensation Committee (Remuneration Committee).

The general rule is that the Board members do not perform any tasks for Sparebanken Møre other than those relating to their position on the Board. In cases where companies with which the Board’s members have an association perform tasks for Sparebanken Møre, the entire Board is informed. Fees for such services are approved by the Board. If remuneration has been paid in addition to the ordinary Board fee, such remuneration will be specified in notes in the Annual Report. 

Deviations from the code of practice: None

 

12. Remuneration of executive employees

In accordance with the Regulation on remuneration schemes, Sparebanken Møre has a Compensation Committee (Remuneration Committee), which is elected by and from amongst the Board’s members. The Board is responsible for approving and maintaining Sparebanken Møre’s remuneration policy, and for assessing and monitoring the effects of the remuneration policy. The practising of the remuneration scheme shall be reviewed at least once a year by an independent control body, and a specific report shall be prepared on the annual review. Within Sparebanken Møre, the Group’s internal auditor (BDO) prepares a report on the practising of the remuneration scheme.

Sparebanken Møre does not operate with incentive-based remuneration (commission) for any of the Bank’s employees.

A collective bonus scheme has been established with a common calculation principle for all employees. Where appropriate, the scheme is reduced in relation to the length of service or full-time percentage equivalent during the year. The CEO is not covered by this scheme. The size of the bonus depends on the overall achievement of the Group’s targets in relation to the Group’s long-term strategic plan.

In addition, each employee can receive a lump-sum supplement in addition to their salary based on that person’s achievement of their goals in relation to their individual action plan. As a general requirement, variable lump-sum remuneration of senior executives, employees with duties of material importance to the Bank’s risk exposure, and employees who perform control duties must be based on a combination of an assessment of the person concerned, the person’s business unit and the Bank as a whole. The starting point for determining variable lump-sum remuneration shall be the risk-based result.

For senior executives, etc. referred to in the above paragraph, there are people who hold positions which are not directly linked to result-generating units. For these people, greater emphasis is placed on achievement of the goals of the individual’s department/section in established managerial agreements, as regards results in relation to changes in working methods and the achievement of personal and case results. These assessments are based on results achieved over a two-year period. In the assessments, emphasis is also placed on Sparebanken Møre’s total return on equity capital over the previous two years, insofar as is possible.

In the case of senior executives, etc. who work in result-generated units, the financial key figures defined in Sparebanken Møre’s balance scorecard and the fulfilment thereof over the previous two years is given greater emphasis than in the case of people who do not work in directly result-generating units. Attainment of the goals laid down for the individual and the department/section in established management agreements over and above the financial figures in the balancescorecard shall also be used for assessing these employees. The balance scorecard contains various indicators which are directly related to risk-related results.

At least half of the general bonus paid to all employees is given in the form of Sparebanken Møre’s ECs (MORG). The allocation is given from Sparebanken Møre’s holdings of its own ECs corresponding to the market value at the time of settlement. These ECs cannot be freely transferred by the individual any earlier than one year after allocation (see below concerning specific rules for senior executives, etc.).

Senior executives, etc. also receive at least half of their general bonus in the form of MORG. For these employees, ECs cannot be freely transferred by the individual any earlier than evenly distributed over a period of three years.

At least half of all variable lump-sum supplements to employees who are not senior executives, etc. shall be paid in the form of MORG if the variable lump-sum supplement amounts to NOK 50,000 or more. In such cases, these ECs shall be held for at least one year prior to disposal.

At least half of all variable lump-sum supplements paid to senior executives, etc. shall be given in the form of MORG, regardless of the amount concerned. These ECs cannot be freely transferred by the individual any earlier than evenly distributed over a period of at least three years. In the event of a negative trend in Sparebanken Møre’s results, or in the specific results of the business unit of a senior executive, etc., the approved variable remuneration may be reduced over the following three years after receipt of the variable remuneration. Any severance fee upon termination of employment shall be adapted to the results that have been achieved over time. Poor results shall not be rewarded. Senior executives, etc. shall not have agreements or insurance policies which provide security against the loss of performance-based remuneration.

The CEO's salary is fixed by the Board in a board meeting. The Board is informed of the salaries and other remuneration paid to those members of staff who report to the CEO.

Specific guidelines for Sparebanken Møre’s remuneration scheme have been prepared and presented to the General Meeting. The Board shall annually present a statement concerning executive pay as a separate item for the General Meeting.

Deviations from the code of practice: None

 

13. Information and communication

Guidelines for reporting of financial and other information have been prepared and adopted by the Board.

Sparebanken Møre attaches great importance to the provision of accurate, relevant and up-to-date information concerning the Group's development and results in order to 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 and via publication on Oslo Stock Exchange.

Annual and interim reports are available in English for Sparebanken Møre's international contacts. The Bank’s major banking connections abroad are kept informed on a regular basis, partly 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 of practice: 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 Financial Supervisory Authority of Norway for acquisitions of ECs that result in ownership stakes of more than 10 per cent of the equity share capital.

Deviations from the code of practice: Because of the statutory restriction on ownership in savings banks, this point represents a deviation

 

15. Auditor

The General Meeting elects auditors and determines 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 Bank’s annual plans include 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, internal control routines and accounting principles. At such meetings, the external auditor will make the board members aware of any areas which would benefit from an improvement in overall quality levels, and present proposals for improvements. The external auditor attends all Audit Committee and Board meetings that deal with the Bank’s Annual Report and financial statements, and reviews all areas where the Board members need to be informed of any significant circumstances.

Every year, the auditor shall present an overview of billed/accrued fees which is broken down into ordinary auditing fees and other services. The General Meeting shall consider the external auditor’s fee annually.

The Board has adopted guidelines for the general management’s access to use the auditor for non-audit services.

Deviations from the code of practice: None