Internal governance | OTP banka

The Management Board, consisting of six members, runs the operations of OTP banka d.d.  autonomously and on its own responsibility. Management Board members are appointed for a five-year period and may be re-appointed.
 
The Management Board reports to the Supervisory Board on all matters for which the reporting obligation is prescribed by the applicable regulations. Moreover, the Management Board informs the Supervisory Board about any other matters determined by a resolution of the Supervisory Board.
 
In performing their functions, members of the Management Board shall at all times comply with the requirements of the Banking Act (hereafter: the ZBan-3) applicable to members of the Management Board, in addition to fulfilling the following duties and tasks:

• to act in accordance with the requisite professional diligence and, in particular, to ensure that the Management Board carries out its work in accordance with the provisions of the ZBan-3
• to act in an open, fair and independent manner in order to effectively assess the decisions of the senior management concerning the running of OTP banka d.d.
• to act in accordance with the highest ethical standards of governance, taking into account the prevention of conflicts of interest
• to dedicate sufficient time to their duties, so that these are carried out effectively, taking into account the requirements of the ZBan-3

In accordance with the ZBan-3, the Management Board shall set up a risk management function that reports directly to the former and that is functionally and organizationally segregated from the other functions of OTP banka d.d. in which conflicts of interest could arise vis-à-vis the risk management function. To that end, it must take into account the nature, scope and complexity of the activities OTP banka d.d. performs.
 
The Management Board shall establish and implement the type of internal governance arrangements set out in the ZBan-3 that facilitate the effective and prudent governance of OTP banka d.d. based on clearly defined competences and responsibilities, and on policies and measures to prevent conflicts of interest.
 
Within the scope of its powers and duties, the Management Board is responsible for defining, adopting and regularly reviewing the strategy and policy for taking up and managing the risks to which OTP banka d.d.  is or could be exposed in its operations, including risks from the macroeconomic environment in which OTP banka d.d.  operates, taking into account the current business cycle.
 
For making decisions concerning the operations of individual segments of OTP banka d.d., the Management Board has appointed various committees, such as the Bank Credit Committee, the Problem Loan Committee, the Liquidity Committee, the Assets and Liabilities Committee (ALCO), the Operational Risk Committee, and the Fit and Proper Committee (the committee responsible for assessing the suitability of officers holding key positions, including members of the management and supervisory bodies).
 
Further details concerning the composition of the Management Board as well as the composition and work of Management Board committees are set out in the Annual Report of the Group and the Bank.

The Supervisory Board of the Bank shall consist of at least 6 (six) members and maximum of 11 (eleven) members.

The Supervisory Board exercises the powers vested in it by the Companies Act (hereafter: the ZGD-1), the ZBan-3 and other regulations. Its work is regulated by the Rules of Procedure of the Supervisory Board.

During the period of performing their functions, members of the Supervisory Board shall at all times fulfil the requirements applicable to their appointment, while at the same time acting in accordance with the requisite professional diligence and, in particular, ensuring that the Supervisory Board carries out its work in accordance with the provisions of the applicable regulations.

Further details concerning the work of the Supervisory Board are set out in the 2017 Annual Report of the Group and the Bank.

In accordance with the relevant provisions of the ZGD-1 and the ZBan-3, the Supervisory Board has established the following committees: the Audit Committee, the Remuneration Committee, the Nomination Committee, the Risk Committee.

Supervisory Board committees are consultative bodies of the Supervisory Board. Each of them has at least three members, who are at the same time members of the Supervisory Board. Supervisory Board committees carry out their work in accordance with the respective Rules of Procedure, and typically meet four times a year or as required.

Audit Committee

Pursuant to the ZGD-1, the responsibilities of the Audit Committee are as follows:

Remuneration Committee

In accordance with the ZBan-3, the Remuneration Committee has the following responsibilities:

 
Nomination Committee

In accordance with the ZBan-3, the Nomination Committee has the following responsibilities:

Risk Committee

In accordance with the ZBan-3, the Risk Committee has the following responsibilities:

 

OTP banka has in place the following independent control functions: an internal audit function, a compliance function, an anti-money laundering and counter-terrorist financing function, and a risk management function.

Internal Audit Centre 

The Internal Audit Centre of OTP banka exercises its powers and performs its work in compliance with the ZBan-3, the International Standards for the Professional Practice of Internal Auditing, the Code of Ethics of Internal Auditors, and the Code of Principles of Internal Auditing. Its duties and competences are set out in the Charter of Internal Auditing, while the method of its work is regulated by the Rules Governing the Work of Internal Auditors. The Internal Audit Centre is responsible for coordinating the work of all internal auditors of the OTP banka Group, and for the transfer of good practice. The internal auditors must give assurance of their organizational independence. The main duty of the Internal Audit Centre is to give the Management and Supervisory Boards an impartial assurance with respect to the efficiency of risk management, taking into consideration an assessment of whether the key risks are properly managed and the system of internal controls is effectively implemented.

Compliance Office 

As part of its recent organizational changes, and in accordance with the provisions of the ZBan-3, OTP banka has set up the Compliance Office as an independent organizational unit that reports directly to the Management Board and is functionally and organizationally segregated from the other functions of OTP banka in which conflicts of interest could arise vis-à-vis the Compliance Office, with the head of the Compliance Office having direct access to both the Supervisory Board and the Supervisory Board committees.
 
As stipulated in the ZBan-3, the main task of the Compliance Office is to identify compliance risks to which OTP banka is or could be exposed in its operations due to the breach of valid regulations or requirements of the Bank of Slovenia or the European Central Bank, or due to the breach of valid agreements, prescribed practices or ethical standards that could impact OTP banka´s revenues, capital or reputation. The Compliance Office reports its findings to the Management and Supervisory Boards and, if appropriate, to the Risk Management Division.

Anti-Money Laundering and Counter-Terrorist Financing Office 

In OTP banka, activities and measures with respect to the prevention of money laundering and terrorist financing are carried out by the Anti-Money Laundering and Counter-Terrorist Financing Office in accordance with the Prevention of Money Laundering and Terrorist Financing Act.

OTP banka has also set up a system for reporting any breach of applicable regulations and any suspicion of harmful practices undertaken by employees (whistleblowing). The system referred to above makes it possible for OTP banka employees to internally report any breach of applicable regulations or internal rules via independent and autonomous reporting lines. OTP banka has adopted measures to prevent any retaliatory acts, discrimination or other forms of inappropriate treatment of employees who have reported breaches.

OTP banka has drafted and is implementing its Policy on the Selection of Suitable Candidates for a Management Body (hereafter: the Policy) in accordance with the relevant provisions of the applicable Banking Act (ZBan-3). The Policy, which has been approved by the OTP banka Supervisory Board, substantially addresses issues relating to the selection of candidates for membership of a OTP banka management body (either the Supervisory Board or the Management Board).

The Policy takes account of the provision of the first paragraph of Article 67 of the Bank of Slovenia´s Regulation on Internal Governance Arrangements, the Management Body and the Internal Capital Adequacy Assessment Process for Banks and Savings Banks (hereafter: the Regulation), pursuant to which the Supervisory Board must comply with the provisions of the Policy when appointing and dismissing members of the Management Board. In accordance with Point 1 of the first paragraph of Article 68 of the Regulation, the person proposing the candidates for membership of the Supervisory Board must present the candidates to the Shareholders´ Meeting before the latter makes a decision on the appointment of Supervisory Board members. Such a presentation must, among other things, include a statement that the candidate selection process has been carried out in compliance with the Policy.

Given that members of a OTP banka management body have a crucial role in safeguarding the interests of OTP banka, they must be properly qualified and experienced, as well as sufficient in number, to be able to execute in a reliable manner, both individually and collectively as a body, the tasks entrusted to them, while ensuring that their private interests are aligned with the long-term interests of OTP banka. In view of their responsibility for running and supervising the operations of OTP banka, the members of a management body are expected to have specific professional and personal competence. The required know-how, skills and experience of each member of a management body separately and in combination with other members of the management body must be such as to ensure that the transactions carried out by OTP banka, the risks to which it is exposed, and its governance structure are understood to the extent necessary to reach professional, well-thought-out and competent decisions for the purpose of properly managing and supervising OTP banka. Aside from professional competence, candidates for membership of a OTP banka management body must demonstrate appropriate personal attributes. All candidates appointed to a management body must be reliable, have a good reputation, and be experts in their respective professional fields.

While the requirements that the candidates for a particular position must meet and the personal characteristics they must have depend on the specifics of that position and the conditions applicable to it, they are directly determined by the nature, scope, volume and complexity of transactions OTP banka is engaged in (it must be noted in this regard that OTP banka is considered to be a bank of systemic importance for the Slovene banking system and is defined as such within the framework of the Single Supervisory Mechanism – SSM). 

The Bank has an interest to follow the gender equality initiatives, in particular the activities of the European Commission, that is putting the topic on the agenda as “equality in decision making” is one of the priorities of the strategic engagement for gender equality; cooperating with and supporting all groups concerned to design and implement EU-wide activities on gender balance in leadership positions; collecting, analysing and disseminating data, trends and information on women and men in decision-making; increasing awareness and promoting networking and the exchange of good practices among all groups concerned.

Pursuant to the above, the Nomination Committee set as a target for the gender that is underrepresented in the Management Body in a way that the Bank shall put reasonable efforts to improve the balance over the course of the next five (5) years. The banks policy to meet this target (increasing the gender balance) shall be implemented already in the hiring/selection process for new candidates for Management Body. To increase the underrepresented gender in practice when deciding between a female and male candidate the one who represents at that point in time the underrepresented gender shall be selected.
 

Diversity, Equity, Inclusion & Belonging are concepts, being fundamental elements to understand the complexity of how each person feels represented, is treated fairly, has access to equitable opportunities and feels valued and supported therefore it is in OTP banka policy of diversity, equality, inclusion and belonging entered into force on 1 January 2023.

Diversity is acknowledging understanding, accepting, valuing, and celebrating differences among people. It occurs in areas such as gender, race, religion, sexual preferences, age, disability, family responsibilities, marital status, and status as a parent. However, it is not limited to these examples. Diversity also exists between individuals in the roles they perform, where they are from and their socio-economic status.

In OTP banka we consider that these are key aspects on building a more human, resilient, innovative, and sustainable bank. Our aim is to ensure that our business policies, processes, and behaviors promote diversity, inclusion, equity and belonging and create an environment where individual differences are valued.

This policy sets out OTP banka’s commitment to Diversity, Inclusion, Equity and Belonging. A Diverse workforce, Inclusive culture, Equitable treatment of employees and creating a work environment with a sense of Belonging help us to fulfil our purpose to achieve the strategic objectives and follow the strategic pillars of the bank’s Business Strategy and People Strategy.

In OTP banka, we seek to create a diverse, inclusive, equitable, supportive, and safe environment where we operate in a way that enriches our workplace. We are committed to:

The DEIB Policy is reflected in the way staff work and operate and is supported by bank’s Business Strategy, People Strategy, Code of Conduct, and several other policies and rulebooks that limit potential unconscious bias, enable flexible work practices and support employees and their changing needs.

To achieve a diverse and inclusive environment, OTP banka supports several programs and practices that promote diversity, equality, inclusion and belonging. The bank includes all this in the field of recruitment and selection process, remuneration policy, career development and performance management, key Talents and Succession planning, trainings, gender diversity, voice of employees, internal communication, prohibition of discrimination, sense of Inclusion and Belonging…

The implementation of the DEIB Policy is monitored with the help of measurable key performance indicators and key risk indicators determined by the Employee Development Strategy and with regular reviews and amendments to the bank's internal acts related to the areas of diversity, equality, inclusion and belonging topic.