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Corporate Governance Report 2009

Mashreqbank Corporate Governance rules are based on Ministerial Resolution Number 518 of 2009, industry best practices, Law Number 8 of UAE Companies Law, UAE Central Bank regulations, and the Securities and Commodities Authority code on Corporate Governance. 

Through a good Corporate Governance structure, we seek to balance the financial success, controls, transparency and accountability. The Bank has a clear documented delegation of authority for administrative and credit approvals. The delegation of authority is judiciously provided based on experience, performance, track record and the position of individuals. Any misuse of authority or acts of negligence are highlighted through regular audits and credit reviews which are escalated up to board level depending upon the seriousness of the issue.

The Bank has well established policies and procedures documented in various manuals and supported by detailed Standard Operating and desk-top Procedures. The Bank has a written Code of Conduct to be followed by all employees. This Code of Conduct is signed by employees and its adherence is monitored closely.

A detailed qualitative disclosure on risk management policy and controls is provided through a separate Note on Pillar-3 Disclosure attached to our annual financial statements available on Bank’s website. Please refer to this note for further information on our policies. For accounting policies, please refer to Note Numbers 3 and 4 published in our consolidated financial statements which are available on the bank’s website. Similarly, a comprehensive qualitative note (Note Number 42) on risk management policy is also published along with the annual consolidated financial statements that may be referred for further information on risk management issues.

The bank’s detailed financial statements prepared in accordance with International Financial Reporting Standards (IFRS) are posted on its website which can be referred to for various pertinent disclosures.

Corporate Governance is high on Mashreq’s agenda and we have a page on our website dedicated to our Corporate Governance practices.

Board of Directors composition 

The bank’s Board consists of 7 Directors. The Chairman and 5 Directors are Non-Executive Directors and only the CEO is an Executive Director. Two Directors out of seven are independent Directors who are not related to the major shareholders or Chairman or the CEO of the Bank.

The Executive Director and CEO is the son of the Chairman.  Another son of the Chairman and two of his nephews are also Board members.

All Directors were elected by the shareholders of the company and have a 3-year term.  All the Directors are well-qualified, experienced professionals and add tremendous value to the overall management capability. These Directors are successful businessmen in their own right and they also hold very responsible positions in public life.

All the directors have declared their interest and directorships at the time of joining the Board and also their dealings in bank’s securities are on full disclosure and arms length basis.

The names of the Directors and positions held by them are listed here.

The Board of Directors meet at least once every Quarter.  They have delegated certain powers to CEO for effective day-to-day management.  All important management issues are raised at Board level where the bank’s senior management presents details to the Board.

Remuneration of the Board 

The remuneration of Board members consists of Director’s fee which is a fixed amount for the year and is paid annually after closure of the year. For 2009, fee payable is AED 2.15 Million which is 0.2% of Net Profit.

In addition, the Executive Director and CEO is paid a monthly salary and he is entitled for performance bonus also.

Board Meetings

The Board of Directors meet minimum once every Quarter. During 2009, Mashreqbank Board had 5 meetings. 

Board Committees

Audit Committee of the Board: The Audit Committee of the Board consists of the following 3 members, 2 of which are Non-Executive Directors 

  1. Mr. Mohamed Abdulla Ahmed Al Ghurair
  2. H.E. Abdul Aziz Abdullah Al Ghurair
  3. Mr. Abdulla Mohamed Ibrahim Obaidalla 

The Audit Committee, during the year, meets the external auditor and provides them the recommendations on the overall audit plan. They also discuss the auditor’s management letter and the management’s response, as well as, corrective actions taken. They review the quarterly financials and approve Quarterly and Annual financial reports of the bank. The Audit Committee also meet’s the bank’s Head of Audit Compliance and Review Group to review their charter, scope of work, and the organization structure. The inspection reports from regulators are also presented to the Audit Committee for their review and action. 

Remuneration and Compensation Committee of the Board: The following 3 Non-Executive members are members of this Committee 

  1. Mr. Ali Rashed Ahmad Lootah
  2. Mr. Abdul Rahman Ahmed Lootah
  3. Mr. Abdulla Mohamed Ibrahim Obaidalla

This Committee meets as and when required but at least once a year. The main task of this Committee is to review the reward strategy of the bank and approve the annual increments and bonus recommended by management.

The Board Committees are an important element in the overall corporate governance framework.  There are various management committees which have been established by the Board and have delegated authority to manage the bank’s affairs on day-to-day basis.

Management Committees 

The Bank’s Executive Management Committee consists of CEO and his Direct Reports. This Committee meets on monthly basis and discusses issues concerning the Bank and takes required decisions.  The following are sub-Committees of the Executive Management Committee of the bank and derive their authority through the Board’s delegation to CEO. These sub-Committees are specific to a function and all concerned functional heads are members of these Committees.

  1. The Audit and Compliance Committee - ACC: This Committee helps the Board Audit Committee and considers issues of internal control, internal audit, and risk identification. Response gaps, if any, to internal audit findings are also reviewed by this committee. This committee meets every month.
  2. Asset and Liability Committee - ALCO:  ALCO is responsible for monitoring and managing the bank’s assets and liabilities with the primary objective of managing liquidity to ensure obligations and applicable regulatory requirements are met on an on-going basis while also mitigating interest rate risks. ALCO meets every month.
  3. Information Security Committee - ISC: This is also a high level management committee to review and administer information security infrastructure in the bank. This Committee meets every month.
  4. Risk Committee: This Committee derives its powers from the Board delegation. It sets risk policies and programs. It also ensures their adherence. The Committee meets as and when required.
  5. Investment Committee: The Investment Committee meets as and when required. The primary focus of the Committee is to approve the bank’s investments of funds in securities. It also reviews the performance of the bank’s investments as compared to benchmarks established by them.

External Auditors: Deloitte (a member of the Deloitte Touche and Tohmatsu) were appointed external auditors for Mashreqbank Group consolidation and parent company audit by the shareholders in their meeting held on March 15, 2009 on a fee of AED 640,000.  In addition, the auditors of our overseas locations and subsidiaries are paid separately.

General: During the year, Mashreq share trading was very thin and only 8596 shares representing 0.005% of total shares were sold / purchased.  None of the directors or major shareholders sold or purchased any of their holdings.