Corporate government
The Board of Directors of Bankinter, S.A. is formed by ten members, who are characterised by their professional capability, integrity and independent judgement. The status of director is reported each year in the Corporate Governance Report, which is subject to approval by the Board of Directors.
Of its ten members, two are executive directors and eight are non-executive directors. Five of the latter are independent, two are proprietary and the last, in the opinion of the Board, is neither proprietary nor independent.
Bankinter firmly believes in the importance of balancing power in decision-making procedures, and a clear division of power between the non-executive Chairman and the CEO.
The number of independent directors appointed to the Board is very high: The Remuneration Committee, the Audit and Regulatory Compliance Committee and the Risk Committee are composed entirely of independent directors, and the Appointments and Corporate Governance Committee is composed mostly of independent directors (75%). All committees are chaired by independent directors.
Although there is a division of powers at Bankinter between the non-executive Chairman and the CEO, the Bankinter Articles of Association envisage the possibility of appointing a lead director from among its independent directors, whose powers will be likewise established.
Bankinter establishes clear rules on dedication, and sets limits to the number of boards of other companies on which its directors may sit.
Members of the Bankinter Board of Directors have a wide range of knowledge and experience and, with regard to gender equality, 30% of board members are women.
The attendance ratio at Board meetings for directors is 98.2% (100% if attendance by proxy with voting instructions is taken into account).
In 2016 there was no change in the composition of the Board of Directors.
Directors are appointed for a period of four years and may be re-elected at the end of the term.
The Board has created an Executive Committee, the powers of which may be delegated. Furthermore, the Board of Directors has the following committees with supervisory, reporting, advisory and proposal powers: the Audit and Regulatory Compliance Committee, the Risk Committee, the Remuneration Committee and the Appointments and Corporate Governance Committee. The Regulations of the Board of Directors, available on the company's corporate website, detail the functions and powers assigned to each of these committees.
The current composition of the aforementioned committees is as follows:
On 18 November 2015, the Board of Directors of Bankinter approved the Director Selection and Succession Policy, according to which the process for the selection and succession of directors will adhere to the following general principles:
i. The process will guarantee compliance with applicable regulations and will be carried out respecting the characteristics of the composition of the Board of Directors set out in the Articles of Association and in the Board Regulations.
ii. The process will encourage there to be a clear majority of independent directors on the Board and the number of executive directors to be the minimum necessary taking into account the Group's complexity.
iii. The process will guarantee there is an adequate balance between proprietary and independent directors, thus reflecting, as much as possible, the proportion between share capital with voting rights represented by proprietary directors and the rest of the share capital.
iv. The process will ensure diversity of nationalities, gender and experiences, such that decision-making is enriched and a variety of points of view are heard when debating matters within its competence.
v. The process will guarantee the stability of the Board of Directors in line with the measures taken by the Company to ensure, whenever possible, that the appointment or re-election of directors does not affect more than one fourth of the Board members in any given year.
The process for selecting directors must be based on an analysis of the needs of the Company and of the entities that make up the Group. This analysis will be carried out by the Board of Directors on the advice of the Appointments and Corporate Governance Committee.
Candidates for Company directorships must be honourable and well-suited, must have proven solvency, competence, experience, qualifications and training, and must be available and committed to their position.
The Appointments in Corporate Governance Committee will assess the balance of powers, expertise, diversity and experience necessary for the Board of Directors. Accordingly, the Committee will define the necessary duties and skills of the candidates that must cover each vacancy, and determine the time and dedication required so as to permit the efficient discharge of their duties.
In general, Bankinter uses external advisers to select candidates for membership on the Board of Directors as independent directors.
With regard to gender equality, Bankinter is committed to equal opportunities for men and women, which is in line with carrying out objective selection processes that are free from any determining conditions or biases which may limit the access of women to appointments as directors. Therefore, the candidate's independence, professional qualifications, capacity and experience in the industry are assessed in each case. The candidate selection process seeks to ensure that the candidates reviewed always include women.
As a result of this commitment, in 2010 a woman was appointed to the Board of Directors as an executive director and was the Company's first female executive director. In 2014 and 2015, two women were appointed as independent directors, which resulted in a 30% ratio of women on the Board of Directors, representing early compliance with the target internally agreed upon in the document “Representation target for the less represented gender on the Board of Directors and guidelines on how to reach such target”, adopted by the Board of Directors in 2014, and that established in the Code of Good Governance for listed companies for 2020.
In accordance with the policy approved by the Board in 2015, the succession process for Board members must guarantee that it is carried out in a planned and coordinated fashion, thus protecting the continuity of the business.
The Appointments and Corporate Governance Commitee looks to ensure the existence of succession plans and update them for the Chairman and the executive directors of the Company and, where applicable, to submit proposals to the Board of Directors so that this succession is carried out in a planned and orderly manner. This analysis is submitted to the Board of Directors on an annual basis. The succession and selection policy for Board members is available on the company's corporate website.
The Regulations of the Board of Directors contain an article that includes the functions of the Secretary, who is attributed all functions corresponding thereto by virtue of the Spanish Companies Act and in accordance with best corporate governance practices. These functions include safeguarding the formal and material legality of the Board's actions, overseeing compliance with good governance recommendations assumed by the Bank and ensuring that the procedures and rules of governance are respected and reviewed on a regular basis.
On 16 December 2015, the Board of Directors approved a procedure for preparing the meetings of the Board and its committees. The procedure assigns the Secretary of the Board functions related to assisting the Chairman to ensure that all directors receive the relevant information in order to discharge their duties in good time and in the appropriate format.
According to the Regulations, and before the start of each financial year, the Board of Directors will approve the meeting schedule for the following year and the expected agenda for them, whereby directors are entitled to propose additional items to be included on the agenda. The calendar and the agenda may be amended by resolution of the Board itself or by decision of the Chairman, who will report the change to the directors sufficiently in advance, except in cases of emergency. The minimum number of meetings will be 10 per year (well above the legal requirement to hold meetings once a quarter).
Accordingly, the Board of Directors of Bankinter met 11 times in 2016.
Moreover, as indicated in the previous section, in 2015 the Board of Directors approved a procedure for preparing the meetings of the Board and its committees following a proposal from the Appointments and Corporate Governance Committee. Notice must be given, except in cases of emergency or necessity, sufficiently in advance of the date of the meeting. This procedure includes, among others, the following aspects:
Directors are guaranteed to receive the necessary information in order to adequately assess the corresponding transactions or decisions prior to when the Board or Committee meetings are held, so that they may reasonably prepare for the meetings and actively participate in the discussions.
Conduct of the meetings: The Board of Directors, either directly or through its committees, fully exercised its supervisory role in 2016. It was kept well informed of the progress and activity of the Bankinter Group's various business areas and of general matters within the scope of its supervisory functions, and, most prominently, the Board has monitored the Bank's strategic objectives defined in 2015, which have been periodically discussed in specific items on the respective agendas. Similarly, Board members have been informed about the conclusions of the various internal and external audit reports, among many other matters addressed, such as the management and control of risks associated with the Bankinter Group.
Dedication to the Board's tasks:
Directors are required to devote the time and effort necessary in order to effectively discharge their duties and, in any case, to comply with the limits on the maximum number of Boards to which they may belong, as established by law.
Directors must ensure that absences from meetings of the Board of Directors and the Committees of which they are members are limited to unavoidable cases.
These requirements have been adequately met by all Board members of Bankinter, with an attendance rate of 98.2%, which is 100% if attendance by proxy is included, and full commitment to the analysis and discussion of the issues that have been placed before them through the study of the supporting documentation and any other information required for such purpose.
One of the Board's powers is to produce an annual assessment of its own workings and those of its committees and, based on its conclusions, to propose an action plan to correct any shortcomings detected.
In accordance with corporate governance recommendations, the Board of Directors has decided that this assessment will be carried out by external advisors at least every 3 years. In 2016 this assessment was carried out by an independent external expert, Russell Reynolds.
The assessment carried out in 2016 by Russell Reynolds covers the functioning of the Board and its committees and the performance of its Chairman, executive directors and the chairmen of the committees, and entails an individual assessment of all its members. The assessment process was carried out in the following phases: i) send out questionnaires prepared by the external expert for Bankinter to each of the Board members, ii) prepare tables on and analyse all responses received, and carry out face-to-face interviews with each of the directors in order to obtain a more in-depth look at the responses given in the questionnaires, and iii) compare these responses with best corporate governance practices in Spain and abroad. The opinion of all directors was also sought out regarding the challenges faced by the Bank and its Board and the values that define the culture of Bankinter's Board of Directors, and an analysis was carried out comparing the characteristics of the Board with those of other relevant companies in the Spanish financial sector.
The results of the external expert's assessment showed, on one hand, the comprehensiveness of the assessment requested by the Board and, on the other hand, the essential conclusions reached, which reflect the significant effort made by Bankinter's Board, highlighting the commitment, diversity and high qualification of each of the Board members, the strong leadership of executive directors, which permeates throughout the organisation, and the commitment of benchmark shareholders, which provide stability and strength to the management and supervisory functions exercised by the Board. These results place Bankinter's Board in a leading position among the boards analysed.
In short, the assessment carried out in 2016 did not detect any shortcomings that would require implementing an action plan to correct any of the areas analysed: i) quality and efficiency in the functioning of the Board of Directors, ii) functioning and composition of its committees, iii) diversity in the composition and competencies of the Board of Directors, iv) performance of the Chairman of the Board and the Company's CEO, and v) performance and contribution of each director, in particular that of the chairmen of the committees.
However, the independent external expert did make certain suggestions for improvement that were indicated after carrying out the assessment, and which will be analysed and monitored, if the Company decides to implement them, by the Appointments and Corporate Governance Committee at successive meetings.
Description of the remuneration system
The principles and components of director remuneration are detailed in the Directors' Remuneration Policy and in the Annual Report on Directors' Remuneration which is subject to an advisory vote at the Annual General Meeting.
As part of its good governance policy, Bankinter decided, as of its entry into force in 2006, to implement and enforce recommendation 40 of the then Unified Good Governance Code of Listed Companies in relation to submitting its report on the directors' remuneration policy to the General Meeting as a separate item on the agenda, subject to an advisory vote. As of 2008, the Bank's shareholders therefore had the opportunity to express their opinion on this remuneration report. The report on directors' remuneration is currently governed by the Spanish Companies Act, which makes it mandatory for listed companies to submit this report to an advisory vote at the Annual General Meeting.
The Shareholders' Meeting is the competent body to approve the maximum annual amount of remuneration corresponding to all directors acting as such. This amount will remain in force until amended at the Shareholders' Meeting, although the Board may reduce the amount in those years when deemed justified.
The specific amount that corresponds to each of the directors in accordance with the Articles of Association and the form of payment will be determined by the Board of Directors. To this end, the positions held by each director on the body itself and their membership to and attendance at the various committees will be taken into account.
This remuneration currently has two components: i) a fixed annual amount, and ii) attendance fees.
Directors are entitled to remuneration (salaries, incentives, bonuses, pensions, insurance and severance payments) that, as proposed by the Remuneration Committee and approved by the Board of Directors, is deemed appropriate for the performance of other functions in the Company, regardless of whether they are executive directors or not, other than those that entail collective supervisory and decision-making functions discharged as mere Board members.
The variable components of remuneration are established such that there is an appropriate ratio between fixed and variable components of total remuneration.
The variable components do not exceed one hundred percent of the fixed components of total remuneration for each director, unless the shareholders at the General Meeting approve a higher ratio, which in no case is to exceed two hundred percent of the fixed components of total compensation, under the terms established by law.
The Annual Report individually presents the remuneration received by each director, expressing the amounts relating to each item of remuneration. Additionally these items appear individually in the report as well as the remuneration that corresponds to the executive functions entrusted to the Company's executive directors.
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