Instruction No. 64/DGSIF/DSB on Corporate Governance Principles in Credit Institutions

P.O. Box No. 692 - Conakry - Telephone: (+224) 30 412651 - Telefax: (+224) 30 414898 - Telex: 22 225 BAREG - GE

Article 2: For the purposes of this instruction, the following terms are defined:

I. DEFINITIONS

Article 1: This instruction aims to clarify the implementation procedures of Law L/2013/060/CNT of August 12, 2013, on banking regulation, as well as the provisions of the Uniform Act on Commercial Company Law and Economic Interest Grouping of the OHADA Treaty, hereinafter referred to as the Uniform Act, regarding corporate governance principles as defined in this article.

It establishes provisions applicable to the following points:
I. Definitions
II. Role of the General Meeting
III. Role of the Board of Directors
IV. Role of the General Management
V. Risk Management
VI. Parent Company and Subsidiary Relations
VII. Ethics and Conflict of Interest Management
VIII. Final Provisions

DECIDES

Having regard to Law L/2014/016/AN of July 2, 2014, establishing the statutes of the Central Bank of the Republic of Guinea; Having regard to Law L/2013/060/CNT of August 12, 2013, on banking regulation; Having regard to Decree D/2010/010/PRG/SGG of December 27, 2010, appointing the Governor of the Central Bank of the Republic of Guinea; Having regard to Instruction No. 002/DGSIF/DSB of December 2, 2013, on the internal control framework for credit institutions;

THE GOVERNOR
CENTRAL BANK INSTRUCTION No. 64/DGSIF/DSB of [Date] RELATIVE TO CORPORATE GOVERNANCE PRINCIPLES WITHIN CREDIT INSTITUTIONS REPUBLIC OF GUINEA Conakry, [Date]

Article 7: The Board of Directors must facilitate shareholder participation in general meetings and ensure the interests of minority shareholders are taken into account.
When the credit institution possesses subsidiaries or holdings, or controls other companies, the management report must contain the same information regarding them.

Article 6: The notice of convocation to the General Meeting must include the sending, or making available upon request, of the management report and resolution proposals supported by sufficiently clear, precise, and detailed explanations. The notice of convocation must be brought to the attention of shareholders at least 15 days before the holding of the General Meeting.
They must ensure access to information on the credit institution's operations according to legal prescriptions and statutory provisions, particularly during annual general meetings.

Article 5: The annual management report of the Board of Directors to the General Meeting, provided for in Article 452 of the Uniform Act, is a mandatory document that must contain all useful information elements enabling shareholders to assess the company's activity during the past fiscal year, the operations carried out, difficulties encountered, results obtained, formation of distributable results, proposal for allocation of said results, the financial situation of the credit institution, and its future prospects. It must be supplemented by clear information on the adopted strategy, risks incurred, and the nature and results of controls conducted.

Article 4: The Board of Directors and General Management must guarantee good organization of the practical modalities for exercising shareholders' right to information and voting rights. They guarantee the sincerity and quality of information provided to shareholders.

Article 3: The General Meeting of shareholders must have access to complete, precise, and sincere information enabling it to exercise the powers conferred by law, particularly regarding the nomination and determination of remuneration of directors and statutory auditors, adoption of consolidated financial and prudential statements, approval of regulated agreements, and amendment of the statutes.

II. ROLE OF THE GENERAL MEETING

• corporate governance: the set of principles and modalities for the administration, direction, and management of the enterprise;
• risk acceptance level: the overall risk the Board of Directors is willing to assume to achieve the bank's objectives. It can be defined by quantitative and qualitative elements;
• general risk policy: the set of decisions defining the credit institution's risk profile.
• risk appetite: the nature and degree of risks assumed by the credit institution.

It is responsible under the same conditions for establishing corporate governance structures respecting the principles of this instruction in subsidiaries located in Guinea or abroad.

Article 10: The Board of Directors must define ethics policies regarding the operation of the institution, the nomination of its directors, members of General Management, and heads of various business lines, as well as staff recruitment. These policies are defined to prevent any conflict of interest.
The Board of Directors must ensure in particular that the objectives defined by General Management are not disproportionate to the technical, human, and financial resources of the credit institution, and that associated risks are properly measured and controlled. It ensures the permanent maintenance of a capital level allowing compliance with prudential regulation, while being consistent with the credit institution's risk profile.

1. Powers
   Article 8: In accordance with the provisions of Article 435 of the Uniform Act, the Board of Directors is vested with the broadest powers to act in all circumstances on behalf of the company. It exercises them within the limits of the corporate purpose and subject to those expressly attributed to the General Meeting. It is notably responsible, ultimately, to shareholders and the Central Bank of the Republic of Guinea for the financial solidity of the institution, its organization, risk control, internal control, corporate governance system, and compliance with laws and regulations.
   The Board of Directors exercises its powers with objectivity towards all interested parties, maintaining a balance in decision-making between shareholder interests and those of other stakeholders, promoting the credit institution's long-term growth and value creation prospects, and ensuring at all times the protection of depositors.

Article 9: The Board of Directors defines the major strategic orientations, the risk acceptance level, and the general risk policy. To this end, it must approve the objectives and policies proposed by General Management and supervise their implementation.

III. ROLE AND RESPONSIBILITY OF THE BOARD OF DIRECTORS
particularly through appropriate organization enabling the exercise of their right to question management.
Decisions taken solely in the interest of dominant shareholders and to the detriment of minority shareholders, without being justified by the credit institution's interest, may be considered and sanctioned as an abuse of majority as defined in Article 130 of the Uniform Act.

• not be General Director or employee of the credit institution, its parent company, a subsidiary, or an affiliated company, and not have held one of these functions during the past five years;
• not be General Director or employee, or have ceased to hold these functions for at least five years, of a company in which the credit institution holds directly or indirectly a director mandate;
• not be a manager or employee of a supplier or a debtor client of the credit institution;
• not have been statutory auditor or external auditor of the credit institution during the past five years.

3. Nomination, training, and remuneration policy
   Article 15: A formalized and transparent procedure for the selection and nomination of directors, members of General Management, members of the credit committee not designated by Article 48 of Instruction No. 002/DGSIF/DSB of December 2, 2013, on the internal control framework, and those of the internal audit committee must be drafted.

4. Quality and Independence of the Board of Directors
   Article 12: Directors must possess sufficient knowledge in banking and corporate management to exercise their responsibilities.
   They must be able to exercise their right to be informed and to understand all activities of the credit institution, particularly the most complex operations.

Article 13: The Board of Directors must include members capable of forming an independent judgment on the credit institution's activities. To this end, it is recommended that it include independent directors chosen based on their competence and expertise in the banking sector.

Article 14: A director is qualified as independent when they have no other relationship with the credit institution or the group to which it belongs, of a nature to compromise the exercise of their freedom of judgment.
The criteria to examine to qualify this independence and prevent conflict of interest risks include, in particular:

Article 11: Directors refrain from interfering in the day-to-day management of the credit institution.
The Board of Directors must ensure that the risk management strategy it defines is cascaded through policies and procedures that prevent money laundering and terrorist financing.
The Board of Directors must approve the establishment of a risk surveillance and internal control system enabling permanent and complete control of all activities and ensuring timely information reporting. In the event that a credit institution has subsidiaries or outsources activities, it must ensure that the risk surveillance and internal control system is applied to these entities under the same conditions.

The remuneration of Board of Directors members is subject to approval by the General Meeting. The remuneration of the General Director and Deputy General Directors is fixed by the Board of Directors. The remuneration policy for senior management is subject to approval by the Board of Directors.

4. Chairmanship of the Board of Directors
   Article 19: The Chairman of the Board of Directors is responsible for the proper functioning of the Board and for maintaining trust relations among its members. He
   Article 18: The remuneration of directors, the General Director, Deputy General Directors, and senior management must be consistent with the long-term interests of the institution and its shareholders, while preserving the rights of minority shareholders, depositors, and other stakeholders.
   The remuneration policy must reflect the involvement of directors, the General Director, and senior management in value creation. It must be formalized and approved by the General Meeting of shareholders.
   The Board of Directors may entrust remuneration management to a committee composed of at least three of its members.
   It ensures the permanent updating of its members' knowledge. Members to whom the Board entrusts responsibilities within technical committees must receive, if necessary, specific training related to the powers assigned to said committees.
   The legal and regulatory capacity to sit on a Board of Directors must be verified prior to a director's nomination. In credit institutions with public participation, civil servants may be appointed as directors representing the State, according to rules governing the civil service.

Article 17: The Board of Directors ensures that appropriate training is provided to new members to enable them to quickly grasp the nature of the credit institution's activities and risks, its strategy, corporate governance model and organization, as well as the regulatory and institutional environment in which it operates.
must possess the experience, competencies, and personal qualities necessary to exercise his function.
Article 20: To enable the Board of Directors to play its supervisory role over General Management's activities, it is recommended that the functions of Chairman of the Board of Directors and General Director be exercised by two different persons.

Article 22: The Board of Directors must require General Management to provide all information and explanations that can inform its decision-making. These information must be accurate, relevant, and communicated in a timely manner. The Board of Directors may, at its request, hear any person.
Article 23: The Board of Directors operates collegially.
Each Director must act in the interest of all shareholders, while taking into account those of depositors and other stakeholders.
The Board of Directors must be capable of issuing objective and independent judgments on the management of the credit institution's activities. It must rule with complete impartiality towards General Management, dominant shareholders, or other stakeholders. To effectively fulfill its function, each director must know and master the professional standards enabling him to ground his judgments.
Article 24: Directors are required to exercise their function with impartiality and in an informed and prudent manner. They must demonstrate loyalty towards the credit institution at all times. In particular, Directors representing dominant or controlling shareholders must act without defending the interests of the shareholders they represent to the detriment of the credit institution or all shareholders.
When a Managing Director (Président Directeur Général) is appointed, he must ensure he does not hinder the exercise of the Board of Directors' powers over the control of the credit institution's management and refrain from withholding information, including through delayed communication, which could notably distort other Board members' judgment on the financial situation and risks of the credit institution, or keep them ignorant of irregularities committed within it.
Article 21: The Chairman of the Board of Directors is required to communicate to other Board members, General Management, and statutory auditors, upon receipt, the results of on-site controls by the Central Bank transmitted under the conditions provided in Article 68 of Law L/2013/060/CNT of August 12, 2013, on banking regulation. The concerned credit institution must provide the Central Bank with a copy of the minutes of this communication. Non-compliance with the provisions of this article by the various concerned parties is subject to the sanctions provided in Article 89 of said law.

5. Operation

The internal audit committee must without delay transmit to all Board of Directors members, in the most appropriate form, any information coming to its knowledge that could seriously affect the financial solidity, activities, results, or reputation of the credit institution. Beyond the powers provided in Article 6 of Instruction No. 002/DGSIF/DSB of December 2, 2013, on the internal control framework, the internal audit committee may handle any other matter at the request of the Board of Directors. The internal audit committee must report to each Board of Directors meeting the content and results of its work. In particular, the Board of Directors is required, according to the periodicities provided by Instruction No. 002/DGSIF/DSB of December 2, 2013, on the internal control framework for credit institutions, to examine the organization, implementation, and results of the risk surveillance and internal control of the credit institution and to take related decisions.
Article 28: The credit institution must bring to the attention of the Central Bank of the Republic of Guinea any element casting doubt on the morality or competence of a Board of Directors member, the General Director, or a Deputy General Director.

6. Technical Committees
   Article 29: In accordance with Article 5 of Instruction No. 002/DGSIF/DSB of December 2, 2013, on the internal control framework, the Board of Directors must designate at least three of its members to the internal audit committee.
   Article 25: The Board of Directors meets as often as necessary based on the size of the credit institution, its annual work program, and particular circumstances of the institution's life, and at least three (3) times per year.
   The number of meetings and individual director participation must be clearly stated in the annual report to the General Meeting of shareholders.
   The minutes of each meeting are drawn up under the conditions provided by Article 458 of the Uniform Act. It must include a summary of debates and a record of adopted decisions.
   Article 26: Complete and detailed information and necessary documents relating to different agenda items must be provided to each member at least 15 calendar days before the Board of Directors meeting. These documents must be kept as an appendix to the meeting minutes and made available to the Central Bank of the Republic of Guinea upon request.
   Article 27: The Board of Directors must follow an annual program enabling it to address at minimum all questions falling under legal, regulatory, and statutory provisions.

• to judge the effective contribution of each member by their attendance at Board of Directors or committee meetings, and their constructive engagement in discussions and decision-making.
  The evaluation must cover in particular the structure, exercise of powers, and operation of the Board of Directors, internal audit committee, General Management, credit committee, and other committees created by the Board of Directors. It must also cover the competence of the members of these bodies. The evaluation process must notably enable the Board of Directors to:
• ensure that the composition of the Board of Directors and committees allows them to fulfill their powers and meet assigned objectives;
• assess the quality of each body's operation;
• ensure that information transmission and response to explanation requests are rapid and effective;
• verify that submitted files are prepared and discussed adequately.
  They may engage heads of internal control framework and risk surveillance structures, as well as statutory auditors or external auditors, to conduct any additional investigations likely to inform their judgment.
  Article 32: The annual report communicated to the General Meeting of shareholders must cover the activities of the audit committee and technical committees.

7. Evaluation of the Board of Directors and Committees
   Article 33: An annual evaluation procedure for the Board of Directors, General Management, and various committees must be drafted and validated by the Board of Directors.
   Article 30: The internal audit committee must meet as often as necessary based on the size of the institution, the nature and complexity of its activities, and at least once per quarter.
   To successfully carry out its missions, it ensures that established communication channels provide it with timely access to complete and relevant information from General Management, the risk surveillance and internal control framework, statutory auditors, and external auditors.
   Article 31: The Board of Directors may, to improve its corporate governance, establish other technical committees within its ranks, the number and structure of which depend on the size of the credit institution and the complexity of activities to be managed.
   Members of these various committees are authorized to meet with any competent person, in the absence of General Management members or any key manager of the institution.

Article 38: The General Director exercises authority and assumes a supervisory function over all personnel.
He ensures the maintenance of a detailed hierarchical and functional organizational chart defining precisely the positions and functions that must be approved by the Board of Directors.
Article 37: The General Director is responsible for the day-to-day management of the credit institution within the powers delegated by the Board of Directors. He is assisted in his various tasks by at least one Deputy General Director. The General Director and Deputy General Directors are all approved by the Approval Committee.
He ensures the effective steering of the strategy realization process and the p