TIDMOSB
Operating sustainably
and responsibly is integral to our business model and strategy.
Corporate responsibility report
We take a SPECIALIST approach
to everything we do we challenge ourselves to ensure we understand
our stakeholders requirements and use our creativity, skill and
expertise to fulfil them with honesty and integrity.
We take a PERSONAL approach to everything we do we treat everyone with
respect and take accountability for our actions.
We take a FLEXIBLE approach to everything we do we ensure that we work
collaboratively with our colleagues, customers and other stakeholders to
achieve shared positive outcomes.
What we achieved in 2019
In October 2019, the Combination with CCFS became effective, and as a
result we welcomed new customers and employees to the OSB Group. We also
extended our reach in the communities in which we operate. As we
integrate the two businesses, the focus of the combined Group remains
the same: to become the financial services provider of choice for all of
our customers and to
build on OneSavings Bank's long tradition of putting the customer at the
heart
of everything we do.
The achievements in the year that
we are particularly proud of and which highlight how we are continuously
improving our relationships with our key stakeholders include:
- Customers - consistently high consumer Net Promoter Score for both
OSB: +66, and CCFS: +72
- Employees - OSB and CCFS were included in the Sunday Times 100 Best
Companies to Work For and OSBIndia certified as a Great Place to Work
- Communities - donated GBP398,000 to community and charitable causes
across OSB and CCFS
Focused on our customers
OneSavings Bank encourages a culture that aims to:
- communicate and work with each customer on an individual basis
- act with consistency across all channels
- promote a confident, open and trustworthy workforce
- offer simplicity and ease of business
- offer long-term value for money, and
- offer transparent products without the use of short-term bonus rates,
and to offer existing customers the benefit of loyalty rates.
Our customers are part of our success and we aim to become a financial
services provider of choice. To support this, we use the OSB and CCFS
established governance frameworks for consistent best practice across
the business and ensure we have combined robust policies and procedures
to minimise the risk of failure to deliver the service both our savers
and our borrowers have come to expect.
The main policies which govern how we transact with customers are
discussed below and apply at a Group level. As the integration with CCFS
progresses, duplicate policies will be replaced by a combined Group-wide
policy.
Lending policy - ensures that the Group lends money responsibly and
within the Bank's lending criteria and risk appetite. The Lending policy
is approved annually and rolled out to all relevant operational
employees to use within their day-
to-day roles. The Lending policy goes through two quality assurance
processes with both the Operations and the Credit team, with results
presented to the Group Risk Committee each
year. The performance of our lending and potential risks and changes are
discussed, challenged and approved at Group Credit Committee and Group
Risk Committee.
Vulnerable Customer and Suicide Awareness policy - sets out the
standards and approach for the identification and treatment of
vulnerable customers and provides guidance to all parts of the Group to
ensure vulnerable customers consistently receive fair outcomes.
It ensures that employees are appropriately trained to identify
vulnerability and potential suicide risks in our customers and put in
place appropriate actions to deal with such issues as effectively as
possible.
The Vulnerable Customer Review Committee continually improves standards
and ensures that policy and outcomes are reported to the Group Risk
Committee and ultimately the Board. The Group is committed to delivering
fair and suitable outcomes to all customers based on their individual
circumstances.
Arrears, Repossessions and Forbearance policy - ensures that handling of
arrears and repossessions delivers
fair and suitable outcomes tailored
to the circumstances of the individual customer. The policy is focused
on seeking to work proactively with customers to prevent them falling
into arrears, or to cure the arrears position to deliver an appropriate
outcome. The Group Risk Committee, a Committee of the Board, is
responsible for reviewing risk issues and reporting regularly to the
Board, which retains responsibility for understanding and controlling
the degree of risk undertaken.
Employees have mandatory annual training on all key policies, with a
completion rate of 99% in 2019.
There are also policies that apply to the business as a whole and govern
our operations, including:
- Data Protection and Retention policies to ensure the Group protects
its customer data and manages and retains it fairly and appropriately.
- Conduct Risk framework, including treating customers fairly to ensure
the Group conducts its business fairly and without causing customer
detriment.
- Conflicts of Interest policy to ensure the Group can identify and, if
possible, avoid conflicts, and where this is not possible, to manage
conflicts fairly.
Customer engagement
We take a personal approach to our customers, treating each customer as
an individual and listening to their needs.
Many of our customers are also members of the Kent Reliance Provident
Society (KRPS), the Society that took over the management of the
membership of the former Kent Reliance Building Society. The Bank and
the Society have benefited from member engagement through the online
portal launched late in 2015, enabling input from a geographically
broader range of members. During 2019, six major studies were undertaken,
with the 514 members on our KRPS panel helping OSB to identify the areas
of our propositions most valuable to members.
Customer complaints
Whilst we concentrate on providing an excellent service, when things go
wrong, we aim to put them right and learn from any mistakes made.
Complaints Handling policy - ensures that the Group responds to
complaints swiftly, fairly and consistently and
that customers' concerns are taken seriously. We investigate complaints
competently, diligently and impartially, supported by appropriately
trained employees. Through the Operations Committee, management
information on complaints is collected and reported on a regular basis
to the
Board and other relevant Committees as appropriate for them to consider
if additional actions are required. Root cause analysis is used to
identify and solve underlying issues rather than apply quick fixes.
Focused on our employees
Our employees are our key asset. Their skills, expertise and enthusiasm
are fundamental to achieving our strategic goals, and throughout 2019
we have continued to invest in training, development and employee
engagement activities in order to make OSB an even better place to work.
In the latter part of the year, a central focus was on the Combination
with CCFS. We strived to ensure a joined-up
approach in terms of proactive employee communications in order to
ensure that our employees in all sites were kept
up to date with how the Combination progressed, and that messages were
consistent. Employees also had the opportunity to raise questions with
the CEO anonymously and responses to those questions were published
centrally for all employees to view.
Recruitment
OSB has dedicated Talent Acquisition Teams in place in both the UK and
India. Recruitment specialists partner with hiring managers in all
departments and provide bespoke support in attracting high quality
candidates for vacant positions and, through robust selection processes,
assist them to make strong selection decisions.
We advertise vacancies internally on a weekly basis in order to provide
career development opportunities for existing employees. In 2019, we
filled 22% of UK OSB vacancies (47 out of 217), 5% of vacant positions
in India (11 of 210) and 56% of vacancies in CCFS (72 of 127) with
internal candidates during the year.
A key focus for our Talent Acquisition Teams was again placed on
proactively identifying potential candidates directly and through
improved use of the OSB internet and external job boards. Our UK Talent
Acquisition Team filled 20% of roles on a direct recruitment basis,
resulting in a saving in excess of GBP 280,000 on agency
recruitment fees. Within OSBI, almost 50% of vacancies closed in 2019
were by way of direct recruitment activities.
We take a personal approach to our customers, treating each customer as
an individual and listening
to their needs.
We will expand our Talent Acquisition Team approach within CCFS in 2020,
in order to ensure that hiring managers in Wolverhampton can utilise
local, dedicated and specialist recruitment support.
Our recruitment procedures are fair and inclusive, with shortlisting,
interviewing and selection always carried out without regard to gender
reassignment, sexual orientation, marital or civil partnership status,
colour, race, caste, nationality, ethnic or national origin, religion or
belief, age, pregnancy or maternity leave or trade union membership.
No candidate with a disability is excluded unless it is clear that the
candidate is unable to perform a duty that is intrinsic to the role,
having taken into account reasonable adjustments. Reasonable adjustments
to the recruitment process are made to ensure that no applicant
is disadvantaged because of their disability and questions asked during
the process are not discriminatory
or unnecessarily intrusive.
In 2019, OSB welcomed 156 new UK employees with a further 142 joining
OSBIndia. CCFS saw 128 new employees, which at the end of the year
resulted in our Group-wide employee base expanding to a total of 1,834.
Both CCFS and OSB operate successful referral schemes with CCFS'
Recommend a Friend Scheme resulting in the recruitment of 12 new
employees in 2019. Within OSB, 22 vacant UK positions were filled during
the year as a result
of the Employee Referral Scheme, with a further 32 vacancies filled as a
result
of the Employee Referral Scheme in OSBI.
Training and development
The OSB People Development Team, based in both the UK and India,
concentrates
on providing learning and development opportunities for all employees,
using
a mix of internal and externally-sourced content, which are delivered
through
a range of media, including workshop and digital formats.
A key focus throughout 2019 was the implementation of OSB's Fit to
Practice Scheme, which requires line managers to play a more proactive
role in
identifying development needs, providing developmental feedback and
establishing appropriate activities to continually progress competence
levels of their
direct reports.
Within CCFS, the approach regarding training and competence requirements
is managed on a departmental basis and, as such, there is an opportunity
for us to establish a consistent and Group-wide approach throughout
2020.
In 2019, we provided a wide range of workshops, including bespoke
management development programmes, regulatory training and business
change content to support operational and systemic training needs. There
were 354 separate workshops or learning events delivered by the People
Development Team in the UK and over 100 other separate learning events
attended by OSB staff that were either delivered at external events or
delivered internally
by external training providers.
Within OSBI, we concentrate on making all those who join the Group feel
as welcome as possible. We provide as much training as necessary to
enable employees to perform to their best ability. In 2019, new
employees were provided with an average of 108 hours of training before
starting their role and in addition to this, there was significant focus
placed on establishing consistency with workshops and content that is
being delivered by the UK People Development Team. During 2019, we
delivered 187 workshops at OSBI.
During 2019, the Learning and Development Team at CCFS increased the
amount of training they deliver, with
the number of learning hours per full time employee increasing from 40
in 2018 to 45 in 2019. Over 200 sessions were run
by the CCFS team.
OSB saw 99% of monthly mandatory regulatory training completed within
the monthly deadlines, which shows the importance we place on ensuring
that our employees are suitably aware of key requirements. Mandatory
training
is similarly taken seriously at CCFS, where 98.6% of all training was
completed by the end of 2019.
The Group is also committed to supporting employees undertaking
professional development and, in 2019, 19 OSB employees received
financial support
to pursue professional qualifications, with a further six being
financially supported by CCFS.
Under OSB's UK Apprenticeship Scheme, at the end of 2019, we had six
apprentices working within a number of different functions throughout
the business.
With each individual apprenticeship arrangement running for two years,
we remain positive that this will lead to a number of permanent
appointments and ongoing careers within the Group.
Retention and progression
The Group has a genuine desire to retain, support and develop its
employee base. During 2019, 87 UK OSB employees, 43 employees in OSBI
and 76 CCFS employees were formally promoted to a more senior grade.
Our Group-wide regretted attrition rate for 2019 was 11%, made up of an
OSB UK rate of 10%, a rate of 7% in CCFS and 16% in OSBI, all below
industry averages. In addition to this, we achieved a low rate of
non-regretted attrition, which
on a Group-wide basis was 5%.
In 2019, OSB again identified Primary Talent Groups in both the UK and
India, which were provided a range of talent management activities, in
order to aid their ongoing progression. Activities included: access to a
Board, Executive or senior mentor, career development interviews,
psychometric profiling and related coaching and bespoke off-site
group leadership workshops delivered via an external Business School or
specialist. The Group considers this initiative as an integral part of
retaining and developing our emerging talent, either as technical
specialists or as potential leaders of
the future.
Within CCFS, the approach to talent management in 2019 saw a continued
focus on future leadership through
its Aspiring and New Line Manager programmes. The first is aimed at
staff members who aspire to become a manager in the near future, and was
designed to allow the employee to deepen their understanding of the
knowledge, skills and attitude required in a managerial or supervisory
role. The second programme is for new line managers
and was developed to equip CCFS line managers and supervisors with the
tools to develop and grow their leadership and management capabilities.
It consists of ten core modules, which make up the essential elements of
the programme, with an optional nine modules which can be completed
thereafter.
Remuneration and benefits
We believe in rewarding our employees fairly and transparently, enabling
them to share in the success of the business.
Details of the Group's remuneration policies can be found in the
Remuneration Report on page 131.
We offer our employees a comprehensive range of benefits, and continue
to review these to ensure they are in line with market practice.
Whilst there are some differences within the standard benefits packages
provided by OSB and CCFS, we will be undertaking a detailed Group-wide
review during 2020 in order to establish how these approaches can be
harmonised.
In 2019, key additions to OSB benefits included the provision of a
fully-funded Medical Cash Plan for all employees and the opportunity to
sacrifice part of annual bonuses directly into the pension plan.
Enhancements made during 2019 to the CCFS benefits package included the
introduction of flexible and voluntary benefits which included the
following:
Health Cash Plan, Health Screening, Cycle to Work Scheme, Car Leasing
Scheme, Holiday Trading Scheme and a Retail, Health and Wellbeing
Discount Scheme.
We also encourage our employees
to hold shares in the Bank for the long term, via an annual ShareSave
Scheme. These schemes are open to all UK-based employees and allow them
to save a fixed amount of between GBP 5 and GBP 500 per month over
either three or five years in order to use these savings at the end of
the qualifying period to buy OSB shares at a fixed option price. At the
current time, around 58% of OSB employees and 68% of CCFS employees are
members of one of our ShareSave Schemes.
Redundancy and redeployment
There is a Group-wide Redundancy and Redeployment policy designed to
ensure that, ahead of any potential redundancy, we take all reasonable
steps to identify feasible alternatives that meet the needs of the
business. If a redundancy situation is unavoidable, employees would be
given maximum warning possible, support to seek alternative positions,
priority for retraining, counselling if required and support to seek
alternative employment. The Board has safeguarded the existing
contractual and statutory rights of OSB and CCFS employees and for a
period following completion of the Combination, the Group amended
redundancy policies to provide enhanced payments.
We believe in rewarding our employees fairly and transparently, enabling
them to share in the success of the business.
Employee engagement and culture
In October 2019, for the fifth consecutive year, OSB's UK employees were
invited
to participate in the Sunday Times Best Companies to Work For employee
engagement survey, and almost 90% of employees submitted a response.
We achieved an overall score increase of 2.3% and, for the first time,
OSB achieved a Two Star Accreditation Rating, signifying outstanding
levels of workplace engagement. The continuous improvement in employee
engagement saw OSB included within The Sunday Times 100 Best Companies
to Work For list for the second time. The improved
results were primarily achieved as a result of the creation and
implementation of Culture and Engagement Plans within
all departments and the broader identification and implementation of
initiatives by the Engagement Steering Group.
Whilst CCFS did not participate in the Best Companies to Work For survey
as a result of the Combination, it was placed in the Top 20 of the
Sunday Times Best Companies to Work For list of 2019, the fourth
consecutive year that CCFS achieved Top 20 status.
Our participation in the next Best Companies to Work For survey will be
on a Group-wide basis, including all UK employees within both OSB and
CCFS.
In June 2019, OSB employees in both the UK and India also took part in
the annual Banking Standards Board survey for the third consecutive year,
which aims to influence positive change throughout the banking sector.
This saw another extremely high overall participation
rate of 76% and provided an insight into employees' perceptions of the
application of the Group's values, potential barriers to challenge and
to speak up along with their observations of unethical or inappropriate
behaviour. The results showed an increase in the majority of the nine
separate survey categories, with the average category score increasing
by 1.4% compared with the 2018 results, giving OSB an average ranking of
14 out of the 29 banks who participated in the survey. When the
2020 Banking Standards Board Survey is undertaken, we will also be
inviting all CCFS employees to participate for the first time.
OSBI participates in a separate employee engagement survey, run by the
Great Place to Work Institute, and has been officially certified as a
Great Place to Work for the third year in succession, with strong
results in all five survey categories (credibility of management,
respect for people, fairness at the workplace, pride and camaraderie
between people). The highest score related to the Pride category,
reflecting the strong brand and culture that exists throughout the teams
in Bangalore.
In 2018, OSB partnered with specialist external consultants to design
and launch the Group's Mission, Vision, Values and the supporting
behaviours and in 2019 we focused on embedding these throughout the
business, and weaving them into
our cultural DNA through an ongoing programme of related communications
and pulse surveys.
OSB's four values (Stronger Together, Aim High, Take Ownership and
Create Your Future) were implemented into Group- wide processes,
including goal setting, appraisals, and interview and selection. To
support this further, around 80 senior managers and the same number of
line managers attended workshops focusing on truly embedding our values
and progressing towards the achievement
of our Mission and Vision. In addition, we launched a separate and
extensive programme of communications to introduce all staff to our
different types of customers, who are at the heart of our Mission and
Vision statements.
Our proactive approach in driving organisation culture and the
associated efforts in the design of our Mission, Vision, Values and
supporting behaviours saw OSB listed as finalists at the 2019 Business
Culture Awards in two separate categories:
(a) Best Employer Brand and Values Initiative for Business Culture and
(b) Best Medium-Sized Organisation for Business Culture. We were
delighted that our work in the design and implementation of our Mission,
Vision and Values was further recognised at the Business Culture Awards
ceremony when we achieved the runner- up award in both categories.
CCFS has five established principles that act as organisational values
(Respect, Excellence, Attention, Challenge and Honesty) which are
already embedded within its performance appraisal processes. A key
challenge for 2020
will relate to establishing a harmonised approach to Mission, Vision and
Values that will enable us to further build on the cultural progression
that has been achieved to date in both OSB and CCFS.
2019 also saw the inception of OSB's Workforce Advisory Forum (OneVoice),
which aims to improve the level of engagement that OSB's Board has with
the wider workforce. In addition to rotating Non-Executive Directors and
Group Executive Committee members, the forum is attended by employees
who have nominated themselves to represent the employees within their
respective department or office location.
Within CCFS, the Employee Representative Committee, which met four times
in 2019, includes representatives from all parts of the business who
meet with senior management teams to raise any concerns they may have
and provide input.
The Group operates a Whistleblowing policy, championed by the Chair of
the Group Audit Committee. We encourage employees to feel confident in
raising serious concerns at the earliest opportunity, and provide
avenues to raise concerns confidentially, protected from possible
reprisals. Regular reports are provided to the Group Audit Committee,
including an annual report, which is also presented to the Board.
Employee recognition and awards
In 2019, OSB recognised the significant tenure of 51 employees who
reached a five, ten, 15 or 20-year milestone of employment with the
Group via our Long Service Award programme. There were two employees who
reached 20 years' service and our longest-serving employee now has over
32 years' service. CCFS commenced trading in 2008 and in 2019 was able
to provide 10 Year Service Awards to eight employees and 5 Year Service
Awards to a further 53 individuals.
Every quarter, OSB employees are invited to nominate their colleagues as
part of our OneTeam Award programme, which aligns with OSB's four
values. Throughout 2019, we received over 400 nominations from which 29
individuals and teams were awarded. CCFS continues to recognise those
employees who consistently demonstrate our values and behaviours and two
employees each quarter are recognised as Charter Champions.
The expertise of our employees was also acknowledged within the mortgage
industry during 2019 with Alison Drysdale winning Underwriter of the
Year at the British Specialist Lending Awards.
Health and safety
The Board recognises the importance of health and safety and takes
responsibility for it within the Group. We have a duty
of care to all of our employees and customers, and a safe and healthy
work environment is paramount. We are committed to fostering and
maintaining a working environment in which our
employees can flourish, and our customers can safely transact with us.
We operate a Health and Safety policy and we review our employee and
customer environment regularly.
Annual mandatory health and safety training is completed by all Group
employees. In 2019, we undertook a full review of OSB's real estate. The
review demonstrated that all sites are compliant with statutory health
and safety regulations and provided us with additional best practice
improvements and recommendations which will be implemented in the
future.
Diversity and inclusion
We recognise the benefits that diversity of our people brings to the
business and we actively promote and encourage a culture and environment
which values and celebrates our differences. In 2019, we continued our
journey to become a truly diverse and inclusive organisation, which is
committed to providing equal opportunities through the recruitment,
training and development of our employees.
The commitment to actively promote an environment where disabled
candidates and employees are welcomed was again an area of focus. In
line with OSB's Disability Confident Employer (Level Two)
status, we are proud to have a number of employees who are registered as
disabled.
CCFS has already achieved Disability Confident Committed status and
we'll be working towards increasing this to Level Two status in the
future.
CCFS is a signatory of the MIND Pledge to Change and we are committed to
reducing the stigma of mental health within the workplace. All CCFS
managers undergo training aimed at preventing discrimination and
promoting good mental health throughout our business.
This training programme is delivered with the support of Mental Health
First Aid England and the programme is accredited by the Royal Society
for Public Health.
Within OSB, there has been a significant focus on supporting mental
health via the provision of Mindfulness Workshops which were delivered
in a number of different office locations throughout the year.
CCFS' Wolverhampton offices are in the heart of the West Midlands and
boast a richly diverse local community that is reflected in the
diversity of our people. As a Group, we value and celebrate diversity by
hosting theme days on
key festival dates such as Eid, Diwali, Vaisakhi and Easter.
OSB published its 2019 Gender Pay Gap Report in line with legislation
that applies to all UK companies with more than 250 employees. The full
publication is available on the Group's website: www.osb.co.uk.
OSB's median gender pay gap as at the snapshot date of 5 April 2019 was
37.6%, with the mean gap at 43.1%, these figures reduced from the 2018
reported figures
of 44.0% and 45.5%, respectively.
CCFS' median gender pay gap as at the snapshot date of 5 April 2019 was
17.8%, with the mean gap at 49.8%, these figures reduced from the 2018
reported figures
of 19.5% and 52.2% respectively.
Whilst it is pleasing to see progression across the Group, we are
committed to reducing these gaps further.
Fundamentally, in both OSB and CCFS, the gaps relate to the structure of
our workforce and reflect the fact that we have more men than women in
senior roles and more female employees undertaking clerical roles.
Progress has been made to positively impact both aspects of our
workforce structure, and we remain confident that our gaps will continue
to close.
We recognise that we need to focus on improving our gender balance and
have made solid progress towards the commitments that OSB and CCFS have
made as signatories of HM Treasury's Women in Finance Charter. Both OSB
and CCFS committed to a target of 30% of senior management positions
being undertaken by female employees, with OSB's target date being the
end of 2020 and CCFS by the end of 2022.
Solid progress was made towards these commitments throughout 2019, with
OSB increasing from 28% at the end of 2018 and closing the year on 31%.
In 2020 we will be reporting our Women
in Finance Charter progress on a joint basis, maintaining an overall
target of 30% by the end of 2020, at which point a new ongoing target
will be established.
In 2019, OSB's Women's Networking Forum, which is focused on helping to
identify and break down the barriers that prevent women from progressing
within financial services, continued to
develop both its membership and range of activities. It provided regular
opportunities for individuals to participate in relevant discussions,
listen to and engage with guest speakers and undertake bespoke
development activities to support and encourage career progression.
CCFS formed a Diversity and Inclusion Working Group in July 2019,
comprised of 14 members, who introduced themselves to the business
during National Inclusion Week. To date, they have coordinated
a mental health quiz, undertaken sign language sessions and engaged with
a local charity to deliver a thought-provoking training session,
challenging managers
to think how fair are they?.
CCFS is also engaged with Stonewall and became a diversity champion
employer, ensuring that we do even more to ensure that our LGBT
employees (and future hires) recognise CCFS as an inclusive employer of
choice. Additionally, CCFS became a member of The Employers Network
for Equality & Inclusion (ENEI), the UK's leading employer network
covering all aspects of equality and inclusion issues in the workplace.
At the end of 2019, over 56% of our UK OSB workforce was female, as was
59% of the CCFS employee base, and within OSBIndia females constitute
41% of all staff.
Currently, 15% of our Group Executive Committee and 45% of our Board are
female, placing us 12th in the Financial Services Sector of the November
2019 Hampton-Alexander Review of the FTSE 250.
We have both Flexible Working and Homeworking policies in place to
provide increased support to our staff who have parental and/or carer
responsibilities.
Within CCFS, we have around 18% of employees working under a formal
flexible working arrangement relating to reduced or compressed working
hours. Within
OSB, around 10% of our UK employees work part-time hours with a further
11 individuals working a compressed working week.
Male Female
Number of Board
Directors 9 5
Number of Directors
of subsidiaries 19 3
Number of senior
managers (not
Directors) 98 44
All other employees1 763 929
1. Includes OSB, OSBI and CCFS
At the end of 2019, over 56% of our UK OSB workforce was female, as was
59% of the CCFS employee base, and within OSBIndia females constitute
41% of all staff.
Human rights
We want each member of our workforce and other stakeholders to be
treated with dignity and respect. OSB endorses the UN Declaration of
Human Rights and supports the UN Guiding Principles of Business
and Human Rights. The Group adheres to the International Labour
Organisation Fundamental Conventions. We seek to engage with
stakeholders with fairness, dignity and respect. The Group does not
tolerate child labour or forced labour. OSB respects freedom of
association and the rights of employees to be represented
by trade unions or works councils. The Group is a fair employer and does
not discriminate on the basis of gender, religion, age, caste,
disability or ethnicity. Our policy applies throughout the Group and is
communicated to our employees during induction training.
The Group's third annual statement under the Modern Slavery Act 2015 was
published on our website in June 2019. Over the year, no instances of
modern slavery were reported and we continue
to ensure all relevant employment policies have direct consideration to
the risk of modern slavery. These policies include Recruitment and
Selection and Diversity and Inclusion.
CCFS has zero tolerance for slavery and human trafficking and, in line
with the Modern Slavery Act 2015, takes active steps to identify and
combat slavery and human trafficking in its business
and supply chains. In 2019, CCFS continued work to identify and assess
potential risk areas in its supply chains, grading the risks as high or
low based on criteria and factors we have determined to be relevant in
the assessment of the risks. Enhanced due diligence is undertaken on
suppliers considered to be high risk and anti-modern slavery provisions
are incorporated into our contracts with suppliers.
OSB and CCFS have an Anti-Bribery policy, reviewed annually and approved
by the Group Audit Committee. It will not accept or condone any
behaviour connected with accepting, requesting or offering any bribe or
inducement in return for providing
a favour.
OSB and CCFS do not consider themselves to be at a high risk of bribery;
they conduct all of their business in the UK and the
only significant outsourcing arrangement is with a wholly-owned
subsidiary of a UK Building Society in relation to CCFS' deposit-taking
business.
In relation to the procurement of goods and services, the Anti-Bribery
policy operates in conjunction with a number of other Group policies
which are incorporated into the Conflicts of Interest policy, Modern
Slavery Act Statement, and Vendor Management and Outsourcing policy.
All staff are required to complete an Anti-Bribery and Corruption
Compliance Training module on induction and every other year afterwards.
On an annual basis all staff have to acknowledge that
they have read the Employee Handbook, which reminds them of the need to
comply with the Anti-Bribery policy.
If an employee suspects that the Policy is being violated, they are
required to immediately report this in accordance with the Group's
Internal Fraud policy and Response Plan or the Financial
Crime reporting procedure as appropriate.
The Group's Whistleblowing policy and procedure is also available as an
alternative reporting process, if for
whatever reason, it is felt that the other procedures above are not
appropriate.
OSBIndia
OSBIndia is a wholly-owned subsidiary of the Group. OSBI operates from
an office in Bangalore and employs 490 employees, of which 41% are
female. OSBI supports the Bank across various functions including
Support Services, Operations, IT, Finance and Human Resources. We
actively promote integration between our colleagues in the UK and India
with frequent employee exchanges, transfers, overseas training, staff
and management visits.
As part of the Group, OSBI falls under the same Group policies that are
in force in the UK offices, most importantly, Equal Opportunities,
Non-discrimination and Harassment, Whistleblowing, Information Security
and Clear Desk policies. There are only very slight differences in the
Group's main HR policies due to local legislation.
OSBI is a holder of ISO 27001: 2013 certified, which demonstrates high
standards of information security. To that end, the business continuity
site in Hyderabad was opened and became fully operational in 2017. OSBI
prides itself on excellence in customer service and the ISO 9001: 2015
certified is a testament to meeting customer and regulatory requirements
by providing outstanding customer service.
In compliance with the Modern Slavery Act, we do not support excessive
overtime and our employees in India are encouraged to work in accordance
with local legislation. Employees in our
Bangalore office enjoy a range of benefits which include 22 days of
annual leave, 12 days' sick leave and cafeteria services.
Focused on the environment
OSB's Environmental policy states that we are committed to reducing our
environmental impact and to continually improve our environmental
performance
as an integral part of our business strategy. This policy ensures that
we meet or exceed all relevant environmental obligations under law and
regulation.
The Environmental policy is under review to include additional risk
assessments and develop actions and measures to include the impact of
environmental change on the Group's business activities, in addition to
focusing on our impact
on the environment.
2019 was yet another year when the Group took on initiatives, or
advanced existing ones, to achieve its goal of becoming a greener
organisation.
OSB Greenhouse gas emissions
The Group is committed to promoting awareness of environmental issues
amongst our employees. In 2019, OSB was successful in reducing single
use plastic consumption by taking away unnecessary bins and installing
large recycling stations across the estate. We now have a Green
Committee, made up of volunteers,
our Green Ninjas, who actively support the policy.
OSB is active in attempting to reduce its carbon footprint and, in 2019,
it introduced two electric vans which the Maintenance team use to travel
between sites. Electric charging points are now also available for
employees to use, encouraging the use
of electric vehicles.
CCFS operates an environmental management system that is certified to
the internationally recognised ISO 14001 standard. This not only
supports legal compliance but provides a framework for ongoing
improvements.
In 2019, further progress was made on tackling CCFS' carbon footprint
(see
Greenhouse gas emissions). This included undertaking an ESOS energy
assessment, introducing a Cycle to Work scheme
and providing support for employees to choose ultra-low emissions
vehicles. Improvements were also made to waste management and recycling
by introducing reusable cups, enhancing segregation of waste and
introducing
battery recycling. Employee engagement has been key, and CCFS rolled out
online environmental awareness training, plus various communications and
activities throughout the year, led by its enthusiastic Environmental
Committee.
Across the Group, we have high-level environmental objectives to:
- Accept responsibility for contributing to the protection of the
environment and strive to ensure that our actions will not detract from
the long-term sustainability of environmental resources
- Minimise harmful emissions
- Promote advantageous environmental practices by all staff
- Consult with suppliers to improve the environmental impact of goods
and services provided to the Group
OSB Greenhouse gas emissions
2018
2019 Tonnes
Emission source Tonnes CO2e CO2e
Combustion of fuel 89 76
Operation of facilities 3 5
Purchased electricity 884 951
Total greenhouse gas emissions 976 1,032
Total emissions per employee 0.88 1.04
CCFS Greenhouse gas emissions
2018
2019 Tonnes
Emission source Tonnes CO2e CO2e
Combustion of fuel 213 158
Operation of facilities 3 3
Purchased electricity 201 273
Total greenhouse gas emissions 417 434
Total emissions per employee 0.61 0.68
Purchase of renewable energy (50.4) n/a
Total net GHG emissions 366.6 n/a
Net emissions per employee 0.54 n/a
Fuel type Emissions conversion factor
source
UK electricity -- location Department for Environment,
based (excluding transmission Food and Rural Affairs 2019--20
and distribution), UK
gas, diesel, R134-a,
R32 and R22 F-gas
Overseas electricity http://www.carbon-calculator.org.uk/
Mandatory greenhouse gas report
Reporting scope
- Our methodology has been based on the principles of the Greenhouse Gas
Protocol, taking account of the 2015 amendment which sets out a dual
reporting methodology for the reporting of Scope 2 emissions. This means
that UK electricity is reported using two methods.
- We have reported on all the measured emissions sources required under
The Companies Act 2006 (Strategic Report and Directors' Report)
Regulations 2013, except where stated.
- The period of our report is 01/01/2019 - 31/12/2019.
- This includes emissions under Scope 1 and 2, except where stated, but
excludes any emissions from Scope 3.
- Conversion factors for UK electricity (location-based methodology),
gas and other emissions are those published by the Department for
Environment, Food and Rural Affairs for 2019/20.
- Conversion factors for UK electricity (market-based methodology) have
been set as 0, due to the 100% renewable electricity tariffs which were
in place throughout the 2019 year.
- The market-based methodology has only been applied to UK electricity
supplies.
- Conversion factors for overseas electricity have been provided by the
Government of India, taken from 2018.
- Conversion factors for overseas (India only) diesel usage are those
published by the Department for Environment, Food and Rural Affairs for
2019/20.
- Conversion factors used for the reporting of F-Gases R22, R32 and
R134-a are those published by the
Department for Environment, Food and Rural Affairs for 2019/20.
- The following emission IDs have been retired and are not included
within the 2019 report:
Prestige Finance - gas meters 2978102004 (OSB-INV-04189-10-07- NAT-004)
and 2978102105 (OSB- INV-04189-10-07-NAT-105) have
been disconnected and replaced by new gas meter (OSB-04189-10-07-
GAS-104).
Maidstone - site closed in November 2017. Emission ID for electricity
(OSB- INV-04189-10-05-ELE-841) retired.
- The following sites have been added to the portfolio during the 2019
reporting year: 30 Watersmeet and 51 Watersmeet.
- There has been a significant reduction in F-Gas recharges between 2018
and 2019 as no F-Gas recharges were required for any of the UK sites.
- There has been an increase in combustion, due primarily to the
estimation applied to the Prestige site as no gas data was available for
the 2019 year, therefore benchmarking estimation based on office type
and floor area has been applied (using TM46 benchmarks).
- There has been a reduction in emissions relating to purchased energy
(electricity) which is due in large part to the lower 2019 carbon factor
for location-based grid electricity, as electricity usage increased in
2019 to
2,314.5 MWh (from 2,180 MWh in 2018).
Statement of exclusions
- Global diesel/petrol use (for vehicles) has been excluded from the
report on the basis that data is not available
for reporting. This is due to be reviewed for inclusion in future years.
- It has been confirmed that there is no LPG use within the estate,
either in the UK or overseas.
- It has been confirmed that there is no mains gas supply in relation to
the India operations.
- Two UK sites, Interbay and Fleet, continue to be excluded from
reporting as these are managed rented properties with energy charged as
a flat rate as part of a service charge and are therefore excluded on
the basis of the financial control approach. Heritable
at Newman Street is a landlord site, but as data was available for
reporting in the 2018 year, this data has been used as a direct
comparison estimation for 2019 to ensure consistency.
Focused on our communities
We have a strong tradition of caring about our local communities. Each
year, OSB engages with people across the UK and India, by taking part in
a variety of charitable events and partnerships.
In 2019, the Group, including CCFS pre- Combination donations, raised
GBP 398,000 for its charity partners and our employees also volunteered
their time to support a variety of community-based activities. OSBI is
also heavily engaged within its local community in Bangalore through
participation in
2019 marked the beginning of a new partnership with our current national
charity partner, My Shining Star, Children's Cancer Charity, as well as
the introduction of local charity partners for each of our brands. By
partnering with national and local charities, we can offer employees the
chance to make a difference, both nationwide and closer to home. By
focusing our efforts on our nominated
charities, we can make a more meaningful impact to the lives of those
that the charities support.
Throughout the year, we continued to enable employees to have an impact
The OSB Community Fund
As well as encouraging fundraising
and volunteering, we also offer financial support for causes close to
our employees' hearts through our Community Fund initiative. Any
employee can apply for funding on behalf of a registered charity or
community project that they are actively involved with. A total of 34
applications were made in 2019, and we are hoping for even more in 2020,
as the popularity of the scheme grows. The initiative, since being
piloted successfully in OSB's UK offices,
has also now been introduced in India.
Our national charity partner
charitable causes and programmes
on the charities that matter to them,
that require critical assistance.
Giving something back
We are proud of our strong links with our local community, especially
through the Kent Reliance brand, which has been synonymous with the
county for over
150 years. As our employee numbers have grown, so has our commitment to
give something back to our local communities.
Our community strategy is built primarily around three key pillars
consisting of Volunteering, Fundraising and Community Investment, which
provide a platform
for OSB to live its vision and values.
by encouraging an active hands on approach, through fundraising and
volunteering opportunities. More employees than ever before used their
Day to Make a Difference this year; this is a paid day to help support
any registered charity or community group.
This is often linked to one of our local charity partners, for example
our annual community-based campaign, Project Kent, that Kent Reliance
runs alongside KMFM, or something close to the hearts of our employees.
Furthermore, if employees choose to undertake additional fundraising
activities, the Bank will match any funds raised up to a specific
amount.
My Shining Star: Children's Cancer Charity
My Shining Star is a charity that supports families through the
financial hardship associated with childhood cancer. Around 1,600
children are diagnosed with cancer in the UK every year.
Families spend an extra GBP 600 per month, on average, during their
child's cancer treatment (mainly for transport, food and accommodation)
and many fall into debt as a result, or families become separated as
siblings of the child are left at home.
The money we have raised throughout 2019 has gone directly to improving
the lives of families in their darkest times.
Our local charity partners
Each of our locations supports our national charity partner by taking
part in Group- wide fundraisers, but we also encourage our employees to
support a charity on their doorstep. By engaging with charity champions
at each location, we are able to ensure the views of each location are
represented when a local charity partner was agreed. Our charity
champions
have been instrumental in supporting our Giving Something Back
initiative and have organised a number of fundraisers in support of our
national and local charity partners.
Demelza Hospice Care for Children supported by Kent Reliance
Kent Reliance branches continue to support Demelza as their local
charity partner, fundraising in branches and offering customers the
dedicated Demelza Children's Account, whereby the charity receives an
annual donation equivalent
to an agreed percentage of the combined funds held across the associated
accounts at the end of the year.
Breast Cancer Haven, Wessex supported by InterBay Commercial Breast
Cancer Haven is a centre in Titchfield, Hampshire. The charity provides
free support and advice for those affected by breast cancer and their
families, in a relaxing, non-clinical environment. This year, the team
has raised money for Breast Cancer Haven through a variety
of fundraisers, including a sponsored fire-walk, tea party events, a
summer festival and skydives.
Age UK Hertfordshire supported by Prestige Finance
Age UK Hertfordshire works tirelessly to help improve the lives of
thousands of the elder generation. It is one of the largest charities
providing services to the elderly in Hertfordshire, providing vital
support for many people in need of later life care. Not only have the
team been fundraising with events like their Easter charity bake sale,
they've been getting hands on and volunteering in the local care home
and taking part in a Strictly Come Dancing themed event.
Shooting Star Children's Hospices supported by InterBay Asset Finance
Shooting Star Children's Hospices supports 700 life-limited babies,
children and young people living in London and Surrey, and their
families. Bespoke support is available 365 days a year at their two
purpose-built children's hospices, as well as in families' own homes at
no cost to them. As our newest local charity partner, joining us
in October, OSB employees have already helped Shooting Star to move
items from its old warehouse, to a new fit-for- purpose facility, so
they can store more equipment to help more people.
OSBI fundraising
Corporate social responsibility is extremely important to OSBI. The
concept of helping society is embedded in its corporate governance
structure through its Corporate Social Responsibility (CSR) Policy and
also through employee engagement.
As part of the OSBI CSR Policy, funds are kept aside each year to spend
on social causes. This is governed by a CSR Committee and implemented by
the
Corporate and Social Responsibility Group. The focus is to help and
contribute in areas where there is critical need and within
the office locality so they are also able to contribute their time.
In 2019, the CSR Group continued to support the areas of child welfare,
education and healthcare.
Child welfare and education
OSBI has partnered with SOS Children's Village, located in Bangalore, to
fund education, food, clothing and housing for 20 orphans. Working
together with SOS, OSBI employees helped to provide support for the
holistic development of orphans and women and children belonging to
vulnerable families. OSBI also hosted some events at SOS for employees
to spend time with the children, which was highly appreciated by both
the children and employees.
Healthcare
OSBI is currently supporting HBS Hospital to provide dialysis sessions
to 40 individuals who live below the poverty line. OSBI has also
contributed two dialysis machines which can provide over 11,000 dialysis
sessions over a period of five years. HBS Hospital is a non-profit
hospital which provides critical healthcare to members
of society who could otherwise not afford the care they need.
OSBI also continued to support maintaining the gardens at CV Raman
General Hospital for the second year. Hospital workers and patients have
appreciated the positive impact such a space has had on patients, their
relatives and the hospital staff.
CCFS and the community
Giving back
CCFS has established itself as one of the local area's largest and
fastest growing employers, now employing 684 people primarily in
Wolverhampton. Providing support to our community is an important part
of our overall strategy. Every year we ask our employees to nominate a
local charity that they would like us to support. This decision is made
by the Charity Committee with final approval from
the CEO.
In 2019, we raised over GBP 92k for Socks and Chocs, a local charity
that supports the homeless in the West Midlands
and beyond. In addition to our existing charitable contributions which
have totalled GBP 373k since 2008, CCFS offers a Good Causes fund that
can be used towards special charity events being undertaken by, or
linked to, employees or their families. In addition, we have
longstanding relationships as supporters of local cricket and rugby
clubs, and CCFS and its brands are passionate supporters of the local
community. This year, Charter Savings Bank increased its focus on
supporting overlooked and underserved UK communities through new
partnerships with local sports clubs.
Working alongside both Coventry Rugby Club and Wolverhampton Rugby Club,
we are actively demonstrating the values we share with our customers.
Coventry Rugby Club
In 2019, Charter Savings Bank entered into a new partnership with
Coventry Rugby Club, focusing on inspiring young children through two
important initiatives: Rugby and Reading, and Rugby in Schools.
Rugby and Reading is designed to inspire disadvantaged and disaffected
children to read more. Our programme is led by members of Coventry's
elite first team who go into schools to read books with children aged
between 5 and 11, enabling them to exercise both body and mind
as they experience an hour of engaging storytelling before enjoying a
hands-on game of tag rugby.
Rugby in Schools gives boys and girls aged between 5 and 16 access to
coaching sessions delivered by one of Coventry's top performing first
team players, providing one-to-one interactions with positive role
models as well as receiving professional coaching.
As title partners for both programmes, we have committed to support over
100 hours of rugby-based learning activity in total a fantastic
opportunity for children in local schools.
In addition to the two programmes, CSB is supporting Coventry Rugby's
charitable Foundation with their efforts to improve the lives of
children currently living in
poverty across the city, by providing access to a Match Day Experience
and supporting their Project:500 initiative.
Match Day Experience gives 40 disaffected and disadvantaged children the
opportunity to attend a live Championship rugby game, enjoy a tour of
the ground, take part in a pre-game coaching session on the pitch and
participate in a Q&A with first team players.
Project:500 aims to use rugby to drive positive engagement with children
living in poverty, giving 500 disadvantaged and disaffected children the
chance to learn through sport and give them an opportunity to be part of
a positive and inclusive community. CSB has funded spaces for children
on the programme, with the first event in October reported as a major
success and the first step
in Coventrys goal to lift children out of poverty.
Wolverhampton Rugby Club
In November 2019, Charter Savings Bank and Wolverhampton Rugby Club
announced an extension to their longstanding partnership, reinforcing
the Bank's commitment to the
Club's development.
To mark the occasion, CSB upgraded the Club's Castlecroft base with a
brand-new pitch-side electronic scoreboard, which will now provide
up-to-the-minute information for over 200 grassroots rugby fans
each week.
Since the partnership began, the Bank has been keen to ensure its
support makes
a real difference.
In 2016, it was instrumental in providing significant funds towards
renovations to Wolverhampton's changing room facilities, which are now
used by up to
15 of Wolverhampton's male and female development teams.
By partnering for a further five years, CSB is helping the club provide
grassroots sporting opportunities for the local community for both male
and female
players, across a wide-range of ages, and for their loyal supporters in
the local area.
Looking forward to 2020
As OneSavings Bank and Charter Court Financial Services have now come
together, we will be looking to bring together the best of all of our
community activities, and continue to support our people in fulfilling
their passions to support matters that are close to their hearts.
Section 172 statement
Section 172 of the Companies Act 2006 requires a Director of a company
to act in the way he or she considers, in good
faith, would be most likely to promote the success of the company for
the benefit
of its members as a whole. In doing this, section 172 requires a
Director to have regard, among other matters, to: the likely
consequences of any decision in the long term; the interests of the
company's employees; the need to foster the company's business
relationships with suppliers, customers and others; the impact of the
company's operations on the community and the environment; the
desirability of the company maintaining a reputation for high standards
of business conduct; and the need to act fairly with members of the
company.
The Directors give careful consideration
to the factors set out above in discharging their duties under section
172. The stakeholders we consider in this regard are our employees, our
customers, our shareholders, the regulators and the local communities in
which we are located.
The Board recognises that building strong relationships with our
stakeholders will help us to deliver our strategy in line with our
long-term values, and operate the business in a sustainable way.
Stakeholder engagement
The Board is committed to effective engagement with all of its
stakeholders. The Board and its Committees regularly receive reports
from management
on issues concerning customers, the environment, communities, suppliers,
employees, regulators and investors, which they take into account in
their discussions and in their decision-making process under section
172.
The Board and its Committees undertake deep dive reviews to further
develop their understanding of key issues impacting all stakeholders. In
addition to this, the Board seeks to understand the interests and views
of the Group's stakeholders by engaging with them directly as
appropriate. Some of the ways in which the Board has engaged directly
with stakeholders over the year
are shown below.
Customers
Our customers are at the centre of what we do. During 2019, we ran a
special campaign focusing on different customer groups. The campaign
focused on bringing the customers to life through life-sized cardboard
cut-outs in the office and video clips telling their stories. These
customers were then used to generate discussions on the needs of such
customers and
how the best outcome can be achieved for them. The campaign generated
numerous conversations and insights into how customer service can be
tailored to maximise customer experience. More information on our
customers is provided on page 76.
Employees
In addition to the Board receiving updates from senior management on
various metrics and feedback tools in relation to employees, members of
the Board engage with the Group's employees in a variety
of ways. A Workforce Advisory Forum (OneVoice) was established and Mary
McNamara serves as the designated Non- Executive Director representing
the view of employees. Other Non-Executive Directors and members of the
Group Executive Committee are also encouraged to attend OneVoice on a
rotating basis. More details on OneVoice are provided on page 145
in the Corporate Governance Report. Further information on engagement
with employees is provided on pages 77.
Investors
The Board regularly receives updates on feedback from investors from
senior management. In addition, various members of the Board, including
the Chairman and Chair of the Group
Remuneration Committee meet frequently with institutional investors to
discuss
and provide updates about and seek feedback on the business, strategy,
long-term financial performance and the Directors' Remuneration Policy.
Members of the Board also met shareholders at the AGM, as well as
receiving briefings from the Group Head of Investor Relations
on shareholders. Further information on feedback from institutional
investors in relation to the Remuneration Policy
is provided on page 144.
Regulators
Members of the Board regularly meet with the Group's regulators. There
was increased engagement with regulators during 2019, due to the
Combination. Since the Combination, the Group has moved to a Level 2
firm, as designated by the Financial Conduct Authority (FCA). This means
that the number
of interactions with regulators will increase for 2020 and beyond.
Decision-making
We set out below an example of how the Directors have had regard to the
matters set out in section 172(1)(a) to (f) when discharging their
duties under section 172 and the effect of the decisions taken by them.
The most significant decision taken during 2019 was the Combination with
CCFS. The Board carefully weighed the benefits of the Combination for
investors, customers, employees and the company (which are outlined on
page 5) against any impact on those stakeholders.
The financial consequences of the Combination were assessed by the Board
and independently challenged by external advisers. The Board also
considered the operational consequences of the decision and the
resources needed to achieve the desired outcomes; this included meeting
the expectations of our regulators. On balance, the Board considered
that the benefits of the Combination outweighed the detriment to certain
stakeholders and the risk associated with the transaction.
Non-financial information statement
In the 2019 Annual Report, OSB Group has addressed the requirements of
sections 414CA and 414CB of the Companies Act 2006 relating to
non-financial reporting. The table below summarises key disclosure
requirements and provides references to where further information can be
found, which taken together form the 2019 Non-financial information
statement.
Section
Policies Due diligence Outcomes/impact within
the
Annual
Report
-------------------------------- --------------------------- --------------------------------- ----------------
Environmental matters
--------------------------------
Description inc. objectives How reviewed and by What actions were taken/
OSB's Environmental whom and how frequently outputs of actions Corporate
Policy sets out commitment The policy is approved There are ongoing initiatives, responsibility
to reducing our environmental annually by the Group which are described report,
impact and to continually Nomination and Governance in this corporate responsibility see page
improve our environmental Committee. It has an report. This is part 84.
performance as an integral accountable executive of an ongoing and developing
part of our business and it is reviewed set of environmentally
strategy. This policy by the Group Executive focused actions. The
seeks to ensure that Committee before Board actions have resulted
we meet or exceed all Committee approval. in outcomes during
relevant environmental 2019 such as reduced
obligations under law single use plastic
and regulation. consumption.
--------------------------------
Employees
--------------------------------
Description inc. objectives How reviewed and by What actions were taken/
The Flexible Working whom and how frequently outputs of actions Corporate
Policy outlines the The Chief Financial The application of responsibility
approach of the Group Officer is the accountable the Flexible Working report,
to support flexible executive for the Group's Policy is managed by see page
working for its employees. employee policies. HR, who ensure consistency 82.
This is designed to The Group's Governance in its application.
improve engagement Forum reviews these HR also report regularly
among staff and is policies annually and to the Executive Committee
also now an important they are approved annually on the take-up of flexible
recruitment offering. by the Group Executive working arrangements
Committee. in the Group.
--------------------------------
The Diversity and Inclusion There is an accountable Gender diversity is
Policy confirms executive for the regularly measured Corporate
responsibility
report,
see page
81.
the Group's commitment Diversity and Inclusion and reported in the
to encourage and Policy. The Group organisation and
promote diversity, Executive Committee externally. Hiring
equality and inclusion, reviews this policy and promotion processes
and promote a culture annually and they are are monitored to ensure
that actively values approved annually suitable male
difference and recognises by the Group Nomination and female candidates
that individuals and Governance are presented for
from different backgrounds Committee. all roles. This has
and experience resulted in more gender
can bring valuable balanced hiring and
insights into the Group recruiting decisions.
and enhance the way Both OSB and CCFS have
in which we work. achieved external
disability confident
recognition. The Group
will continue to work
on promoting diversity
and inclusion across
a broader range
of measures in the
future.
The Health and Safety There is an accountable Health and safety statistics
Policy ensures that executive for the Health are reported to the Corporate
the Group complies and Safety Policy. Board on a regular responsibility
with legislation to The basis through the year. report,
protect Policy is reviewed Annual health and safety see page
its employees and customers annually by the various training is completed 81.
and provide a suitable Committees and approved by all employees. The
and safe environment by the Board. Group also conducted
for customers, employees a review of the entire
and anyone affected real estate portfolio
by the Group's operations. in 2019, which resulted
in actions to continue
to improve employee
health and safety.
--------------------------------
Section
Policies Due diligence Outcomes/impact within
the
Annual
Report
--------------------------------- ----------------------------- ------------------------------- -------
Social matters
---------------------------------
Description inc. objectives How reviewed and by What actions were taken/
The Vendor Management whom and how frequently outputs of actions
and Outsourcing Policy The Group Chief Operating The Group operate robust
outlines the core requirements Officer is the accountable assurance processes in
which must be met by executive. The Vendor relation to these policies
the Group and provides Management Committee as described further in
a structure to efficiently reviews these policies the report.
manage potential and annually and they are
contracted third party approved by the Risk
relationships with Management Committee.
service providers and
compliance with the
specific regulatory
obligations.
---------------------------------
The Lending Policy The Group Chief Credit The Group Risk Committee
sets out the assessment Officer is the accountable challenges how the policy
of a prospective customer's executive. The Credit is applied to ensure that
ability Committee reviews the the right outcomes are
and willingness to policy annually and achieved.
repay a mortgage and it is approved by the
determines the adequacy Group Risk Committee.
of the security offered.
---------------------------------
The Complaints Handling The Group Chief Operating The number of complaints
Policy outlines at Officer is and how long it took us
a high level the Group's the accountable executive. to resolve them forms
regulatory The Operations Committee part of the management
expectations from a reviews the policy and Board monthly reporting
complaint handling annually and it is packs and an annual report
in a customer-centric approved by the Risk of complaints is presented
and complaint perspective. Management Committee. to the Board. Low levels
of complaints were indicated
during 2019 with a maximum
result in the Business
Balanced Scorecard.
---------------------------------
The Vulnerable Customer The Group Chief Credit A new training programme
Policy sets the standards Officer is the accountable has been developed to
and approach for the executive. The Vulnerable focus on more complex
identification and Customer Review Committee customer scenarios including
treatment of vulnerable reviews the policy identifying vulnerable
customers and provides annually and it is customers and how best
guidance to all areas approved by the Risk to serve them and their
of the Group Management Committee. changing needs.
to ensure vulnerable
customers consistently
receive fair outcomes.
---------------------------------
The Data Protection The Group General Counsel Additional new controls
Policy ensures that and Company Secretary were introduced in 2019.
there are adequate is the accountable
policies and procedures executive. The Data
for ensuring the Group's Governance Forum reviews
compliance with the the policy annually,
General Data Protection which is then approved
Regulation and confirms by the Group Risk Committee.
the necessary steps The Data Protection
that should be taken Officers for both CCFS
to protect personal and OSB report twice
data. a year to the Group
Executive Committee
and the Board regarding
compliance with the
Data Protection Policy
and customer data requests.
---------------------------------
The Arrears, Repossessions The Group Chief Credit The Group Risk Committee
and Forbearance Policy Officer is the accountable challenged and approved
covers policies and executive. The Credit updates to policies Including,
procedures in place Committee reviews the the Group Lending Policy,
to deal with cases policy annually and the Arrears,
of arrears, including it is approved by the Repossessions and Forbearance
those more serious Risk Management Committee. Policies and the Loan
cases of arrears which Impairment Provisioning
result in the Group Policy.
taking possession of
and selling
a mortgaged property.
---------------------------------
Section
Policies Due diligence Outcomes/impact within
the
Annual
Report
--------------------------------- ---------------------------- -------------------------------- -------
Respect for human rights
---------------------------------
Description inc. objectives How reviewed and by What actions were taken/
The Whistleblowing whom and how frequently outputs of actions
Policy is designed The Group General Counsel The Group regularly promotes
to ensure that employees and Company Secretary awareness of the Whistleblowing
can raise their is the accountable Policy throughout the
concerns about wrongdoing executive and the Chair year.
or malpractice within of the Group Audit
the Group, without Committee is directly
fear of victimisation, accessible to all employees
subsequent discrimination with whistleblowing
or dismissal. concerns. The Group
Audit Committee reviews
the policy annually
and it is approved
annually by the Board.
There are also quarterly
reports to the Board
Audit Committee regarding
whistleblowing reports.
---------------------------------
The Modern Slavery The Chief Risk Officer Over the year, no instances
Statement sets out is the accountable of modern slavery were
the steps taken by executive. The Risk reported and we continue
the Group to ensure Management Committee to ensure all relevant
there is no slavery and Group Executive employment policies have
in our operations and Committee review the direct consideration to
supply chains. statement annually the risk of modern slavery.
and it is approved
annually by the Board.
The Group continues
to classify suppliers
as low, medium and
high risk in relation
to modern slavery and
enhanced due diligence
is applied to suppliers
and contractors deemed
high risk.
---------------------------------
Anti-corruption and anti-bribery matters
----------------------------------------------------------------------------------------------------------------
Description inc. objectives How reviewed and by What actions were taken/
The Anti-Bribery and whom and how frequently outputs of actions
Corruption Policy aims The Chief Risk Officer The Group does not consider
to provide employees is the accountable itself to be high risk
and contractors with executive. The Risk regarding bribery and
a clear set of guidelines Management Committee corruption and there were
to ensure the Group reviews the policy no bribery or corruption
conducts its activities annually and issues identified during
in an ethical and appropriate it is approved by the 2019.
manner as well as complying Group Audit Committee.
with the laws and regulations Mandatory annual training
of each jurisdiction is applied to all employees
in which it operates. regarding the Anti-Bribery
and Corruption Policy.
---------------------------------
Vendor Management and
Outsourcing Policy
-- see above.
---------------------------------
The Conflict of Interest The Group General Counsel There were no breaches
Policy provides guidance and Company Secretary of the conflicts of interest
around managing conflicts is the accountable policy during 2019.
of interest under the executive. The Risk
Financial Conduct Management Committee
Authority ('FCA') regulations, reviews the policy
the Companies Act 2006, annually and it is
and the FCA High Level approved by the Group
Standards Executive Committee.
-- the Senior Management Group Compliance maintain
Systems and Controls gifts and hospitality
('SYSC'). and conflicts registers,
which are reviewed
annually by the Risk
Management Committee
and the Group Nomination
and Governance Committee.
External directorships
and interests of NEDs
are also reviewed annually
by the Group Nomination
and Governance Committee.
---------------------------------
Anti-corruption and anti-bribery matters continued
Section within the
Annual Report
Description inc objectives
The Anti-Money Laundering and Counter Terrorist Financing Policy
provides a consistent approach throughout the Group to the deterrence
and detection of those suspected of laundering the proceeds
of crime or those involved in the funding of terrorism and the relevant
disclosure to the necessary authorities.
How reviewed and by whom and how frequently
The Chief Risk Officer is the accountable executive. The Risk Management
Committee reviews the policy annually and it is approved by the Group
Audit Committee. All employees must complete mandatory anti-money
laundering training annually.
What actions were taken/ outputs of actions
There were no instances of money laundering during 2019.
Risk review,
see page 115.
Description of business model
Description of principal risks
Non-financial key performance indicators
This Strategic report is approved by the Board and signed on its behalf
by:
Jason Elphick
Group General Counsel and Company Secretary
19 March 2020
Governance
Directors' Report
Board of Directors 96
Group Executive team 98
Corporate Governance Report 100
Group Nomination and Governance Committee Report 109
Group Audit Committee Report 112
Group Risk Committee Report 118
Other Committees 121
Directors' Remuneration Report 122
Directors' Report: Other information 145
Statement of Directors' responsibilities 147
How our Board and Executive team set the strategic direction and provide
oversight and control.
Key reads within this section:
Corporate Governance Report
We are pleased to report full compliance
For more information See page 100
Group Risk Committee Report
We continued to enhance and integrate the Strategic Risk Management
Framework
For more information See page 118
Group Remuneration Report
Extensive engagement with shareholders
For more information See page 144
Board of Directors (biographies)
David Weymouth
Chairman
David was appointed to the Board in September 2017 and held the position
of Chairman until October 2019. He was
re-appointed as Chairman on 4 February 2020.
Committee membership
Chair of the Board Integration and of the Group Nomination and
Governance Committees; a member of the Group Remuneration Committee.
Experience and qualifications
David was previously Chief Information Officer at Barclays Bank plc and
Chief Risk Officer at RSA Insurance Group plc. He sat on the Executive
Committee of both
companies. He served as a Non-Executive Director of Bank of Ireland (UK)
plc. His experience as an executive includes a wide range of senior
roles in operations, technology, risk and leadership. David
is also Chairman of Mizuho International Plc and his other current
Non-Executive directorships include Fidelity International Holdings (UK)
Limited and The Royal London Mutual Insurance Society.
Key skills
David has over 40 years' experience in the financial services industry
and has a degree in Modern Languages from University College London and
an MBA from the University of Exeter.
Andy Golding
Chief Executive Officer
Appointment
Andy was appointed to the Board in December 2011.
Committee membership Member of the Board Integration Committee.
Experience and qualifications
Andy was previously CEO of Saffron Building Society, where he had been
from 2004. Prior to that he held senior positions at NatWest, John
Charcol and Bradford & Bingley. Andy currently holds a number of posts
with industry institutions, including membership of the UK Finance
Executive Committee.
He is also a Director of the Building Societies Trust and has served as
a Non- Executive Director for Northamptonshire NHS and Kreditech. Andy
was a member of the Building Societies Association's Council; and of the
Financial Conduct Authority's Small Business Practitioners Panel until
October 2019.
Key skills
Andy has over 30 years' experience in financial services.
Noel Harwerth1
Senior Independent Director
Noel Harwerth
Noel was appointed to the Board and the position of Senior Independent
Director in October 2019.
Committee membership
Member of the Group Nomination and Governance, Group Remuneration and
Group Risk Committees.
Experience and qualifications
Noel was appointed to the Board of CCFS in June 2017 and was its Senior
Independent Director from August 2017. Noel is a Non- Executive Director
of Scotiabank Europe plc and Sirius Minerals plc. She is a former
Non-Executive Director of Standard Life Aberdeen plc and RSA Insurance
Group plc, prior to which she held a variety of senior roles with
Citicorp for 15 years, latterly serving as the Chief Operating Officer
of Citibank International. Noel's prior non- executive roles also
include GE Capital Bank Limited, Sumitomo Mitsui Banking
Corporation Europe Avocet Mining, Alent plc, Corus, Logica, The London
Metal Exchange and Standard Life Assurance Limited.
Key skills
Noel has extensive experience in both
the public sector with government bodies and the private sector with
global banking companies, which brings valuable insight to the boardroom
debate.
April Talintyre
Chief Financial Officer
April joined the Bank in May 2012 and was appointed to the Board in June
2012.
Committee membership Member of the Group Models and Ratings Committee.
Experience and qualifications
April was previously an Executive Director in the Rothesay Life pensions
insurance business of Goldman Sachs and worked for Goldman Sachs
International for over
16 years, including as an Executive Director in the Controllers division
in London
and New York. April began her career
at KPMG in a general audit department.
Key skills
April has broad financial services experience. She has been a member of
the Institute of Chartered Accountants in England and Wales since 1992.
Graham Allatt1
Non-Executive Director
Graham was appointed to the Board in May 2014.
Committee membership
Chair of the Group Risk Committee and the Group Models and Ratings
Committee; a member of the Group Audit Committee.
Experience and qualifications Graham was previously Acting Group Credit
Director at Lloyds TSB and Chief Credit Officer at Abbey National. Prior
to this he spent 18 years in the NatWest Group culminating in the role
of Managing Director, Credit Risk at NatWest Markets.
A Fellow of the Institute of Chartered Accountants, Graham was involved
with housing associations for nearly 30 years as Treasurer and Board
member in the North of England and in London.
Key skills
Graham has significant banking, credit risk and financial services
experience.
Rajan Kapoor1
Non-Executive Director
Rajan was appointed to the Board and the position of Chair of the Group
Audit Committee in October 2019.
Committee membership
Chair of the Group Audit Committee and member of the Board Integration,
Group Remuneration, Group Risk and Group Models and Ratings Committees.
Experience and qualifications
Rajan was appointed to the Board of CCFS in September 2016. He was
Financial Controller of the Royal Bank of Scotland (RBS) Group and held
a number of senior finance positions in a 28-year career with RBS. Rajan
is a Fellow of the Institute
of Chartered Accountants and of the Chartered Institute of Bankers in
Scotland.
Key skills Rajan has wide-ranging experience of all aspects of banking
including external
reporting, financial planning and analysis, asset and liability
management, taxation and stress testing. He also has extensive
experience of financial and regulatory reporting in the UK and US with a
strong background in internal financial controls, governance and
compliance.
Sarah Hedger1
Non-Executive Director
Sarah was appointed to the Board in February 2019.Committee membership
Member of the Group Audit, Group Remuneration and Board Integration
Committees.
Experience and qualifications
Sarah held leadership positions at General Electric for 12 years in its
Corporate, Aviation and Capital business development teams, leaving
General Electric as Leader of Business Development and M&A for its
global GE Capital division. Prior to General Electric, she worked at
Lazard & Co., Limited for 11 years, leaving as Director, Corporate
Finance and spent five years as an auditor at PwC. Sarah is an
Independent Non-Executive Director of Balta Group NV, a Belgian company
listed on Euronext.
Key skills
Sarah has significant capital management and mergers and acquisitions
experience in financial services. She is a qualified chartered
accountant.
Mary McNamara1
Non-Executive Director
Mary was appointed to the Board in May 2014.
Committee membership
Chair of the Group Remuneration Committee and member of the Group
Nomination and Governance Committee.
Experience and qualifications
Mary is a Non-Executive Director of Motorpoint plc and, until December
2019, of Dignity plc. She was previously CEO of the Commercial Division
and Board Director of the Banking Division at Close Brothers Group PLC.
Prior to that, Mary was Chief Operating Officer of Skandia, the European
arm of Old Mutual Group. Mary spent 17 years at GE Capital, running a
number of businesses including GE Fleet Services Europe and GE Equipment
Finance.
Key skills
Mary h
1 Independent Non-Executive Director.as broad senior management
experience in the banking and finance sectors.
Group Executive team (biographies)
A strong core team
Jens Bech
Group Commercial Director
Experience and qualifications
Jens joined the Bank as Chief Risk Officer in 2012, before becoming
Group Commercial Director
in 2014.
Jens joined the Bank from the Asset Protection Agency, an executive arm
of HM Treasury, where he held the position of Chief Risk Officer. Prior
to joining the Asset Protection Agency, Jens spent nearly a decade at
management consultancy Oliver Wyman where he advised
a global portfolio of financial services firms and supervisors on
strategy and risk management. Jens led Oliver Wyman's support of Iceland
during the financial crisis.
Alan Cleary
Group Managing Director, Mortgages
Experience and qualifications
Alan joined the Bank following the Combination with CCFS in October
2019.
Alan was the Managing Director at Precise Mortgages, and a co-founder of
that business. Alan is responsible for Group mortgage product
development, marketing and originations.
Alan has worked in the mortgage industry for over 25 years. He was Head
of Sales at BM
Solutions from inception in 2001 to 2005 when he became Director of
Halifax Intermediaries, the largest intermediary mortgage brand in the
UK at the time.
Richard Davis
Chief Information Officer
Experience and qualifications
Richard joined the Bank in 2013.
Richard has worked in financial services for 20 years, rising to Chief
Information Officer at GE Money UK in 2004.
He subsequently helped launch MoneyPartners (an Investec subsidiary), as
IT Director, through to the eventual sale to Goldman Sachs. Prior
to joining the Bank, Richard worked for four years at Morgan Stanley
covering IT, Projects and Transaction Management for the European
residential business as an Interim Director.
Peter Elcock
Chief Risk Officer, CCFS
Experience and qualifications
Peter joined the Bank following the Combination with CCFS in October
2019.
Peter is responsible for the CCFS Risk. He has over 39 years of
experience in financial services, having held a number of senior
positions in financial institutions, including 27 years at
Barclays plc in a variety of roles and most latterly at director level
leading risk management strategy and change. He was previously the
Chief Risk Officer at Coventry Building Society.
Jason Elphick
Group General Counsel and Company Secretary
Experience and qualifications
Jason joined the Bank in June 2016.
Jason has over 25 years of legal private practice and in-house financial
services experience.
Jason's private practice experience was primarily in Australia with King
& Wood Mallesons and in New York with Sidley Austin LLP and he has been
admitted to practice in Australia, New York and England and Wales.
Jason's in-house financial services experience was most recently as
Director and Head of Bank Legal at Santander in London. Prior to this
Jason held various roles at National Australia Bank, including General
Counsel Capital and Funding,
Head of Governance, Company Secretary and General Counsel Product,
Regulation and Resolution.
John Gaunt
Group Chief Information Officer
Experience and qualifications
John joined the Bank following the Combination with CCFS in October
2019.
John held the position of Director of IT and Change Management at CCFS
and had
responsibility for the operational and tactical delivery of all business
matters relating to information technology, information security and
change management.
With over 19 years' experience in information technology, information
security and change management within the financial services sector,
John has held a number of senior IT roles within Nationwide Building
Society and Derbyshire Building Society.
Hasan Kazmi
Chief Risk Officer, OSB
Experience and qualifications
Hasan joined the Bank in September 2015 as Chief Risk Officer.
Hasan has over 19 years of risk experience having worked at several
financial institutions, including Barclays Capital, Royal Bank of Canada
and Standard Chartered Bank. Prior to joining the Bank, Hasan was a
Senior Director at Deloitte within its Risk and Regulatory practice with
responsibility for leading the firm's enterprise risk, capital,
liquidity, recovery and resolution practice. Hasan graduated from the
London School of Economics with a MSc in Systems Design and Analysis and
a BSc in Management.
Clive Kornitzer
Group Chief Operating Officer
Experience and qualifications
Clive joined the Bank in 2013. Clive has over 25 years of financial
services experience, having worked at several financial organisations
including Yorkshire Building Society, John Charcol and Bradford and
Bingley.
Prior to joining the Bank, Clive spent six years at Santander where he
was the Chief Operating
Officer for the intermediary mortgage business. Clive has also held
positions at the European Financial Management Association and has been
the Chair of the FS Forums Retail Banking
Sub-Committee. Clive is a Fellow of the Chartered Institute of Bankers.
Lisa Odendaal
Group Chief Internal Auditor
Experience and qualifications
Lisa joined the Bank in April 2016.
Prior to joining the Bank, Lisa worked for Grant Thornton where she was
an Associate Director responsible for leading several outsourced audit
functions within the Business Risk Services division.
Lisa is a qualified Chartered Internal Auditor and has over 25 years of
internal audit and
operational experience gained in the UK, UAE and Switzerland, having
worked at several financial institutions, including PwC, Morgan Stanley,
HSBC and Man Group.
Paul Whitlock
Group Managing Director, Savings
Experience and qualifications
Paul joined the Bank following the Combination with CCFS in October
2019.
Paul was an Executive of Charter Savings Bank. Paul brings specialist
knowledge of the savings market and is responsible for all aspects of
the Group's savings strategy, products, propositions, sales,
distribution and operations.
With over 20 years of UK and international experience in the retail
banking industry, including senior positions at First Direct, HSBC and
Shawbrook Bank, Paul has extensive experience delivering banking
products
to the consumer market.
Richard Wilson
Group Chief Credit Officer
Experience and qualifications
Richard joined the Bank in 2013.
Prior to joining the Bank, Richard was head of the credit function for
Morgan Stanley's UK origination business and subsequently looked after
the Credit and Collections strategy within its UK, Russian and Italian
businesses. Between 1988 and 2006, Richard held various roles at
Yorkshire Building Society, including the position of Mortgage
Application Centre Manager.
Corporate Governance Report
Dear Shareholder,
The statement of corporate governance practices, including the Reports
of Committees, set out on pages 109 to 144 and information incorporated
by reference, constitutes the Corporate Governance Report of
OneSavings Bank.
UK Corporate Governance Code (the Code)
Compliance Statement
During 2019, the Company applied the principles
and complied with the applicable provisions of the Code.
The Code is available at www.frc.org.uk.
1 Independent Audit Limited has no other connection with the Company or
individual Directors.
David Weymouth
Non-Executive Chairman
19 March 2020
I am pleased to present to you the Company's Corporate Governance Report
for 2019, and to report full compliance throughout the year with the
Code as updated in 2018.
This is my first report to you following the Combination with CCFS. The
Board continues to be committed to the highest standards of corporate
governance and considers that good corporate governance is essential to
provide the Executive team with the environment and culture in which to
drive the success of the business. In a year of considerable uncertainty
relating to Brexit, a key focus of the Board has been on the Combination
with CCFS and governance has been and will continue to be a key aspect.
Just prior to the Combination, the Board and its Committees undertook an
external evaluation facilitated by Independent Audit
Limited1(Independent Audit), details of which are set out in the Report
on page 107. The review concluded that the Board and its Committees
continue to operate effectively.
I would like to welcome Directors who joined the Board on
4 October 2019; Tim Brooke, Noel Harwerth, Rajan Kapoor and Ian Ward.
Sir Malcolm Williamson served on the Board from
4 October 2019 until 4 February 2020. Noel Harwerth was appointed as the
Senior Independent Director, succeeding Rod Duke. Rajan Kapoor was
appointed as Chair of the Group Audit Committee, succeeding Eric Anstee.
I would like to thank Sir Malcolm Williamson, Eric Anstee and Rod Duke,
who have left the Board since the Combination. I would also like to
thank Tim Brooke, Margaret Hassall and Ian Ward, who are not seeking
election or re-election at the AGM, for their service and contributions.
The Investor Relations function continues to assist the Board in
developing a programme of meetings and presentations to both
institutional and private shareholders, details of which are also set
out in the Report below. We welcome shareholders to attend the AGM,
which will be held at the offices of Slaughter and May, One Bunhill Row,
London EC1Y 8YY on 7 May 2020 at 11am.
The role and structure of the Board
The Board of Directors (the Board) is responsible for the long- term
success of the Company and provides leadership to the Group. The Board
focuses on setting strategy and monitoring performance and ensures that
the necessary financial and human resources are in place to enable the
Company to meet its objectives. In addition, it ensures appropriate
financial
and business systems and controls are in place to safeguard
shareholders' interests and to maintain effective corporate governance.
The Board now also has a particular focus on integration matters.
The Board is responsible for setting the tone from the top in relation
to conduct, culture and values, for ensuring continuing commitment to
treating customers fairly, carrying out business honestly and openly and
preventing bribery, corruption, fraud or the facilitation of tax
evasion.
The Board operates in accordance with the Company's Articles of
Association (the Articles) and its own written terms of reference. The
Board has established a number of Committees as indicated in the chart
on page 56. Each Committee has its own terms of reference which are
reviewed at least annually. Details of each Committee's activities
during 2019 are shown in the Group Nomination and Governance, Group
Audit, Group Risk, Group Remuneration, Group Models and Ratings and
Board Integration reports on pages 109 to 144.
The Board retains specific powers in relation to the approval of the
Bank's strategic aims, policies and other matters, which must be
approved by it under legislation or the Articles. These powers are set
out in the Board's written terms of reference and Matters Reserved to
the Board which are reviewed at least annually.
A summary of the matters reserved for decision by the Board is set out
below:
Strategy and management
- Overall strategy of the Group
- Approval of long-term objectives
- Approval of annual operating and capital expenditure budgets
- Review of performance against strategy and objectives
Structure and capital
- Changes to the Group's capital or corporate structure
- Changes to the Group's management and control structure
Risk management
- Overall risk appetite of the Group
- Approval of the Strategic Risk Management Framework
Financial reporting and controls
- Approval of financial statements
- Approval of dividend policy
- Approval of significant changes in accounting policies
- Ensuring maintenance of a sound system of internal control and risk
management
Remuneration
- Determining the remuneration policy for the Executive Directors
- Oversee the introduction of new share incentive plans or major changes
to existing plans
Corporate governance
- Review of the Group's overall governance structure
- Determining the independence of Directors
Board members
- Changes to the structure, size and composition of the Board
- Appointment or removal of the Chairman, Chief Executive Officer,
Senior Independent Director and Company Secretary
Other
- The making of political donations
- Reviewing the overall levels of insurance for the Group
Accountability
In line with the Code provisions, the Board ensures that a
fair, balanced and understandable assessment of the Group's position and
prospects is presented in all financial and business reporting. The
Board is responsible for determining the nature and extent of the
principal risks it is willing to take in achieving its strategic
objectives and maintains sound risk management and internal control
systems. The Board has established formal and transparent arrangements
for considering how it should apply the corporate reporting, risk
management and internal control principles and for maintaining an
appropriate relationship with the Group's auditors.
Financial and business reporting
The Board is committed to ensuring that all external financial reporting
presents a fair, balanced and understandable assessment of the Group's
position and prospects. To achieve this, the Board reviews each report
and considers the level of consistency throughout; whether there is a
balanced review of the competitive landscape; the use of sufficiently
simple language; the analysis of risks facing the business; and that
there is equal prominence given to statutory and alternative
performance measures. The Board has established a Group Audit Committee
to assist in making its assessment. The activities of the Group Audit
Committee are set out on pages 112 to 117.
Risk management and internal control
The Board retains ultimate responsibility for setting the Group's risk
appetite and ensuring that there is an effective Strategic Risk
Management Framework to maintain levels of risk within the risk
appetite. The Board regularly reviews its procedures
for identifying, evaluating and managing risk, acknowledging that a
sound system of internal control should be designed to manage rather
than eliminate the risk of failure to
achieve business objectives.
The Board has carried out a robust assessment of the principal risks
facing the business, including those that would threaten its business
model, future performance, solvency or liquidity. Further details are
contained in the viability statement on pages 73 and 74.
The Board has established a Group Risk Committee to which it
Further details of the Group's risk management approach, structure and
principal risks are set out in the Group Risk review on pages 52 to 72.
The Board has delegated authority to the Group Audit Committee for
reviewing the effectiveness of the Company's internal control systems
including oversight of financial reporting processes. The Group Audit
Committee is supported by the Internal Audit function in discharging
this responsibility, and receives regular reports from the Group Chief
Internal Auditor
as to the overall effectiveness of the control system within the Group.
The Group Audit Committee also receives reports from the external
auditors on control matters. Details of the review of the effectiveness
of the Company's internal control systems are set out in the Group Audit
Committee report on page 115.
Control environment
The Group is organised along the three lines of defence model to ensure
at least three stages of independent oversight to protect the customer
and the Group from undue influence, conflict of interest and poor
controls.
The first line of defence is provided by the operational business lines
which measure, assess and control risks through the day to day
activities of the business within the frameworks set by
the second line of defence. The second line of defence is provided by
the Risk, Compliance and governance functions which include the Board
and Group Executive Committee. As noted above,
the Board sets the Company's risk appetite and is ultimately responsible
for ensuring an effective Strategic Risk Management Framework is in
place. The Compliance function maintains the key controls framework
which tracks and reports on key controls within the business to ensure
compliance with the main provisions of the Financial Conduct Authority
(FCA) and the Prudential Regulation Authority (PRA) handbooks. Policy
documents also include key controls that map back to the key controls
framework. The third line of defence is the Internal Audit function.
The Board is committed to the consistent application of appropriate
ethical standards, and the Conduct Risk Policy sets out the basic
principles to be followed to ensure ethical considerations are embedded
in all business processes and decision-making forums. The Group also
maintains detailed policies and procedures in relation to the prevention
of bribery and corruption, and a Whistleblowing Policy.
Directors
has delegated authority for oversight of the Group's risk appetite,
risk monitoring and capital management. The Group Risk Committee
provides oversight and advice to the Board on current risk exposures and
future risk strategy and assists the Board
in fostering a culture within the Group, which emphasises and
demonstrates the benefits of a risk-based approach to internal control
and management.
The Directors who served during the year are listed in the table on page
103. Sir Malcolm Williamson, Tim Brooke, Noel Harwerth, Rajan Kapoor and
Ian Ward were appointed on 4 October 2019. Sir Malcolm Williamson, Eric
Anstee and Rod Duke ceased to be Directors on 4 February 2020. Tim
Brooke, Margaret Hassall and Ian Ward will not stand for election or
re-election at the AGM and will cease to be Directors on 7 May 2020.
The Board currently consists of 11 Directors; the Chairman, two
Executive Directors and eight independent Non-Executive Directors
(NEDs). The biographies of the Directors (excluding
NEDs stepping down from the Board) can be found on pages 96 and 97.
Board meetings and attendance
The Board met 13 times during the year. The Board has a formal meeting
schedule with ad hoc meetings called as and when circumstances require.
This includes an annual calendar of agenda items to ensure that all
matters are given due consideration and are reviewed at the appropriate
point in the
regulatory and financial cycle. The Board has established a number of
Committees as shown in the table below, including the newly-established
Board Integration Committee which is chaired by David Weymouth. The
table also shows each Director's attendance at Board and Committee
meetings they were eligible to attend in 2019.
Group
Group Group Nomination Board
Audit Remuneration and Governance Group Integration
Director Board Committee Committee Committee Risk Committee Committee
---------------------
Sir Malcolm
Williamson
(Chairman) 1/11 n/a 1/11 1/11 n/a 3/31
David Weymouth
(Deputy
Chair) 13/13 n/a 7/7 5/5 n/a 3/3
Graham Allatt 12/13 7/7 n/a n/a 7/7 n/a
Eric Anstee 12/13 7/7 n/a n/a 7/7 n/a
Tim Brooke 1/11 2/21 n/a n/a 2/21 n/a
Rod Duke 13/13 n/a 7/7 5/5 n/a 3/3
Andy Golding 13/13 n/a n/a n/a n/a 3/3
Noël
Harwerth 1/11 n/a 1/11 1/11 1/21 n/a
Margaret
Hassall 13/13 5/53 n/a n/a 5/53 3/3
Sarah Hedger 12/122 2/22 n/a n/a n/a 3/32
Rajan Kapoor 1/11 2/21 1/11 n/a 2/21 3/31
Mary McNamara 12/13 n/a 7/7 4/43 5/53 n/a
April Talintyre 13/13 n/a n/a n/a 4/53 n/a
Ian Ward 1/11 n/a n/a n/a n/a n/a
1. Appointed as a Director on 4 October 2019.
2. Appointed as a Director on 1 February 2019.
3. Ceased to be a member on 4 October 2019.
All Directors are expected to attend all meetings of the Board, any
Committees of which they are members and to devote sufficient time to
the Company's affairs to fulfil their duties as Directors.
Where Directors are unable to attend a meeting, they are encouraged to
submit any comments on the meeting materials in advance to the Chair, to
ensure that their views are recorded and taken into account during the
meeting.
The first combined Board meeting was held in Wolverhampton and provided
an opportunity for Directors and Executives to meet with representatives
from different parts of the business. Similarly, introductory meetings
were held in Chatham.
Key Board activities during the year included:
- Strategy - the Board convened a number of meetings and update calls
leading up to the Combination with CCFS
- Risk monitoring and review
- Governance and compliance
- External affairs and competitor analysis
- Talent review/succession planning
- Annual, interim and quarterly reporting
- Customer/brand/product review
- Policy review and update
- Investment proposals
- Mission, Vision and Values
Roles of the Chairman and Chief Executive Officer
The roles of Chairman and Chief Executive Officer (CEO) are distinct and
held by different people. There is a clear division of responsibilities,
which has been agreed by the Board and is formalised in a schedule of
responsibilities for each.
The Chairman, David Weymouth, is responsible for setting the tone at the
top and ensuring that the Board has the right mix of skills, experience
and development so that it can focus on the key issues affecting the
business and for leading the Board and ensuring it acts effectively.
Andy Golding, as CEO, has overall responsibility for managing the Group
and implementing the
strategies and policies agreed by the Board. A summary of the key areas
of responsibility of the Chairman and CEO, and how these have been
discharged during the year, are set out on page 104.
Chairman's responsibilities
Activities carried out in 2019
Chairing the Board and general meetings of the Company.
David Weymouth chaired 12 out of 13 Board meetings held in during 2019,
as well as the 2019 AGM.
Sir Malcolm Williamson chaired one Board meeting following his
appointment in October 2019. He retired from the Board on 4 February
2020.
Setting the Board agenda and ensuring that adequate time is available
for discussion of all agenda items.
The Chairman liaised with the Company Secretary, set the annual calendar
of Board business and the agendas for the individual meetings. Time is
allocated for each item of business at meetings.
Promoting the highest standards of integrity, probity and corporate
governance throughout the Company.
The Board received regular updates from its Committees on changes in
corporate governance and its application to the Company.
Ensuring that the Board receives accurate, timely and clear information
in advance of meetings.
The Chairman, in liaison with the Company Secretary and the CEO, agreed
the information to be distributed to the Board in advance of each
meeting.
Promoting a culture of openness and debate by facilitating the effective
contribution of all NEDs.
Ensuring constructive relations between Executive and NEDs and the CEO
in particular.
The Chairman ran meetings in an open and constructive way, encouraging
contribution from all Directors and regularly met with the NEDs without
management present so that any concerns could be expressed.
Regularly considering succession planning and the composition of the
Board.
The Board received regular updates from the Group Nomination and
Governance Committee. Details of the Committee's activities are
explained in the Group Nomination and Governance Committee report on
pages 109 to 111.
Ensuring training and development needs of
all Directors are met, and that all new Directors receive a full
induction.
The Chairman, in liaison with the Company Secretary, has reviewed the
Directors' training requirements. Details of induction and training held
during the year are given on page 106.
Ensuring effective communication with shareholders and stakeholders.
The Chairman, along with the Board, and assisted by the CEO, CFO and
Investor Relations team, agreed a programme of investor relations
meetings. Details of meetings carried out during the year are shown on
page 108.
Chief Executive Officer's responsibilities
Andy Golding's responsibilities as CEO are to ensure that the Company
operates effectively at strategic, operational and administrative
levels. He is responsible for all the Group's activities; he provides
leadership and direction to encourage others to
effect strategies agreed by the Board; channels expertise, energy and
enthusiasm; builds individual capabilities within the team; develops and
encourages talent within the business; identifies commercial and
business opportunities for the Group, building strengths in key areas;
and is responsible for all commercial activities of the Group, liaising
with regulatory authorities where appropriate. He is responsible for the
quality and financial wellbeing of the Group, represents the Group to
external organisations and builds awareness of the Group externally.
Following the Combination, Andy now has a specific focus on the delivery
of integration objectives.
An experienced Group Executive team, comprising specialists in finance,
banking, risk, legal and IT matters, assist the CEO in carrying out his
responsibilities. The biographies for the Group Executive team are set
out on pages 98 and 99.
Group Executive Committee
The CEO chairs the Group Executive Committee, whose members also include
the Chief Financial Officer (CFO), Group Chief Operating Officer, Chief
Risk Officers of OSB and CCFS, Group General Counsel and Company
Secretary, Group Commercial Director, Group Chief Information Officer,
Chief Information Officer, Group Chief Credit Officer, Group Managing
Director for Mortgages; Group Managing Director for Savings and the
Group Chief Internal Auditor. Members of the CCFS Executive team joined
the Group Executive Committee following the Combination. The Group
Executive Committee is supported by a number of Management Committees.
The purpose of the Group Executive Committee
is to assist the CEO in the performance of his duties, including:
- The development and implementation of the strategic plan as approved
by the Board.
- The development, implementation and oversight of a strong operating
model that supports the strategic plan.
- The development and implementation of systems and controls to support
the strategic plan.
- To review and oversee operational and financial performance.
- To prioritise and allocate the Group's resources in accordance with
the strategic plan.
- To oversee the development of a high performing senior management
team.
- To oversee the customer proposition and experience to ensure
consistency with the Group's obligation to treat customers fairly.
- To oversee the appropriate protection and control of private and
confidential data.
- To review and oversee the key and strategic business risks.
- To oversee how the Mission, Vision and Values are being embedded.
The Group Executive Committee's activities during the year included:
- Business review
- Capital and funding
- Human resources and succession planning
- Governance, control and risk environment, current and forward-looking
- Integration planning
- Monitoring target operating model progress
- Mission, Vision and Values
Senior Independent Director
Following the Combination, Noel Harwerth was appointed as the Senior
Independent Director (SID), succeeding Rod Duke. The SID's role is to
act as a sounding board for the Chairman and to support him in the
delivery of his objectives. This includes ensuring that the views of all
other Directors are communicated to, and given due consideration by, the
Chairman. In addition, the SID is responsible for leading the annual
appraisal of the Chairman's performance.
The SID is also available to shareholders should they wish to discuss
concerns about the Company other than through the Chairman and CEO.
Company Secretary
The Company Secretary, Jason Elphick, plays a key role within the
Company, advising on good governance and assisting the Board to
discharge its responsibilities, acting with integrity and independence
to protect the interests of the Company, its shareholders and employees.
Jason advises the Company to ensure that it complies with all statutory
and regulatory
requirements and he works closely with the Chairman, CEO and Chairs of
the Committees of the Board so that Board procedures (including setting
agendas and the timely distribution of papers) are complied with, and
that there is a good communication flow between the Board, its
Committees, senior management and NEDs. Jason also provides the
Directors with advice and support, including facilitating induction
programmes and training in conjunction with the Chairman.
Effectiveness
Balance and independence
The effectiveness of the Board and its Committees in discharging their
duties is essential for the success of the Company. In order to operate
effectively, the Board and its Committees comprise
a balance of skills, experience, independence and knowledge to encourage
constructive debate and challenge to the decision- making process.
The Board comprises eight NEDs, the Chairman and two Executive
Directors. All of the NEDs, including the Chairman, have been determined
by the Board to be independent in character and judgement and free from
relationships or circumstances which may affect, or could appear to
affect, the relevant individual's judgement. The independence of the
NEDs is reviewed continuously, including a formal annual review. Any NED
who does not meet the independence criteria will not stand for election
or re-election at the AGM.
The size and composition of the Board is kept under review by the Group
Nomination and Governance Committee and the Board to ensure an
appropriate balance of skills and experience are represented. An
external skills review was undertaken during 2019. The Board is
satisfied that its current composition allows
it to operate effectively and that all Directors are able to bring
specific insights and make valuable contributions to the Board, due to
their varied commercial backgrounds. The NEDs provide constructive
challenge to the Executives, and the Chairman ensures that the views of
all Directors are taken into consideration in the Board's deliberations.
The Directors' biographies can be found on pages 96 and 97.
Non-Executive Directors' terms of appointment
NEDs are appointed for terms of three years, subject to annual
re-election by shareholders. The initial term may be renewed up to a
maximum of three terms (nine years). The terms of appointment of the
NEDs specify the amount of time they are expected to devote to the
business, which is a minimum of two and half days per month, calculated
based on the time required to prepare for and attend Board and Committee
meetings, the
AGM, meetings with shareholders and training. Their commitment also
extends to working such additional hours as may be required in
exceptional circumstances.
NEDs are required to confirm annually that they continue to have
sufficient time to devote to the role.
Appointment, retirement and re-election of Directors
The Board may appoint a Director, either to fill a vacancy or as an
addition to the existing Board. All appointments are subject to a formal,
rigorous and transparent procedure; succession is also considered.
Appointments and succession planning are based
on merit and objective criteria and, within this context, promotes
diversity of gender, social and ethnic backgrounds, cognitive and
personal strengths. Any new Director must then retire at the next AGM
and is put forward for election by the shareholders.
All other Directors are put forward for re-election annually. In
addition to any power of removal conferred by the Companies Act, any
Director may be removed by special resolution, before the expiration of
his or her period of office and, subject to the Articles, another person
who is willing to act as a Director may
be appointed by ordinary resolution in his or her place. Tim Brooke,
Margaret Hassall and Ian Ward will not stand for election or re-
election at the AGM and will cease to be Directors on 7 May 2020.
Conflicts of interest
The Company's Articles set out the policy for dealing with Directors'
conflicts of interest and are in line with the Companies Act 2006. The
Articles permit the Board to authorise conflicts and potential conflicts,
as long as the potentially conflicted Director
is not counted in the quorum and does not vote on the resolution to
authorise the conflict.
Directors are required to complete an annual confirmation including a
fitness and propriety questionnaire, which requires declarations of
external interests and potential conflicts. In addition, all Directors
are required to declare their interests
in the business to be discussed at each Board and Committee meeting. The
interests of new Directors are reviewed during the recruitment process
and authorised, if appropriate, by the Board at the time of their
appointment. The Group Nomination and Governance Committee also reviews
conflicts of interest relating to Directors at least annually; periodic
reviews are also undertaken as required. The Group has also adopted a
Conflicts of Interest Policy, which includes a procedure for identifying
potential conflicts of interest within the Group.
No Director had a material interest in any contract of significance in
relation to the Group's business at any time during the year
or at the date of this report.
Directors' indemnities
The Articles provide, subject to the provisions of UK legislation, an
indemnity for Directors and Officers of the Group in respect of
liabilities they may incur in the discharge of their duties or in
the exercise of their powers, including any liabilities relating to the
defence of any proceedings brought against them, which relate to
anything done or omitted, or alleged to have been done or
omitted, by them as Officers or employees of the Group. Directors' and
Officers' liability insurance cover is in place in respect of
all Directors.
Directors' powers
As set out in the Articles, the business of the Company is managed by
the Board, which may exercise all the powers of the Company. In
particular, save as otherwise provided in company law or in the Articles,
the Directors may allot (with or without conferring a right of
renunciation), grant options over, offer, or otherwise deal with or
dispose of shares in the Company to such persons at such times and
generally on such terms and conditions as they may determine. The
Directors may at any time after the allotment of any share but before
any person has been entered
in the Register as the holder, recognise a renunciation thereof by the
allottee in favour of some other person and may accord to any allottee
of a share a right to effect such renunciation upon and subject to such
terms and conditions as the Directors may think fit to impose. Subject
to the provisions of company law, the Company may purchase any of its
own shares (including any redeemable shares).
Training and development
The Chairman ensures that all Directors receive a tailored induction on
joining the Board, with the aim of providing a new Director with the
information required to allow him or her to contribute to the running of
the Group as soon as possible. The induction programme is facilitated
and monitored by the Company Secretary to ensure that all information
provided is fully understood by the new Director and that any queries
are dealt with. Typically, the induction programme will include a
combination of key documents and face to face sessions covering the
governance, regulatory and other arrangements of the Group. Since the
Combination, all Directors have had meetings with specific areas of the
business within the Group.
As senior managers, under the Senior Managers Regime operated by the PRA
and FCA, all Directors have had to maintain the
skills, knowledge and expertise required to meet the demands of their
positions of significant influence within the Bank. As part of the
annual fitness and propriety assessment, Directors are required to
complete a self-certification that they have undertaken sufficient
training during the year to maintain their skills, knowledge and
expertise and to make declarations as to their fitness and propriety.
The Company Secretary supports the Directors to identify relevant
internal and external courses to
ensure Directors are kept up to date with key regulatory changes, their
responsibilities as senior managers and other matters impacting the
business.
Information and support
The Company Secretary and the Chairman agree an annual calendar of
matters to be discussed at each Board meeting to ensure that all key
Board responsibilities are discharged over the year. Board agendas are
then distributed with accompanying detailed papers to Directors in
advance of each Board and Committee meeting. These include reports from
Executive Directors and other members of senior management. All
Directors have direct access to senior management should they require
additional information on any of the items to be discussed. The Board
and Group Audit Committee also receive further regular and specific
reports to allow the monitoring of the adequacy
of the Group's systems and controls.
The information supplied to the Board and its Committees is kept under
review and formally assessed on an annual basis as part of the Board
evaluation exercise to ensure it is fit for purpose
and that it enables sound decision-making.
There is a formal procedure through which Directors may obtain
independent professional advice at the Group's expense. The Directors
also have access to the services of the Company Secretary as described
on page 105.
Board evaluation
The Board undertakes an evaluation of its performance and that of its
Committees and individual Directors annually. An externally-facilitated
evaluation was conducted during 2019 by Independent Audit. The
evaluation was conducted by face to face interviews. Independent Audit
concluded that members of the Board brought a wide range of relevant
skills, knowledge and experience. The report outlined that OSB and the
Board
benefited from a very capable senior management team noting that the
energetic, confident and committed CEO and CFO were universally well
regarded and possessed the necessary skills to drive growth. The report
noted that their relationship with the Board was one of mutual respect
and openness. It further stated that the quality of reports had improved
across most areas, giving the Board foundation for good discussions. It
was felt that OSB was on a positive path and that the Board was well
placed to perform its duties effectively.
Independent Audit made suggestions which may, collectively or in some
combination, contribute to more discursive Board meetings, with
adjustments being made to ways in which the Directors and senior
management interact in order to benefit the Board. The Board was aware
that the technology strategy
required ongoing attention in light of OSB's growth, as did culture in
order to monitor how successfully it is being integrated and understood
throughout the Group. Independent Audit was satisfied that no individual
or group of Directors dominated
the discussions or had undue influence in the decision- making process.
Suggestion Action proposed
Explore ways in which NEDs can be Chairman to review Board and individual
increasingly equipped to provide more NED challenge as part
wide-ranging strategic challenge as of the regular Board effectiveness
the business grows. reviews. Actions to be considered if
required.
Increase the opportunities for NEDs Informal catch-ups will be scheduled
to interact with each other, with around some meetings.
Executives and with counterparts from
the combined entity.
Ensure that a skills matrix is in Skills matrix developed by an external
place (and adjusted following the firm and presented to the Group Nomination
Combination) for NEDs and Executives, and Governance Committee in December
with input from the Group Nomination 2019.
and Governance Committee.
Continue to monitor closely the implementation A number of culture surveys were conducted
and integration of the new culture. during and after the Combination. This
will continue as part of the broader
post integration culture strategy review.
Consider dedicating additional time 50% extra time has been allocated to
on Board meeting days to cover the post Combination Board meetings. This
extra workload of the combined Board. will be monitored and adjusted as appropriate.
Chairman and secretary to monitor as
part of the Board effectiveness monitoring
post Combination.
Consider additional support for HR To be considered by CEO and Group Nomination
Department, such as appointing a remuneration and Governance Committee post Combination
specialist. as part of the operating model review.
Continue to monitor risk reporting The management information ('MI') relating
to the Board, to ensure it gives a to Risk has been reviewed and refined
clear and effective summary of the throughout 2019. Risk MI will also
debate and encourages NEDs to focus be benchmarked against industry standards.
on the overarching risk picture.
The Group Nomination and Governance An external review was commissioned,
Committee could be which involved interaction with each
more proactive on succession, feeding Board member to create a detailed skills
back more detailed reports to the matrix of the existing Board. This
Board to fuel the creation of a skills report is scheduled for full Board
matrix for NEDs, which acknowledges discussion
the value of the Board as a combined in 2020. A new Board Effectiveness
entity which can be stronger than review will be commissioned in 2020
the sum of its parts. which will continue to work on this
and review the effectiveness of the
Board as a whole.
Whistleblowing
The Group has established procedures by which employees may, in
confidence, raise concerns relating to possible improprieties
in matters of financial reporting, financial control or any other
matter. The Whistleblowing Policy applies to all employees of the Group
and is benchmarked against industry standards. The Group Audit Committee
is responsible for monitoring the Group's whistleblowing arrangements
and the Policy.
The Group is confident that the arrangements are effective, facilitate
the proportionate and independent investigation of reported matters and
allow appropriate follow-up action to be taken. Further details are
provided on page 116.
Relations with shareholders
Dialogue with shareholders
The Group has a dedicated Investor Relations function which maintains
regular, open and transparent dialogue with institutional investors and
sell-side analysts. The team has access to the CEO and CFO who are
available for meetings with shareholders and frequently attend industry
conferences. Twice a year, post year end and half year results, the CEO
and the CFO participate in roadshows meeting larger investors. In 2019,
for OSB only, the Investor Relations team and management met
a total of 140 individual existing and potential investors.
The Board's primary contact with institutional shareholders and
sell-side analysts is through the CEO and the CFO. The Board is also
regularly presented with shareholders' feedback, analysts'
recommendations and market views via Investor Relations updates, topics
which are frequently on the Board agenda.
As a result of the Combination and becoming a Level 2 firm, the Group
conducted a remuneration consultation of the Executive team in the year,
meeting with the top ten shareholders. These meetings were attended by
the then Chairman, Sir Malcolm Williamson and the re-appointed Chairman,
David Weymouth providing an opportunity to discuss the proposed
remuneration but also any other topics of interest to our investors.
Annual General Meeting
The AGM will be held at the offices of Slaughter and May, One Bunhill
Row, London EC1Y 8YY on 7 May 2020 at 11am. The Chairs of each of the
Committees of the Board will be present to answer questions put to them
by shareholders. The Annual Report and Accounts and Notice of the AGM
will be sent to shareholders
at least 20 working days prior to the date of the meeting.
Shareholders are encouraged to participate in the AGM process, and all
resolutions will be proposed and voted on at the meeting on an
individual basis by shareholders or their proxies. Voting results will
be announced and made available on the Company's website, www.osb.co.uk.
Shareholders may require the Directors to call a general meeting other
than an AGM as provided by the Companies Act 2006.
Requests to call a general meeting may be made by members representing
at least 5% of the paid-up capital of the Company as carries the right
of voting at general meetings of the Company (excluding any paid-up
capital held as treasury shares). A request must state the general
nature of the business to be dealt with at the meeting and may include
the text of a resolution that may properly be moved and is intended to
be moved at the meeting. A request may be in hard copy form or in
electronic form and must be authenticated by the person or persons
making it.
A request may be made in writing to the Company Secretary to the
registered office or by sending an email to company.
secretariat@osb.co.uk. At any general meeting convened on such request,
no business shall be transacted, except that stated by the requisition
or proposed by the Board.
Group Nomination and Governance Committee Report
The Combination provided an opportunity for an extensive review of the
balance of skills required on the Board.
Dear Shareholder,
I am pleased to present my first report to you as
Chair of the Group Nomination and Governance Committee.
Membership and meetings
The Committee met a total of five times during 2019.
The members of this Committee are myself as Chairman of the Board (David
Weymouth), Noel Harwerth and Mary
McNamara. Prior to the Combination, Rod Duke served as Chair of the
Committee and I would like to thank him for his service and
contribution.
A number of items were considered by the Committee during 2019,
including examination of the revised UK Corporate Governance Code
against practices to ensure compliance at the earliest opportunity. The
Bank's progress in terms of achieving the commitments set out in the
Women in Finance Charter and various diversity initiatives were also
reviewed. I am very pleased to announce that OSB achieved its three year
target during 2019 of having 30% of senior roles in the Bank occupied by
women by 2020. During 2019, CCFS also made progress towards its targets,
and since the Combination the Committee has been reviewing and intends
to shortly publish a new revised Group target for
the combined entity.
Further details on areas considered by the Committee are provided on
pages 110 and 111.
David Weymouth
Chair of the Group Nomination and Governance Committee and Chairman of
the Board
19 March 2020
Group Nomination and Governance Committee Report continued
Responsibilities
The specific responsibilities and duties of the Committee are set out in
its terms of reference which are available on our website,
www.osb.co.uk.
Composition of the Board and its Committees
The Committee conducted a review of the composition of the Group Audit,
Group Remuneration and Group Risk Committees and its own composition
during 2019, carefully considering the skills of the existing members
and looking at any skills gaps applicable to each Committee. Sarah
Hedger was appointed as a NED on 1 February 2019 following an extensive
search for
an individual whose skills it was felt would add additional value to the
Board.
On combining with CCFS, a number of changes were made to the Board and
Committee memberships. Sir Malcolm Williamson was appointed Chairman of
the Board, with David Weymouth (the previous Chairman) assuming the role
of Deputy Chair and
leading the newly-established Board Integration Committee with a clear
focus on the delivery of cost synergies and other expected benefits of
the Combination. As part of the Combination, Tim Brooke, Noel Harwerth,
Rajan Kapoor and Ian Ward (previously NEDs of CCFS) were appointed to
the Board, with Noel Harwerth assuming the role of the SID. In addition,
Rajan Kapoor was appointed as Chair of the Group Audit Committee; Sir
Malcolm Williamson was appointed as Chair of this Committee and has
since retired; David Weymouth now Chairs this Committee.
Graham Allatt and Mary McNamara remained as Chairs to the Group Risk
Committee and Group Remuneration Committee respectively. A Group Models
and Ratings Committee was also established, with effect from January
2020, which Graham Allatt will Chair.
On 4 February 2020, Sir Malcolm Williamson retired as Chairman of the
Board and David Weymouth resumed the role of Chairman. On the same date,
Rod Duke resigned from the OSB Board and was appointed Chairman of the
CCFSL Board; Eric Anstee also resigned. Tim Brooke, Margaret Hassall and
Ian Ward will step down from the Board after the AGM. David Weymouth was
not involved in discussions relating to his appointment as Chairman.
Succession planning
The Committee considered both Board and Executive level succession
planning during 2019, including ways in which skills could be developed.
The Combination provided an opportunity for a wholesale review of the
balance of skills required on the Board. An external firm was engaged to
assist with this process. The findings were then used to discuss the
optimum composition of the Board. In 2019, there has been considerable
focus in the Bank on establishing the new Group Executive Committee,
drawing
on senior executives from both OSB and CCFS in doing so. That process is
now complete, noting that whilst two banking licences are retained there
will be a separate Chief Risk Officer for each of the regulated Banks.
In 2019, the Committee refined its review of Executive skills, in
particular with a detailed succession plan
established for each role, drawing upon a review of existing talent
across both of the Banks.
The Committee also received updates on the performance of the wider
employee population, including those participating in the Primary Talent
Group.
Diversity
Our Bank recognises and embraces the benefits of having a diverse Board
and workforce, and sees diversity at Board level as an essential element
in maintaining a competitive advantage. We believe that a truly diverse
Board and workforce will include and make good use of differences in the
skills, regional and industry experience, age, background, race, gender
and other distinctions between people. The Board recognises for itself
that diversity is the key to better decision-making and avoiding group
think.
These differences are considered in determining the optimum composition
of the Board and, where possible, will be balanced appropriately. All
Board appointments are made on merit, in the context of the skills,
experience, independence and knowledge which the Board as a whole
requires to be effective.
The Committee regularly reviews diversity initiatives including its
annual review of the Diversity and Inclusion Policy. The Board remains
committed to the Women in Finance Charter and has introduced measurable
objectives with the aim continuing to
be that 30% of senior management positions within the Group's UK
population will be undertaken by female employees by the end of 2020.
Currently, 15% of the Group Executive Committee and 45% of our Board are
female, placing us in the top 12 of the FTSE 250 for gender diversity.
9% of the Board is from an ethnic minority. The Board recognises and
embraces the benefits that diversity can bring to its Board and sees
diversity and inclusion at Board level as an essential element in
maintaining a competitive advantage. This will be reviewed again at the
end of 2020, post significant integration activities.
Our Bank has also appointed a Diversity and Inclusion Champion, Jason
Elphick, to promote a series of diversity initiatives such as our
commitment to those with a disability, mental health in the workplace
and unconscious bias training.
Further details relating to diversity and inclusion are set out
on page 81.
Governance
The Committee reviewed changes in the regulatory landscape, particularly
the remit and composition of Committees following the Combination.
Activities during 2019
In last year's report the Committee identified eight key priorities.
A summary of actions taken and outcomes are set out in the table below.
Objective Action taken
--------------------------------------------------------
Consider the approach to Board The Combination with CCFS in 2019 meant the
and Group Executive succession focus of this action was firstly to establish
planning and the extent to the new optimal Board and Group Executive team.
which that planning incorporates An external review led to a series of recommendations
a range of diversity criteria to be actioned by the Committee and the Board
beyond gender diversity. regarding Board composition in 2020. In addition,
the Committee reviewed the succession plans
for the prior Executive team (before the Combination)
during 2019 and will conduct an in-depth review
of executive succession plans across both Banks
during 2020.
--------------------------------------------------------
Consider further training Training and development needs for Committee
and development needs for members were reviewed and training plans prepared
Committee members. for each Committee and broader Board members
during 2019. This involved a combination of
tailored internally provided training and attendance
at externally provided training events.
--------------------------------------------------------
Provide oversight of how the The Committee received regular updates on culture
Mission, Vision and Values and engagement, reviewed and tested externally
are being embedded. run surveys (the Sunday Times Best Companies
to Work For and the Banking Standards Board
surveys).
--------------------------------------------------------
Corporate governance reform. The Committee receives regular updates on corporate
governance changes in the industry, including
the steps being taken by the Group to ensure
compliance with any relevant changes.
--------------------------------------------------------
Embedding diversity initiatives The Bank has raised awareness of the various
and reduction of the gender initiatives that have been put
pay gap. in place to support diversity. Such initiatives
relate to disabled facilities, mental health
awareness workshops, the introduction of a
Women's Networking Forum and unconscious bias
training. Regular updates are provided to the
Committee on the progress of diversity initiatives.
--------------------------------------------------------
External Board and Committee An externally-facilitated evaluation of the
effectiveness. Board and its Committees was undertaken during
2019, with a positive result overall. The Committee
also reviewed and monitored the action plan
of suggested improvements. Further details
are set out on page 107.
--------------------------------------------------------
Oversee progress with the The Committee reviewed the Environmental Policy
Group's purpose and sustainability. and the actions being taken to enable the Bank
to continue to operate sustainably.
--------------------------------------------------------
Oversee development of the Members of the Committee met with the Primary
talent pipeline. Talent Group ('PTG') to understand the level
of support provided to them and what other
support would be beneficial. The Committee
also received periodic reports of the activities
undertaken by the PTG.
--------------------------------------------------------
Priorities for 2020
The Committee's priorities for 2020 are:
- Ensuring that the composition and size of the Board and Board
Committees remains appropriate post Combination.
- Overseeing the development of succession plans for Group Executive
Committee members and key Board roles.
- Oversee the development of the revised Mission, Vision and Values for
the combined Group, along with the strategy to embed them.
- Review and agree the new combined diversity initiatives and reduction
of the gender pay gap.
- External Board and Committee effectiveness review.
- Oversee progress with the Group's combined purpose and sustainability
initiatives.
- Oversee the development of the talent pipeline and its relationship to
succession planning.
- Provide oversight of the newly-established employee forum, OneVoice.
Group Audit Committee Report
The Committee is responsible for monitoring and reviewing the Group's
financial reports and disclosures.
Dear Shareholder,
I am pleased to present my first report of the Group Audit Committee for
2019, following my appointment as its Chair in October 2019. The
Committee is responsible for monitoring and reviewing the Group's
financial reports and disclosures, its accounting policies and practices
and systems of internal controls, including internal financial controls.
The Committee manages the relationship with the external auditors and
oversees the work of the Internal Audit function. During the year, the
Committee has continued to focus on areas of significant judgement in
the financial statements, including those relating to the Combination
with CCFS, as set out in the report below.
Taken as a whole, the Committee has an appropriate balance of skills,
including recent and relevant financial experience.
In addition to members, standing invitations to Committee meetings are
extended to the Executive Directors, Chief Risk Officer, Chief Internal
Auditor, Group Conduct and Compliance Director and the external audit
partner; all of whom attend meetings as a matter of practice. Other
non-members
may be invited to attend all or part of any meeting as and when
appropriate.
The Company Secretary acts as Secretary to the Committee. The Group
Chief Internal Auditor and the external auditor attended all meetings
during the year and also met in private
with the Committee; they have also had regular contact with the previous
Chair throughout the year, as well as myself following my appointment. I
discuss and agree the agenda with the Chief Financial Officer and Group
Chief Internal Auditor in advance of each meeting and receive a full
briefing on the key agenda items.
Upon assuming the role of Chair, I also became the Group Whistleblowers'
Champion. The Committee oversees the framework and its operational
effectiveness and reports to the Board on such matters. I have specific
responsibility for overseeing the integrity, effectiveness and
independence of the Group's policies and procedures on whistleblowing.
Further details on the activities of the Committee during the year and
how it discharged its responsibilities are provided in the Report below.
Rajan Kapoor
Chair of the Group Audit Committee
19 March 2020
Membership and meetings
The Committee met seven times during the year. The current members of
the Committee are Rajan Kapoor as Chair, Graham Allatt, Tim Brooke and
Sarah Hedger. Eric Anstee was Chair of the Committee until 4 October
2019 and a member until 4 February 2020 when he stepped down from the
Board. Margaret Hassall ceased to be a member of the Committee on 4
October 2019. Tim Brooke will cease to be a member of the Committee on 7
May 2020. Rajan Kapoor served as Chair of the CCFS Audit Committee and
has wide-ranging finance experience in the banking industry.
Responsibilities
The primary role of the Committee is to assist the Board in overseeing
the systems of internal control and external
financial reporting across the Group. The Committee's specific
responsibilities are set out in its terms of reference, which are
reviewed at least annually. These are available on the Company's website,
www.osb.co.uk, and cover external and internal audit, financial
reporting, compliance, whistleblowing, fraud and internal controls.
In addition, the Chair of the Group Audit Committee is available to meet
with the Company's investors on request, in accordance with the
Financial Reporting Council's (FRC) Stewardship Code.
Activities during 2019
The principal activities undertaken by the Committee during the year are
described below.
Significant areas of judgement considered by the Committee
The following significant accounting judgements were considered by the
Committee in relation to the interim and full year results of the Group.
The Committee also focused on the classification of Loan book Expected
Credit Losses
The Committee received and challenged reports from management prior to
each reporting date, explaining the approach taken to provisioning and
the resulting changes in provision levels during the period.
Post completion of the Combination with CCFS, the Committee reviewed and
challenged management's proposals relating to the:
- IFRS 9 provision requirements for the purchase of originated credit
impaired (POCI) assets in respect of CCFS as set as at the date of
Combination.
- Stage 2 transfer criteria: management proposed the implementation of
an aligned transfer criteria framework which incorporated both a
quantitative approach, which assessed whether a significant increase in
credit risk had been observed (i.e. change in probability of default
level) from the point of origination, supplemented by a qualitative
rules-based approach, using both internal and external credit bureau
information.
- Stage 3 transfer criteria: CCFS implemented an aligned stage 3 logic
within the reporting period.
- Macroeconomic scenarios and probability weightings: management
proposed utilising a common set of macroeconomic scenarios across both
businesses, coupled with aligned probability weightings. Post the UK
General Election result, the Committee received reports from the Group's
economic adviser and management proposing a revised set of probability
weightings. The Committee revised the original management proposals on
how probabilities attached to the scenarios had changed during the
period and ultimately approved the final weightings utilised within the
Group's impairment calculations. The Group continued to utilise four
scenarios; an upside, base case and two further downside scenarios.
Loan book acquisition accounting and income recognition
integration costs including exceptional items. In its assessment,
the Committee considered and challenged reports from management,
explaining each area of significant judgement and management's
recommended approach. The Committee also received reports from the
external auditor setting out their views on the accounting treatment and
judgements underpinning the financial statements.
The Group did not acquire any loan portfolios (other than the loans
acquired in the Combination) in 2019. However, it has acquired a number
of portfolios in prior years. Acquired loan books are initially
recognised at fair value. Significant judgement is required in
calculating their effective interest rate (EIR), using cash flow models,
which include assumptions on the likely macroeconomic environment,
including House Price Index (HPI), unemployment levels and interest
rates, as well as loan level
and portfolio attributes and history used to derive prepayment rates,
the probability and timing of defaults and the amount of incurred
losses. The EIRs on loan books purchased at significant discounts are
particularly sensitive to the prepayment and default rates assumed, as
the purchase discount is recognised over the expected life of the loan
book through the EIR. New defaults
are modelled at zero loss (as losses will be recognised in profit and
loss as impairment losses) and therefore have the same impact on EIR as
prepayments. Incurred losses at acquisition are calculated using the
Group's collective provision model. The Committee reviewed and
challenged reports from management before each reporting date on the
approach taken. Particular focus was given to loan books where
performance varied from expectation. The Committee reviewed a comparison
of actual cash flows to those assumed in the cash flow models by book to
challenge management's assessment of the need to update cash flow
projections and adjust carrying values accordingly.
Effective interest rate
A number of assumptions are made when calculating the effective interest
rate for newly-originated loan assets. These include their expected
lives, likely redemption profiles and the anticipated level of any early
redemption charges (ERCs). Certain mortgage products offered by the
Group include significant directly-attributable net fee income, in
particular certain Buy-to- Let products, and/or those that transfer to a
higher revert rate after an initial discount or fixed period. Judgement
is used in assessing the expected rate of prepayment during the
discounted or fixed period and during the period post rate reversion.
The Group uses historical experience of customer behaviour in its
assessment along with economic outlook and market conditions.
OSB
In 2018, OSB introduced a period spent on the higher reversion rate in
the EIR for two year fixed products. This was expanded to include three
and five year fixed mortgages in 2019, as additional behavioural trends
emerged. The assumed period spent on
the revert rate was based on a careful consideration of past behavioural
data and the potential impact of the economic and regulatory outlook.
The Committee also reviewed and challenged other assumptions used in the
EIR calculations, in particular, prepayment curves applied in the
redemption profile. Prepayment curves for fixed rate mortgages were
approved by the OSB Assets and Liabilities Committee prior to
implementation.
CCFS
The Committee received information on the prepayment curve change
proposals and supporting analysis to enable them to independently
challenge the approach and conclusions.
The Committee also received and reviewed sensitivity analysis for key
assumptions. Based on this work, the Committee is satisfied that the
approach taken and judgements made were reasonable.
Further details of the above significant areas of judgement can be found
in note 3 to the financial statements.
Combination accounting
The Committee considered, reviewed and challenged the acquisition
accounting for the Combination with CCFS. This included the purchase
price allocation (PPA) incorporating fair valuation of acquired tangible
assets and liabilities and the identification and valuation of
intangible assets.
An established model already in place at CCFS was used to determine the
fair value of the loan book and associated pipeline. The Committee
received and challenged the sensitivity analysis presented by management
and also considered prices achieved on structured asset sales in 2019
and 2020.
Management used an independent external expert for advice on PPA and the
identification and valuation of intangibles. The Committee reviewed and
challenged the approach taken and
key assumptions and judgements made together with sensitivity analysis.
Based on this work, the Committee was satisfied that the approach taken
and judgements made in respect of the Combination accounting and PPA
were reasonable.
Hedged assets
The Committee was also updated on the results of management's regular
reviews of the amortisation profile of fair value adjustments on hedged
assets associated with cancelled swaps in OSB, against the roll-off of
the underlying legacy back book of long-dated fixed rate mortgages. The
Group accelerated the amortisation of fair value adjustments on hedged
assets during the year, in line with the mortgage asset run-off, due to
faster than expected prepayments.
Financial Reporting
The Committee's review of financial reporting during the year included
the Annual Report and Accounts, the Interim Results, quarterly trading
updates, analysts presentations and pillar
3 disclosures. As part of its review, the Committee assessed
management's application of key accounting policies, significant
accounting judgements and compliance with disclosure requirements to
ensure that these were consistent and appropriate to satisfy the
relevant requirements. In particular, the Committee considered carefully
the presentation of results on both a statutory and pro forma basis to
ensure transparency and consistency throughout.
Viability and Going Concern
The Committee considered the current position of the Group, along with
principal and emerging risks and assessed the prospects of the Group
before recommending to the Board the Group's long-term viability
statement. The Committee also
undertook a review before recommending to the Board that the going
concern basis should be adopted in preparing the annual and interim
financial statements.
Financial Reporting Council review
The Committee reviewed comments received from the Financial Reporting
Council (FRC) on the OSB 2018 Annual Report and Accounts and
management's proposed responses. These included enhancing disclosures in
the 2019 Annual Report and Accounts in respect of non-financial
information and aligning ECL disclosures, where possible, with the
recommendations made by the Taskforce on Disclosures about Expected
Credit Losses.
The Committee notes that the review conducted by the FRC was based
solely on the Group's published report and accounts and does not provide
any assurance that the report and accounts are correct in all material
respects.
Fair, balanced and understandable
The Committee considered, on behalf of the Board, whether the 2019
Annual Report and Accounts taken as a whole are fair, balanced and
understandable, and whether the disclosures are appropriate. The
Committee reviewed the Group's procedures around the preparation, review
and challenge of the Annual
using a risk-based methodology, including input from senior management
and the Committee. A written report is prepared following the conclusion
of each Internal Audit engagement and distributed to the Committee and
senior management.
Responsibility for ensuring appropriate corrective action is taken, lies
with management. The Internal Audit function follows up on engagement
findings and recommendations until remedial actions have been completed.
Internal Audit maintains a close relationship with the Group's external
auditor, Deloitte LLP (Deloitte). The external auditor is informed of
Internal Audit's activities and results. The Committee carries out an
annual review of the effectiveness of the Internal Audit function. In
2019, this was facilitated by a survey completed by Committee members,
certain executives and the external auditors who had interacted with the
Internal Audit function during the year. Following the review, the
Committee was satisfied that the Internal Audit function operated
effectively during the year.
Systems of internal control and risk management
Report and the consistency of the narrative sections with the
financial statements and the use of alternative performance measures and
associated disclosures.
Following its review, the Committee is satisfied that the Annual Report
is fair, balanced and understandable, and provides the information
necessary for shareholders and other stakeholders to assess the Group's
position and performance, business model and strategy, and has advised
the Board accordingly.
Pillar 3 disclosures
The Committee approved the Group's Pillar 3 regulatory disclosures for
publication on the Group's website, following a review of the governance
and control procedures around their preparation.
Internal Audit
The primary role of the Internal Audit function is to protect the assets,
reputation and sustainability of the Group. It assists the Group in
accomplishing its objectives by providing independent and objective
assurance on the design and operating effectiveness of the Group's risk
management, governance, control framework and processes.
The Group Chief Internal Auditor and her team are supported by a panel
of co-source firms who provide expert resource, when requested, on
specific internal audits. The co-source model has been applied to CCFS
as at 1 January 2020. Prior to this date, CCFS outsourced its Internal
Audit function to KPMG. KPMG now forms part of the co-source panel to
ensure that the experience and knowledge gained from CCFS is retained
within the Group.
The Internal Audit Charter, which formally defines Internal Audit's
purpose, authority and responsibility, was benchmarked against the
latest guidance published by the Institute of Internal Auditors (IIA)
and approved by the Committee in November 2019. The Committee also
approved the annual Internal Audit Plan, which was developed, based on a
prioritisation of the audit universe
The Committee received regular reports from the Group Chief Internal
Auditor during 2019, which included progress updates against the
Internal Audit Plan, the results of audits undertaken and any
outstanding audit action points. The Committee approved the annual
review of the Compliance Risk Assessment and Assurance Plan and received
regular reports from the Group's Compliance function. The Committee used
the Internal Audit
and Compliance Reports for its assessment of the effectiveness of the
Group's system of internal controls and risk management. The Committee
also received a report on the effectiveness of the Group's system of
controls from the CEO, which was based on
a self-assessment process completed by senior managers and executives in
the Group.
The Committee received and reviewed reports from management on the
status of the substantiation of balance sheet general ledger accounts
prior to the reporting date. The systems of internal control and risk
management have been in place for the year under review and up to the
date of approval of the Annual Report and Accounts.
The Committee reviewed and approved a number of policies following their
annual update, including: anti-bribery and corruption, data protection,
data retention and record management, fraud, sanctions, whistleblowing
and anti-money laundering and counter terrorist financing. The Committee
received reports on fraud prevention arrangements, fraud incidents,
whistleblowing and an annual report from the Group's Money Laundering
Reporting Officer during the year. The Committee also received regular
updates on data governance and controls as the Group continued to
enhance its data governance arrangements in connection with its planned
application for an Internal Ratings-Based (IRB) model for capital
requirements.
Whistleblowing
The Committee is responsible for monitoring the Group's Whistleblowing
Policy and arrangements. Where concerns have been raised, a detailed
report is provided on the investigation, actions taken, lessons learnt
and changes made as a result.
The Chair of the Committee has overall responsibility for whistleblowing
arrangements with oversight from the Board. Training and periodic
updates are provided to all employees who are encouraged to use the
multiple channels available to raise any concern they have. No concerns
were raised that required
a report to be made to the regulators.
External auditor
The Committee is responsible for overseeing the Group's relationship
with its external auditor, Deloitte LLP (Deloitte). This includes the
ongoing assessment of the auditor's independence and the effectiveness
of the external audit process, the results of which inform the
Committee's recommendation to the Board relating to the auditor's
appointment (subject to shareholder approval) or otherwise.
Appointment and tenure
Deloitte was appointed as external auditor of the Group from 2019
following a competitive tender process, with Rob Topley as the lead
audit partner. The Committee confirms that the Group has complied with
the Statutory Audit Services for Large
Companies Market Investigation (mandatory use of competitive tender
processes and Audit Committee Responsibilities) Order 2014, which
requires FTSE 350 companies to put their statutory audit services out to
tender no less frequently than every
ten years.
New EU legislation adopted by the UK in 2016 set a maximum audit tenure
of 20 years and also requires a tender at least every ten years. The new
legislation is effective for financial periods commencing on or after 17
June 2016. Against this backdrop, the Group put the external audit
contract out for tender for the
2019 financial year. There are no restrictive contractual provisions
limiting the Company's choice of auditor. The next external
audit tender is expected to be 2028 for the financial year 2029. A
resolution to re-appoint Deloitte as auditors will be presented at the
AGM.
Effectiveness
The Committee assesses the effectiveness of the external audit function
on an annual basis. In 2019, the review was facilitated through a survey
completed by members of the Committee, certain Executive Directors and
other key employees who had significant interaction with the external
audit team during the year. The survey assessed the effectiveness of the
lead partner and audit team, the audit approach and execution, the role
of management in the audit process, communication, reporting and support
to the Committee as well as the independence and objectivity of the
external auditor. The assessment concluded that the external audit
process was effective throughout 2019.
Non-audit services
The engagement of the external auditor to provide non- audit services to
the Group could impact the assessment
of its independence and objectivity. The Group has therefore established
a policy governing the use of the external auditor for non-audit
services. The policy specifies prohibited and approved permitted
services and sets the framework within which permitted non-audit
services may be provided. Prohibited services comprise activities that
are generally perceived to involve the auditor making judgements or
decisions that are the responsibility of management.
The Group maintains active relationships with several other large firms
and any decision to appoint the external auditor for non- audit services
is taken in the context of its understanding of the Group, which can
place it in a better position than other firms to undertake the work and
includes an assessment of the cost- effectiveness and practicality of
using an alternative firm.
The new EU statutory audit market reform legislation adopted in the UK
also applies a cap on permissible non-audit services of 70% of the
preceding three-year average of audit fees for UK incorporated Public
Interest Entities (PIEs). This is applicable for financial periods
commencing on or after 17 June 2019. The
changes in EU law have been directly implemented in the UK by amendments
to the Companies Act. The changes will continue to apply despite the
UK's exit from the EU. As a result of the Combination of OSB and CCFS,
the new combined Group contains multiple PIEs. Furthermore, where there
has been a recent change in auditor, as is the case for OSB, the
application of the rules needs to be considered carefully for each PIE.
For the OSB Group, the rules on capping non-audit services will apply
for the first time in 2022 (based on the average audit fees for 2019,
2020
and 2021). For the CCFS Group, the rules will apply for the first time
in 2020 (based on the average audit fees for 2017, 2018 and 2019).
The Committee pre-approved a number of permitted services in 2019,
including interim profit verifications and the half year review. The
Committee also pre-approved other permitted non- audit services subject
to an overall threshold of 50% of the final cost of 2019 Group annual
audit services. The Committee, post Combination, also reviewed and
approved non-audit services provided to the CCFS Group. The Committee
regularly reviews
a schedule of year to date non-audit services. All permitted engagements
where the fee is expected to be less than GBP 25,000 may be approved by
the CFO; where the fee is expected to be above GBP 25,000 but below GBP
100,000 it must be approved by
the Chair of the Committee. Engagements over GBP 100,000 are approved by
the Committee.
The OSB and CCFS policies were aligned for 2020 and incorporate the
revised FRC ethical standard and audit standards effective from March
2020. The policy incorporates a whitelist of permitted non-audit
services for UK incorporated PIEs which primarily
relate to those services required by law and regulation and other
assurance services associated with the annual audit or annual report and
reporting accountant services.
The fees paid to the external auditor in respect of non-audit services
during 2019 totalled GBP 329,000, representing 16% of 2019
Group audit services of GBP 2,115,000 (2018: GBP 135,000 representing
17% of 2018 Group audit services of GBP 814,000) and are detailed in the
table below.
Fees payable to the Company's auditor for the audit of the Company's
annual accounts include GBP 540,000 in respect of the audit of the
acquisition date balance sheet and acquisition
accounting. Fees payable to the Company's auditor for the audit of the
accounts of subsidiaries includes GBP 592,000 in relation to the CCFS
year end audit and GBP 65,000 in relation to the audit of Canterbury
Finance No.1 plc. Audit-related assurance services include fees in
respect of the interim review and profit verification and include
services for CCFS, relating to profit verifications from the date of the
Combination. Other assurance services include
Group Audit Committee - key responsibilities
Internal Control and Risk Management
- Review internal financial control systems to identify, assess and
monitor financial risks and other internal control and risk management
systems
- Review and approve systems and controls for the prevention of bribery
and procedures for detecting fraud including conduct risk and related
activities
- Review the adequacy and effectiveness of anti-money laundering systems
and controls
- Review the adequacy and security of the Group's whistleblowing
arrangements and procedures
Financial Reporting
- Monitor the integrity of the financial statements, including annual
and interim reports, trading updates, Pillar 3 disclosures, and any
other formal announcements relating to financial performance
- Provide challenge and oversight on the consistency, quality and
appropriateness of significant accounting policies and on the methods
used to account for significant or unusual transactions
- Ensure appropriate accounting standards, estimates and judgements have
been followed, taking into account the view of the external auditor
- Recommend significant changes to accounting policy to the Board
other Combination-related work and agreed upon procedures in respect of
securitisations (2018: review of data submitted to the Bank of England
under the Term Funding Scheme and a review of the OSB India financial
statements as required by Indian income tax rules).
The Committee is satisfied that Deloitte is independent. It took into
account the non-audit services provided during the year, and
confirmations given by Deloitte as to its continued independence at
various stages in the year.
Training
The Committee undertook training during the year, including making
extensive use of the Audit Committee Institute and training programmes
run by the major accountancy firms. The members
of the Committee attended seminars and update meetings held by the FRC.
In addition, Committee members attended a number of in-house workshops
on specific areas. Some members of the Committee also met with key staff
during the year to increase their knowledge and understanding of the
business.
Effectiveness
The Committee formally considers its effectiveness annually.
In 2019, the assessment was facilitated using a survey completed by
members of the Committee. The review concluded that
the Committee operated effectively throughout 2019 with no significant
improvements required.
Internal Audit
- Monitor and assess the role and effectiveness of the Internal Audit
function in the overall context of the risk management system and the
work of compliance, finance and the external auditor
- Review and approve the annual internal audit plan and the internal
audit charter to ensure alignment to the key risks of the business
External Audit
- Ensure that at least once every ten years, the audit services contract
is put out to tender to enable the Committee
to compare the quality and effectiveness of the services provided by the
incumbent auditor - Consider and recommend to the Board the appointment,
re-appointment and removal of the external auditor and to put this to
shareholders for approval at the AGM - Oversee the relationship with the
external auditor to include assessing the external auditor's
independence and objectivity taking into account relevant UK law,
regulation, ethical guidance and other professional requirements,
approving remuneration for both audit and non-audit services and
approving terms of engagement
- Discuss and review factors that could affect audit quality with the
external auditor and approve the annual audit plan
- Develop and recommend to the Board the Group's formal policy on the
provision of non-audit services by the external auditor and assess
whether there is a direct or material effect on the audited financial
statements
Group Risk Committee Report
The Committee robustly challenged the Group's performance against the
Board-approved risk appetite.
Dear Shareholder,
I am pleased to present the report of the Group Risk Committee.
The Group Risk Committee met seven times in 2019. Since the Combination
in October 2019, the composition of the Committee has changed, with Eric
Anstee, Margaret Hassall,
Mary McNamara and April Talintyre ceasing to be members. I would like to
thank each of them for their contributions during their time spent on
the Committee. Tim Brooke, Noel Harwerth and Rajan Kapoor have been
appointed as members with effect from October 2019 and, along with
myself (Graham Allatt) form the membership of the Committee. Tim Brooke
will cease to be a member on 7 May 2020. Only members of the Committee
are entitled to attend meetings; however, the Chairman of the Board has
a standing invitation to the Committee, along with the Chief Executive
Officer (CEO), Chief Financial Officer (CFO), Chief Risk Officers (CROs)
and Group Chief Credit Officer (GCCO), unless the Chairman of the
Committee informs any of them that they should not attend a particular
meeting or discussion.
The Committee robustly challenged the Group's performance against the
Board-approved risk appetite, ensuring appropriate and timely
consideration was given to business, economic
and regulatory factors impacting the Group's risk profile. The Committee
maintained oversight of the Group's Strategic Risk Management Framework
(SRMF) to ensure that it remained fit for purpose to support the Groups
strategic growth objectives.
The Committee assessed and recommended for approval by the Board, key
regulatory submissions including the Internal Capital Adequacy
Assessment Process (ICAAP), the Group Recovery Plan and the Internal
Liquidity Adequacy Assessment Process (ILAAP). In discharging this
responsibility, the Committee focused on risk quantification techniques,
underlying assumptions and the resulting risk assessment.
The Committee retains oversight of the strategic risk-based initiatives,
including the Internal Ratings-Based (IRB) programme, operational
resilience and the data enhancement programme.
Further information on the role and activities of the Committee is
provided in the following Report.
Graham Allatt
Chair of Group Risk Committee
19 March 2020
Responsibilities
The primary objective of the Committee is to support the Board in
discharging its risk oversight and governance responsibilities. In
particular, the Committee enables the Board to:
- Set a clear tone from the top in relation to a risk-based culture
which fosters individual and collective accountability for risk
management.
- Continuously review, challenge and recommend enhancements to the
Group's SRMF.
- Ensure adequacy of how the Group organises and resources its risk
management and oversight functions across the first and second line.
- Actively assess performance against risk appetite and challenge
management to ensure that the Board's strategic, business and regulatory
objectives are not put at unacceptable levels of risk.
The Committee's specific responsibilities are set out in its terms of
reference, which are available on the Company's website at
www.osb.co.uk.
Activity during 2019
In 2019, with oversight from the Committee, the Group continued to
enhance and further integrate its SRMF, which represents the overarching
framework established to manage its risk profile
in line with the Board strategy and risk appetite. The detailed overview
of the SRMF is provided in the Group's Pillar 3 disclosures.
The key areas of the Committee's focus during 2019 are outlined below.
Risk appetite
The Committee played an active role in shaping and assessing the design
of the Group's risk appetite in the context of economic and business
outlook and uncertainties, the strategic growth agenda of the Group and
regulatory developments. Members of the Committee participated in a risk
appetite workshop in which risk appetite statements, risk metrics and
guiding limits and triggers were discussed and challenged prior to
recommendation to the Board for approval. The Committee also ensured
that
the proposed risk appetite was subject to appropriate alignment to the
Group's strategic agenda, business plans and stress testing
capabilities.
The Committee also reviewed the Group's position against risk appetite
across all principal risks and escalated issues to the Board where
appropriate.
IRB Programme
The Committee reviewed regular project updates including a detailed plan
to merge the OSB and CCFS specific IRB projects which incorporated an
approach to develop and implement enhanced model governance
arrangements.
Credit risk
The Committee has monitored the performance of the Group loan book on
aggregated and asset class sub-segment levels by assessing the key
indicators of credit quality, security coverage (including flood risk),
affordability and borrower risk profile. The Committee also assessed
forward-looking credit risk indicators in the form of bureau data on
customer credit scores, mover alerts and indebtedness, business and
economic early warning indicators.
The Committee challenged and approved updates to policies including the
Group Lending Policy, the Arrears, Repossessions and Forbearance
Policies and the Loan Impairment Provisioning Policy. The Committee also
exercised oversight over credit risk models and provided an appropriate
level of challenge in relation to model construction and validation to
ensure that the models are appropriate and robust. The Committee has
also directed management on how to monitor model performance.
During 2019, the Committee oversaw plans for the alignment of IFRS 9
methodologies and approaches across OSB and CCFS.
The Committee also assessed and approved the Group's provision adequacy
levels throughout the year.
Market risk and liquidity risk
Market risk and liquidity risk are continually monitored by the Group
Assets and Liabilities Committee (ALCO) which reports to the Committee.
The Committee reviewed ALCO's regular assessments of the UK
macroeconomic environment and potential impacts on the Group's assets
and liquidity.
The Committee undertook an extensive assessment of the ILAAP prior to
submission to the Board for approval.
Key areas of Committee focus were in relation to scenarios, funding
assumptions under stress and calibration of liquidity and funding risk
appetites.
Solvency risk and ICAAP
The Committee was involved with the design and approval of appropriate
macroeconomic scenarios to be used in the Group's ICAAP. The ICAAP
demonstrates how the Group would manage its business and capital during
adverse macroeconomic and idiosyncratic stresses. The Committee assessed
the results of all the risk-based capital assessments and stress testing
before finally recommending the full ICAAP document to the Board
for approval.
The Committee also reviewed and challenged the Group Capital Plan and
monitored total capital and CET1 forecasts throughout the year, ensuring
risks were understood and managed appropriately.
The Committee additionally started to consider moving towards a combined
ICAAP for OSB and CCFS and sought external advice on the best approach
to alignment.
Group Risk Committee Report continued
Operational risk
The Committee received reports on operational risks at each of its
meetings. The reports covered risk incidents that had arisen to allow
the Committee to assess management's response and remedial action
proposed. The reports also covered key risk indicators (KRIs), which can
be quantitative or qualitative and provided insights regarding changes
in the Group's operational risk profile.
The Committee requested a detailed analysis of operational incidents
occurring during the course of 2019 to further understand any causes and
trends. The Committee was satisfied that the actions taken were
appropriate and that the control
of operational incidents continued to improve.
A full programme of operational resilience testing was undertaken
throughout the year, including a Board-level disaster recovery
test simulation which was externally-facilitated and constructive
feedback was provided.
Compliance and regulatory risk
The Committee received reports covering compliance and financial crime
KRIs, which can be quantitative or qualitative
and provide insights regarding changes in the Group's compliance and
regulatory risk profile. The Committee also assessed and recommended
enhancements to the compliance and financial crime risk appetite before
recommending it for approval by
the Board.
Risk Management Framework integration
The Committee considered the Combination Integration Plan and
harmonisation of the Risk Management Frameworks and functions of OSB and
CCFS. An external firm assisted the Group with the creation of the
Integration Plan which sets out the key components of the respective
firms' frameworks. The scope of all components is broken down into three
distinct groupings, namely; business as usual, regulatory requirements
and risk projects and sets out a summary of workstreams and timelines to
achieve harmonisation.
Other risk types
The Committee reviewed the Group profiles of conduct risk, reputational
risk, climate change risk and business and strategic risk against their
respective risk appetites.
Recovery Plan
The Recovery Plan process is designed to ensure that in a time of stress
the Group has a credible recovery plan that can be implemented in a
timely manner. The Committee reviewed and commented on the proposed set
of recovery options within its plan.
Group Risk Committee - key responsibilities Risk appetite and assessment
- Advise the Board on overall risk appetite, tolerance and strategy
- Review risk assessment processes that inform the Board's
decision-making
- Consider the Group's capability to identify and manage new risks
- Advise the Board on proposed strategic transactions, including
acquisitions or disposals, ensuring risk aspects and implications for
risk appetite and tolerance are considered
Risk monitoring and framework
- Review credit risk, interest rate risk, liquidity risk, market risk,
compliance and regulatory risks, solvency risk, conduct risk,
reputational risk and operational risk exposures by reference to risk
appetite
- Challenge and endorse the SRMF
- Provide challenge and oversight to the ICAAP framework
- Monitor actual and forecast risk and regulatory capital positions
- Recommend changes to capital utilisation
- Provide challenge and oversight to the ILAAP framework
- Monitor the actual and forecast liquidity position
- Review reports on risk appetite thresholds, identify where a risk of a
material breach of risk limits exists and ensure proposed actions are
adequate
- Provide challenge and oversight to the Recovery Plan framework
CROs and risk governance structure
- Consider and approve the remit of the Risk function
- Recommend to the Board the appointment and removal of the CROs
- Review promptly all reports from the CROs
- Review and monitor management's responsiveness to the findings of the
CROs
- Receive reports from the ALCO and the Risk Management Committees
Other Committees
Group Models and Ratings Committee
Following the Combination, the Group Models and Ratings Committee was
established as a sub-committee of the Group Risk Committee in January
2020. The primary purpose of the Committee is to act as the designated
Committee for the purpose of material aspects of the rating and
estimation processes
(as articulated in Article 189 of the EU Capital Requirements
Regulation) and provide assurance of the Group's models and ratings
systems. The Committee is chaired by the Chair of the Group Risk
Committee, Graham Allatt. Rajan Kapoor and April Talintyre are members
of the Committee.
Board Integration Committee
The Board Integration Committee was established in October 2019,
following the Combination with CCFS. The primary objective of the
Committee is to oversee planning and execution of the integration of OSB
and CCFS, including oversight of synergies realisation. David Weymouth
has been appointed as Chair of the Committee, with Andy Golding,
Margaret Hassall, Sarah Hedger and Rajan Kapoor as members. Rod Duke
served as a member until he stepped down from the Board on 4 February
2020.
The Committee met three times during 2019.
(END) Dow Jones Newswires
March 31, 2020 13:02 ET (17:02 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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