Corporate Governance

Corporate governance at VAB Bank is carried out in accordance with applicable legislation of Ukraine, in particular with the requirements of the Civil and Commercial Codes of Ukraine, Laws of Ukraine «On Banks and Banking», «On Joint-Stock Companies», other laws, regulatory acts issued by the National bank of Ukraine, Securities and Stock Market State Commission. To build efficient and transparent governance system, the Bank has studied and implemented the best international corporate governance practice principles and requirements.

While developing corporate governance system, VAB Bank was considering the rights and interests of shareholders, managers, clients, and other participants of corporate and banking relations, as well as the ways to encourage active and continual cooperation among them. The Bank’s transparency policy and well-organized informing system ensure timely and reliable information disclosure on all material issues and lead to constructive dialogue among all stakeholders.

VAB Bank Corporate Governance Principles

Guaranteed Rights of Shareholders
The Bank guarantees to all shareholders the ability to exercise their rights in accordance with the applicable Ukrainian legislation

Integrity
The Bank considers interests and prevents potential conflicts of interests among stakeholders: shareholders, managers, investors, employees and clients. Also, the Bank implements dialog and open discussion between the Management Board and the Supervisory Board.

Efficient Management
Following high ethical standards, the Bank makes well considered decisions based on professional and fair governance of its bodies. The Supervisory Board oversees activities of the Management Board, which is responsible for current operations. The Supervisory Board shall not be engaged in the Bank’s current activities.

Transparency
The Bank shall disclose all relevant information on timely and accurate basis, including financials, performance and ownership and governance structure. The Bank discloses information on material developments, which arise between regular periodic reporting. While disclosing information, the Bank acts according to the principle of simultaneous informing of all shareholders.

Financial Discipline
VAB Bank financial reports shall be drawn up in compliance with the Ukrainian (NSBO) and International Financial Reporting Standards (IFRS). The reports are audited by independent professional auditors in full and on timely basis. The Bank discloses annual, semiannual and quarterly financial reports.

Corporate Governance System

To appropriately balance the governing powers at the Bank, the two-tier system of corporate governance, that separates supervisory and management functions, is introduced. The members of the Supervisory Board are not holding executive posts and, vice versa, the members of the Management Board are not a part of the Supervisory Board. Audit function is fulfilled by a separate independent body, the Auditing Committee, the members of which are not holding posts in either the Supervisory or the Management Board.
VAB Bank’s corporate governance system includes:

The General Shareholders’ Meeting - the highest governance body, which enables shareholders to exercise their rights;
The Supervisory Board, which ensures the protection of shareholders rights, oversees and regulates the Management Board activities;
The Management Board - an executive body being in charge of Bank’s current activities in line with (corresponding to) the main directions, approved by the General Shareholders’ Meeting;
The Auditing Committee, which controls financial and operational activities of the Bank and reports to the General Shareholders’ Meeting and/or the Supervisory Board.

The Bank organizational structure includes all necessary forms of controls for effective and coherent governance: from shareholders, the Supervisory Board, the Management Board, the independent Auditing Committee, the Risk Management Department, the Internal Audit Department sides, and vertical control over different Bank’s activities. Powers, competence and interaction among Bank’s governance bodies are formalized in the VAB Bank Articles of Association and governance bodies’ provisions.

More information on the Bank’s governance bodies could be found on our web-site in sections, devoted to each of them, as well as in the section of Documents, where the Bank’s internal regulatory documents are disclosed.

Members of the governance bodies fulfill their obligations on the fiduciary basis, i.e. they act exclusively (solely) in the best interest of the Bank, its shareholders and stakeholders. The fiduciary duty assumes the duty of loyalty and the duty of care that require members of the governance bodies to act on a fully informed basis, in good faith, and with due diligence, that is feasible owing to a coherent internal control and audit system.

The members of the governance bodies are avoiding the conflict of interest. When a potential conflict of interest, an interested party economic or financial transaction appears, Board members shall inform about them the Supervisory Board. Such Board members shall be suspended from making the decision on the relevant issue.

Making decisions on related parties transactions is within the competence of the Supervisory Board, which ensures that these transactions are carried out on market terms. The process and terms of transactions with related parties are controlled by the Internal Audit Department and external auditors. The Bank discloses information on nature and amount of transactions with related parties in annual financial statements according to Ukrainian and international financial reporting standards.

Information Policy and Transparency

Timely and accurate information disclosure is one of the foundational principles in Bank’s activity. Information reliability is justified by the reviews and opinions of the Bank’s independent auditorErnst&Young, one of the Big Four auditors, Bank’s Auditing Committee and the Internal Audit Department.

The Bank is in continuous process of improving its information policy providing more transparency and, in this way, facilitating the execution of the right of shareholders and stakeholders to receive trustworthy and timely information, which might considerably influence the decision taken by them. The Bank ensures ongoing information disclosure, including periodic disclosure and current disclosure, which provides immediate disclosure on material developments. In accordance with the Bank’s Articles of Association, the Supervisory Board determines the confidential information, which is not disclosed, providing at the same time reliable procedures of securing, saving and working with such information.

The Bank’s web-site and its financial reports represent exhaustive sources of information on Bank’s activities. On our web-site one might find:

Bank’s Annual Reports for the past five years
Corporate presentation with major performance indicators
Annual (including consolidated) and quarterly financial reports according to the Ukrainian Accountancy Standards (NSBO) with opinions and notes of the Bank’s independent auditors for the past five years
Annual and semiannual financial reports according to the International Financial Reporting Standards (IFRS) with opinions and notes of the Bank’s independent auditor Ernst&Young for the past five years
Information on Bank’s shares
Information on Shareholders’ General Meetings
Internal regulatory documents.

VAB Bank’s information and transparency policy is highly appraised by the international experts. As a result, for the fifth consecutive year the Bank ranks among the top 5 most transparent banks in Ukraine according to the survey conducted by Standard & Poor’s Corporate Governance Services jointly with the Financial Initiatives Agency. In 2010, second year in a row, S&P recognized VAB as the most transparent bank among 30 largest Ukrainian banks. VAB Bank’s total transparency scored 65.1%. The Bank’s disclosure of “Ownership Structure and Shareholder Rights” category information matches the best international practice, which is, inter alia, owing to the fact of belonging to an international financial group.

Financial and Business Activities Control

The Auditing Committee
The Auditing Committee was established as the controlling instrument of Shareholders’ General Meeting over the Bank’s financial and operational activities. Since the Auditing Committee members are not allowed to hold posts in any other Bank’s governance body, it submits the opinion on the Bank’s financial statement as an independent evaluation of the Bank’s financial stability for the Shareholders’ General Meeting consideration. The Auditing Committee has the right to involve both internal and external auditors and experts to conduct its audits. In case of revealing potential threats to the Bank’s interests, the Committee has the right to ask for convening the extraordinary Shareholders’ General Meeting.

Internal Audit Department
The Internal Audit Department was established to ensure the Supervisory Board’s effective control over the compliance of Bank’s activities in place with the applicable law and internal regulatory documents. The Department is directly reporting to the Supervisory Board. The Internal Audit Department evaluates the appropriateness of control systems of financial, operational and other activities, as well as the efficiency of systems for risk management. The composition of the Department is approved by the Supervisory Board. The Department conducts regular and extraordinary audits, endorsed by the Supervisory Board and approved by the Management Board.