ahli bank

Jordan Ahli

Bank

An assessment of Corporate Governance

Submitted to: Dr. Heba Ajlouni

Group: Alaa Zureikat, Dania Khirfan, Eman Abukheit, Khaled AlSharif,

Mohammad Aref, Razan Hijjawi, Rasha Tomaira

Corporate Governance of Banks

‘’The banking sector is unique among sectors of the economy because it plays a central

role in contributing to the financial stability of and the provision of financial resources to

the economy.

This sector includes major global banks that are systemically important banks (SIBs),

the failure of one or more of which could trigger a global financial crisis. In addition,

banks have a unique operating model’’. (Source: Basel Committee of Banking

Supervision, Consultative Document, External Audits of Banks – March 2013).

‘’The complexity of the banking business increases the asymmetry of information and

diminishes stakeholders’ capacity to monitor bank managers’ decisions.

Banks are a key element in the payment system and play a major role in the functioning

of economic systems. They are also highly leveraged firms, due mainly to the deposits

taken from customers. For all these reasons, banks are subject to more intense

regulation than other firms, as they are responsible for safeguarding depositors’ rights,

guaranteeing the stability of the payment system, and reducing systemic risk’’ (Corporate

Governance in Banking: The Role of the Board of Directors by De Andres, P & Vallelado,

E, 2008)

2


What is different about Banks?

• Banks have numerous stakeholders

• The complexity of the business that can shift quickly.

Source: (Mehran et al, 2011)

‘’Following the financial crisis in 2008 that initiated the global economic slowdown, the

Central Bank of Jordan cut its key interest rates three times to help boost economic

activity’’. The prudent regulations set in place by the Central Bank of Jordan have

enabled the sector to withstand the repercussions of the global financial crisis and

economic slowdown. This is not to say that the sector escaped them unscathed, but

rather that the banks were resilient in both their growth and profitability’’. (Source:

JordInvest Banking Sector Report, 2012)

3


From a banking industry perspective, corporate governance involves the

allocation of authority and responsibilities, i.e. the manner in which the

business and affairs of a bank are governed by its board and senior

management, including how they:

• set the bank’s strategy and objectives;

• determine the bank’s risk tolerance/appetite;

• operate the bank’s business on a day-to-day basis;

• protect the interests of depositors, meet shareholder obligations, and take

into account the interests of other recognized stakeholders; and

• align corporate activities and behavior with the expectation that the bank will

operate in a safe and sound manner, with integrity and in compliance with

applicable laws and regulations.

Source: Basel Committee of Banking Supervision, Consultative Document, External Audits of Banks –

March 20134

Background

Jordan Ahli Bank (previously Jordan National Bank) is a leading

Jordanian institution, with a steeped national history and heritage.

Established in 1955, Jordan Ahli Bank was the first national bank to

be established in East Jordan and the sixth public shareholding

company to be established in the Kingdom.

5Source: Jordan Ahli Bank Corporate Responsibility Report for the year 2012

Bank Strategy & Vision

6

Stock Price

7

Board of Directors

8

Overview

According to the Basel Committee there are significant differences in the legislativeand regulatory frameworks across countries as regards the functions of the board ofdirectors and senior management.

Some countries use a two-tier structure, where the supervisory function of the boardof directors is performed by a separate entity known as a supervisory board, whichhas no executive functions. Other countries, by contrast, use a one-tier structure inwhich the board has a broader role.

In Jordanian Banks, a one-tier structure is adopted.

9Source: Basel Committee on Banking Supervision, Enhancing Corporate Governance for Banking Organisations, 2006

Number of Board Members

Jordan Ahli Bank consists of 13 Board Members presented in the following Slides:

Source: Jordan Ahli Bank Annual Report, 2012

10

Who Classifies as an Independent

Director?

In accordance with the Jordanian Central Bank’s Corporate Governance Code, 2007 section 2-d-iii

An ‘independent' Director (whether natural person or representing legal entity) is one whose directorship constitutes his only connection to the Bank, and whose judgment is therefore unlikely to be influenced by external considerations. Minimum standards for an ‘independent' Director include:

(1) one who has not been employed by the Bank for the preceding three years;(2) is not a relative (up to the second degree) of an administrator of the bank;(3) is not receiving payment or compensation from the Bank (other than as a Director);(4) is not a director or owner of a company with which the Bank does business (other than business relationships made in the ordinary course of business of the Bank and on substantially the same terms as those prevailing at the time for comparable transactions with nonaffiliated parties);(5) is not, nor in the past three years has been, affiliated with or employed by a present or former auditor of the Bank; and(6) is neither a shareholder with effective interest in the capital of the Bank nor affiliated with oneان ال تشكل مساهمته مصلحة مؤثرة في راس مال البنك او يكون حليفا لمساهم اخر

:قانون البنوك، تعريف المصلحة المؤثرة هي كالتاليحسب

.اعتباريشخص ل من رأسما%( 10)عن ل السيطرة على ما ال يق: المصلحة المؤثرة

11

Why Independent Directors?

Definitions of what constitutes “independence” for directors vary acrossdifferent legal systems, and are often reflected in exchange listingrequirements and supervisory standards.

The key characteristic of independence is the ability to exercise soundjudgment after fair consideration of all relevant information andviews without undue influence from management or inappropriateoutside interests. The extent to which supervisors establish stringenttests of either independence or non-independence for bank directorsmay depend in part on the extent to which there is a party or partieswho are in a special position to influence the bank.

Qualified independent directors can bring new perspectives from other businesses that may improve the strategic direction given to management, such as insight into local conditions, and can also be significant sources of management expertise.

12Source: Basel Committee on Banking Supervision, Enhancing Corporate Governance for Banking Organisations, 2006

Board Members & their Qualifications

H.E Dr. Rajai Muasher

Position: Chairman of the Board of Directors - Executive

Representative for Al Raja’ for Investments

Year of Birth: 1944

Nationality: Jordanian

Education:

PhD Business Administration / Marketing, USA

MBA, USA

BSc, Chemistry, American University of Beirut

Experience:

Deputy Prime Minister;

Former Minister of State;

Former Minister of Industry and Trade;

Minister of Supply - multiple cycles;

Member of the Senate - multiple cycles;

Chairman and member of various companies

Year of Appointment: 1997

13


H.E Mr. Nadim Yousef Muasher

Position: Deputy Chairman – Part time

Year of Birth: 1950


Education:MSc Civil Engineering USA; BA Architecture

Experience: • Former member of the Senate;

Chairman to the following companies: Arab International Hotels Co. (Marriott);

El Zay Ready Wear ManufacturingCo.;

Jordan Worsted Mills Co.;

Ad Dawliya for Hotels andMalls Co. (Sheraton);

Business Tourism Co.


14


Dr. Henry Azzam

Position: Member

Representative for Bayblos Bank – Non-Executive

Year of Birth: 1949


Education:PhD Economics; MA Statistics and Finance

Experience: • Chairman and CEO, Deutsche Bank MENA;

CEO, Amwal Invest / Jordan 2005-2007;

Managing Director, Middle East Capital Group in Amman and Beirut 1998-2001;

Assistant General Manager, National Commercial Bank in Saudi Arabia 1990-1998


15


H.E Mr. Marwan Awad

Position: Member - Executive

Representative for Jordan Worsted Mills Co.

Year of Birth: 1951


• Education:

Master of Economics, Vanderbilt University, USA; Higher Diploma in Economic Development, Vanderbilt University, USA; BA Business Administration, University of Jordan

Experience: Current CEO / General Manager of Jordan Ahli Bank;

Head of Association of Banks in Jordan – multiple cycles;

Former Minister of Finance; Former General Secretary,

Ministry of Industry and Trade;

Former General Manager, Industrial Development Bank;

Former General Manager, Qatar Islamic Bank;

Former General Manager of Middle East Investment Bank; Central Bank of Jordan – several positions; Author of several books and publications dealing with foreign exchange, investment, finance, and economic studies; Board Member of several companies


16


H.E Mr. Wasef Azar

Position: Member

Representative, Jordan Investor Centre

Year of Birth: 1936


• Education:

Master of Economics and Development Management, USA; Bachelor of Law (LLB), Damascus

Experience:

Member of the House of Senate;


Board Member of various companies; many years experience in both the public and private sectors, and in various fields;


Manager of several establishments and companies


17


Mr. Emad Yousef Muasher

Position: Member

Representative for Muasher Investment and trading Co – Non Executive

Year of Birth: 1957


• Education:MA International Business Administration, USA; BA Economics

• Experience:

Deputy Chairman and Board Member of various companies, including Muasher Co., part of Muasher Group


18


Mr. Rafiq Saleh Muasher

Position: Member

Representative for Rajai Muasher & Brother Co – Non-executive

Year of Birth: 1949


• Education:MSc Construction Engineering; MSc Engineering, Project Management, USA

• Experience:

Ranco Co. for Contracting and Trade (1976–1980); Rajai Muasher & Brothers Co. (1980–1985); Al Ahliyya Financial Investments (1985–1988); National Securities Co. (1988 to date)


19


Mr. Mohmmad Al Abdullat

Position: Member

Representative , The social Security corporation (Investment unit)

Year of Birth: 1946


• Education:BA Commerce Cairo University

Experience:

Executive Director, Nuqul Group;Board Member/ Treasurer, Chamber of Industry, Amman;Board Member, Arab Union Council for Paper Industry;Chairman of the Board, Pearl Sanitary Paper Converting Co. PLC; Advisor to the Office of the Prime Minister; Deputy Chairman, Civil Service Consumer Cooperation; Board Member in various companies


20


Mr Mahmoud Zuhdi Malhas

Position: Member

Independent

Year of Birth: 1935


• Education:BA Economics, American University of Beirut

Experience: Prominent businessman and owner of Al Mahmoudiah Trading Co., operating in general trade and trademarks representation since 1994;Chairman and Board Member to several banks and companies


21


Mr Ala’adin Sami

• Position: Member

Representative for ZI & MIE Co

Year of Birth: 1953

Nationality: Egyptian

• Education:

MA Financial Management; BA Accounting

Experience:

Deputy Chairman of Al Zahid Group, S.A.; Chairman of Arab- Sudanese Truck Co.; Board Member of Arab Truck and Vehicle Saudi Co.; Board Member of Laguna Tourism Development Co., Egypt


22


Mr Karim Tawfik Kawar


Independent

Year of Birth: 1966


• Education:

BA Financial Management and Computer Science, Boston College

Experience: Former Jordanian Ambassador to the USA; Former Managers’ Committee Member at: Ideal Group, Vision Investment, Batelco Jordan and National Equipment and Technical Services; Former Economic Advisory Board Member;Current Chairman of the Board, Kawar Group; Board Member, JWICO; Head of Managers’ Committee at: Iris Guard, Nathealth, Kawar Power Co., King Abdullah II Development Fund Board of Trustees, Jordan River Foundation Board of Trustees; Founder and President of the Management Committee for the Information Technology Companies’ Society; President of Jordan Computer Society, as well as various other initiatives, societies, and groups


23


H.E Dr. Abdel Elah Al Khatib


Independent

Year of Birth: 1953


• Education:

MA International Media, Master of International Economics and Development BA Political Science

Experience: Member of the House of Senate; Several-time Former Minister of Foreign Affairs; Chairman of Lafarge Jordan Cement Co.; Occupied several diplomatic posts in the Ministry of Foreign Affairs;President of the Royal Society for the Conservation of Nature; Member in Board of Trustees of King Hussein Foundation;Member in Board of Trustees of Hussein Cancer Center; Member in Board of Trustees of American Center of Oriental Research; Former Board Member, Central Bank of Jordan


24

Conclusion and Recommendations

In our opinion the bank is currently enjoying the maximum number of Board members complying to the Company’s Law which is 13.

Almost all Board members are prominent figures in society, have had previous governmental and ministerial posts, and have sufficient qualifications and experience.

High concentration of ‘Muasher’ family in the bank in the board of directors which indicates that family may act as the ‘shadow director’.

Source: Our Analysis25

Shadow Director

• A shadow director is a person in accordance with whose directions or instructions the directors of a company are accustomed to act

• Under this definition, it is possible that a director, or the whole board, of a holding company, and the holding company itself, could be treated as a shadow director of a subsidiary

• A founder or significant shareholder who wishes to escape the disclosure requirements of a directorship might still be counted as a 'shadow' director and held responsible for actions as if he or she were a formal director

• Source: http://www.brefigroup.co.uk/directors/what-is-a-shadow-director.html

26

http://www.brefigroup.co.uk/directors/what-is-a-shadow-director.html

Family Businesses

• Family members in business tend to demonstrate a greater sense of loyalty to each other and to the business. They also tend to be more committed to the success of the business and are more passionate about what the business stands for.

Family business owners have the opportunity to teach and pass along their business and personal values to the next

• generation of family managers/owners. Family members take pride in upholding these family values and build them into their day-to-day work and personal activities. The work culture is often a reflection of these family values.

• Family businesses often rely on the family as a source of capital for funding business activities, which has often been cited as a significant competitive advantage, especially when times are tough and funding is tight.

Succession

• As well as providing career opportunities, family businesses also favour passing the business along to the next generation of family members. The opportunity to be an owner of the family business or of any business for that matter can be both motivating and rewarding.

• Family businesses tend to be less driven by short-term financial results and are prepared to sacrifice short-term gains for the achievement of longer-term goals, which allows them to align the deployment of resources with their strategic objectives. This long-term approach to investing is often referred to as “patient capital.”

Source: KPMG LLP, The Competitive Advantage of a Family Business (2011) 27

Name Ownership Percentage

H.E Dr. Rajai Muasher 1.59%

Mrs.Huda Muasher 0.02%

H.E Nadim Muasher 3.64%

Mrs. Rania Dallal 0.02%

H.E Mr. Wasef Azar 0.06%

Mrs. Abla Muasher 0.08%

Mr. Imad Muasher 3.65%

Ms.Nadine Halasa 0.05%

Mr. Tareq Imad Muasher 0.05%

Co. H.E Mr Marwan Awad 0.01%

The Social Security Corporation 2.37%

Mr.Mohmmad Zuhdi Malhas 1.12%

Mr.Karim Tawfik Kawar 0.07%

28Source: Annual report 2012

Ownership for Board members & their

Families

Corporate Representation

Al Raja' forinvestment

Byblos BankJordan

WorstedMiles

JordanInvestor

Centre Co

MuasherInvestment&T

rading Co

RajaiMuasher&Bro

ther

Arabia S.A.LHolding co

ZI&IMECO(SaudiArabia)

Series 1 1.59 10.38 6.12 5.67 0.26 0.01 1.45 0.71

0

2

4

6

8

10

12

Axi

s Ti

tle

Series 1

Source: Annual report 2012

30

Central Bank Corporate Governance Code Compliance Status of Ahli Bank ‘CG’ Manual

The Pillars of the Code : 1) Commitment to Corporate Governance

i) The Bank has compiled this Code, which has beenapproved by the Bank’s Board and is published. An up-to-date version of the Code is available to the public onrequest and on the Bank’s website.

Comply

The Bank included a Corporate Governance Manual as part of its Annual Report.

Up to date version is available on their website and on ASE

iii)The Bank on an annual basis publicly reports itscompliance with the Code, where necessary detailinghow each provision of the Code has been implementedand, where relevant, where and why the Bank’sexecutive management has adopted procedures thatare different from those recommended by the Code.

The bank already discloses their practices within their annual reports and have a corporate governance manual as per ASE and CBJ requirements, however we did not find detailing on how they comply or not comply with each provision of the code.

This is not evident from the published reports of the bank

31

Central Bank Corporate Governance Code Compliance Status of Ahli Bank

2)The Functions of the Board of Directors: a )General principles

i) The Board of Directors has overall responsibility for theoperations and the financial soundness of the Bank andensures that the interests of shareholders, depositors,creditors, employees, and other stakeholders, including theCentral Bank of Jordan (CBJ), are met.

The Board ensures that the Bank is managed prudently andwithin the framework of laws and regulations and the Bank'sown policies.

Stated in section 1/1

Comply

The Bank has presented its strategic objectives in the annual report.

Bank’s history and accomplishments

Corporate Responsibility Report,2012 to ensure fairness for the rights of all stakeholders

ii) The Bank affirms that the obligations of each Director areowed to the Bank as a whole, and not to any particularshareholder.

stated in section 1/1 – point #2

We did not find sufficient data to show any hidden motives of board members

32

Central Bank Corporate Governance Code Compliance Status of Ahli Bank ‘CG’ Code

2) The Functions of the Board of Directors: a ) General principles

iii) The Board sets the Bank's strategic goals, as well asoverseeing the executive management of the Bank.

The day-to-day operation of the Bank is theresponsibility of executive management, but the Boardas a whole ensures and certifies that internal controlsystems are effective and that the Bank's activitiescomply with strategy, policies and proceduresapproved by the Board or as required by law orregulation.

As a critical part of these internal controls, the Boardensures that all dimensions of the Bank's risk aremanaged properly.

Stated – section 1/1 points # 3&4

Comply

The bank has a risk management department who areresponsible for all the reporting on risk, and they sendreports to the BOD as well as to the executives on monthlybasis, internal audit departments, moreover there arespecialized executive committees (will be elaborate laterin more details)

Source: Internal source from Ahli Bank

Also, they constantly update their banking systems to inorder to keep up with the continuously changingdevelopments of the banking industry (Source: Chairman’sletter to Shareholders, Annual Report, 2012)

33


2)The Functions of the Board of Directors: b) The Chairman and the General Manager

i) The position of the Chairman of the Board is separated from that of General Manager. In addition, there is no family relationship up to the 3rd degree between the Chairman and the General Manager.

The division of responsibilities between the chairman and the general manager has been set out in writing , is subject to review and revision from time to time as necessary, and is approved by the Board.

Stated in section 1/2 points #1 & 2

Comply (but we haven’t seen the manual)Statement of functions for Chairman and General manager are available at the bank Source: Internal Source at Ahli Bnak

A written manual is endorsed and reviewed by the BoD when necessary (source: Annual Report, 2012)

ii) If the chairman is an executive , then the Bank will consider appointing an independent member of the Board as a Deputy Chairman to act as an independent resource and conduit for shareholders.

The bank recognizes that’s international best practice to have a non-executive chairman, & will keep this matter under review.

Stated in section 1/2, point #3

Not ComplyBank has appointed Nadim Muasher as Deputy Chairman (Source: Annual Report 2012) HoweverNadim Muasher was the chairman before Rajaitook place, and is not independent director

34


2)The Functions of the Board of Directors: b) The Chairman and the General Manager

The Status of the chairman (whether executive or non-executive) is publically disclosed

Stated in section 1/2point #3

Comply

The Annual Report states that H.E RajaiMuasher is an executive director

2) The Functions on the Board of Directors: C) The Role of the Chairman of the Board

i) The chairman promotes a constructive relationship between the Board & Bank’s Executive Management, & between the executive Directors and the non-executive Directors

Stated in section 1/3 point #1 Annual report\corporate governance manual

We do not have sufficient data to prove it

35


2) The Functions of the Board of Directors: C) The Role of the Chairman of the Board

iii) The Chairman ensures that both Directorsand the Bank’s shareholders receive adequate and timely information.

Stated in section 1/3 point#3

Comply

The bank discloses their practices in General Assembly meetings & annual report , also semi annual and quarterly report are published on ASE website for shareholders to be up to date with financial performance (Source: ase website)

Iv) The chairman ensures high standards of Corporate Governance by the Bank

Stated in Section 1/3 point#4

Comply

They have a section ‘’Bank’s commitment to Corporate Governance Requirements in their annual reports

36

Central Bank Corporate Governance Code, 2007 Compliance Status of Ahli Bank ‘CG’ Code

2) The Functions of the Board of Directors: d) Composition of the Board

i) The Bank intends that the composition of the Board isdetermined in order to obtain the optimal mix of skillsand experience. Accordingly , there should be a mix ofexecutive Directors (i.e. Directors who also occupy anoperational management position in the Bank) and non-executive Directors (i.e. Directors who do not have anoperational management position in the Bank). Toestablish a substantial weight of non-executive opinionon the Board, the majority of Directors shall be non-executive. Some of these non-executive Directors mayalso be described as independent Directors.

Stated in section 1/4 points# 1&2

Comply

10 out of 13 are non-executives, and out of these non-executives there are 3 independent directors

only. (Source: Annual Report, 2012)

Board members representing companies are not classified as independent directors (Source: Interview with Ahli Bank / Head of Corporate Responsibility Unit)

ii) To foster an independent element within the Board, the Bank's policy is that the Board should have at least three independent, non-executive, Directors.

Stated in section 1/4 point #3

Comply, they exceeded the number of independency required.

37


2) Functions of the Board of Directors: e) Board practices

i) The Bank's Board meetings take place at least six times a year. In order to ensure that a full range of topics is considered, it is the practice of the Bank's executive management to schedule a specific topic to be highlighted at each meeting.

Comply

The Board held nine meetings during 2012 (Source: Annual Report, 2012)

iii) The Bank provides adequate information to Directors sufficiently in advance of meetings to enable them to reach informed decisions.

Stated in section 1/5 point # 7Comply

We do not have sufficient data to prove it

38


Board practices

iv) A permanent written record of Board discussions and Directors' votes iskept by the Board Secretary .

Stated section 1/5 point # 8

Comply

Mr. Hani Farraj is announced as the Secretary of the Board in the Annual Report.

Also, evident from general assembly meeting minutes, Mr. Hani Farraj is also the minute taker

vi) The categories of transactions that require Board approval (including loanslarger than a set amount and transactions with related parties) have beenclearly defined in writing.


Comply

Potential Risk remain that the bank did not take collateral to any loan for a related parties.

Related party transactions for BoD families are disclosed in Annual report

39Source: ASE website

40


Board practices

vii) It is a key responsibility of Directors to ensure they be kept informed ofdevelopments within the Bank, and in the banking industry as a whole, both local and international.

Accordingly, the Bank provides Directors with appropriate briefings regarding the Bank throughout their tenure, and upon the Director's request.


Comply

Also, the bank produces marketing reports regularly (published on their website for the banking industry, also the annual report containsa section dedicated for ‘’Performance of the Jordanian Economy’’

viii) Individual Directors have independent access to executive management,and in particular the Committees of the Board have access to executivemanagement.


Comply

Yes, this is evident from the organizational structure.

x) The Bank has drawn up an organization chart, showing lines of reportingand authority, and including board and executive management committees. The portion of the chart showing the more senior levels is made public.


ComplyYes, chart & lines of reporting are presented in the annual reports

41Source: Annual Report, 2012

42


Board activities: appointment and succession

i) The Board's policy is to appoint a General Manager with integrity, technical competence, and experience in banking.


Comply

Marwan Awad has good educational qualification , he has also a very good experience record , as he worked in Central Bank of Jordan – Several positions

ii) The Board is required to approve the appointment of some senior executives such as the Chief Financial Officer and the head of internal audit, and to ensure that they have the requisite skills.

Stated in section 1/6 point#2

Comply

iii) The Board has approved executive management succession plans for senior executives of the Bank, which set out the required qualifications and requirements of the positions.


Comply

Board Committees

43

Introduction

According to the Basel Committee on Banking Supervision ‘Principles for enhancing corporate governance’ ‘’Board committees are established to increase efficiency and allow deeper focus in specific areas’’

The number and nature of committees depends on many factors, including:

• Size of the bank;

• Size of the bank’s board;

• The nature of the business areas of the bank; and

• The bank’s risk profile.

44

Basel Committee on Banking Supervision ‘Principles for enhancing corporate governance’, October 2010

45

Board Committees

Audit Committee

Nomination & Remuneration

Committee

Executive Committee

Corporate Governance Committee

Risk Management Committee

Assessment of Ahli Bank Board Committees

Central Bank Corporate Governance Code Ahli Bank Status

Board Committees / General Principles

i) For greater efficiency Board Committeeshave been set up with formally delegatedobjectives, authorities, responsibilities andtenure, in the form of board committeecharters or terms of reference.The Board Committees regularly report tothe full Board and do not substitute for theBoard and its’ responsibilities.

Partially Comply

Not all board committees have formally written charters, only the audit committee has it; however the bank is in the process of developing charters for other committees (Source: Interview with Ahli Bank)

Although this is Stated - Section 2/1 of the Corporate Governance Manual of Ahli Bank (Annual Report, 2012, p. 155)

‘’Each committee should have a charter or other instrument that sets out its mandate, scope & working procedures’’ (Source: Basel Committee on Banking Supervision)

ii) Membership of Board Committees, together with summaries of their responsibilities and duties, are disclosed in the Bank’s Annual Report.

Comply

Committee duties are stated in Annual Report, 2012 (p.146-148)

46


iii) The Board may decide to combine the functions of several Committees if appropriate or if administratively more convenient.

Comply

Nomination and remuneration are merged in one committee (Annual Report, 2012 – p. 147)

47

Assessment of Ahli Bank Board

Committees


H.E Dr. Rajai Muasher(Chairman of BoD)

H.E Mr Wasef Azar / Rep Jordan Investor Center Co

H.E Mr. Moh’d Abdallat / Rep SSC

H.E Mr. Nadim Muasher / Deputy Chairman

48


49


The Bank has formed a Corporate Governance Committee of the Board.

Comprising the Chairman of the board & two of the non-executive directors to direct the preparation, updating and implementation of the code.

Comply

Ahli Bank has formed a Corporate Governance Committee (Source: Annual Report, 2012 p.146)

Wasef Azar and Mohammad Abdallat are non-executive directors

According to the Basel Committee on Baking Supervision, principles for enhancing Corporate Governance ‘’A Corporate Governance Committee has become increasingly common among banks’’


The Corporate Governance Committee’s (which was mainly established and active in2008) duties are as follows:

• Supervise the development of the Bank’s Corporate Governance Code and overseeits implementation.

• Ensure that effective follow-up mechanisms are in place for the Code’simplementation across all managerial levels.

• The Committee shall also supervise all updates to the manual, in accordance withthe directives of the Central Bank of Jordan and with the approval of the Board.

50Source: Jordan Ahli Bank Annual Report, 2012

Audit Committee

H.E Mr. Wasef Azar – Committee Head / Rep. Jordan Investor Center

Mr. Karim Kawar – Member (Independent)

H.E Mr. Moh’d Abdallat – Member / Rep. Social Security Corporation

51

Source: Annual Report, 2012

Audit Committee

52


i) In accordance with the Banking Law theBank has an Audit Committee comprisingthree non executive Directors. Membershipof the Audit Committee is disclosed in theAnnual Report.

(also in line with the Baking Law of 2000 /Article (32))

Comply.

The audit committee members are mentioned in the annual report, 2012 p. 146, they are all non-executive directors

ii) At least two members of the AuditCommittee should have relevant financialmanagement qualifications and/ or expertiseand at least two members of the AuditCommittee are independent Directors.

Partially Comply.

All audit committee members are non-executive but only one member is independent (Mr. KarimKawar). The rest are representatives of companies

During the interview with insider at the Bank / Head of CR unit, we were told that BoD members who’re company representatives are not considered ‘independent’ directors.

Audit Committee Members Qualifications

53

Audit Committee Member Name

Degree & Experience

H.E Mr. Wasef Azar –Committee Head / Rep.Jordan Investor Center Co. (Independent)

MA Economics and Development Management, USA; Bachelor of Law (LLB), DamascusMember of the House of Senate; Former Minister of Industry and Trade; Board Member of various companies; many years experience in both the public and private sectors, and in various fields; Former Minister of Industry and Trade; and Manager of several establishments and companies

H.E Mr. Karim Kawar –Member(Independent)

BA Financial Management and Computer Science, Boston College, USAFormer Jordanian Ambassador to the USA; Former Managers’ Committee Member at: Ideal Group, Vision Investment, Batelco Jordan and National Equipment and Technical Services; Former Economic Advisory Board Member; Current Chairman of the Board, Kawar Group; Board Member, JWICO; Head of Managers’ Committee at: Iris Guard, Nathealth, Kawar Power Co., King Abdullah II Development Fund Board of Trustees, Jordan River Foundation Board of Trustees; Founder and President of the Management Committee for the Information Technology Companies’ Society; President of Jordan Computer Society, as well as various other initiatives, societies, and groups

H.E Mr. Mohammad Al-Abdallat – Member/Rep of Social Security Corporation (Independent)

BA Commerce, Cairo University Executive Director, Nuqul Group; Board Member/ Treasurer, Chamber of Industry, Amman; Board Member, Arab Union Council for Paper Industry; Chairman of the Board, Pearl Sanitary Paper Converting Co. PLC; Advisor to the Office of the Prime Minister; Deputy Chairman, Civil Service Consumer Cooperation; Board Member in various companies

Audit Committee


iii) The Audit Committee has all the duties and responsibilities required by the Banking Law and other relevant laws and regulations, including the duties to review:

1. the scope, results and adequacy of the Bank’s internal and external audits,2. the accounting judgments that are intrinsic to the financial statements; and3. the Bank’s internal controls.

Comply

The internal audit reports to the audit committee (Source: org chart in Annual Report, 2012).

Also this is mentioned in Ahli Bank’s corporate governance code, section 2/2 p.155 of Annual Report, 2012)

iv) The Audit Committee recommends to the Board theappointment or the removal, the remuneration, and othercontractual terms of the external auditors, in addition toassessing the objectivity of the external auditors, including theconsideration of any other non- audit work performed by theexternal auditors.

Comply.

Mentioned under the committee duties that: ‘’The Committee shall submit recommendations to the Board regarding the appointment, termination,remuneration and any other relevant contractual issues related to the external auditor’’ (Source: Annual Report, 2012 p. 147), and mentioned in Ahli Bank Corporate Governance Code p.155 of Annual Report.

54

Audit Committee

Central Bank Corporate Governance Code

Ahli Bank Status

V) The Audit Committee has, by aspecific provision in the writtencharter of its functions andresponsibilities, the ability to obtainany information from executivemanagement, and the ability to callany executive or Director to attendits meetings.

Comply.‘’The Committee shall have the authority to access any information from ExecutiveManagement and to call on any executive staff or Board Member to attend its meetings’’ (Annual Report, 2012 p. 147)they do invite executives to the meeting such as head of internal audit (source: Insider from Ahli Bank / Investor Relations officer)

We have not seen their charter, but they mentioned in their Annual Report 2011:- تحديث ميثاق مجموعة التدقيق الداخلي وميثاق لجنة التدقيق الداخلي ودليل المدققتم»

Sالداخلي وبما يتفق مع أحدث المعايير الدولية .المهنية للتدقيق الداخلي

Also during the interview with insider, we were told audit committee is the only committee that currently has a written charter.

vi) The Audit Committee meets each of the Bank’s external auditors, its internal auditors and its compliance officers, without executive management being present, at least once a year.

ComplyThe audit committee meets Deloitte & Touche + internal auditors & compliance officers once a year without executive management, usually this is done prior to the General Assembly Meeting (source: Insider from Ahli Bank / Investor Relations officer)

Also stated in Ahli Bank’s Corporate Governance Code section 2/2 p.155.

55

Nominations & Remuneration Committee

H.E Wasef Azar(Committee Head) / Rep.

Jordan Investor Center Co.

H.E Mr. Rafiq Muasher / Rep. Rajai Muasher &

Brothers Co.

Mr. Ala’adin Sami / Rep. ZI & IME Co.

Mr. Mahmoud Malhas(Independent)

56

Nominations & Remuneration

Committee

According to the Annual Report, the committee duties are:

• Shall put forward names of nominated board members for consideration taking nominees abilities & qualifications into consideration.

• Determines whether a nominee qualifies as an independent member as defined by the Central Bank of Jordan

• Assess board’s effectiveness

• Supplying the BoD with information and briefs providing background information on various important banking issues.

• Recommend the extent of remuneration including bonuses, monthly salaries and other benefits).

• Devising remuneration policy that ensures bonuses/salaries to attract and retain qualified staff.


57

The Nominations & Remuneration Committee


i) The Nominations and Remuneration Committeecomprises a minimum of three non-executiveDirectors, the majority of which (including theCommittee chairman) are independent.

Not ComplyAlthough this is Stated in Annual Report, 2012 p.147, and in Ahli Bank’s Corporate Governance Code section 2/3 p. 155.

All are non-executive, however only one member is independent (Mr. Mahmoud Malhas).

According to our interview with insider at Ahli Bank with head of CR unit, we were told that board members who are representatives of companies on the board are not considered independent.

ii) The Nominations and Remuneration Committeenominates all Board appointments, duly consideringcandidates’ abilities and qualifications and, for re-nominations, their attendance and the quality andextent of their participation in Board meetings.

In accordance with the Companies Law, the tenure ofthe Board of Directors expires every four years fromthe date of election, and each Director may re-submititself for election at the Annual General Assembly

Partially Comply.Committee does not nominate them, most of have joined in 1997 (Muasher Family Members, Karim Kawar in 2008) or nominated by the companies they are representing.

However their attendance and quality of meetings are all recorded and taken into account (Source: Insider interview at Ahli Bank / head of CR unit).

Tenure expires ever 4 years, and BoD members are re-selected. (please refer to circular in next slide).

58

59Source: http://www.ase.com.jo/en/disclosures?category=all&symbol=AHLI


60


iii) The Nominations and RemunerationCommittee makes the determination ofwhether a Director is ‘independent’ considering the minimum standards forindependence set out in this Code.

Comply

Yes, status of independency for the BoD is disclosed in Annual Report for each board member.

Stated in section 2/3 point#3 of Ahli Banks Corporate Governance Code, p.156

iv) The Nominations and Remuneration Committee has implemented a formal method of assessing the effectiveness of the Board.

Performance criteria are objective and include comparison with other similar banks and financial institutions, as well as safety and soundness criteria and regulatory compliance.

Not Comply

There is no written assessment criteria for board members, however their meetings and attendance is recorded as per the requirements of the company’s law (source: Interview with Insider Ahli Bank / Head of CR unit)

Although it is Stated in section 2/3 point #4 (Annual Report, 2012, Ahli Bank corporate governance code)


61


V) responsible for providing backgroundbriefing material for Directors as requested, aswell as ensuring that they are kept up to dateon relevant banking topics.

The Bank encourages Directors to attendseminars and events that allow them meetlocal and international organizations, entitiesand companies.

Comply

The finance department prepares relevant banking topics (source: Interview with insider at ahli bank/Risk management & compliance manager)Also, the bank has recommended a certification for board members, which was obtained by 2 board members (source: Interview with training & development manager)

Stated in Ahli Bank Corporate Governance Code section 2/3 p.156 in Annual Report.

vi) recommends to the Board the remuneration(including monthly salary and other benefits) ofeach Director and the General Manager.

The Nominations and Remuneration Committeealso reviews the remuneration (includingsalaries) of other executive management.

Comply

They recommend the remuneration of each director and CEO, in addition to review remuneration of other executives. (source: Insider from Ahli Bank / interview with head of CR unit)

Also Stated in section 2/3 point#6 (Source Annual Report, 2012 / Ahli Bank Corporate Governance Manual)

Also compliant with Article (62) of Company’s Law



vii) The Nominations and Remuneration Committee ensuresthat the bank has a remuneration policy, which is sufficient toattract and retain qualified individuals, and is in line with theBank’s peers in the market.

Stated in section 2/3 point #5 (p. 156 of Annual Report, 2012 / Ahli Bank Corporate Governance Code)

But do not have sufficient information to prove this.

viii) A summary of the Bank’s remuneration policy is disclosed in the Annual Report. In particular, the remuneration of individual Directors and the highest-paid non-Director executives is disclosed, including salary and benefits in kind.

Comply after Jordan Securities Commission asked them to disclose it for two years in a row (2011 & 2012) (source: ASE Website) / please refer to circulars in next slides.

62

63Source: http://www.ase.com.jo/en/disclosures?category=all&symbol=AHLI

Source: http://www.ase.com.jo/en/disclosures?category=all&symbol=AHLI

64


H.E Mr. Nadim Muasher –Committee Head

H.E Mr Wasef Azar / Rep. Jordan Investor Center

H.E Mr. Moh’d Abdallat / Rep. SSC

M.R Hani Fraij / Rep. Arabia / Lebanon S.A.L

65

Risk Management

According to the Annual Report, the committee duties are summarized below:

• Review all risks to which the Bank is exposed.

• Review the Bank’s risk management policies and strategies before they are endorsed by the Board.

• The Committee shall stay abreast of the rapid developments and many complexities that have the potential to impact the Bank’s risk management process; the Committee shall submit regular reports on these developments to the Board.


66

Central Bank Corporate Governance Code Status of Ahli Bank

i) The review of risk management is handled by aRisk Management Committee. This Committee iscomprised of Directors and may also includeexecutive management.

Comply (composed of directors but no executives)

ii) The Board on a regular basis reviews andapproves the risk management strategies andpolicies of the Bank.

Executive management is responsible forimplementing the strategies that have beenapproved by the Board, and for developing thepolicies and procedures for managing the varioustypes of risk.

Comply

The risk management committee reviews the risk mngt departments strategies and policies (Source: Interview with Risk & Compliance manager)

Stated in section 2/4 (Source: Annual Report, 2012 / Ahli Bank Corporate Governance Manual)

67


Central Bank Corporate Governance Code Status of Ahli Bank

iii) The structure and development of a coherentand comprehensive risk management departmentwithin the Bank has been proposed by executivemanagement, reviewed by the Risk ManagementCommittee, and approved by the Board.

ComplyStated in section 2/4 (Annual Report, 2012 / Ahli Bank Corporate Governance Code)

The bank has a risk management department. ‘’The executive management shall uphold the responsibility to carry out the strategies and to develop policies & procedures to manage a variety types of risk’’ (Source: Annual Report, 2012)

Risk management department reports to the CEO according to organization structure. (annual report, 2012 p.163)

iv) The Bank considers that the rapid development and increasing complexity of risk management requires that the Risk Management Committee keep fully informed of the developments in the Bank’s risk management functions.

Accordingly, the Committee makes regular reports to the full Board.

Comply

The risk management committee reviews all reports from risk management department, and discusses them with the BoD (Source: Insider from Ahli Bank / Interview with Risk & Compliance manager)

Regarding the committee conducting regular reports to the board (we do not have sufficient information on this)

68


Executive Committee

69

• H.E. Dr. Rajai Muasher - Committee Head

• H.E. Mr. Nadim Muasher - Deputy Committee Head

• H.E. Mr. Rafiq Muasher - Member / Representative, Rajai Muasher & Brothers Co.

• H.E. Mr. Wasef Azar - Member/ Representative, Jordan Investor Centre Co.

• H.E. CEO/General Manager – Member

• H.E. Mr. Karim Kawar – Member

• H.E. Mr. Emad Muasher - Member/ Representative, Muasher Investment and Trading Co.

Executive committee

Jordan Ahli Bank also has an Executive Committee with the following duties:

• Reviewing Credit facilities which exceed senior credit committee’s authority & review any requests any committee members express reservations about.

• Writing off outstanding (and other types of) interest, in addition to overdue interest payments on discounted promissory notes, outstanding due guaranteed withdrawals, unpaid withdrawals, & withdrawals from special reserves, as well as any amount in excess of the authority of the CEO & the Chairman. This must occur upon the recommendation of the Credit Committee & the CEO.

Source: Annual Report, 2012 p. 148

70

Committee Meetings

Committee Corporate Governance

Audit Nomination & Remuneration

Committee

Risk Management

Executive

No. of Meetings in

2011

2 5 1 2 4

No. of Meetings in

2012

1 6 1 1 3

71

Source: Annual Reports 2011 & 2012

Conclusion

72

Recommendations

73

Executive Management

74

Shareholders

75

Shareholders

76

No. Name Total shares 2012

Ownership percentage

Total shares 2011

Ownership percentage

1 Byblos Bank 15,571,022 10.38% 15,571,022 10.38%

2 Abraaj Capital 13,989,648 9.32% 13,989,648 9.32%

3 Jordan Worsted Mills Co.

9,180,152 6.12% 8,873,603 5.92%

4 Jordan Investor Centre Co.

8,499,747 5.67% 8,218,636 5.48%

Total 47,240,569 31.49% 46,652,909 31.10%

Shareholders

Commitment towards shareholders: Under the bank Code Of conduct the following must be met

1. Reinforce shareholder confidence in the bank through persevering efforts to strengthen the bank and its capability, and increase its profits by transforming the bank to a banking establishment that adheres to international standards and seeks to compete on local, regional, and international levels.

2. Commitment to seek, follow-up on, and develop all potential business opportunities, and make the most of them in order to achieve the highest profitability possible.

3. Commitment to institutional loyalty to the bank and to safeguarding its confidential matters.

4. The immediate disclosure of all substantial and material matters that pertain to shareholders and their rights.

77

Adequacy of implementing best

practices in treatment of shareholders

78

Central bank

corporate

governance code

Ahli Bank Corporate

governance code

Results Comments and

recommendation

The Bank takes active steps to

encourage shareholders, in

particular minority

shareholders, to participate in

the Annual General Assembly,

and also to vote either in person

or in their absence by proxy.

The Bank will take steps to

encourage shareholders, particularly

minority shareholders, to attend

the annual meeting of the General

Assembly and vote either in person

or, in the event of their

absence, by proxy.

Complied and this is clear by

all general assembly meetings

disclosure published at the

ASE.jo

All reports must be sent in an

earlier stages to the

shareholders so they can read

it carfully as general assembly

meeting is not just a meeting

The Bank’s policy is that the

chairmen of all Board

Committees should be present

at the Annual General

Assembly, and are invited to

address relevant questions from

shareholders

The chairmen of the Audit

Committee, the Nominations and

Remunerations Committees and any

other offshoot committees of the

Board shall attend the annual

meeting of the General Assembly.




ASE.jo

Picture for the disclodure in

the ase web disclosure 13-5-

2013

Representatives from the

external auditors are present at

the Annual General Assembly to

answer questions about the

audit and their auditors’ report

Representatives of the external

auditors shall attend the annual

meeting of the General Assembly

in order to answer any questions

attendees may have regarding the

auditing process and audit report.




ASE.jo

Picture for the disclosure in


2013

Shareholder Relationships

Adequacy of implementing best

practices in treatment of shareholders

79

Central bank

corporate

governance code

Ahli Bank Corporate

governance code


recommendation

The Bank policy is that there will

be voting on each separate issue

that is raised at the Annual

General Assembly.

Separate voting shall be taken into

consideration on every issue raised

during the General

159

Assembly’s annual meeting.




ASE.jo



2013

As required by the Companies

Law, Directors submit

themselves for election or re-

election at the Annual General

Assembly on a regular basis, and

the appointment of the Bank’s

external auditors is elected at

the Annual General Assembly

In accordance with the Companies

Law, Board members shall be elected

or re-elected during the

annual meeting of the General

Assembly. Voting on the external

auditor shall also be carried out

during the same meeting

Partially Complied and this is

clear by all general assembly

meetings disclosure

(published at the ASE.jo)but

BOD election is not annually

done its for four years , the

external auditor is been

elected annually

1) its clear that the code of

central bank is taking into

considration the best practices

of companies law

2) Picture for the disclosure in


2013

Notes, minutes, and a report of

the proceedings of the Annual

General Assembly, including the

results of voting, and the

questions from shareholders

and executive management’s

responses, are prepared and

made available to shareholders

after the Annual General

Assembly

Following the conclusion of the

General Assembly’s annual meeting,

a report shall be prepared and

provided to shareholders. The report

must contain the comments made

during the meeting and the

meeting’s outcomes, including

voting results, shareholder inquiries

and the responses provided by

Executive Management.




ASE.jo



2013

Shareholder Relationships

Disclosure for General assembly meeting

on 30 / 4 / 2013

80

Disclosure for General assembly meeting

on13/ 5 / 2013

81

Conclusion and recommendations

• Ahli bank procedure is complied with the best practice required by the central bank of jordan .

• Shareholders must be given more time with the documents before arranging the general assembly meeting

82

Internal & External Audit

83

Auditing controls

• Based on the regulations of the Central Bank of Jordan and the Jordanian Securities Commission and under the supervision of the Board of Directors’ various offshoot committees which includes both corporate governance committee and Audit committee , the Bank’s Executive Management continued to monitor the full implementation of the Bank’s adopted Corporate Governance Code. The Bank exhibited its strong commitment to the regulations set out in the Code and those specified by the government; its monitoring of adherence to both is ongoing, ensuring the Bank’s total compliance. (Annual report 2012)

• A clear proof of the bank interest in adopting the regulations and procedures is creating the Method and Procedure Documentation Department ;A large number of the Bank’s adopted customer procedures and regulations were documented and modified based on the latest global models and ISO standards and have been circulated among all Bank employees to ensure the endurance of the Bank’s secure and risk-free environment. The Department finalized and approved a large number of work procedures and manuals related to banking services and other departments within the Bank, while adopting new procedures within the branches in Palestine. (Annual report 2012)

84

Auditing controls

• According to the Code of conduct of AHLI bank Commitment towards application of all laws, bylaws, and rules required in countries where the bank operates does include :

1. Commitment to the true disclosure of information required by regulatory authorities expressly, clearly,efficiently, and respectfully.

2. Commitment to safeguard professional relationships with officials in regulatory authorities and seek to gain their confidence in the bank, and its commitment to all stipulated rules.

3. Unconditional commitment to cooperate with regulatory authorities on professional grounds and assist members of the Board of Directors in the superior performance of their commitments in this regard.

85

Internal Auditing

Three levels of auditing :There are three levels of internal auditing , the first is on directors level , the second is on executive management level and the third is on employees level (supportive one):

1. Audit Committee

2. Internal Audit Group

3. Inspection and Internal Control Department

86

Internal Audit Group

• Bank’s internal auditing under the central bank laws is a must . Thus Ahli bank follows strict procedures and regulations to do so. The Internal audit departement- which reports to the audit committee- ensures compliance with the laws, regulations and procedures in the country under the CEO but not the CEO himself as he must be audited by the BOD.(Annual report 2012, and Corporate governance for al Ahli Bank)

• Throughout the year of 2012, the Group implemented its operational plan, which was based on the established strategic plan approved by the Internal Audit Group of the Board of Directors. This was carried out in light of ongoing reviews of the audit plan and performance assessment results related to the Bank’s different branches, departments and groups.(Annual report 2012)

87

Internal Audit Group

• The Group gave its utmost attention to the implementation of regulatory authorities’ instructions and directives. Also, the Group completed its mission to further develop the skills of its staff members and employees, enrolling them in training courses in accordance to the development plan, and qualifying them to attain professional certifications in the field of internal auditing.(Annual report 2012)

• The Group began implementing the final stage of the TeamMate project. In addition, the Group, in coordination with the Human Resources Group – Training and Development Department – began holding training courses for Bank employees focused on combating money laundry and terrorism financing. The training courses were hosted by auditors who specialize in the aforementioned fields. (Annual report 2012)

88

Inspection and Internal Control

Department

• In 2012, Inspection and Internal Control processes were improved in all Bank departments and groups. The work of the Analysis and Research Department came into effect, as did the implementation of planned programs and follow-up audits of the Bank’s employees. (Annual report 2012)

• The Department has worked to improve and develop the branches’ monthly audit reports and their corresponding auditing assessment to better suit each branch according to its volume of work. (Annual report 2012)

89

Comparison

90

Central bank corporate

governance code

Ahli Bank Corporate governance

code


recommendation

The Board is required to approve the

strategy, and the business plans,

and the Board ensures that

performance against plan is

reviewed and that corrective action

is taken as needed. The Bank’s

budgeting process is part of the

short-term planning and

performance measurement.

The Board shall endorse the devised

strategy and plans of action,

and then ensure that Executive

Management monitors the results

achieved accordingly, taking

corrective measures where necessary. The

preparation of the budget shall be

considered part of the

short-term planning and performance

evaluation process.

Partially complied , according to

CB it’s the board responsibility to

monitor performance throught

management but in ahli corporate

code the responsibility is on the

management

complied with banking law article

21 , we recommend to adjust the

code to sharing responsibilities of

monitoring performance,

The Board ensures that the Bank

maintains a high degree of integrity

in its operations. Formal policies,

including a Code of Conduct, and

definitions and controls on conflicts

of interest and insider dealing, have

been established and are required

to be assented to by all employees

and Directors, and these have been

published.

The Board must ensure that the Bank

operates with the utmost integrity. To

achieve this, the Bank

will provide a guide to its policies as well

as a Code of Ethics, which includes the

Bank’s definition

of a conflict of interest. The Charter also

includes the definition of transactions

undertaken by

Bank employees for their own personal

benefit, which are based upon insider

information received

through the access granted to them by the

Bank. These policies and the Code of

Ethics apply to all

Bank employees and Board members.

Board members must approve said

documents, as well as their

dissemination to the public.

complied

we recommend to assure that the

code of conduct and other internal

by law have no conflict in defining

control and it must be announced

to all employees

Code Of Conduct, planning and bank procedures

Comparison

91


governance code


code


recommendation

Rules and procedures for related

party transactions between the Bank

and its employees or Directors or

their companies, or other related

parties, including lending and share

trading transactions must be clear.

Rules and regulations governing

operations with related parties, whether

between the Bank and

its employees, members of its Board or

their companies, or related parties,

including those involved in

mutual lending or trading transactions

with the Bank.

complied

This is one of the responsibilities

of Method and Procedure

Documentation Department

bank loans extended to Directors

and their companies are made at

market rates and not on preferential

terms and the Directors involved in

any such transaction do not

participate in discussions, nor vote,

on it. Related party transactions are

subject to individual approval by

those Directors of the Bank who are

unrelated to the transaction, and

they are disclosed in the Annual

Report. The Bank’s internal controls

ensure that all related party

transactions are handled in

accordance with this policy.

These rules must include provisions

ensuring

that Board members and their companies

are granted a level of credit in

accordance with prevailing

market rates; they shall not receive any

preferential treatment or participate in

any meeting in which

their personal transactions or dealings

are discussed or come to a vote.

Furthermore, Board members’

personal Bank transactions shall be

disclosed in the Bank’s Annual Report.

Bank departments

concerned with control systems and

internal inspections must ensure that all

stakeholder procedures

are conducted according to this policy.

Complied but.

They tried to make a preferntial

treatment to the 30th largest

investors once by issuing shares

only to them but the ASE refused

that and insist that it must be

published to all shareholders. This

gives a bad indecatores of how the

management is dealing with its

shareholders.

Complied with Article 21,e in

banking law


Comparison

92


governance code


code


recommendation

Clear controls preventing Directors

or employees benefiting from the

use of insider information have

been put in place.

Clear audit systems in place prohibiting

the Board and Bank employees from

exploiting insider

information for their own personal

benefit

Complied but. for the usual empolyees the

information systems are

controlled but for the executive

management audit comitte should

be responsble to make the use of

these informations by management

used ethically , Complied with

Article 21,e in banking law

The Bank has written policies

covering all significant bank

activities. Such policies are

regularly reviewed to ensure that

they conform to any changes in laws

and regulations, the economic

environment and other

circumstances affecting the Bank

The Bank must possess written policies

that cover all of its banking activities,

which must be

circulated to employees of all

administrative levels. These policies must

be regularly revised to

include any amendments or changes to

rules, regulations, economic conditions

and any other Bankrelated

issues.

complied

this is one of the responsibilities

of Audit deparetment at all levels +

Procedure Documentation

Department

The Bank as part of its lending and

credit approval process assesses

the quality of corporate governance

in its corporate borrowers,

especially public shareholding

companies, and includes the

strength or weakness of their

corporate governance practice in

the borrower’s risk assessment, and

where appropriate the Bank rewards

those borrowers who exhibit good

governance practices.

N/A NA its not regulated by the bank , this

gives a bad indecation of how well

the corporate governance code is

been implemented in jordan in

general


Comparison

93


governance code


code


recommendation

The Bank’s structure of internal

controls is reviewed at least once a

year by internal and external

auditors.

The Bank’s Inspection and Internal

Control systems’ organizational structure

shall be reviewed by the

internal auditor and external auditor at

least once per year.

complied

For the external auditor its clear in

their independent report that this

is done . For the internal control

the upper levels of the audit

departement is responsible and on

a continuous bases is doing so , a

proof of this is the declaration of

improvement on the annual report

published annually

statement of executive

management’s responsibility for

establishing and maintaining

adequate internal control over

financial reporting for the Bank

The annual report should include a

passage describing Executive

Management’s responsibility to establish

and maintain an Inspection

and Internal Control system on the Bank’s

financial reporting.

complied

By the new regulations of central

bank of jordan , the financial

statements are been audited by

several internal and external

parties

a statement identifying the

framework used by executive

management to evaluate the

effectiveness of internal control

The annual report should include a

passage outlining the basis upon which

Executive Management assesses the

effectiveness of the

Inspection and Internal Control system.

Complied but.

according to the Central bank

request the framework is clear but

according to the Ahli bank

governance code this must be

clearly written in the annual report

which is not the case

executive management’s assessment

of the effectiveness of internal

control as of the date of the

financial statements included in the

Annual Report

Executive Management’s assessment of

the effectiveness of the Inspection and

Internal Control

system as is, on the date that appears on

financial statements included in the

Bank’s Annual Report.

Complied but.

according to the Central bank

request the framework is clear but

according to the Ahli bank

governance code this must be

clearly written in the annual report

which is not the case


Comparison

94


governance code


code


recommendation

disclosure of any material

weaknesses in the internal controls

(a material weakness is a

significant deficiency or

combination of significant

deficiencies that result in the

possibility that a material

misstatement will not be prevented

or detected)

The disclosure of any material

weaknesses in the Inspection and

Internal Control systems (a material

weakness is defined as any clear point of

weakness or group of weaknesses that

could potentially

result in the inability to prevent the

creation or detection of a false,

significant financial statement).

Complied but.

External auditor mentioned all

weeknesses or diffecincies in

independent Audit report, but the

management does not mention it in

the annual report

a statement that the Bank’s external

auditor has issued an attestation

report on executive management’s

assessment of the effectiveness of

internal controls.

The External Auditor’s report, in which

he/she expresses his/her opinion on the

Executive

Management’s assessment of the

effectiveness of the Inspection and

Internal Control system.

Complied

the external audit report explain

deeply all issues related to the

internal control and also the risks

of not implementing new

regulations by IFRS as an example

The Bank has set up arrangements

whereby staff can confidentially

raise concerns about possible

irregularities, and that allow for

such concerns to be independently

investigated and followed up. Such

arrangements are overseen and

monitored by the Audit Committee

The Bank shall establish procedures that

allow staff to submit immediate,

confidential reports

in the case of concerns regarding

potential irregularities. These procedures

shall allow for an

independent investigation and follow-up

of these concerns. The Audit Committee

shall oversee the

implementation of these procedures.

Complied but.

a weakness in both Codes , its not

clear who will see this possible

irregularities and how the staff

will be protected in case of the

presence of the fraud,

another weekness in the Bank Code

is because they use the word

Potential not possible , which

minimize the importance of the

whisle blowing technique


Comparison

95


governance code


code


recommendation

The Bank’s policy is that the Internal

Audit function of the Bank should be

adequately resourced, trained,

remunerated, and be provided full

access to Bank records and staff

members, and given sufficient

standing and authority within the

Bank to adequately carry out its

task. The functions, powers and

responsibilities of Internal Audit are

documented within the Internal

Audit Charter which is approved by

the Board and published within the

Bank.

The Bank shall provide the Internal Audit

Group with a sufficient cadre of qualified

human resources

who will be trained and compensated

appropriately. The Internal Audit Group

has the right to obtain

any information and to contact any

employee within the Bank, and is also

granted the authority

necessary to perform the duties assigned

to it in the required manner.

Complied

According to banking law , CB has

must do inspection for the internal

environment whenever it wants

articles 70 and 71

The Internal Audit function reports

primarily to the Chairman of the

Audit Committee

The Internal Audit Group shall submit its

reports to the chairman of the Audit

Committee.

CompliedIts clear by the organizational

structure

To promote independence, internal

audit staff do not also have

operational responsibilities.

Internal audit is responsible for

proposing the structure and scope

of the audit schedule, and any

potential conflicts of interest are to

be reported to the Audit Committee.

Internal auditing employees may not be

assigned any executive responsibilities.

The Internal Audit

Group is responsible for proposing the

structure and scope of an internal audit,

and must also inform

the Audit Committee of the presence of

any potential conflicts of interest.

Conflict

According to Ahli bank its not a

necessity to hold just the Audit

duties. The question is how could

you audit a department which you

are responsible for in the first

place ? The

Code of the bank must be adjusted

. however in reality its according

to the Central bank code

Internal audit

Comparison

96


governance code


code


recommendation

The Internal Audit reports may be

discussed with the departments and

operational units being reviewed,

but the Internal Audit function is

allowed to operate and make a full

and honest report without outside

influence or interference

The Internal Audit Group shall perform its

duties and prepare its report in full with

no external

interference. The Group has the right to

discuss its report with the departments

that were audited.

Complied but.No informatin available to make

sure that this is the case

(1) the Bank’s financial reporting

(ensuring that significant financial,

managerial, and operating

information are accurate, reliable ,

and timely).

The Bank’s financial reporting operations

(ensuring the accuracy, reliability and

timeliness of key

information regarding financial,

executive and procedural issues).

Complied but.

one case was detected by the ASE

that some informations was not

declared by the management

financial reporting. another thing

to be added is that the bank is

requered to submit the financial

statement on a quarterly basis.

(2) compliance with internal

policies, international standards,

procedures, and applicable laws

and regulations;

Compliance with the Bank’s internal

policies and standards, as well as

international procedures, laws

and related regulations.

Complied but.

Weakness, Due to the variance of

the international laws , this must

be specified .

Internal audit

The primary responsibility of the Internal Audit function, conducting risk focussed audits, is at least the review of:

Conclusion and recommendation

• Its obvious that the bank is following the governance code of conduct of Central bank but giving more focus on the area where the banking law had clear regulations .CB must follow and check all points in the corporate governance code published by it more strictly which is not the case at this time(its still clear that the corporate governance code is a second degree regulations (Own analysis )

97

External Auditors

• The external auditors for Ahli bank is Deloitte & Touché (M. E.), on an annually basis and according to the Central bank laws, Deloitte do an independent Auditor’s report.

• In this report the auditors should clearly show the adequacy of the financial statements , procedures and commitment to laws of al Ahli Bank. They become responsible about their report once its stamped and announced . they have to conduct their audit in accordance with International Standards on Auditing. Those standards require that they comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. The procedures selected MUST depend on the their judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. (Central bank governance code , Audit report 2012)

98

External Auditors

• The Audit report must also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.(Central bank governance code , Audit report 2012)

• On their Audit report the statement of “In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Jordan Ahli Bank as of December 31, 2012, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards.” Make them share the responsibility of how adequate the financial statements are, with the board of directors and the executive management .this must be clearly mentioned in the audit report under the Central bank corporate governance law for banking in Jordan. (Central bank governance code , Audit report 2012)

• According to the financial statement submitted by Ahli Bank and the audit report for the year ended 31. Dec. 2012 , the compliance was 100 % met.

99

External Auditors

• The Auditing procedures starts with assuring that AHLI bank is following the standards issued by the International Accounting Standards Board (IASB), the prevailing rules of the countries where the Bank operates and the instructions of the Central Bank of Jordan

100

Comparison

101


governance code


code


recommendation

The Bank requires the regular

rotation of the external audit

between auditing firms. Should this

no longer be practical, then the Bank

will at a minimum require the

regular rotation of the principal

partner in charge of the external

audit.

The position of external auditor shall be

rotated regularly among audit firms. If

this policy becomes difficult to apply in

practice, the Bank shall request the

regular rotation of the principal partner

responsible for the external audit of the

Bank.

Complied but.

its very important to rotate at least

of principal partner and this must

be monitored by Central bank , in

the banking law they must prepare

a list of external auditors and to

choose one but nothing was

mentioned about if the rotation is

a must

The external auditors’ report is

submitted to the Audit Committee as

well as the Annual General

Assembly. The external auditors

meet the Audit Committee, without

executive management present, at

least once per year.

The external auditor shall provide the

Audit Committee with a copy of his/her

report. The external

auditor shall meet with the Audit

Committee in the absence of Executive

Management at least once

per year.

Complied

Strict regulations are mentioned in

the banking law article 61

External audit


• Its clear that the external auditors (Deloitte & Touché) is doing a clear job , their independent reports had covered all items related to the bank in very good and responsible way .but a question to be answered is (if Deloitte & Touché is the external auditors for Ahli bank, Arab bank, Jordan Kuwait bank and central bank ) who will control them and who will guarantee that no information will be used by individuals of Deloitte & Touché to serve their own interest (own analysis )

102

Risk Management &

Compliance

103

Risk Management and compliance

• There are three level of risk management , the first one is the risk committee at directors level , the second one is the risk management of executive management and the third on which is at operational level is the risk management and compliance department

• Risk management committee

• Risk management at executive level

• Risk management and compliance group

104

Risk management at executive level

• The main responsibilities of this department are to direct the risk management and compliance department toward the right procedures of identifying and managing risks and monitoring the mitigations in another hand .

105

Risk management and compliance group

• The Bank’s risk management conducts its activities (identification, measurement, management, monitoring and controlling) through applying the best international practices in connection with risk management, administrative organization and risk management tools in accordance with the size of the Bank, its activities and types of risks it is exposed to. (Independent Audit Report 2012)

• The Risk Management Group carried out a number of steps during 2012 contributing to the strengthening of the Bank’s risk management processes and procedures in a manner consistent with the directives set by the Central Bank of Jordan as follows:

The Group prepared a study on the impact of Basel III curricula applications and requirements, which were recently issued by the Basel Committee on financial supervision.(Annual report 2012)

In line with the Central Bank of Jordan directives and taking into consideration the changing economic circumstances, amendments were made to the Bank’s investment policy, while a model for calculating “Value at Risk” VAR was further developed for analytical purposes. .(Annual report 2012)

The Group performed a comprehensive review of work procedures related to the Compliance and the Anti-Money Laundry policies in the Palestine branches. .(Annual report 2012)

106

Customers’ risk classifications were reviewed from a compliance perspective based on a theoretical framework and methodology, in preparation for an electronic application once the system becomes operational. .(Annual report 2012)

A guide detailing work procedures and policies related to the currently used Moody’s risk classification system was prepared. .(Annual report 2012)

Work procedures regarding credit management and documentation were further developed and upgraded at the Cyprus branch. .(Annual report 2012)

107

Risk types

A: Credit Risk

Bank Credit risk management policy includes the following:

• Specifying credit ceilings and concentrationsThe credit policy includes specific and clear ratios for the maximum credit that can be granted to a customer. Moreover, there are different credit ceilings for each administrative level.

• Determining the risk mitigation methods through

Collaterals and their convertibility to cash and coverage of the credit granted. Preapproval of the credit facilities committee on the extension of credit. Credit approval authority varies from one management level to another based on

the customer’s portfolio size, maturity and customer’s risk degree.

• Mitigating the assets and liabilities concentration risk

• Studying, monitoring and following up on credit

108

Risk types

B: Market Risk

• Interest rate Risk : Interest rate risk results from the potential change in interest rates and, consequently, the potential impact on the fair value of the financial instruments. The Bank is exposed to the risk of interest rates due to a mismatch or a gap in the amounts of assets and liabilities according to the various time limits or review of interest rates in a certain period. (Independent Audit Report 2012)

• Currencies Risk The currencies’ positions are monitored daily to ensure that they are within the determined limits. (Independent Audit Report 2012)

• Foreign Currency Risks Within its approved investment policy, the Bank’s Board of Directors sets up limits for the positions of all currencies at the Bank. These positions are monitored daily through the Treasury and Investment Department and are submitted to the executive management to ensure that the maintenance of the currencies’ positions are within the approved limits. Moreover, the Bank follows the hedging policy to mitigate the risks of foreign currencies by using financial derivatives. (Independent Audit Report 2012)

109

Risk types

• Risks of Changes in Share Prices This represents the risk resulting from the decline in the fair value of the investment portfolio of the shares due to the changes in the value of the shares’ indicators and the change in the value of shares individually (Independent Audit Report 2012)

• Share Price Risk The Board of Directors adopts a specific policy in diversifying investments of the shares based on geographic and sectorial distribution at predetermined percentages that are monitored daily.

• Interest Re-pricing Gap The Bank adopts the policy of matching the amounts and maturities of assets and liabilities to narrow gaps through dividing assets and liabilities into several categories with different durations or interest rate review maturities, whichever are nearer.

110

Risk types

C: Liquidity Risks:

• Liquidity risk represents the Bank’s inability to make available the necessary funding to fulfill its obligations on their maturities. To protect the Bank against these risks, the management diversifies funding sources, manages assets and liabilities, matches their maturities and maintains an adequate balance of cash and cash equivalents and marketable securities.

111

Comparison

112


governance code


code


recommendation

(1) the analysis of all risks

including credit risk, market risk,

l iquidity risk and operational risk;

Analyzing all risks, whether they be credit

risks, market risks, l iquidity risks or

operational risks.

Developing methodologies for the

measurement and control of each type of

risk.

Complied its done by the group and then

reviewed by the external audit

(2) the development of

methodologies for the measurement

and control of each risk;

Developing methodologies for the

measurement and control of each type of

risk.

Complied its done by the group and then

reviewed by the external audit

(3) recommending limits to Risk

management committee, and the

approval, reporting and recording of

exceptions to policy;

Providing recommendations to the Risk

Management Committee on appropriate

risk l imits and

approvals, while submitting reports and

documenting exceptions to risk

management policies

Complied the structure of Ahli bank by

creating 3 levels of risk

management is reflecting the

request of the C.B.

(4) the provision of information on

risk metrics and on the Bank’s risk

profile to Senior management and to

the Board (the Board reviews the

risk statistics of the Bank, both

qualitative and quantitative, at each

regular Board meeting);

Providing the Board and senior Executive

Management with information on the

Bank’s risk

measurement and its risk profile. (The

Board shall, at every meeting, regularly

review the Bank’s

quality and quantity of risk statistics).

Complied No informatin available to make


The responsibilities of the Bank’s risk management department include:

Risk Management

Comparison

113


governance code


code


recommendation

(5) the provision of risk information

for use in the Bank’s public

statements and reporting.

Providing information on the Bank’s risks

to be disclosed or published for the

public

Complied Available in the annual report

(independent audit report )

The functions of the risk

management department are

assisted by a network of properly

constituted, authorised, and

documented committees such as

credit committees, assets and

liabilities/treasury committees, and

operational risk committees.

The Bank’s other committees, such as the

Credit Committee, Assets and Liabilities

Management

Committee/Treasury and the Operational

Risk Committee will assist the Risk

Management Group in

the performance of its duties, according

to the authority granted to each

committee

Complied the structure of Ahli bank by

creating 3 levels of risk

management is reflecting the

request of the C.B.

The structure, operation, and

ongoing development of the Bank’s

risk management department and

functions are discussed and

explained in the Bank’s public

documents, primarily in the Annual

Report.

The Bank’s Annual Report will include

information on the Risk Management

Group regarding its

structure, nature of operations and its

latest developments.

Complied Based on the annual report (

Independent audit report )

The responsibilities of the Bank’s risk management department include:

Risk Management

Comparison

114


governance code


code


recommendation

The Bank’s policy is that it has an

independent compliance function

which is adequately resourced,

trained and remunerated, in

accordance with the Central Bank’s

instructions in this regard

An independent Compliance Department

shall be established in accordance with

the relevant

Central Bank of Jordan directives.

Complied but . According to the structure Risk and

complince are in the same

departement as they are very

correlated

The compliance function establishes

effective mechanisms to ensure that

the Bank complies with all

applicable laws and regulations,

and any non-statutory guidelines

and codes. The functions, powers

and responsibilities of the

compliance function are

documented and published within

the Bank

The Compliance Department will prepare

an effective methodology to ensure that

the Bank is

in compliance with all valid laws and

legislation, as well as any other relevant

directives. The Bank

will document the duties, authorities and

responsibilities of the Compliance

Department, and then

circulate said document within the Bank

Complied The responsibility is shared by

both compliance departement and

Method and Procedure

Documentation Department

The compliance function is

responsible for developing the

compliance policy of the Bank and

ensuring its implementation

throughout the Bank. The Board is

responsible for approving the

compliance policy and overseeing

its implementation.

The Board will adopt and monitor the

compliance policy. The Compliance

Department will be

responsible for its preparation,

development and application at the Bank.

Complied Internal audit is also responsible

to ensure the implementation of

the compliance policies

complied with the banking law

article 26

Compliance

Comparison

115


governance code


code


recommendation

The compliance function reports on

operational compliance within the

Bank to the Chairman or a

committee of the Board, copying the

General Manager on each report, in

accordance with the Central Bank’s

instructions in this regard

The Compliance Department shall report

on the outcome of its operations and its

monitoring of

compliance to the Board or its offshoot

committee. A copy will be sent to

Executive Management, in

accordance with the relevant directives of

the Central Bank of Jordan.

Complied No informatin available to make


Compliance


• The bank is giving this part a huge importance because its affect directly the presence of the bank , the structure of the bank is helping a lot in managing all levels of risks.

116

A clear evidence of the importance of Audit, risk and compliance is clear in the efforts of HR department courses

117

Disclosure

118

Bank Disclosure Mechanism

• Ahli Bank committees to Amman Stock Exchange disclosures policy and regulations to regulate disclosures information and follow up on the implementation of the policy in accordance with the requirements of the regulatory authorities. Ahli Bank provides shareholders and investors with accurate, clear and timely disclosure information in accordance with the requirements of the supervisory authorities, in a manner that would enable them to take their decisions accurately. This includes disclosures related to:

1: Periodic reports:A: Preliminary reports:– Ahli Bank should publish its preliminary information after finishing the auditor its preliminary

revision and within 45 days form the end of the fiscal year and provide ASE with the reports, the reports should include:

– Gross profits.– EBIT.– Income taxes.– Minority interest in earnings– Net profits.– Comparison with the last year.– Brief Bank achievements.

119


B: Annual reports:

– BOD should deliver the annual report within no more than 3 months to ASE from the end of the fiscal year and it should include the below:

– Chairman’s Letter• BOD reports which includes:• Description for Bank activities and its geographic presence, the

capital employed and number of employees.• Description of subsidiaries and their activities. • Description of the BOD members and top executives.• List of large shareholders and their owned shares.• Competitive position in the industry and market share.• Dependency level on customers/suppliers if it poses 10% or more

of sales/purchases in relative the past year.• Bank’s hierarchy, employee’s number and their qualifications and

their training programs. • Bank’s achievements supports by evidences.• Financial effects resulted from operations that are not related

directly to the Bank’s core business.120


• The net profit/net loss and distributed dividends of the last 5 years.

• Next year strategic plan along with any important expansions.

• External auditing firm’s name and paid fees and any other fees paid for the external auditor and why.

• Outstanding shares owned by BOD or top executives or their relatives or companies that have authority of them relative to the last year.

• Compensations paid for BOD or top executives which includes salaries, bonuses and travel expenses inside or outside the kingdom.

• Risk management report.

• Social corporate responsibility report.

• Charity initiatives.

121


– Audited financial statements compared to the last year statements that includes:

• Balance sheet.

• Net profits/loss.

• Cash flows.

• Changes in equity rights.

• External auditors report.

• BOD’s pledge that there is no major concerns that may threaten the sustainability of the Bank.

• BOD’s pledge of its responsibility of the provided information in the financial statements and its guarantee of the proper monitoring tools.

122


C:Semiannual reports:

Ahli Bank should provide semiannual reports within one month period of the end of the fiscal period and comparison with the last period which includes:

– Balance sheet.

– Net profits/loss.

– Cash flows.

– Changes in equity rights.

– Internal auditing report claiming that all information had been revised according to the accredited accounting principles.

– Description of the achievements for the current period and comparison with the already planned achievements.

123


D: Quarterly reports:

Ahli Bank should provide quarterly reports within one month period of the end of the fiscal period and comparison with the last period which includes:

– Balance sheet.

– Net profits/loss.

– Cash flows.

– Changes in equity rights.

– Internal auditing report claiming that all information had been revised according to the accredited accounting principles.

124


2. Ahli Bank should inform ASE without any delay and issue a public statement about any changes of the below within one week:

• Any new designation or resignation in the BOD or top management.

• Any changes in the issued bonds, stocks and issued loans.

• Bank’s assets, short term/long term liabilities, capitalization, credit’s rating and equity changes.

• Deals agreed on or cancelled and their effect on Bank’s profitability.

• Disasters that have effect on Bank’s profitability.

• Sudden losses and their effect on Bank’s profitability.

125


• Important BOD decisions that may affect shares prices which include:– Issue new shares.– Changes in capital investment or changes in Bank purposes.– Mergers or acquisitions.– Dividends.– Liquidation.

• BOD decisions.• Call for irregular BOD meeting.• New BOD formation or current BOD members/top executive

resignation.• Quitting the business.• Legal claims.

126


• As it appears from ASE website, Ahli Bank is committed to all of the aforementioned terms and conditions but Ahli Bank’s website contains only limited quantity of the published reports.

• The Board accepts responsibility for the Bank’s financial statements and the contents of the Annual Report, for their accuracy, and for their completeness.

• In Comparison with another bank in terms of disclosures mechanism, they are all complied with ASE terms as they are susceptible to be punished if not, and ASE site list all companies that didn’t send their disclosure in a timely fashion manner.

• Regular meetings between senior executives of the Bank and investors and shareholders

• Reports are not available in both Arabic and English, it’s either or• ‘Management Discussion and Analysis’ (MD&A) disclosure that allows investors to

understand current and future operating results and the financial condition of the Bank, including the possible impacts of known trends and events and uncertainties.

127


• Jordan Securities Commission Requirements as in the annual report• Description of Bank’s Main Activities• Location of Branches• Capital Investment Volume• Brief introduction of the members of the Jordan Ahli Bank Board of Directors• Brief introduction to the members of the Jordan Ahli Bank Senior Executive

Management• Major Shareholders, owning 5% or more of Jordan Ahli Bank’s Capital• Competition and Ranking:• The Jordan Ahli Bank ranks fourth in terms of capital and net credit facilities, and

fifth in terms of shareholders’ equity; it is currently ranked third regarding total assets and deposits. The Bank operates in Jordan, Lebanon, Palestine, and Cyprus, and enjoys an excellent market share in each of the aforementioned locations.

• There are no specific suppliers or primary clients, internally or externally, which form 10% of the Bank’s purchases or revenues

• Neither Jordan Ahli Bank nor any of its products enjoy any government protection or privilege pursuant to laws, regulations or any other means

128

Comparison

129

Report Type Required Information Comply or Not

- Gross profits.

- EBIT.

- Income taxes.

- Minority interest in earnings

- Net profits.

- Comparison with the last year.

- Brief Bank achievements

- Bank activities and its geographic presence

- Description of subsidiaries and their activities.

- BOD members and top executives

- Large shareholders and their owned shares

- Competitive position and market share

- Dependency level

- Bank’s hierarchy, employees number and there qualification

- Bank’s achievements

- Financial effects resulted from operations that are not related directly to the Bank’s core

business

- The net profit/net loss and distributed dividends for the last 5 years

- Next year strategic plan

- External auditing firm’s name and paid fees

- Outstanding shares owned by BOD or top executives or their relatives

- Compensations paid for BOD or top executives

- Risk management report.

- CSR report

- Risk management report.

- Audited financial statements compared to last year

- External auditors report

- BOD’s pledge

- BOD’s pledge of its responsibility of the provided information

Preliminary reports Yes

Annual reports Yes

Comparison

130

Report Type Required Information Comply or Not- Balance sheet

- Net profits/loss

- Cash flows

- Changes in equity rights

- Internal auditing report

- Description of the achievements for the current period

- Balance sheet

- Net profits/loss

- Cash flows

- Changes in equity rights

- Internal auditing report

- Any new designation or resignation in the BOD or top management.

- Any changes in the issued bonds, stocks and issued loans

- Bank’s assets, short term/long term liabilities, capitalization, credit’s rating and equity

changes

- Deals agreed on or cancelled and their effect on Bank’s profitability.

- Disasters that have effect on Bank’s profitability

- Sudden losses and their effect on Bank’s profitability

- Important BOD decisions that may affect shares prices

- BOD decisions

- Call for irregular BOD meeting

- New BOD formation or current BOD members/top executive resignation.

- Quitting the business

- Legal claims

Quarterly reports Yes

Changes Yes

Semiannual reports Yes

Bank’s Subsidiary

Companies

131

Bank’s Subsidiary Companies

• The accompanying consolidated financial statements include the financial statements of the Bank’s branches in Jordan and abroad and the following subsidiary companies under its control. Moreover, control is achieved when the Bank has the ability to control the financial and operating policies of the subsidiary companies to obtain benefits from their activities. Additionally, transactions, balances, revenues, and expenses between the Bank and its subsidiaries are eliminated. Transactions in transit are shown under “other assets” or “other liabilities” in the consolidated statement of financial position.

132


• The Bank’s subsidiary companies are as follows:

133

Subsidiary Name Location Capital Activities Assets Liabilitie

s

Revenu

es

Expens

es

14,015,390

Ahli owns 97.89%

800,000

whole- owned

3,500,000

whole- owned

15,000,000

whole- owned

10,000,000

whole- owned

2,259,786 868,555Ahli Financial Leasing Company Jordan Leasing 26,732,217 13,465,016

2,481,397 1,977,121

Ahli Financial Brokerage Company Jordan Brokerage 17,138,850 3,903,428 745,364 4,157,760

Ahli Micro Finance Company JordanGrant loans to limited

income individuals8,018,716 2,374,757

514,319,068 472,844,361 12,130,299 9,568,028

Zarqa National College Company Jordan Education 1,163,374 110,376 561,341 461,018

A- Ahli International Bank Lebanon Financial Services


• - The financial statements of the subsidiary companies are prepared for the same financial year using the same accounting policies adopted by the Bank. If the accounting policies adopted by the companies are different from those used by the Bank, the necessary adjustments to the financial statements of the subsidiary companies are made to comply with the accounting policies followed by the Bank.

• - The results of the subsidiaries are incorporated into the consolidated statement of income from the effective date of acquisition, which is the date on which actual control over the subsidiaries is assumed by the Bank. Moreover, the operating results of the disposed subsidiaries are incorporated

134

Corporate Culture

135

Corporate Social

Responsibility

136

ahli bank

Documents

banks business

banks strategy

major global banks

jordan national bank

external audits of banks

banking business

thecentral bank of jordan

banks risk toleranceappetite