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«OP Financial Group's Corporate Governance Statement This is a description of OP Financial Group's Corporate Governance Statement. By law, a credit ...»

-- [ Page 1 ] --

OP Financial Group’s

Corporate Governance Statement

2015

1 (51)

© OP

23.2.2016

OP Financial Group's Corporate Governance Statement

This is a description of OP Financial Group's Corporate Governance Statement. By law, a credit institu-

tion and a securities issuer shall present its corporate governance system. OP Financial Group's issuer

(Pohjola Bank plc) draws up its own corporate governance statement and that statement substantially

complies with that of OP Financial Group. This OP Financial Group statement applies to credit institu- tions within the central cooperative consolidated other than the abovementioned issuer. OP Financial Group member cooperative banks will publish their own corporate governance statements.

Contents 1 Management

2 Structure of OP Financial Group and Pohjola Group, and administrative bodies

3 Central cooperative's Annual Cooperative Meeting

4 Supervisory Board and its committees

5 OP Financial Group's President, Group Executive Chairman, and OP Cooperative's CEO and Executive Board

6 Management system

7 Internal and external control

7.1 Internal control

7.2 External control

8 Financial reporting process

9 Remuneration

10 Insidermanagement

11 Disclosure policy

12 Corporate social responsibility

13 Updating Corporate Governance

–  –  –

OP Financial Group creates sustainable prosperity, security and wellbeing for its owner-customers and in its operating region by means of its strong capital base and efficiency. Its long-term customer-driven approach also enables continuous renewal.

The Group develops its services and products to meet customer needs.

The Group has three business segments: Banking, Non-life Insurance and Wealth Management.

OP Financial Group consists of the following two parts:

1. Amalgamation of OP Financial Group cooperative banks

2. Other entities and organisations of OP Financial Group The amalgamation of OP Financial Group member cooperative banks is formed by OP Cooperative (central cooperative), companies belonging to its consolidation group, the central cooperative’s member credit institutions and companies belonging to their consolidation groups, and credit institutions, financial institutions and service companies in which the abovementioned institutions jointly hold more than half of the voting rights form the amalgamation.

–  –  –

gamation hold more than half of the total votes. The extent of OP Financial Group differs from that of the amalgamation of the member cooperative banks in that OP Financial Group subsumes companies other than credit and financial institutions or service companies. The most important of these are the insurance companies with which the amalgamation forms a financial and insurance conglomerate. In addition, Omasairaala Oy, a hospital, belongs to the Group.

More detailed information on the legal structure of OP Financial Group and the amalgamation of the member cooperative banks can be found in the Financial Statements of OP Financial Group. The amalgamation of the member cooperative banks does not form a corporate group, as referred to in the Accounting Act, or a consolidation group, as referred to in the Act on Credit Institutions. The central cooperative of the amalgamation prepares consolidated financial statements as referred to in Section 9 of the Act on the Amalgamation of Deposit Banks.

Member cooperative banks

Group member cooperative banks are independent, local deposit banks engaged in retail banking. They provide modern and competitive banking services to households, SMEs, agricultural and forestry customers and public-sector entities. Helsinki OP Bank Ltd, the central cooperative’s wholly owned subsidiary, is responsible for providing corresponding retail banking services in the Helsinki Metropolitan Area. Its extraordinary general meeting of 14 November 2015 decided to change the bank to a cooperative-based deposit bank. The new cooperative bank will start operating on 1 April 2016 according to plan.

In terms of the type of their business organisation, the member cooperative banks are cooperatives whose basic values underlying decision-making include the one member, one vote principle. Within the member cooperative banks, the highest decisionmaking body is the cooperative meeting or assembly comprising owner-customers, which elects a Supervisory Board for the bank. The Supervisory Board in turn elects an Executive Board for the bank.

–  –  –

Cooperative bank federations The cooperative bank federations are regional cooperation bodies for the member cooperative banks. Finland is divided into 16 federations of cooperative banks and the boundaries of the federations essentially follow those of provinces.

The federations nominate candidates in their region for the OP Cooperative Supervisory Board. In addition, the cooperative bank federations cooperate e.g. in projects related to marketing, corporate social responsibility and internal training.

The meeting of a cooperative bank federation comprising member cooperative banks shall elect the Executive Board to represent the federation and attend to its affairs.





According to corporate governance recommendations, the Executive Board consists of a minimum of three (3) and a maximum of nine (9) members elected annually.

OP Cooperative and its responsibilities The central cooperative of OP Financial Group is OP Cooperative and OP Andelslag in Swedish and is domiciled in Helsinki.

–  –  –

Board and being made up of management executives. The central cooperative’s member banks own OP Cooperative.

The central cooperative’s members may include credit institutions, as referred to in the Act on the Amalgamation of Deposit Banks, whose Bylaws or Articles of Association have been approved by the central cooperative. The Supervisory Board takes decisions on admitting new members.

The purpose of the central cooperative as the central cooperative of the amalgamation and as the company heading the financial and insurance conglomerate formed by OP Financial Group is to equitably contribute to and support the development of, and cooperation between, its member credit institutions, other OP Financial Group companies and entities and the entire OP Group. To that end, the central cooperative controls the Group's centralised services, develops the Group's business, manages the Group's strategic control and lobbying and manages control and supervision duties belonging to the central cooperative of the amalgamation and the company heading the financial and insurance conglomerate. Furthermore, the central cooperative acts as OP Financial Group's strategic owner institution.

Changes in OP Financial Group’s structure in 2015

Six new cooperative banks joined OP Financial Group on 19 May 2015 when Keiteleen Osuuspankki, Laihian Osuuspankki, Multian Osuuspankki, Osuuspankki Poppia, Petäjäveden Osuuspankki and Tuusniemen Osuuspankki, which were part of POP Group, decided to join OP Financial Group as independent cooperative banks.

In 2015, the number of OP Financial Group member cooperative banks decreased from 181 to 178 as a result of mergers with one another.

Sotkamon Osuuspankki merged into Kainuun Osuuspankki on 31 May 2015. ItäUudenmaan Osuuspankki merged on 31 July 2015 into Porvoon Osuuspankki that was renamed Itä-Uudenmaan Osuuspankki. Mynämäen Osuuspankki merged on 31 August 2015 into Nousiaisten Osuuspankki that was renamed MynämäenNousiaisten Osuuspankki. Hartolan Osuuspankki and Sysmän Osuuspankki merged on 31 August 2015 into Etelä-Päijänteen Osuuspankki that was renamed JärviHämeen Osuuspankki. Myrskylän Osuuspankki merged into Orimattilan Osuuspankki on 30 September 2015. Karkun Osuuspankki merged into Tampereen Seudun Osuuspankki on 31 October 2015. Ylivieskan Osuuspankki merged on 31 December 2015 into Kokkolan Osuuspankki that was renamed Keski-Pohjanmaan Osuuspankki. Pyhälaakson Osuuspankki merged into Suomenselän Osuuspankki on 31 December 2015.

Vasa Andelsbank and Östra Korsholms Andelsbank accepted a merger plan on 31 August 2015, according to which the latter will merge into the former. The planned date for registration of the merger execution is 29 February 2016.

Keiteleen Osuuspankki and Pielaveden Osuuspankki accepted a merger plan on 14 October 2014, according to which the former will merge into latter. Initially, the planned date for registration of the merger execution was 31 May 2015. The banks asked the National Board of Patents and Registration to postpone the registration of the merger execution to a later date. The new planned date for registration of the merger execution is 31 July 2016.

–  –  –

In calculating the votes cast at the Meeting, members exercise their voting rights, based on cooperative contributions, equalling their shares in the central cooperative.

–  –  –

In the composition of the Supervisory Board and its members' competence requirements, OP ensures that the members have adequate experience and professional skills to perform their duties professionally and carefully. Supervisory Board members must have adequate knowledge of the financial sector. In the competence requirements, OP also ensures that the Supervisory Board is diverse and has adequate corporate social responsibility knowledge.

4 Supervisory Board and its committees

–  –  –

less the term of office ends prior to this date due to a change in the allotment of the seats among the federations. The Supervisory Board comprised 34 members on 31 December 2015.

An administrative officer or salaried employee may not be elected to the Supervisory Board from a member bank which, pursuant to Section 8 of OP Cooperative’s Bylaws, has only one vote at Cooperative Meetings, i.e. which has received financial support referred to in said section. A person who is 68 years of age or older is not eligible for Supervisory Board membership. However, a member who turns 68 years of age during his membership may sit on the Supervisory Board until the closing of the next Cooperative Meeting.

Responsibilities of the Supervisory Board

Under OP Cooperative’s bylaws, the Supervisory Board shall supervise the central cooperative’s corporate governance, managed by the Executive Board and the CEO, and ensure that the central cooperative’s operations are managed in a professional and prudent manner in accordance with the Co-operatives Act and in the best interests of the central cooperative and OP Financial Group.

In addition, the Supervisory Board shall, for example, confirm OP Financial Group’s strategy and other shared goals and policies, the central cooperative's operational and financial targets, appoint and discharge the President and Group Executive Chairman acting as the CEO of the central cooperative and other Executive Board members and deputy members and the Chief Audit Executive.

According to the rules of procedure confirmed by the Supervisory Board, its responsibilities also include as follows:

 Confirm the general policies as specified in the Act on the Amalgamation of Deposit Banks;

 Confirm risk limits regarding risk-bearing capacity and risk types for OP Financial Group and the risk categorisation principles for member banks and regularly follow the progress of the business, risk-bearing capacity and risk exposure of OP Financial Group and the central cooperative consolidated;

 Confirm OP Financial Group's annual plan;

 Monitor the progress of the implementation of OP Financial Group's strategy valid from time to time;

 Name OP Financial Group's regional banks;

 Adopt the principles and policies concerning OP Financial Group's remuneration development and decide on the Group's long-term remuneration schemes; and  Discuss and decide on the appointment of the Group-level working groups of strategic significance.

Supervisory Board Chair and Vice Chairs (presiding officers) At its first meeting after the Annual Cooperative Meeting, the Supervisory Board shall elect from among its members a Chair and two Vice Chairs until the closing of the next Annual Cooperative Meeting.

The presiding officers of the Supervisory Board comprise the Chair and both Vice Chairs of the Supervisory Board. Holding their meeting whenever necessary, the presiding officers prepare proposals to the Supervisory Board of the central cooperative on, for instance, the structural changes in the central cooperative's senior management or the central cooperative's organisation as well as on the appointment of the central cooperative's Executive Board members, deputy members and the Chief Audit Executive, the check of their job descriptions and the cancellation of their tasks. The presiding officers make decision on annual review of salaries and benefits for the central cooperative's Executive Board members, deputy members and the Chief Audit Officer as well as remuneration. It informs the Supervisory Board of the decisions it 10 (51)

–  –  –

has made. In addition, the presiding officers, for example, assess the fitness and propriety of the central cooperative's Executive Board members, deputy members and the Chief Audit Executive.

Supervisory Board's meeting and decision-making procedures Convened by the Chair or, whenever his is prevented, the Vice Chair, the Supervisory Board meeting is primarily held 6–7 times a year. The Supervisory Board meeting has a quorum when more than half of its members are present. Items on the meeting agenda are primarily prepared by OP Cooperative's Executive Board and primarily presented by the Chair or Vice Chair of the Executive Board. Items on the Supervisory Board meeting agenda are also in the first place discussed in advance by the Supervisory Board Working Committee or by other Supervisory Board committees.

Members and deputy members of OP Cooperative's Executive Board, the Chief Audit Executive and four separately appointed employee representatives and their deputies, if any, have also the right to be present and speak at Supervisory Board meetings.



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