Banks Remuneration Rules

Formation and Responsibilities of the Nomination and Remuneration Committee 7. Banks shall have a Nomination and Remuneration Committee comprising of at least three members. The composition and responsibilities of the committee shall be consistent with SAMA’s Key Principles of Governance in Financial Institutions and any other requirements set by any regulatory authority, as applicable. 8. The General Assembly, upon the proposal of the Board, shall lay down the terms of reference of the Nomination and Remuneration Committee, which should include its work controls, responsibilities, procedures for appointing committee members, their membership duration and remuneration. A copy of the terms of reference of the Nomination and Remuneration Committee shall be submitted to SAMA along-with the Compliance Report for every cycle. 9. The Nomination and Remuneration Committee should work closely with the bank’s Risk Management Committee and/or the Chief Risk Officer in the evaluation of the incentives created by the remuneration system. 10. The Nomination and Remuneration Committee shall review the implementation of the Remuneration Policy at-least on a half-yearly basis to ensure achievement of its stated objectives. 11. The Nomination and Remuneration Committee shall closely review and monitor the remuneration for highest paid staff to verify compliance with the Remuneration Policy, and to avoid misuse. 2.3 Senior Management Responsibilities 12. Senior management should implement the remuneration system that promotes effective governance, sound remuneration practices, ethical behavior and comply with laws, regulations, and internal conduct standards. 13. Senior Management shall be responsible for the following: a. Promote, develop and communicate conduct expectations and clearly link remuneration and conduct standards, including as part of the performance assessment process and ensure that the potential consequences of misconduct on remuneration are clearly explained to all employees. b. Follow-up on the publication of the desired aspirations of every department in the bank regarding ethical behavior and work practices that are in compliance with the laws, regulations and internal standards of behavior, and the application and achievement of these aspirations. c. Identify, monitor and report on relevant indicators of misconduct risk in every department in the bank, as well as monitor the role of each department in the bank in escalating and remediating identified deficiencies or other important matters in an appropriate and timely fashion, in such a way as to allow inclusion of relevant feedback and changes in the performance assessment process if needed. 14. Senior management shall submit a report to the Nomination and Remuneration Committee on a semi-annual basis at least on measures taken and steps to be taken within the framework of applying the Banks Remuneration Rules issued by SAMA and any relevant Laws, Regulations, Principles and Standards. 2.4 Misconduct 15. Banks should have an internal definition of misconduct based on their characteristics, values and business, which promotes adherence to legal, professional, internal conduct and ethical standards. 16. The bank’s risk appetite statements should reflect clear and well-understood values and conduct standards that are tailored and cascaded to individual business units and taken into account when assessing performance and promotion potential. Individuals should be held accountable for ensuring that their own conduct is consistent with these standards.