PSBANK CORPORATE GOVERNANCE (CG) MANUAL

Transcription

1 STRICTLY FOR INTERNAL USE ONLY (Within MBTC Group Only) PSBANK CORPORATE GOVERNANCE (CG) MANUAL Updated 29 Ocber 2015 PSBank Compliance Office 17/F PSBank Center Paseo de Roxas-Sedeno Sts., Makati City Tel. No Local 8468

2 INITIATION OF CHANGES Role Prepared by Name ATTY. LILIAN E. ROQUE SM & General Compliance Officer Reviewed by GILBERT L. NUNAG VP & Chief Compliance Officer Signature Date CORPORATE GOVERNANCE COMMITTEE (CGC) ENDORSEMENT SHEET Role Endorsed by Name JEANNE FRANCES T. CHUA Direcr & CGC Member Signature Endorsed by JOSE T. PARDO BOD Chairman & CGC Member Endorsed by SAMSON C. LIM Direcr & CGC Chairperson Date BOARD OF DIRECTORS (BOD) APPROVAL Board Resolution Number: Date: Ocber 2015 Please see attached duly notarized Secretary s Certificate. 2

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4 SUMMARY OF CHANGES AND THEIR RATIONALE Key changes effected previous Corporate Governance Manual (CGM) (December 2014 version) are as follows: # Changes/Updates Reasons Page(s) 1 Changed frequency holding To just align with 15 Executive Sessions with ASEAN stard Independent Direcrs from at least once semestrally at least during year annually 2 Incorporated necessary To reflect BSP s 21, 33, updates/changes per BSP new rules regarding 43, 46, Circular No. 887 dated 07 completeness & 54 Ocber 2015 re: Amended timeliness in Regulations on submission Approval/Confirmation pertinent Election/Appointment requirements within Direcrs/Officers, including new/longer revised deadlines in deadline 20 (from submission pertinent 10) banking days requirements 3 Incorporated necessary To reflect BSP s 22, 44 updates/changes per BSP new fit & proper Circular No. 889 dated 02 rules for direcrs November 2015 Ocber 2015 & ficers re: Enhancements Fit & Proper Rules 4 Included following To align with provisions under Direcrs: parent-mbtc s CG Manual updated as 16 Voting Procedures June 2015 be 18 Dissenter s Right more comprehensive Appraisal Procedures 28 Disqualification Procedures 30 Removal Procedures 31 Vacancies in Board Direcrs 32 Election Direcrs & Nomination Procedures 35 Orientation & Continuing Education 3 Added provided gist for To make this CG following matters: Manual central point reference 52 Disclosure & Transparency for se related 52 Dividends Policy key policies that 53 Whistle-blowing Policy are required be 53 Related Party Transactions disclosed by SEC Policy pursuant 53 Policy Against Insider ASEAN CG Scorecard Trading (ACGS) 53 Conflict Interest Policy 53 Learning & Development Policy 53 Employee Health, Safety & Welfare Policy 4

5 TABLE OF CONTENTS Contents Pages PART I INTRODUCTION 7 PART II GOVERNANCE STRUCTURE 8 SECTION 1. BOARD OVERSIGHT A. Board Direcrs 1. Composition Board 2. Powers, Responsibilities Duties Board 3. Sckholders Rights Protection Minority Sckholders Interests 4. Conduct Board Meetings Quorum Requirements B. Direcrs 1. Qualifications a Direcr 2. Independent Direcrs 3. Limits for Independent Direcrs 4. Disqualifications Direcrs 5. Disqualification Procedures for Direcrs 6. Removal Procedures for Direcrs 7. Vacancies in Office Board Direcrs 8. Interlocking Direcrships 9. Interlocking Direcrships Officerships 10. Election Direcrs 11. Confirmation Election Direcrs 12. Multiple Board Seats 13. Specific Duties Responsibilities a Direcr 14. Orientation Continuing Education C. Chairman Board, Vice-Chairman, President Corporate Secretary 1. Chairman Board 2. Vice-Chairman 3. President 4. Corporate Secretary D. Board Committees 1. Executive Committee 2. Audit Committee 3. Risk Oversight Committee 4. Corporate Governance Committee 5. Nominations Committee 6. Compensation Remuneration Committee 7. Related Party Transactions Committee 8. Trust Committee 9. Anti-Money Laundering Oversight Committee SECTION 2. SENIOR MANAGEMENT OVERSIGHT A. Senior Management B. Management Committees 1. Assets Liabilities Committee 2. Credit Committee 3. Anti-Money Laundering Compliance Committee 4. Outsourcing Oversight Committee 5. IT Steering Committee 6. Emergency Committee 7. Policy Committee 8. Personnel Committee 9. Retirement Commitment 5

6 TABLE OF CONTENTS Contents Pages B. Officers 1. Qualifications an Officer 2. Disqualifications Officers 3. Interlocking Officerships 4. Confirmation Appointment Officers 5. Duties Responsibilities Officers SECTION 3. COMPLIANCE SYSTEM, RISK MANAGEMENT AND INDEPENDENT ASSURANCE A. Compliance System 1. Bank Compliance Program 2. Chief Compliance Officer 3. Compliance Charter B. Risk Management 1. Risk Management Function 2. Chief Risk Officer C. Internal Controls Independent Assurance 1. Chief Audit Executive 2. External Audir SECTION SECTION SECTION SECTION SECTION SECTION SECTION SECTION SECTION SECTION 4. CODE OF CONDUCT 5. REMUNERATION POLICY 6. DISCLOSURE & TRANSPARENCY 7. DIVIDENDS POLICY 8. WHISTLE-BLOWING POLICY 9. RELATED PARTY TRANSACTIONS POLICY 10. POLICY AGAINST INSIDER TRADING 11. CONFLICT OF INTEREST POLICY 12. LEARNING & DEVELOPMENT POLICY 13. EMPLOYEE HEALTH, SAFETY AND WELFARE POLICY PART III- REPORTORIAL REQUIREMENTS 54 PART IV- PERFORMANCE EVALUATION 59 A. Annual Performance Self-Assessment 1. Board Direcrs 2. Management B. Or Corporate Governance Scorecards PART V COMPLIANCE MONITORING AND SANCTIONS 60 PART VI POLICY REVIEW AND UPDATING 60 6

7 PART I - INTRODUCTION Corporate Governance is Bank s framework rules, systems processes that governs performance Board Direcrs Management ir respective duties responsibilities sckholders or stakeholders which include, among ors, its cusmers, employees, suppliers, financiers, government community in which it operates. 1 This Manual shall be known as PSBank Corporate Governance (CG) Manual. It shall serve as reference2 or guide for Bank for implementation Bangko Sentral ng Pilipinas (BSP) Circular Nos re: Guidelines in Strengning Corporate Governance in BSP-Supervised Financial Institutions; Revised Code Corporate Governance issued by Securities Exchange Commission (SEC), applicable provisions in BSP Manual Regulations for Banks (MORB) or relevant references. The Board Direcrs ( Board), Management, Officers Staff Bank hereby commit mselves principles practices contained in this Manual acknowledge that same will guide m in development achievement Bank s corporate goals. To enjoin Bank-wide compliance, this Manual is posted available in Bank s InfoChannel specifically under Compliance for easy access all employees, ficers direcrs Bank. This Manual is also posted in Bank s corporate website for ready access by all stakeholders Bank. OUR GOVERNANCE CULTURE We see our compliance with applicable laws, rules regulations as a minimum requirement. Going beyond such minimum is true essence good corporate governance. We always aim continually build up trust confidence our stakeholders by running our business in a prudent sound manner, being fair transparent in all our dealings, providing reliable better service in response evergrowing expectations our cusmers, working with integrity accountability. 1 2 SEC Memo Cir. No. 9, s2014 SEC Memo Cir. No. 6, s2009 7

8 PART II GOVERNANCE STRUCTURE SECTION 1. BOARD OVERSIGHT A. Board Direcrs Compliance with principles good corporate governance shall start with Board Direcrs. 1. Composition Board3 a. Pursuant Sec. 15 R.A The General Banking Law 2000, re shall be at least five (5), a maximum fifteen (15) members Board. The Board shall determine appropriate number its members ensure that number is commensurate with size complexity Bank s operations. To extent practicable, members Board shall be selected from a broad pool qualified cidates. A sufficient number qualified non-executive members shall be elected promote Independence Board from views senior management. For this purpose, non-executive members Board shall refer those who are not part day--day management banking operations shall include independent direcrs. b. At least twenty percent (20%) but not less than two (2) members Board shall be independent direcrs: Provided, That any fractional result from applying required minimum proportion, i.e., 20 percent (20%), shall be rounded-up nearest whole number. c. Non-Filipino citizens may become members Board extent foreign participation in equity Bank: Provided, That pursuant Section 23 Corporation Code Philippines (BP BIg. 68), a majority direcrs must be residents Philippines. 2. Powers, Responsibilities Duties Board4 a. Powers Board The corporate powers Bank shall be exercised, its business conducted all its property controlled held, by its Board. The powers Board as conferred by law are original cannot be revoked by sckholders. The direcrs hold ir fice charged with duty exercise sound objective judgment for best interest Bank. b. General Responsibility Board The position a Bank direcr is a position trust. A direcr assumes certain responsibilities different constituencies or stakeholders, i.e., Bank itself, its sckholders, its deposirs or credirs, its 3 Sec. 1 BSP Cir. No Sec. 2 BSP Cir. No

9 management employees, regulars, deposit insurer public at large. These constituencies or stakeholder have right expect that institution is being run in a prudent sound manner. It is responsibility Board foster longterm success Bank sustain its competitiveness pritability in a manner consistent with its corporate objectives best interests its sckholders or stakeholders.5 The Board is primarily responsible for approving overseeing implementation Bank s strategic objectives, risk strategy, corporate governance corporate values. Furr, Board is also responsible for moniring overseeing performance senior management as latter manages day--day affairs Bank. c. Specific Duties Responsibilities Board To ensure a high stard best practice for Bank its sckholders or stakeholders6, Board should conduct itself with honesty integrity in performance, among ors, following duties responsibilities: 1) Approve monir implementation strategic objectives Consistent with Bank s strategic objectives, business plans shall be established for Bank including its trust operations, initiatives re shall be implemented with clearly defined responsibilities accountabilities. These shall take in account Bank s long-term financial interests, its level risk lerance its ability manage risks effectively. The Board shall establish a system for measuring performance against plans through regular moniring reviews, with corrective action taken as needed. The Board beneficial providing supportive shall likewise ensure that Bank has influence on economy by continuously services facilities which will be national economy. 2) Approve oversee implementation policies governing major areas banking operations The Board shall approve policies on all major business activities, e.g., investments, loans, asset liability management, trust, business planning budgeting. The Board shall accordingly define Bank s level risk lerance in respect said activities. A mechanism ensure compliance with said policies shall also be provided. 5 6 SEC Memo Cir. 9, s2014 SEC Memo Cir. 9, s2014 9

10 The Board shall set out matters authorities reserved it for decision, which include, among ors major capital expenditures, equity investments divestments. The Board shall also establish limits discretionary powers each ficer, committee, sub-committee such or groups for purposes lending, investing or any or financial undertaking that exposes Bank significant risks. 3) Approve oversee Implementation risk management policies The Board shall be responsible for defining Bank s level risk lerance for approval oversight implementation policies procedures relating management risks throughout institution, including its trust operations. The risk management policy shall include: (a) (b) (c) (d) (e) A comprehensive risk management approach; A detailed structure limits, guidelines, or parameters used govern risk-taking; A clear delineation lines responsibilities for managing risk; An adequate system for measuring risk; Effective internal controls a comprehensive risk-reporting process. The Board Direcrs shall ensure that a robust internal reporting system is in place that shall enable each employee contribute appreciation Bank s overall risk exposures. The Board shall ensure that risk management function is given adequate resources enable it effectively perform its functions. The risk management function shall be afforded with adequate personnel, access information technology systems systems development resources, support access internal information. 4) Oversee selection performance senior management It is primary responsibility Board appoint competent management team at all times, monir assess performance management team based on established performance stards that are consistent with Bank s strategic objectives, conduct regular review Bank s policies with management team. (a) The Board shall apply fit proper stards on key personnel. Integrity, technical expertise experience in Bank s business, eir current or planned, shall be key considerations in selection process. The Board shall replace members senior management, when necessary, have in place an appropriate plan succession. 10

11 (b) (c) (d) (e) The Board shall regularly monir actions senior management ensure that se are consistent with policies that it has approved. It shall put in place formal performance stards be able effectively assess performance senior management. The Board shall regularly meet with senior management engage in discussions, question critically review reports information provided by latter. The Board shall set frequency meeting with senior management taking in account size, complexity operations risk prile Bank. The Board shall regularly review policies, internal controls self-assessment functions (e.g., internal audit, risk management compliance) with senior management determine areas for improvement as well as promptly identify address significant risks issues. The Board shall set frequency review taking in account size, complexity operations risk prile Bank. The Board shall ensure that senior management s expertise knowledge shall remain relevant given Bank s strategic objectives, complexity operations risk prile. 5) Consistently conduct affairs Bank with a high degree integrity The Board shall lead in establishing ne good governance from p in setting corporate values, codes conduct or stards appropriate behavior for itself, senior management or employees. The Board shall: (a) (b) (c) Articulate clear policies on hling any transaction with DOSRI or related parties ensuring that re is effective compliance with existing laws, rules regulations at all times no stakeholder is unduly disadvantaged. In this regard, Board shall define related party transaction, which is expected cover a wider definition than DOSRI under existing regulations a broader spectrum transactions (i.e., not limited credit exposures), such that relevant transactions that could pose material risk or potential abuse Bank its stakeholders are captured. Require Bank s sckholders confirm by majority vote, in annual sckholders meeting, Bank s significant transactions with its DOSRI or related parties. Articulate acceptable unacceptable activities, transactions behaviors that could result or potentially result in conflict interest, personal gain at expense Bank, or unethical conduct. 11

12 (d) (e) (f) (g) (h) Articulate policies that will prevent use facilities Bank in furrance criminal or improper or illegal activities, such as but not limited financial misreporting, money laundering, fraud, bribery or corruption. Explicitly discourage taking excessive risks as defined by internal policies establish an employees compensation scheme effectively aligned with prudent risk-taking. The compensation scheme shall be adjusted for all types risk sensitive time horizon risk. Furr, grant compensation in forms or than cash shall be consistent with overall risk alignment Bank. The Board shall regularly monir review compensation scheme ensure that it operates achieves objectives as intended. Ensure that employee pension funds are fully funded or corresponding liability appropriately recognized in books Bank at all times. Furr, Board shall ensure that all transactions involving pension fund are conducted at arm s length terms. Allow employees communicate, with protection from reprisal, legitimate concerns about illegal, unethical or questionable practices directly Board or any independent unit. Policies shall likewise be set on how such concerns shall be investigated addressed, for example, by an internal control function, an objective external party, senior management /or Board itself. Articulate policies in communicating corporate values, codes conduct or stards in Bank as well as means confidentially report concerns or violations an appropriate body. 6) Define appropriate governance policies practices for Bank for its own work establish means ensure that such are followed periodically reviewed for ongoing improvement The Board, through policies its own practices, shall establish actively promote, communicate recognize sound governance principles practices reflect a culture strong governance in Bank as seen by both internal external stakeholders. (a) (b) The Board shall ensure that Bank s organizational structure facilitates effective decision-making good governance. This includes clear definition delineation lines responsibility accountability, especially between roles Chairman Board President. The Board shall maintain, periodically update, organizational rules, by-laws, or or 12

13 (c) (d) (e) (f) (g) similar documents setting out its organization, rights, responsibilities key activities. The Board shall structure itself in a way, including in terms size, frequency meetings use committees, so as promote efficiency, critical discussion issues thorough review matters. The Board shall conduct maintain affairs Bank within scope its authority as prescribed in its charter in existing laws, rules regulations. It shall ensure effective compliance with latter, which include prudential reporting obligations. The Board shall appoint a compliance ficer who shall be responsible for coordinating, moniring facilitating compliance with existing laws, rules regulations. The compliance ficer shall be vested with appropriate authority provided with appropriate support resources. The Board shall establish a system checks balances which applies in first instance Board itself. Among members Board, an effective system checks balances must exist. The system shall also provide a mechanism for effective check control by Board over chief executive ficer key managers by latter over line ficers Bank. Checks balances in Board shall be enhanced by appointing a Chairman who is a nonexecutive, whenever possible. The Board shall assess at least annually its performance effectiveness as a body, as well as its various Committees, President, Individual Direcrs, Bank itself, which may be facilitated by Corporate Governance Committee (CGC) or external facilitars. The composition Board shall also be reviewed regularly with end in view having a balanced membership. Towards this end, a system procedure for evaluation shall be adopted which shall include, but not limited, setting benchmark peer group analysis. The Board shall ensure that individual members Board shareholders are accurately timely informed. It shall provide all its members shareholders a comprehensive understable assessment Bank s performance, financial condition risk exposures. All members Board shall have reasonable access any information about Bank at all times. It shall also provide appropriate information that flows internally public. 7) Constitute committees increase efficiency allow deeper focus in specific areas The Board shall create committees, number nature which would depend on size Bank 13

14 Board, complexity operations, long-term strategies risk lerance level Bank. (a) (b) (c) (d) The Board shall approve, review update at least annually or whenever re are significant changes rein, respective charters each committee or or documents that set out its mate, scope working procedures. The Board shall appoint members committees taking in account optimal mix skills arid experience allow members fully underst, be critical objectively evaluate issues. In order promote objectivity, Board, shall appoint independent direcrs non-executive members Board greatest extent possible while ensuring that such mix will not impair collective skills, experience, effectiveness committees. Towards this end, an independent direcr who is a member any committee that exercises executive or management functions that can potentially impair such direcr s independence cannot accept membership in committees that perform independent oversight/control functions such as Audit, Risk Management Corporate Governance Committees, without prior approval Monetary Board.7 The Board shall ensure that each committee shall maintain appropriate records (e.g., minutes meetings or summary matters reviewed decisions taken) ir deliberations decisions. Such records shall document committee s fulfillment its responsibilities facilitate assessment effective performance its functions. The Board shall constitute, at a minimum, Audit Committee, Risk Oversight Committee Corporate Governance Committee. 8) Effectively utilize work conducted by internal audit, risk management compliance functions external audirs The Board shall recognize acknowledge importance assessment independent, competent qualified Internal External Audirs as well as Risk Compliance Officers in ensuring safety soundness operations Bank on a going-concern basis communicate same through-out Bank. This shall be displayed by undertaking timely effective actions on issues identified. Furr, non-executive Board members shall meet regularly, or than in meetings Audit Risk Oversight Committees, in absence senior management, with External Audir Heads 7 As amended by BSP Cir. No

15 internal audit, functions. (a) (b) compliance risk management As such, periodic Executive Sessions with Independent Direcrs (ESI) shall be held jointly by Bank s Chief Compliance Officer (CCO), Chief Risk Officer (CRO), Chief Audit Executive (CAE) External Audir at least annually as needed in order discuss significant issues that may warrant closer attention. The CCO or his designated ficer shall serve as Secretary se executive sessions shall refore coordinate with CRO CAE for agenda/items for discussion record such dialogues in minutes meeting. 9) Have overall responsibility for defining an appropriate corporate governance framework that shall contribute effective oversight over entities in group Towards this end, Board shall ensure consistent adoption corporate governance policies systems across group shall carry-out following duties responsibilities: (a) (b) (c) (d) (e) (f) To define approve appropriate governance policies, practices structure that will enable effective oversight entire group, taking in account nature complexity operations, size types risks which Bank its subsidiaries are exposed. The Board shall also establish means ensure that such policies, practices systems remain appropriate in light growth, increased complexity geographical expansion group. Furr, it shall ensure that policies include commitment from entities in group meet all governance requirements. To define level risk lerance for group, which shall be linked process determining adequacy capital group. To ensure that adequate resources are available for all entities in group effectively implement meet governance policies, practices systems. To establish a system for moniring compliance each entity in group with all applicable policies, practices systems. To define approve policies clear strategies for establishment new structures. To underst roles, relationships or interactions each entity in group with one anor with Bank. The Board shall underst legal operational implications group structure how various types risk exposures affect group s capital, 15

16 (g) (h) (i) 10) risk prile funding under normal contingent circumstances. To develop sound effective systems for generation sharing information within group, management risks effective supervision group. To require risk management, compliance function internal audit group conduct a periodic formal review group structure, ir controls activities assess consistency with Board approved policies, practices strategies require said groups report results ir assessment directly Board. To disclose BSP all entities in group (e.g., owned directly or indirectly by Bank /or its subsidiaries/affiliates including special purpose entities (SPEs), or entities that Bank exerts control over or those that exert control over Bank, or those that are related Bank /or its subsidiaries/affiliates eir through common ownership/ direcrship/ ficership) as well as all significant transactions between entities in group involving any BSP regulated entity. For this purpose, significant shall refer transactions that would require Board approval based on Bank s internal policies or as provided under existing regulations: Provided, that Bank shall continue submit any report required under existing regulations covering transactions between companies within group. Identify Bank s stakeholders in community in which it operates or are directly affected by its operations formulate a clear policy accurate, timely effective communication with m.8 3. Sckholders Rights Sckholders Interests9 Protection Minority a. The Board shall respect rights sckholders as provided for in Corporation Code, namely: 1) Right vote on all matters that require ir consent or approval. Sckholders shall have right elect, remove replace direcrs vote on certain corporate acts in accordance with Corporation Code. A direcr shall not be removed without cause if it will deny minority shareholders representation in Board. Voting Procedures10: Every sckholder entitled vote on a particular question or matter involved shall be entitled one (1) vote for each share sck in his name. 8 9 SEC Memo Cir. 9, s2014 SEC Memo Cir. 6, s PSBank Definitive Information Statement (SEC Form 20-IS) 16

17 Cumulative voting is allowed provided that tal votes cast by a sckholder shall not exceed number shares registered in his name as record date multiplied by number direcrs be elected. Matters submitted sckholders for ratification shall be decided by required vote sckholders present in person or by proxy. Majority vote is required for following: o Approval minutes Annual Meeting Sckholders; o Ratification corporate acts i.e. confirmation all acts Board Direcrs, Executive Committee Management; o Election a member Board Direcrs nominees receiving highest number votes shall be declared elected following provisions Corporate Code; o Election external audirs. All votes shall be counted by Corporate Secretary be assisted by Bank s sck & transfer agent. 2) Pre-emptive right all sck issuances Bank. All sckholders shall have pre-emptive rights, unless same is denied in articles incorporation or an amendment re. They shall have right subscribe capital sck Bank. The articles incorporation shall lay down specific rights powers sckholders with respect particular shares y hold, all which shall be protected by law so long as y shall not be in conflict with Corporation Code. 3) Right inspect books records Bank. All sckholders shall be allowed inspect corporate books records including minutes Board meetings sck registries in accordance with Corporation Code shall be furnished with annual reports, including financial statements, without cost or restrictions. 4) Right information. The sckholders shall be provided, upon request, with periodic reports which disclose personal pressional information about direcrs ficers certain or matters such as ir holdings Bank s shares, dealings with Bank, relationships among direcrs key ficers, aggregate compensation direcrs ficers. 5) Right dividends. Sckholders shall have right receive dividends subject discretion Board. The Bank shall be compelled declare dividends when its retained earnings shall be in excess 100% its paid- in capital sck, except: a) when justified by definite expansion projects or programs approved by Board or b) when Bank is 17

18 prohibited under any loan agreement with any financial institution or credir, wher local or foreign, from declaring dividends without its consent, such consent has not been secured; or c) when it can be clearly shown that such retention is necessary under special circumstances, such as when re is a need for special reserve for probable contingencies. 6) Appraisal right. The sckholders shall have appraisal right or right dissent dem payment fair value ir shares in manner provided for under Section 82 Corporation Code Philippines, under any following circumstances: In case any amendment articles incorporation has effect changing or restricting rights any sckholder or class shares, or authorizing preferences in any respect superior those outsting shares any class, or extending or shortening term corporate existence; In case sale, lease, exchange, transfer, mortgage, pledge or or disposition all or substantially all corporate property assets as provided in Corporation Code; In case merger or consolidation. Dissenter s Right Appraisal Procedures11: On above instances, appraisal right may be exercised by any sckholder who shall have voted against proposed corporate action by making a written dem on corporation for payment fair value his shares within thirty (30) days after date on which vote was taken: Provided, that failure make dem within such period shall be deemed a waiver appraisal right. If proposed corporate action is implemented or effected, corporation shall pay such sckholder, upon surrender certificate(s) sck representing his shares, fair value re as day prior date on which vote was taken, excluding any appreciation or depreciation in anticipation such corporate action. If within a period sixty (60) days after date corporate action was approved by sckholders, withdrawing sckholder corporation cannot agree on fair value shares, it shall be determined appraised by three (3) disinterested persons one (1) whom shall be named by sckholder, anor by corporation third by two thus chosen. The findings majority appraisers shall be final ir award shall be paid by corporation within thirty (30) days after such award is made: Provided, that no payment shall be made any dissenting sckholder unless corporation has unrestricted retained earnings in its books cover such payment: Provided, furr, that upon payment by PSBank Definitive Information Statement (SEC Form 20-IS) 18

19 corporation agreed awarded price, sckholder shall forthwith transfer his shares corporation. b. The Board shall be transparent fair in conduct annual special sckholders meetings Bank. The Bank shall encourage sckholders personally attend such meetings. If y cannot attend, y shall be apprised ahead time ir right appoint a proxy. Subject requirements ByLaws, exercise right shall not be unduly restricted any doubt about validity a proxy should be resolved in sckholder s favor. c. The Board shall promote rights sckholders, remove impediments exercise those rights provide an adequate avenue for m seek timely redress for breach ir rights. They shall encourage exercise sckholders voting rights solution collective action problems through appropriate mechanisms. They shall be instrumental in removing excessive costs or administrative or practical impediments sckholders participating in meetings /or voting in person. The direcrs shall pave way for electronic filing distribution shareholder information necessary make informed decisions subject legal constraints. d. The Board shall make available sckholders accurate timely information enable latter make a sound judgment on all matters brought ir attention for consideration or approval. e. Although all sckholders should be treated equally or without discrimination, Board should give minority sckholders right propose holding meetings items for discussion in agenda that relate directly business corporation. The Board shall also provide minority sckholders access any all information relating matters for which management is accountable for those relating matters for which management shall include such information, if not included, n minority sckholders shall be allowed propose include such matters in agenda sckholders meeting, being within definition legitimate purposes. f. Minority sckholders shall also be allowed nominate cidates Board Direcrs. 4. Conduct Board Meetings Quorum Requirements The direcrs shall act only as a Board, individual direcrs shall have no power as such. A majority Board shall constitute a quorum for transaction business vote a majority quorum Board shall always be needed decide any action. It shall meet regularly properly discharge its functions. It shall also ensure that independent views in Board meetings 19

20 shall be given full consideration all such meetings shall be duly minuted.12 The members Board should attend its regular special meetings in person or through teleconferencing. Independent direcrs should always attend Board meetings.13 The meetings Board may be conducted through modern technologies such as, but not limited, teleconferencing video conferencing as long as direcr who is taking part in said meetings can actively participate in deliberations on matters taken up rein: Provided, that every member Board shall participate in at least fifty percent (50%) shall physically attend at least twenty five percent (25%) all Board meetings every year: Provided, furr, that in case a direcr who is unable physically attend or participate in Board meetings via teleconferencing or video conferencing, corporate secretary shall execute a notarized certification attesting that said direcr was given agenda materials prior meeting that his/her comments/decisions reon were submitted for deliberation/discussion were taken up in actual Board meeting, that submission said certification shall be considered compliance with required fifty percent (50%) minimum attendance in Board meetings.14 The Bank shall submit SEC, on or before January 5 following year, an Advisement Letter on direcrs attendance in Board meetings update pertinent portion Annual Corporate Governance Report (ACGR).15 Meetings Board may be held at any place within Philippines. As far as practicable, materials for Board meeting should be provided at least 3 banking days before meeting16. B. Direcrs 1. Qualifications a Direcr17 A direcr shall have qualifications: following minimum a. He shall be at least twenty-five (25) years age at time his election or appointment; b. He shall be at least a college graduate or have at least five (5) years experience in business; c. He must have attended a special seminar on corporate governance for board direcrs conducted or accredited by BSP: Provided, That incumbent 12 Sec. 2 BSP Cir. No SEC Memo Cir. No. 6 s Sec. 1 BSP Cir. No. 749; MORB Sec. x SEC Memorum Circular No. 1 s PSBank ASEAN Corporate Governance Scorecard (ACGS) 17 Sec. 1 BSP Cir. No. 749; MORB Sec. x

21 direcrs as well as those elected after 17 September 2001 must attend said seminar on or before 30 June 2003 or within a period six (6) months from date election for those elected after 30 June 2003, as case may be, Provided furr that following persons are exempted from attending said seminar18: 1) Foreign nationals who have attended corporate governance training covering core pics in BSPrecommended syllabus certified by Corporate Secretary as having been made aware general responsibility specific duties responsibilities Board Direcrs specific duties responsibilities a direcr; 2) Filipino citizens with recognized stature, influence reputation in banking community whose business practices st as testimonies good corporate governance; 3) Distinguished Filipino foreign nationals who served as senior ficials in central banks /or financial regulary bodies, including former Monetary Board members; or 4) Former Chief Justices Philippine Supreme Court. d. He must be fit proper for position a direcr Bank. In determining wher a person is fit proper for position a direcr, following matters must be considered: Integrity/probity; physical/mental fitness; relevant education/financial literacy/training; possession competencies relevant job, such as knowledge experience, skills, diligence independence mind; sufficiency time fully carry out responsibilities. In assessing a direcr s integrity/probity, consideration shall be given direcr s market reputation, observed conduct behavior, as well as his ability continuously comply with company policies applicable laws regulations, including market conduct rules, relevant requirements stards any regulary body, pressional body, clearing house or exchange, or government any its 19 instrumentalities/agencies. The members Board shall possess foregoing qualifications for direcrs in addition those required or prescribed under R.A. No or existing applicable laws regulations. An elected direcr has burden prove that he/she possesses all foregoing minimum qualifications none disqualifications by submitting documentary requirements. Non-submission complete documentary requirements within prescribed period (as herein enumerated under Part III Reporrial BSP Cir. No. 840 BSP Cir. No. 889 dated 2 November

22 Requirements)shall be construed as his/her failure establish his/her qualifications for position result in his/her removal from Board Independent Direcrs21 An independent direcr shall refer a person who a. is not or has not been an ficer or employee Bank, its subsidiaries or affiliates or related interests during past five (5) years counted from date his election; b. is not a direcr or ficer related companies Bank s majority sckholder; c. is not a sckholder owning more than two percent (2%) or with shares sck sufficient elect one seat in Board, or in any its related companies or its majority corporate shareholders; d. is not a relative, legitimate or common-law any direcr, ficer or majority shareholder Bank or any its related companies. For this purpose, relatives refer spouse, parent, child, bror, sister, parent-in-law, son-/daughter-in-law, bror-/sister-in-law22; e. is not acting as a nominee or representative any direcr or substantial shareholder hank, any its related companies or any its substantial shareholders; f. is not retained as pressional adviser, consultant, agent or counsel institution, any Its related companies or any its substantial shareholders, eir in his personal capacity or through his firm; is independent management free from any business or or relationship, has not engaged does not engage in any transaction with institution or with any its related companies or with any its substantial shareholders, wher by himself or with or persons or through a firm which he is a partner or a company which he is a direcr or substantial shareholder, or than transactions which are conducted at arms-length could not materially interfere with or influence exercise his judgment. A regular direcr who resigns or whose term ends on day election shall only qualify for nomination election as an Independent Direcr after a two (2) year cooling f period. Persons appointed as Chairman Emeritus, Ex-Officio Direcrs/Officers or members any Executive Advisory Board, or orwise appointed in a capacity assist Board in performance its duties responsibilities shall be subject a one (1) year cooling-f period prior his qualification as an Independent Direcr BSP Cir. No. 887 dated 07 Ocber 2015 Sec. 1 BSP Cir. No. 749, as amended by BSP Cir. No. 757/Sec. 38 SRC IRR BSP Cir. No. 793 dated 08 April 2013 SEC Memo Cir. No. 9 S

23 3. Limits for Independent Direcrs24 In selecting independent direcrs, number types entities where cidate is likewise elected as such, shall be considered ensure that he will be able devote sufficient time effectively carry-out his duties responsibilities. a. There shall be no limit in number covered companies that a person may be elected as Independent Direcr (ID), except in business conglomerates where an ID can be elected only five (5) companies conglomerate, i.e. parent company, subsidiary or affiliate; b. ID can serve as such for five (5) consecutive years, provided that service for a period at least six (6) months shall be equivalent one (1) year, regardless manner by which ID was relinquished or terminated; c. After completion 5-year service period, an ID shall be ineligible for election as such in same company unless ID has undergone a cooling f period two (2) years, provided, that during such period, ID concerned has not engaged in any activity that under existing rules disqualifies a person from being elected as ID in same company; d. An ID re-elected as such in same company after cooling f period can serve for anor five (5) consecutive years; e. After serving as ID for ten (10) years, ID shall be perpetually barred from being elected as such in same company, without prejudice being elected as ID in or companies outside business conglomerate. 4. Disqualifications Direcrs25 Without prejudice specific provisions prescribing disqualifications for direcrs, following are disqualified from becoming direcrs: law a. Permanent Disqualification 1) Persons who have been convicted by final judgment a court for fenses involving dishonesty or breach trust such as, but not limited, estafa, embezzlement, exrtion, forgery, malversation, swindling, ft, robbery, falsification, bribery, violation B.P. Blg. 22, violation Anti-Graft Corrupt Practices Act prohibited acts transactions under Section 7 R.A. No (Code Conduct Ethical Stards for Public Officials Employees); 2) Persons who have been convicted by final judgment a court sentencing m serve a maximum term imprisonment more than six (6) years; 24 SEC Memo Cir. No. 9 S2011, as included in Sec. 1 BSP Cir. No MORB Sec. x143 23

24 3) Persons who have been convicted by final judgment court for violation banking laws, rules regulations; 4) Persons who have been judicially declared insolvent, spendthrift or incapacitated contract; 5) Direcrs, ficers or employees closed Banks who were found be culpable for such institution s closure as determined by Monetary Board; 6) Direcrs ficers Banks found by Monetary Board as administratively liable for violation banking laws, rules regulations where a penalty removal from fice is imposed, which finding Monetary Board has become final execury; or 7) Direcrs ficers Banks or any person found by Monetary Board be unfit for position direcrs or ficers because y were found administratively liable by anor government agency for violation banking laws, rules regulations or any fense/violation involving dishonesty or breach trust, which finding said government agency has become final execury. The following are additional disqualifications under Article 3.E.1 SEC Memo No. 6 S2009: 1) Any person convicted by final judgment or order by a competent judicial or administrative body any crime that (a) involves purchase or sale securities, as defined in Securities Regulation Code; (b) arises out person s conduct as an underwriter, broker, dealer, investment adviser, principal distribur, mutual fund dealer, futures commission merchant commodity trading advisor, or floor broker; (c) arises out his fiduciary relationship with a bank, quasi-bank, trust company, investment house or as affiliated person any m; 2) Any person who, by reason misconduct, after hearing, is permanently enjoined by a final judgment or order Commission or any court or administrative body competent jurisdiction from: (a) acting as underwriter, broker, dealer, investment adviser, principal distribur, mutual fund dealer, futures commission merchant, commodity trading advisor, or floor broker; (b) acting as direcr or ficer a bank, quasi-bank, trust company, investment house, or investment company; (c) engaging in or continuing any conduct or practice in any capacities mentioned in subparagraphs (a) (b) above, or willfully violating laws that govern securities banking activities. The disqualification shall also apply if such person is currently subject an order Commission or any court or administrative body denying, revoking or suspending any registration, license or permit issued him under Corporation Code, Securities Regulation Code or any 24

25 3) 4) 5) 6) 7) or law administered by Commission or Bangko Sentral ng Pilipinas (BSP), or under any rule or regulation issued by Commission or BSP, or has orwise been restrained engage in any activity involving securities banking; or such person is currently subject an effective order or a self-regulary organization or association with a member or participant organization. Any person convicted by final judgment or order by a court or competent administrative body an fense involving moral turpitude, fraud, embezzlement, ft, estafa, counterfeiting, misappropriation, forger, bribery, false affirmation, perjury or or fraudulent acts; Any person who has been adjudged by final judgment or order Commission, court, or competent administrative body have willfully violated, or willfully aided, abetted, counseled, induced or produced violation any provision Corporation Code, Securities Regulation Code or any or law administered by Commission or BSP, or any its rule, regulation or order. Any person earlier elected as independent direcr who becomes an ficer, employee or consultant Bank; Any person found guilty by final judgment or order or a foreign court or equivalent financial regulary authority acts, violations or misconduct similar any acts, violations or misconduct enumerated in paragraphs 1) 5) above; Conviction by final judgment an fense punishable by imprisonment for more than six (6) years, or a violation Corporation Code committed within five (5) years prior date his election or appointment. b. Temporary Disqualification 1) 2) Persons who refuse fully disclose extent ir business interest or any material information BSP when required pursuant a provision law or a circular, memorum, rule or regulation BSP. This disqualification shall be in effect as long as refusal persists; Direcrs who have been absent or who have not participated for whatever reasons in more than fifty percent (50%) all meetings, both regular special, Board during ir incumbency, direcrs who failed physically attend for whatever reasons in at least twenty-five percent (25%) all Board meetings in any year, except that when a notarized certification executed by corporate secretary has been submitted attesting that said direcrs were given agenda materials prior meeting that ir comments/decisions reon were submitted for 25

26 3) deliberation/discussion were taken up in actual Board meeting, said direcrs shall be considered present in Board meeting. This disqualification applies only for purposes immediately succeeding election; Persons who are delinquent in payment ir obligations as defined hereunder: (a) Delinquency in payment obligations means that an obligation a person with a Bank where he/she is a direcr or ficer, or at least two (2) obligations with or Banks/FIs, under different credit lines or loan contracts, are past due pursuant MORB Sec. X306; (b) Obligations shall include all borrowings from a bank obtained by: i. A direcr or ficer for his own account or as representative or agent ors or where he/she acts as a guaranr, endorser or surety for loans from such FIs; ii. The spouse or child under parental authority direcr or ficer; iii. Any person whose borrowings or loan proceeds were credited account, or used for benefit a direcr or ficer; iv. A partnership which a direcr or ficer, or his/her spouse is managing partner or a general partner owning a controlling interest in partnership; v. A corporation, association or firm wholly-owned or majority capital which is owned by any or a group persons mentioned in foregoing Items i, ii iv. This disqualification shall be in effect as long as delinquency persists. 4) 5) 6) Persons who have been convicted by a court for fenses involving dishonesty or breach trust such as, but not limited, estafa, embezzlement, exrtion, forgery, malversation, swindling, ft, robbery, falsification, bribery, violation B.P. Blg. 22, violation Anti-Graft Corrupt Practices Act prohibited acts transactions under Section 7 R.A. No. 6713, violation banking laws, rules regulations or those sentenced serve a maximum term imprisonment more than six (6) years but whose conviction has not yet become final execury; Direcrs ficers closed Banks pending ir clearance by Monetary Board; Direcrs disqualified for failure observe/discharge ir duties 26

27 7) 8) 9) 10) 11) 12) 13) responsibilities prescribed under existing regulations. This disqualification applies until lapse specific period disqualification or upon approval by Monetary Board; Direcrs who failed attend required special seminar on corporate governance for Board direcrs conducted or accredited by BSP. This disqualification applies until direcr concerned had attended such seminar; Persons dismissed/terminated from employment for cause. This disqualification shall be in effect until y have cleared mselves involvement in alleged irregularity or upon clearance, on ir request, from Monetary Board after showing good justifiable reasons, or after lapse five (5) years from time y were ficially advised by appropriate department SES ir disqualification; Those under preventive suspension; Persons with derogary records as certified by, or on ficial files, judiciary, NBI, Philippine National Police (PNP), quasi-judicial bodies, or government agencies, international police, monetary authorities similar agencies or authorities foreign countries for irregularities or violations any law, rules regulations that would adversely affect integrity direcr/ficer or ability effectively discharge his duties. This disqualification applies until y have cleared mselves alleged irregularities/violations or after a lapse five (5) years from time complaint, which was basis derogary record, was initiated; Direcrs ficers Banks found by Monetary Board as administratively liable for violation banking laws, rules regulations where a penalty removal from fice is imposed, which finding Monetary Board is pending appeal before appellate court, unless execution or enforcement re is restrained by court; Direcrs ficers Banks or any person found by Monetary Board be unfit for position direcr or ficer because y were found administratively liable by anor government agency for violation banking laws, rules regulations or any fense/violation involving dishonesty or breach trust, which finding said government agency is pending appeal before appellate court, unless execution or enforcement re is restrained by court; Direcrs ficers Banks found by Monetary Board as administratively liable for violation banking laws, rules regulations 27