Board Members’ Succession Plan

1157 Text / Section 2 / No. 142 / Series 31 - Date 12/31/2017

Basic Circular for Banks No. 142

We enclose a copy of Basic Decision No. 12689 dated October 5, 2017, concerning the Board Members Succession Plan (Board Members Succession Plan).

Beirut, October 5, 2017 Governor of Bank Lebanon Riad Tawfiq Salam

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Basic Decision No. 12689 Board Members Succession Plan for Banks (Board Members Succession Plan)

The Governor of Bank Lebanon, based on the Monetary and Loan Law, particularly Articles 70 and 174 thereof, based on Basic Decision No. 9382 dated July 26, 2006, and its amendments concerning Corporate Governance (Corporate Governance), and based on the decision of the Central Council of Bank Lebanon taken in its meeting held on October 4, 2017, hereby decides as follows:

Article 1: The board of directors of each Lebanese bank shall approve a plan based on which the new chairman and members of the board are proposed to the General Assembly, upon expiration of their term or vacancy of a board member's position, called the "Board Members Succession Plan" (Board Members Succession Plan). This plan shall be prepared in accordance with the bank's future strategy and directions, taking into account:

1. The board's structure and culture (Board Culture) regarding the availability of appropriate skills, expertise, and qualities among members.
2. The competencies and skills that the board as a whole must possess.
3. The competencies currently held by existing board members and the required competencies, organized in alignment with the bank's strategic direction.

1159 Text / Section 2 / No. 142 / Series 31 - Date 12/31/2017 4. The competencies and skills of each member individually and their contribution to the board as a whole, which shall include both:

• A. Technical competencies, expertise, and skills (skills in accounting and auditing, financial management skills, experience in the banking sector and strategic planning, knowledge of risk management and good governance, familiarity with laws and regulations...).
• B. Personal qualities and abilities (ability to work effectively within a team, effective communication skills, availability and commitment to attending meetings, honesty, integrity, loyalty, and other high ethical standards...).

5. The member's personality and alignment with the board's culture.
6. The added value of the new member to the board.

Article 2: The board of directors shall identify the non-available competencies among its members (Competence Gaps) and subsequently seek to find the required competencies and propose them to the General Assembly.

Article 3: The board of each Lebanese bank shall specify in the aforementioned plan the maximum term that any independent member may hold on the board of directors, taking into account the importance of electing and adding new members to the board.

Article 4: The aforementioned plan shall be reviewed annually by the board of directors to ensure its alignment with the bank's strategy and operational development.

Article 5: All Lebanese banks shall provide the Banking Supervision Committee with a copy of the aforementioned plan upon its approval and any amendments thereto immediately upon occurrence.

Article 6: Banks are granted a maximum period of one year from the date of issuance of this decision to comply with its provisions.

1160 Article 7: This decision shall take effect upon its issuance.

Article 8: This decision shall be published in the Official Gazette.

Beirut, October 5, 2017 Governor of Bank Lebanon Riad Tawfiq Salam