Bahrain Islamic Bank B S C : BisB Corporate Governance Report 2023

ANNUAL REPORT | 2023

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B I S B . About the Report

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CORPORATE GOVERNANCE REVIEW

Corporate Governance Framework

Bahrain Islamic Bank B.S.C. ("BisB" or the "Bank") is committed to upholding the highest standards of corporate governance by way of balancing entrepreneurship, regulatory compliance, and industry best practices, while creating value for all stakeholders. It also involves having the right checks and balances in place throughout the organization to ensure that the Bank's processes are within an adequate, efficient, and robust internal control and governance framework. The Corporate Governance Policy was amended to take into account all revisions made as per the revised HC Module published by the CBB in 2023.

Statement of Responsibility

The Board of Director (the "Board") is ultimately accountable to the shareholders for the creation and delivery of strong sustainable financial performance and long- term shareholder value through strategic initiatives. The Chairman is responsible for leading the Board, ensuring its effectiveness, monitoring the performance of the Executive Management and maintaining a dialogue with the Bank's shareholders. The Board has established the following Committees to assist it in carrying out its responsibilities:

1. Executive Committee ("EC");
2. Audit Committee ("AC");
3. Nomination, Remuneration, Governance, and Sustainability Committee ("NRGSC");
4. Board Risk and Compliance Committee ("BRCC"); and
5. Board Independent Committee ("BIC")* .

*The Board Independent Committee has been formed to handle an advisory role and provide advice and recommendations to the Board of Directors on issues related to integration and synergies between National Bank of Bahrain (NBB) and Bahrain Islamic Bank (BisB). BisB's corporate governance framework is built on a code of conduct, policies, procedures, internal controls, risk management, Shari'a review and audit, internal and external audit and compliance functions. The framework is based on effective communications, transparent disclosures, performance measurement and accountability. An independent Internal Audit function is established within the Bank that reports functionally to the AC.

Code of Conduct

BisB conducts its business in accordance with the highest standards of ethical behavior. A Business Code of Conduct has been developed, based on the Central Bank of Bahrain ("CBB") Principles of Business regulations, to govern the personal and professional conduct of the directors and employees of the Bank. The code is based on the following principals:

1. Integrity;

2. Conflicts of Interest;

1. Due Skill, Care and Diligence;
2. Confidentiality;
3. Market Conduct;
4. Customer Assets;
5. Customer Interests;
6. Relations with Regulators;
7. Adequate Resources;
8. Management, System and Controls.

The requirements under each of the above principles are made available to the Board and employees of the Bank. The Board monitors any exceptions to the above principles by way of reviewing formal reports issued to the Board's AC.

Compliance

Compliance is an independent function that reports to the BRCC. The Compliance function, guided by the Board's approved policies, works with various business and control functions of the Bank

to ensure compliance with the applicable rules and regulations of the relevant regulatory authorities. Given the digital business strategy of the Bank, as well as the expanding regulatory scrutiny and enforcement, the Compliance Department of the Bank is keeping up with the digital advancements by participating in the risk management process from regulatory compliance perspective.

Communications

BisB conducts all communications with its stakeholders in a professional, honest, transparent, understandable, accurate and timely manner. Main communication channels include the annual report, website, and regular announcements in the appropriate local media.

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Board of Directors Composition*

No.	Director	Designation	Start Date	Term
1.	Dr. Esam Abdulla Fakhro	Non-Executive Director	23 Mar 2016	Third
2.	Mr. Khaled Yusuf AbdulRahman	Non-Executive Director	23 Mar 2016	Third
3.	Mr. Usman Ahmed**	Executive Director	11 January 2023	First
4.	Mr. Mohammed Abdulla Nooruddin	Independent Director	21 Mar 2019	Second
5.	Mr. Khalid Abdulaziz Al Jassim	Independent Director	21 Mar 2019	Second
6.	Mr. Marwan Khaled Tabbara	Independent Director	21 Mar 2019	Second
7.	Mr. Saqer Abdulmohsin Al Sijari	Independent Director	28 Mar 2022	First
8.	Mr. Isa Hasan Maseeh	Executive Director	19 Apr 2020	Second
9.	Mr. Gaby Samir El Hakim***	Executive Director	11 January 2023	First
10.	Ms. Rana Abdulaziz Qambar****	Executive Director	22 May 2023	First

*10% of the Board Members is represented by women.

• In replacement of Mr. Jean-Christophe Durand.
• In replacement of Mr. Yaser Alsharifi.
• In replacement of Ms. Dana Buheji.

The detailed profiles of the Board members are available on the Bank's website.

Board of Directors' Responsibilities

The primary responsibility of the Board of Directors is to provide effective governance over the Bank's affairs for the benefit of its stakeholders and to balance the interests of its diverse constituencies, including associated concerns, employees, and other stakeholders. In all actions taken by the Board, the Directors are expected to exercise their business judgment in what they reasonably believe to be in the best interests of the Bank.

The Board will approve and oversee the implementation of the Bank's strategies and will review and approve the Bank's strategic plan. As part of its strategic review process the Board will review major action and business plans, set performance objectives, and oversee major investments, divestitures, and acquisitions. The Board is also ultimately responsible to ensure effective risk management function, regulatory compliance, adequate internal controls, preparation of financial statements as well as compliance with Shari'a rulings. Every year, the Board reviews the progress of the strategic plan.

One of the Board's most important responsibilities is identifying, evaluating, and selecting candidates for the Board of Directors. The Board will seek members from diverse professional backgrounds who combine a broad spectrum of experience and expertise with a reputation for integrity. Directors should have had experience in positions with a high degree of responsibility, be leaders in the companies or institutions with which they are affiliated and be selected based upon the contributions they can make to the Board.

The Board may not necessarily carry out all these responsibilities but should ensure that these have been delegated to various Board committees or Executive Management committees to act on their behalf and communicate periodic reports to the Board for their review.

Induction of New Directors

The Bank provides an orientation program for new Directors which includes presentations by senior management on the Bank's strategic plans, its significant financial, accounting and risk management issues, its compliance programs, its operations, its Code of Conduct, its management structure and executive officers and its internal and external auditors. A guideline for new Board members was created under a codified document called the "New Board Member Onboarding Guidelines". This document is in place to ensure that new Board members are able to fulfil their governance responsibilities and director duties, and most importantly adjust to the Bank as soon as possible.

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Code of Conduct

The Bank adopts a Code of Conduct and other internal policies and guidelines to comply with the laws, rules and regulations that govern the Bank's business operations. The Code of Conduct applies to all employees of the Bank as well as to Directors.

Review of Internal Control Processes and Procedures

The Audit Committee assists the Board in fulfilling its oversight responsibility relating to the performance of the internal audit function, which regularly reviews and ensures adherence to internal control processes and procedures.

Board Membership

The Board of Directors' membership term is three years, subject to renewal. The current term started in March 2022 and is expected to end in March 2025. Shareholders owning 10% or more of the share capital have the right to nominate a representative on the Board of Directors in proportion to the number of Board members. A secret ballot is held at the Ordinary General Meeting for electing the remaining Board members. The Board of Directors elect, by a secret ballot, a Chairman and Vice Chairman for a renewable term of three years.

Membership of the Board of Directors can be terminated in the following cases:

1. If a member fails to attend at-least 75% of the meetings without a reasonable excuse; 2. If he/she tenders his resignation in writing;

3. If he/she fails to fulfil any related conditions referred to the Bank's Articles of Association;

1. If he/she is appointed or elected in violation of the provisions of the CBB Law and/or Bahrain Commercial Companies Law;
2. If he/she abuses his/her membership for carrying on other business that competes with or is detrimental to the Bank's business;
3. If the shareholder who nominated him/her applies for his/her removal; or
4. If the shareholder who nominated him/her is no longer a shareholder or loses its eligibility to nominate a representative on the Board of Directors.

Board Meetings and Attendance

Minimum Number of Meetings Required = 4

Director	20 Feb	03 May	02 Aug	10 Sep	09 Oct	31 Oct	20 Nov	06 Dec	Attendance
23	23	23	23	23	23	23	23	Percentage
Dr. Esam Abdulla Fakhro									100%
Mr. Khaled Yusuf AbdulRahman									100%
Mr. Usman Ahmed*									100%
Mr. Mohammed Abdulla Nooruddin									100%
Mr. Khalid Abdulaziz Al Jassim									100%
Mr. Marwan Khaled Tabbara									100%
Mr. Saqer Abdulmohsin Al Sijari									100%
Mr. Isa Hasan Maseeh									100%
Mr. Gaby Samir El Hakim**									100%
Ms. Rana Abdulaziz Qambar***	-	-							100%

* In replacement of Mr. Jean-Christophe Durand. ** In replacement of Mr. Yaser Alsharifi.

*** In replacement of Ms. Dana Buheji.

Participated physically Participated via phone/video link

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Board Committees

Board Committee

Members

Objectives

Executive Committee (EC)

Mr. Usman Ahmed* (Chairperson)

Members:

1. Mr. Khalid Yousif Abdul Rahman

2.Mr. Gaby Samir El Hakim**

• Appointed on 11th January 2023 in replacement of Mr. Jean Christophe Durand. **Appointed on 11th January 2023 in replacement of Mr.
  Yaser Alsharifi.

The EC assists the Board of Directors in fulfilling their responsibilities with regards to financing and investments activities, as well as any other matters not delegated to a specific Board Committee.

Accordingly, the EC is empowered to approve specific credit and investment proposals, review budgets, plans and major initiatives for eventual submission to the Board for approval, and to monitor the Bank's performance against business plan objectives.

Audit Committee (AC)	Mr. Khalid Abdulaziz Al Jassim	The AC oversights the integrity and reporting of the
	(Chairperson)	Bank's quarterly and annual financial statements. It
		also covers review of audit findings, provisions, and
	Members:	impairments.
	1. Mr. Saqer Abdulmohsin Al
	Sijari
	2. Mr. Isa Hasan Maseeh

Nomination, Remuneration,	Dr. Esam Abdulla Fakhro
Governance, and	(Chairperson)
Sustainability Committee
(NRGSC)	Members:
	1. Mr. Mohamed Abdulla
	Nooruddin
	2. Mr. Usman Ahmed*
	3. Mr. Marwan Khaled Tabbara
	*Replacing Ms. Dana Buheji
	who resigned from BisB Board
	on 10th May 2023.

The NRGSC is responsible for developing and recommending changes from time to time in the Bank's nomination and remuneration policy, including the variable payment policy. It is also entrusted to identify and recommend persons occupying senior positions including Board members. Furthermore, the Committee also oversees Bank's governance related matters.

NRGSC is also responsible of ensuring the availability of a continuously growing awareness around Environmental, Social, and Governance (ESG) and sustainability areas.

	Board Risk and Compliance	Mr. Marwan Khaled Tabbara	The BRCC is formed to assist the Board of Directors
	Committee (BRCC)	(Chairperson)	in fulfilling their regulatory as well as fiduciary
			responsibilities towards the stakeholders. Furthermore,
		Members:	the Committee also oversees compliance with legal
		1. Mr. Mohamed Abdulla	and regulatory requirements.
		Nooruddin
		2.Mr. Khalid Abdulaziz Al
		Jassim
		3.Mr. Isa Hasan Maseeh
	Board Independent	Mr. Mohamed Abdulla	The Board Independent Committee of Bahrain Islamic
	Committee (BIC)	Nooruddin	Bank (BIC) which was initially formed to supervise the
		(Chairperson)	acquisition of BisB's shares has been reactivated to
			provide advice and recommendations to the Board of
		Members:	Directors on issues related to integration and synergies
		1.Mr. Khalid Abdulaziz Al	between National Bank of Bahrain (NBB) and Bahrain
		Jassim	Islamic Bank (BisB).
		2.Mr. Marwan Khaled Tabbara
		3.Mr. Saqer Abdulmohsin
		Al Sijari

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Executive Committee Meetings and Attendance

Minimum Number of Meetings Required = 4

Members	23 Jan	06 Mar	19 Jun	24 Aug	18 Sep	27 Nov	Percentage
23	23	23	23	23	23
Mr. Usman Ahmed*							100%
Mr. Khalid Yousif Abdul Rahman							100%
Mr. Gaby Samir El Hakim**							100%

• In replacement of Mr. Jean-Christophe Durand.
• In replacement of Mr. Yaser Alsharifi.

Participated physically

Participated via phone/video link

Audit Committee Meetings and Attendance

Minimum Number of Meetings Required = 4

Members	08 Feb	02 May	08 Jun	01 Aug	17 Sep	30 Oct	14 Dec Percentage
23	23	23	23	23	23	23
Mr. Khalid Abdulaziz Al Jassim							100%
Mr. Saqer Abdulmohsin Al Sijari							100%
Mr. Isa Hasan Maseeh							100%

Participated physically

Participated via phone/video link

Nomination, Remuneration, Governance, and Sustainability Committee Meetings and Attendance

Minimum Number of Meetings Required = 2

Members	01 Feb	15 Feb	15 Jun	13 Nov	Percentage
	23	23	23	23
Dr. Esam Abdulla Fakhro					100%
Mr. Mohammed Abdulla Nooruddin					100%
Mr. Usman Ahmed*	-	-			100%
Mr. Marwan Khaled Tabbara					100%

* In replacement of Ms. Dana Buheji.

Participated physically

Participated via phone/video link

Board Risk and Compliance Committee Meetings and Attendance

Minimum Number of Meetings Required = 4

Members	23 Jan	13 Mar	26 Mar	28 May	25 Jun	07 Sep	12 Sep	15 Nov	26 Nov	13 Dec	Percentage
23	23	23	23	23	23	23	23	23	23
Mr. Marwan Khaled Tabbara											100%
Mr. Mohammed Abdulla Nooruddin											100%
Mr. Khalid Abdulaziz Al Jassim											100%
Mr. Isa Hasan Maseeh											100%

Participated physically Participated via phone/video link

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Board Independent Committee Meetings and Attendance

Minimum Number of Meetings Required = Upon Request

Members	23 Feb 23	18 Apr 23	23 Oct 23	Percentage
Mr. Mohammed Abdulla Nooruddin				100%
Mr. Khalid Abdulaziz Al Jassim				100%
Mr. Marwan Khaled Tabbara				100%
Mr. Saqer Abdulmohsin Al Sijari				100%

Participated physically

Participated via phone/video link

Evaluation of the Board and Each Committee

An enhanced Board performance evaluation has been conducted electronically for the year 2023 through the completion of a structured performance evaluation questionnaire form against certain pre-defined criteria as per the mandate of the Board and each of its committees on the effectiveness and contribution of the overall performance of the Board, its committees, and the performance of each Board member. The Nomination, Remuneration, Governance, Sustainability Committee (NRGSC) carried out an evaluation of the Board, its committees and all Board members through the distribution of questionnaires to each Board member. The NRGSC expressed its satisfaction with the positive results of the evaluation. The Board considers this as a beneficial exercise that can maintain the highest standards of governance to comply with the CBB rules and regulations.

Board of Directors Remuneration and Sitting Fees

The Board of Directors are paid an annual remuneration as approved by the shareholders at the Ordinary General Meeting. While the amount of the remuneration is not directly linked to the performance of the Bank, factors such as the Bank's performance, industry comparison and the time and effort committed by the Directors to the Bank, are considered for determining the total remuneration. In addition, Directors are paid sitting fees for attending the meetings of the Board and its various subcommittees. Non-resident directors are also entitled to travel expenses. Further details on the remunerations paid to Board as well as Senior Management are available

under the remuneration disclosures of the annual financial and sustainability report.

Shari'a Supervisory Board Objective

The main objective of Shari'a Supervisory Board (SSB) is to advise the Bank on any Shari'a matter and to ensure compliance with the Shari'a tenets and requirements in their operations. The Shari'a Supervisory Board is entrusted with the duty of directing, reviewing, and supervising the activities of the Bank in order to ensure that the Bank is in compliance with Shari'a rules and Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). The profiles of the Shari'a Supervisory Board are available on the Bank's website.

The Shari'a Supervisory Board has established a Shari'a Coordination & Implementation function to ensure the Shari'a compliance of the Bank and performance of supervision and reviewer from the Shari'a point of view, in addition to the secretariat of the Shari'a Supervisory Board. The Shari'a Supervisory Board has also established an independent Internal Shari'a Audit function that reports any exceptions to the Shari'a fatwas and guidelines.

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