Sparebanken Møre complies with the Norwegian Code of Practice for Corporate Governance of 14 October 2021 (the "Code of Practice") to the extent that it is appropriate for savings banks that have issued equity certificates. The recommendation is available on www.nues.no.
The Financial Institutions Act applies to savings banks that have issued equity certificates. The Act contains provisions that in some cases deviate from provisions in the Public Limited Liability Companies Act, and which mean that the Code of Practice does not fully fit in certain respects.
The following is an account of how Sparebanken Møre has complied with each point of the Code of Practice. Where the recommendation has not been followed, a reason is given for this. However, there are no significant deviations between the Code of Practice and how it is complied with at Sparebanken Møre.
In 2021, the bank also complied with the European Banking Authority's Guidelines on Internal Governance GL 11/2017 to the extent that they are appropriate for Norwegian savings banks. The guidelines are available at www.eba.europa.eu. Compliance with the guidelines is not explained in the following.
Deviations from the Code of Practice: None
Sparebanken Møre was formed on 1 April 1985 by a merger of a number of banks in Møre og Romsdal. Later, several banks in Møre og Romsdal have joined Sparebanken Møre. The banking activities of the merged savings banks can be traced back to 1843.
Sparebanken Møre's articles of association clearly state the activities to be conducted. The purpose of Sparebanken Møre is to carry out business and services that it is customary or natural for savings banks to perform, and which are within the framework of the legislation in force at any given time, and the licences granted at any given time. Sparebanken Møre may provide investment services and related services in accordance with the provisions of the Securities Trading Act. The articles of association can be found in their entirety on Sparebanken Møre's website.
The Group is a full-service provider of financial services in the areas of financing, deposits and investments, payment services, financial advice, asset management, insurance and real estate.
The Board of Directors of Sparebanken Møre ensures that a comprehensive strategy process is carried out annually that defines the Group's goals, strategies and risk profile. The current strategic plan, "Møre 2025", was adopted by the board in November 2021. Five strategic focus areas have been defined, one of which is that Sparebanken Møre will be a driving force for sustainable development.
The Board has also adopted a set of different strategies and governance documents that will form the basis for sound and effective internal risk management. The documents are based on risk exposure, as well as guidelines for overall management and control of the risk areas to which Sparebanken Møre is exposed. ESG factors have been incorporated into the documents to ensure that sustainability considerations are closely linked to the bank's operations and value creation.
The Board of Directors has adopted an overall sustainability strategy for Sparebanken Møre, which will form the basis for both strategic decisions and ongoing operational work. The Group also supports initiatives and principles that entail commitments to align its business strategy with the UN Sustainable Development Goals and the Paris Agreement. Reference is made to a separate chapter in the annual report for a further account of Sparebanken Møre's exercise of corporate social responsibility.
Goals and strategies are within the framework of the business provision in Sparebanken Møre's articles of association.
Sparebanken Møre will maintain its position as the first choice in Northwest Norway for retail customers, as well as small and medium-sized enterprises. Sparebanken Møre will also be an attractive partner for larger companies and the public sector.
Efforts will be made to ensure a sound financial structure and solvency, as well as good profitability. The financial targets are reproduced in Sparebanken Møre's annual report, as well as in Sparebanken Møre's Pilar 3 document, which is available on the bank's website. Throughout the year, the market and other stakeholders receive information about the strategic objectives and developments in relation to these through stock exchange announcements and financial presentations.
Deviations from the Code of Practice: None
Sparebanken Møre's capital is composed on the basis of several considerations. The most important are the Group's size, operations and risk, the internationally oriented business community in Møre og Romsdal, a stable market for long-term financing when needed and goals in the long-term strategic plan.
Through an annual process for evaluating governance and control, including capital needs assessments, the Board focuses on ensuring that the capital is aligned with objectives, strategies, risk profile and regulatory requirements. The capital situation is monitored continuously during the year through internal calculations and reporting.
At the end of 2021, the capital adequacy ratio was above the regulatory and internal minimum capital requirements. Own funds account for 20.9 per cent, core capital 18.9 per cent and CET1 capital 17.2 per cent.
Sparebanken Møre's dividend policy has been published and made available on Sparebanken Møre's website. The dividend policy is as follows:
"Sparebanken Møre's objective is to achieve financial results that provide a good and stable return on the bank's equity. The results are intended to ensure that the owners of equity receive a competitive long-term return in the form of dividends and increases in the value of equity.
Dividends consist of cash dividends to equity certificate holders and community dividends. The share of the profit allocated to dividends is adjusted to the bank's solvency. Unless the solvency ratio indicates otherwise, the aim is that about 50 per cent of the year's profit in total can be distributed as dividends.
Sparebanken Møre's allocation of profit and loss shall ensure that all equity owners are ensured equal treatment."
The board of directors may be authorised by the general meeting to make capital increases for specified purposes. At the Annual General Meeting on 23 March 2021, the Board of Directors was authorised to increase the ownership share capital by up to NOK 98,869,500 if the financial situation should so indicate. The authorisation is valid until the Annual General Meeting in 2022, but still no longer than 31 March 2022. As of the turn of the year, the power of attorney has not been used as there has been no need for it.
The board may also be authorised by the general meeting to purchase its own equity certificates within the framework of the law. At the Annual General Meeting on 25 November 2021, the Board of Directors was authorised to acquire/establish collateral in its own equity certificates of up to NOK 24.7 million. The authorisation has been approved by the Financial Supervisory Authority of Norway.
Deviations from the Code of Practice: None
All equity certificate holders are treated equally and have the same opportunity to influence.
All equity certificates have equal voting rights.
In the event of an increase in equity share capital, existing equity certificate holders shall have preferential rights unless special circumstances indicate that this is waived. Such a deviation will then be justified, and the reason shall be published in a stock exchange announcement in connection with the capital increase.
The board of directors' authorisation to increase the ownership share capital mentioned in item 3 above contains a provision stating that the holders of equity certificates may be waived. If it becomes necessary to use the power of attorney, there must nevertheless, at the relevant time, be special reason for deviating from the priority of engagement.
At the Annual General Meeting on 23 March 2021, the Board of Directors was authorised to increase the ownership share capital by up to NOK 98,869,500 if the financial situation should so indicate. The authorisation is valid until the Annual General Meeting in 2022, but still no longer than 31 March 2022. As of the turn of the year, the power of attorney has not been used as there has been no need for it.
Sparebanken Møre's transactions in its own equity certificates are carried out on the stock exchange. Buy-backs of own equity certificates are made at the prevailing market price.
In order to ensure that equity certificate holders have increased influence on decisions concerning the equity share capital, provisions have been included in the articles of association stating that specified matters of importance to the equity share capital may not be adopted by the general meeting unless a 2/3 majority of the votes cast by the members of the general meeting elected by the equity certificate holders are also obtained. An indication of which cases this applies to is stated in the articles of association that can be found on Sparebanken Møre's website.
Deviations from the Code of Practice: None
Sparebanken Møre's equity certificates are listed on the Oslo Stock Exchange under the ticker MORG, and are freely transferable. The articles of association do not contain any restrictions on negotiability.
In the case of acquisitions of qualifying holdings in financial institutions (10% or more of the capital), special rules apply regarding authorisation from the Financial Supervisory Authority of Norway. Cf. Chapter 6 of the Financial Institutions Act and Section 9-10 of the Securities Trading Act.
Deviations from the Code of Practice: None, with the exception of the special rules set out in the Financial Institutions Act on the acquisition of qualifying holdings.
The equity in savings banks that have issued equity certificates consists of equity share capital, primary capital and retained equity. Primary capital is self-owning capital. Therefore, different requirements apply to, among other things, the composition of the general meeting than those that apply to public limited companies. The requirements are laid down in Chapter 8 of the Financial Institutions Act. Sparebanken Møre complies with the statutory requirements. Section 6 of the recommendation is therefore not fully applicable to savings banks.
The Bank's supreme body is the General Meeting. The general meeting of Sparebanken Møre has 44 members with 14 deputy members, of which 17 members and 4 deputy members are elected by the owners of equity certificates, 13 members and 4 deputy members are elected by and among the bank's customers, 11 members and 4 deputy members are elected by and among the employees and 3 members and 2 deputy members are elected by the general meeting to represent the community function.
The requirements for composition follow from Sparebanken Møre's articles of association. An overview of the elected members is available on Sparebanken Møre's website.
The members of the general meeting are personally elected, and cannot attend by proxy. Deputy members have been elected to attend in the event of absence.
Notice and agenda documents for the meetings of the general meeting are made available on Sparebanken Møre's website no later than 21 days before the meeting. In addition, the notice and case documents are published on the Oslo Stock Exchange, and the notice is sent by post. A member of the general meeting, or others who are required by law to receive such documents, may nevertheless demand that the documents be sent.
The agenda documents shall be detailed and precise enough to enable the members of the general meeting to decide on the matters to be discussed.
Members of the Board of Directors, the Nomination Committee and the external auditor participate in the meetings of the General Meeting. The chairman and managing director of the board are obliged to attend the general meeting.
The general meeting elects the chairman and deputy chairman from among the members of the general meeting who are not employed by the savings bank. The chair of the general meeting is the chairperson of the meeting, or in the absence of the chairperson, the deputy chair.
Deviations from the Code of Practice: Point 6 of the Code of Practice is not fully applicable to savings banks that have issued equity certificates.
Sparebanken Møre's articles of association stipulate provisions on nomination committees. The general meeting has adopted instructions for the general meeting's nomination committee.
The Nomination Committee of the General Meeting is elected by the General Meeting and consists of 4 members, elected from among the members of the General Meeting. The chairman of the committee is elected by the general meeting by special election. The general meeting determines the committee's remuneration.
Both the Chairman of the Board and the CEO shall be summoned to at least one meeting with the Nomination Committee. The nomination committee receives the board's evaluation of its own work.
The committee has representatives from all groups represented at the general meeting. Efforts shall be made to spread the members of the nomination committee geographically within the municipalities in which the savings bank has its area of operation. The nomination committee is independent of the board of directors and other senior executives. Neither board members nor senior executives are members of the committee. Members of the nomination committees are elected for 2 years at a time, and no one can hold office for more than 6 consecutive years.
The Nomination Committee of the General Meeting proposes candidates for members of the General Meeting and deputy members of the community function, the Chair and Deputy Chair of the General Meeting, the Chair, Deputy Chair and other members and deputy members of the Board, as well as the election of the Chair and members of the Nomination Committee.
The nomination committee's recommendation is justified.
The equity certificate holders elect a separate nomination committee that prepares the equity certificate holders' election of members to the general meeting. This committee has 3 members. The customer-elected members of the general meeting elect a separate nomination committee that prepares the customers' election of members to the general meeting. This committee has 4 members.
An overview of who are members of the various nomination committees can be found on Sparebanken Møre's website.
Deviations from the Code of Practice: None
The board consists of 8 members, with 4 deputy members, elected by the general meeting. Two of the members are elected from among the employees.
When electing the members of the board, emphasis is placed on competence, capacity, independence, diversity and that the board shall function as a collegial body. The Financial Institutions Act and the Securities Trading Act require that suitability assessments must be carried out for board members of financial institutions and investment firms. The assessment deals with competence, capacity, independence and suitability/conduct. The assessment must be reported to Finanstilsynet for each board member.
The majority of the board members are independent of senior executives, significant business associates and largest owners of equity certificates. No senior executives are members of the Board of Directors. The chairman and deputy chairman of the board are elected by the general meeting in special elections.
The articles of association stipulate that board members are elected for 2 years. Of the elected members, four are up for election one year, and four members are up for election the following year. Members and deputies who are up for election can be re-elected. An elected member of the board may not hold the position of trust for a continuous period longer than 12 years, or for more than 20 years in total.
The annual report contains further information about the board members' participation in board meetings, competence and how many equity certificates each member owns.
Deviations from the Code of Practice: None
The board has overall responsibility for the management of Sparebanken Møre and shall, through the CEO, ensure that the business is properly organised.
The board has laid down instructions for the board and the general management, with particular emphasis on a clear division of internal responsibilities and tasks.
The Board Instructions contain rules on the Board's work and procedures, including which matters are to be dealt with by the Board, the CEO's duties and duties vis-à-vis the Board, and rules on convening and deliberating meetings.
The board prepares an annual plan for its work that covers tasks stipulated in laws, regulations, government decisions, articles of association and resolutions of the general meeting.
The Board of Directors adopts the overarching long-term financial targets for Sparebanken Møre. These are set out in the Group's strategy document. The document is revised annually in a joint process between the Board of Directors and the Bank's senior management team. In this way, the Board of Directors ensures that Sparebanken Møre is managed in such a way that the set overall objectives are achieved.
The Board of Directors keeps itself informed of Sparebanken Møre's financial position and development through the approval of quarterly and annual reports and monthly reviews of its financial position and development.
The board shall also ensure that the business is subject to satisfactory control and that the group's capital situation is prudent in view of the scope and risk associated with the business.
The board's responsibilities related to review and reporting of risk management and internal control are described in item 10 below.
The Financial Institutions Act lays down stricter rules on disqualification than those set out in the Public Limited Liability Companies Act. In the instructions to the board, the board has laid down guidelines on disqualification that are stricter in some respects than the statutory requirements.
The board instructions specify how the board and the general management shall treat agreements with associated parties.
The board ensures that board members and senior executives make the bank aware of any significant interests they may have in matters that the board is to consider.
The annual accounts contain further information on transactions between related parties.
In the event of non-immaterial transactions between Sparebanken Møre and the equity certificate holders, board members, senior executives or related parties thereof, the board of directors shall ensure that there is a valuation from an independent third party, unless matters are considered by the general meeting.
Independent valuation must also be available in connection with transactions between companies in the same group where there are minority shareholders. Subsidiaries in Sparebanken Møre as of 31.12.21 are all wholly owned by the bank.
In matters of a significant nature where the chairman of the board is or has been actively engaged, the board's deliberations are led by the board's deputy chairman or other board member.
An audit committee, risk committee and remuneration committee have been established. The members of the board committees are elected by and from among the members of the board. The Audit Committee and the Risk Committee have three members, all of whom are independent of the business. The Remuneration Committee has four members, one of whom is from the employees.
The board has adopted instructions for the board committees that describe the committees' tasks and case processing.
The Remuneration Committee is discussed in more detail in section 12 below.
The board evaluates its work and expertise annually with a view to improvement measures.
Deviations from the Code of Practice: None
Sparebanken Møre bases its internal control on a comprehensive risk management process. In order to exercise comprehensive risk management at Sparebanken Møre, the global internal control standard, the COSO model, is used.
The Board of Directors adopted "General guidelines for management and control in Sparebanken Møre" have established as a starting point that each manager in the group shall ensure that he or she has sufficient knowledge of all significant risks within his or her own area of responsibility, so that the risk can be managed in a financially and administratively sound manner.
The "Instructions for the Board of Directors of Sparebanken Møre" define the role of the board, the significance, form, content and implementation of the board's work. Risk management is also included here, both through the management function and the supervisory function. In addition, separate instructions have been prepared for the Group's Audit Committee and Risk Committee, as well as separate instructions for the Remuneration Committee.
The Board ensures that risk management and internal control at Sparebanken Møre are adequate and systematic, and that these processes are established in accordance with laws and regulations, articles of association, ethical guidelines, orders, and external and internal guidelines. The Board of Directors establishes the principles and guidelines for risk management and internal control for the various levels of activity in accordance with the Bank's and the Group's risk-bearing capacity, and ensures that strategies and guidelines are communicated to employees. The board systematically and regularly reviews strategies and guidelines for risk management. The Board monitors and periodically assesses the effectiveness of the Group's overall management and control, including taking into account internal and external influences. The latter applies in particular to changes in the business cycle and macroeconomic framework conditions.
In order to ensure that Sparebanken Møre performs satisfactory risk management and internal control, the Board of Directors receives several types of reports from Sparebanken Møre's control functions on an ongoing basis, including the Risk Management Department, the Compliance Department, the Operational Risk Department, the Internal and External Auditors. The Board is itself active in the annual ICAAP and the Recovery Plan through the implementation of these in the long-term strategic plan. The Board of Directors revises and adopts all of the Bank's overarching risk management documents at least annually. The CEO's reporting on the structure and efficiency of the Group's internal control is carried out every year in the fourth quarter.
The Bank is organised into three lines of defence that contribute to the management and control of the Group's activities and to an adequate division of responsibilities between the enterprise's business areas. This is intended to prevent conflicts of interest, as well as ensure compliance with applicable recommendations for the organisation of financial institutions.
The defense lines report directly to the management and/or the board. Within all three lines of defence, appropriate internal control procedures, mechanisms and processes shall be designed, developed, maintained and evaluated.
Both the board's annual report and the general financial statements contain further information about Sparebanken Møre's risk management and internal control.
Deviations from the Code of Practice: None
Remuneration to the members of the Board of Directors, and the members of the Board Committees, is determined by the General Meeting on the basis of a proposal from the Nomination Committee.
The board members' fees are not dependent on performance. No options are issued to board members.
Provisions have been included in the instructions for the board of directors stipulating that the members of the board, or companies with which they are affiliated, should not take on tasks for Sparebanken Møre beyond their directorship. If they nevertheless do so, the entire board must be informed. Fees for such services shall be approved by the Board of Directors. If remuneration has been paid in excess of ordinary board fees, these will be disclosed in the notes to the annual report.
Deviations from the Code of Practice: None
The Board of Directors annually revises the guidelines for salary and remuneration to senior executives. The guidelines are submitted to the general meeting for approval in accordance with the provisions of the Public Limited Liability Companies Act.
The board's report on executive pay is presented annually to the general meeting for an advisory vote.
Special rules apply to remuneration schemes in financial institutions laid down in Chapter 15 of the Financial Institutions Regulation.
The Board of Directors has elected a Remuneration Committee from among the members of the Board of Directors.
Salaries and other remuneration in Sparebanken Møre shall contribute to the Group's goal attainment and promote the desired behaviour. Furthermore, salary and other remuneration shall be a tool for good management and control of the Group's risk, counteract undesirable risk-taking and contribute to avoiding conflicts of interest.
The practice of the remuneration scheme is reviewed at least once a year by the internal auditor, who submits a report from the review to the board.
Sparebanken Møre has no fixed annual bonus scheme, but this year with good results and good goal attainment, the bank's board will consider a bonus for all the bank's employees, including senior executives with the exception of the CEO. Based on the general uncertainty related to the COVID-19 pandemic, the Board of Directors decided not to pay bonuses for the 2020 financial year in 2021.
In addition to this, the individual employee may receive a one-time supplement as an appreciation for extraordinary efforts. As a general requirement, one-off bonuses for senior executives, employees whose duties are of significant importance to the Bank's risk exposure, and employees with control duties shall be based on a combination of an assessment of the person in question, his or her business unit and the Bank as a whole. The starting point for determining variable one-off remuneration shall be risk-based performance.
For senior executives, etc., as mentioned in the section above, and who do not hold positions that are directly linked to result-generating units, the fulfilment of the individual department's/section's goal attainment is to a greater extent based on established management agreements, in terms of results in relation to changes in working methods and the achievement of personal and case results. These assessments are based on the results that have been achieved also, as far as possible, Sparebanken Møre's total return on equity over the past 2 years.
For senior executives, etc., who work in performance-generating units, the financial targets defined in Sparebanken Møre's BMS (balanced scorecard), and the fulfilment of these over the past 2 years, must be used as a basis to a greater extent than for persons who do not work in direct performance-generating units. For these persons, the assessment shall also be based on the fulfilment of the individual's and the department's/section's goal attainment in established management agreements in addition to the financial figures in BMS. The BMS contains several metrics that are directly related to risk-related outcomes.
A ceiling has been set for both types of variable remuneration.
At least half of the general bonus for all employees is given in the form of Sparebanken Møre's equity certificate. The allotment is made from Sparebanken Møre's holding of own equity certificates corresponding to market value at the time of settlement. The employee may not dispose of the equity certificates earlier than 1 year after allotment (see below regarding special rules for senior executives, etc.).
To senior executives, etc., a minimum of half of the general bonus must be given in the form of equity certificates. The equity certificates cannot be disposed of by the individual earlier than evenly distributed over a period of 3 years.
If there is a negative trend in Sparebanken Møre's results, or in particular in the employee's business unit, the granted variable remuneration may be repaid in whole or in part for the following three years after the variable remuneration has been received. Conduct that gives grounds for dismissal may also lead to the variable remuneration granted being repaid in whole or in part.
Variable remuneration shall only be paid if it is justifiable in view of the enterprise's overall financial position.
Senior executives, etc., shall not have agreements or insurance policies that ensure the lapse of performance-related remuneration.
Deviations from the Code of Practice: None
Sparebanken Møre follows the Oslo Stock Exchange's IR recommendation of 1 March 2021.
The Board of Directors has adopted guidelines for reporting financial and other investor information. The guidelines emphasise that correct, clear, relevant and simultaneous information about the Group's development and results shall create confidence and safeguard the requirement for equal treatment of participants in the securities market. The guidelines also deal with the Group's contact with equity certificate holders outside the general meeting.
An annual plan is prepared for which stakeholders are to be approached, and when and how this is to take place.
Through its annual report and quarterly reports, the Bank seeks to achieve the necessary transparency about the material factors related to the Bank's development. This is done to ensure that market participants have as accurate a picture as possible of the bank's situation. The management conducts presentations in connection with the presentation of Sparebanken Møre's annual and quarterly results. The reports and presentations are made available to the market via Sparebanken Møre's website, including presentations via webcast, and by publication on the Oslo Stock Exchange.
Annual and quarterly reports as well as quarterly presentations of the accounts are prepared in English edition. The bank's bank contacts and investors abroad are also briefed regularly, including through outreach activities where Sparebanken Møre's accounts and development are among the topics.
Information about the bank's equity certificates, dividend policy and financial calendar can be found on the bank's website.
Deviations from the Code of Practice: None
The equity in savings banks that have issued equity certificates consists of equity share capital, primary capital and retained equity.
Primary capital is self-owning capital that cannot be taken over by others through acquisitions.
The Financial Institutions Act stipulates a requirement for authorisation from the Financial Supervisory Authority of Norway for the acquisition of ownership interests amounting to 10 per cent or more of the capital of financial institutions. The Act also stipulates a requirement for permission from the Ministry of Finance in connection with mergers of financial institutions, demergers of financial institutions and divestment of all or substantial parts of a financial institution's activities.
Deviations from the Code of Practice: Point 14 of the Code of Practice does not apply to savings banks that have issued equity certificates.
The audit committee ensures that the auditor prepares an annual plan for the implementation of the audit work, and that the auditor presents the plan to the audit committee.
The Board of Directors and the Audit Committee shall summon the auditor to a meeting where the annual accounts are discussed.
In the meetings, the auditor reviews key aspects of the audit, including significant matters where there has been disagreement between the auditor and the administration. Furthermore, the auditor's view of the bank's risk areas, internal control routines, accounting principles, etc. is also reviewed. The auditor also points out any areas where quality improvement should be carried out, and proposes improvement measures where necessary.
The board's annual plan includes one annual meeting with the auditor at which the bank's management is not present.
The Board of Directors has laid down guidelines for the general management's right to use an auditor for services other than auditing.
Deviations from the Code of Practice: None
