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Corporate Governance Report

Otkritie Financial Corporation Bank’s corporate governance operates in strict compliance with the Russian laws and the recommendations of the Central Bank of the Russia Federation, including the Corporate Governance Code recommended by the Bank of Russia’s Letter No. 06-52/2463 dated April 10, 2014 (hereinafter the Corporate Governance Code) and relies on the best practices, including the generally accepted corporate governance principles developed by the Organisation for Economic Cooperation and Development (OECD).

Otkritie Financial Corporation Bank is a public company whose equities and bonds are traded on the Moscow Exchange (Closed joint-stock company “MICEX Stock Exchange”). The Group’s shares are included in the top level quotation list.

Otkritie Financial Corporation Bank’s corporate governance framework regulates the relations among its executive bodies, the Supervisory Board, shareholders, and other stakeholders.

Otkritie Financial Corporation Bank’s corporate governance aims at balancing efficient management of the Bank with shareholders’ interests and rights. The existing corporate governance structure assigns responsibilities and delegates general governance functions carried out by the General Shareholders’ Meeting and the Supervisory Board and routine management carried out by its executive bodies. The scope of powers of the Bank’s governing bodies is determined by the Russian Federal Law “On Joint-Stock Companies” and the Bank’s Articles of Association.

The Bank’s executive bodies are highly autonomous. The Supervisory Board and shareholders may not, without due cause, interfere in the routine proceedings of the Bank’s executive bodies or limit their ability to run the Bank’s day-to-day operations.

The Bank’s Management Board, led by its Chairman, establishes a system of clear criteria and procedures for the appointment and replacement of heads of the Bank’s departments, an efficient remuneration system, and staff training and development programmes.

To ensure the interests of its shareholders, creditors, clients, business partners and counterparties, Otkritie Financial Corporation Bank continually monitors its compliance with the Corporate Governance Code. 

In 2015, Otkritie Financial Corporation Bank continued its efforts to enhance its corporate governance with key initiatives including:

  • adoption of the revised Corporate Governance Code and revised Regulations of the Supervisory Board Committees;
  • adoption of the Development strategy of Otkritie Financial Corporation Bank and Otkritie Financial Corporation Banking Group for 2015–2019, including the development strategy of corporate governance;
  • adoption of HR and remuneration policy;
  • adoption of risk and capital management strategy.

In line with the principle of transparency, Otkritie Financial Corporation Bank makes regular and timely disclosures and makes available true and complete information about its business, while balancing its commitment to transparency and its business interests. The Bank discloses information on its business activities to all stakeholders in accordance with the Russian law, the Bank of Russia’s regulations and the requirements of the Moscow Exchange. The Bank timely discloses its IFRS and RAS financial statements, securities issuer’s quarterly reports, its ownership structure, material events and facts that concern its business and may influence the Bank’s share price in order to ensure shareholders’ and investors’ ability to make informed investment decisions.

General Shareholders’ Meeting

The General Shareholders’ Meeting is the supreme governing body of Otkritie Financial Corporation Bank. 

Each shareholder may exercise its right to directly participate in managing the Bank by voting on agenda matters at the General Shareholders’ Meeting. The General Shareholders’ Meeting is convened by a resolution of the Supervisory Board in accordance with applicable Russian laws and the Bank’s Articles of Association. 

An annual General Shareholders’ Meeting is held at least two months and up to six months after the end of each fiscal year. An extraordinary General Shareholders’ Meeting may be held upon the request of the Bank’s Supervisory Board, its Auditor, the Internal Audit Commission, or upon the request of shareholders holding at least 10% of the Bank’s voting shares. 

According to the Bank’s Articles of Association, a notice of the form, date and time of the General Shareholders' Meeting, the record date of the list of persons entitled to attend such General Shareholders’ Meeting, and such General Shareholders’ Meeting agenda is to be given to the shareholders in a manner prescribed by the Bank’s Supervisory Board in preparing such General Shareholders’ Meeting.

Within the scope of their authority, shareholders may:

  • amend or supplement the Bank’s Articles of Association and to approve the revised Articles of Association;
  • pass resolutions to reorganise or liquidate the Bank;
  • determine the number of members of the Bank’s Supervisory Board, elect and terminate the power of its members;
  • elect and remove members of the Bank’s Internal Audit Commission;
  • approve the Bank’s Auditor;
  • pay (declare) dividends;
  • approve annual reports, annual financial statements of the Bank;
  • approve major and related-party transactions;
  • increase the Bank’s authorised capital in cases provided by the laws on joint-stock companies and the Bank’s Articles of Association;
  • authorise the buyback by the Bank of its outstanding shares in cases provided by the laws on joint-stock companies and the Bank’s Articles of association;
  • pass a resolution to delist the Bank’s shares and (or) other securities convertible into shares;
  • pass other resolutions as may be provided by applicable laws on joint-stock companies and the Bank’s Articles of Association.

Share Capital

Since its inception, Otkritie Financial Corporation Bank has carried out 27 issues of common shares and three issues of preferred shares.

In 2015, Otkritie Financial Corporation Bank completed its reorganisation through the merger with Petrocommerce Bank. Petrocommerce Bank’s common stock was converted into additional shares of Otkritie Financial Corporation Bank.

As at the end of 2015, Otkritie Financial Corporation Bank’s share capital amounted to RUB 8,462,902,450 and consisted of 157,158,049 common shares and 12,100,000 preferred registered shares with no fixed dividend. The par value of each ordinary and each preferred share is RUB 50. Common and preferred shares vest in their holders rights as provided by the Russian Federal Law “On Joint-Stock Companies” and the Bank’s Articles of Association. All preferred shares are held by the Bank’s subsidiary.

The Bank’s shares are listed on the Moscow Exchange in the top level quotation list.

As of December 31, 2015, the Bank’s shareholders are over 600 corporations and individuals; the major shareholder is Otkritie Holding, directly and indirectly (via subsidiaries) owning 64.71% of the Bank’s voting shares.

The Bank’s shareholding structure is presented on its website as a flowchart and includes a list of holders who have control over or material influence on the Bank (please visit http://www.otkritiefc.ru/about/holders/).  

Supervisory Board

The Supervisory Board is one of the key elements of Otkritie Financial Corporation Bank’s corporate governance. 

The Supervisory Board carries out the strategic governance of the Bank, defines the key risk management and internal control systems principles and approaches, supervises the activities of the Bank’s executive bodies and carries out other crucial functions.

The Supervisory Board makes decisions related to the Bank’s business within the scope of its authority under the Russian law, the Bank’s Articles of Association and the Supervisory Board Regulations. Its meetings are called as provided by the time schedule approved by the Supervisory Board, or as necessary by the resolution of the Supervisory Board’s Chairman, or as requested by any member of the Supervisory Board, the Bank’s Internal Audit Commission, its Auditor, the Chairman of the Management Board, or the Management Board. 

Members of the Supervisory Board are elected by the General Shareholders’ Meeting. Shareholders holding in aggregate at least 2% of the Bank’s voting shares are entitled to nominate members to the Supervisory Board. Supervisory Board members are elected by cumulative vote at a General Shareholders’ Meeting.

In 2015, as part of the effort to promote and enhance corporate governance, the Supervisory Board focused on boosting the efficiency of the risk management system, aligning the Bank’s Development strategy with the current economic environment, strengthening internal controls, supporting staff incentive schemes, and maintaining the transparency of the Bank’s businesses.

In order to ensure unbiased decision-making and to balance the interests of various shareholder groups, there are independent directors serving on the Bank’s Supervisory Board.

The Supervisory Board carries out the strategic governance of the Bank, defines its priority business segments, identifies the key risk management and internal control systems principles and approaches, measures to maintain the Bank’s financial stability and corporate governance frameworks, and carries out other crucial functions.

The Supervisory Board sets agendas for the Bank’s General Shareholders’ Meetings. 

The Supervisory Board sets up efficient executive bodies and monitors their activities. 

The Supervisory Board determines the Bank’s policy aimed at timely and full disclosure of information on its business to its shareholders, prospective investors, and other stakeholders, as well as monitors proper setup and efficiency of the Bank’s reporting system.

The Supervisory Board recognizes its responsibility to the Bank and its shareholders and sees its mission in performing, diligently and in good faith, its duties to govern the Bank in a manner ensuring support for and increasing the Bank’s share price and facilitating exercise by the shareholders of their rights. 

In making its decisions, the Supervisory Board recognises the need to remain fair to all shareholders without giving preference to any group. The Supervisory Board designs an efficient system for identifying and resolving prospective conflicts of interests and maintains an on-going dialogue with shareholders.

In approving the risk management policy, the Supervisory Board seeks to strike the right balance between risks and return, subject to applicable laws, the Bank’s bylaws and Articles of Association. Among other things, under this policy, when entering into transactions or deals associated with higher risk of equity or investment loss, the Bank should consider a reasonable risk level and compliance of the risk to be assumed with thresholds set by the risk management policy.

In line with the best international corporate governance standards, including the corporate governance principles developed by the Organisation for Economic Cooperation and Development (OECD) and the recommendations of the Basel Committee on Banking Supervision, the Bank highly values the importance of independent directors. Their role is to boost shareholder and investor confidence by ensuring effective control over the Bank’s operations and factoring in the interests of all stakeholders (including minority shareholders) in decisions vital to the Bank’s business.

Supervisory Board Resolutions in 2015

In 2015, the Bank’s Supervisory Board held 33 meetings and passed, among others, the following resolutions:

  • to convene and prepare for the General Shareholders’ Meetings, including to approve their agendas, to set the record day for the list of persons authorised to attend the meetings, to approve voting ballots and the package of documents to be submitted to shareholders, to decide other matters associated with preparing for and convening the General Shareholders’ Meetings;
  • to review and to approve the Bank’s RAS and IFRS financial statements;
  • to approve the Development strategy of the Bank and Otkritie Financial Corporation Banking Group for 2015–2019;
  • to approve the Bank’s revised Dividend Policy;
  • to approve the Bank’s revised Corporate Governance Code and Information Policy;
  • to approve the revised Regulations on the Supervisory Board’s Committees, including the Nomination and Remuneration, Strategy, and Audit Committees; 
  • to approve the Bank’s bylaws governing its risk and capital management procedures;
  • to approve the revised HR policy for the Bank’s financial incentive risk management;
  • to review and approve the Internal Audit Department’s reports on the operation and the scope of work;
  • to review and to approve quarterly reports by the supervisor of the professional activities in the securities market and the supervisor of the specialised depository of the Bank;
  • to review and approve an issuer’s quarterly reports;
  • to authorize bond issues, to approve bond prospectus and to make the decision regarding bond issuance;
  • to amend the Regulations on the Bank’s branches.