Corporate governance

In accordance with valid legislation, NLB employs a two-tier system of corporate governance, under which the Bank is managed by the Management Board and its operations are supervised by the Supervisory Board. The Bank’s bodies are the General Meeting of Shareholders, Supervisory Board and Management Board.

Management Board

NLB’s Management Board leads, represents and acts on behalf of the Bank, independently and on its own responsibility, as provided for by the law and the Bank’s articles of association. In accordance with the articles of association, the Supervisory Board may appoint (and recall) three to six members (a president and up to five members) to the Management Board. The president and members are appointed for a term of five years, and may be reappointed or recalled before their term expires in accordance with the law and the Bank’s articles of association.

The term of Božo Jašovič, President of the Management Board, expired on October 1, 2012, based on his resignation. Janko Medja was appointed to a five-year term as President of the Management Board on October 2, 2012. The term of Robert Kleindienst, member of the Management Board, expired on June 30, 2012 based on his resignation. The Bank’s Supervisory Board reached agreement with Marko Jazbec and David Benedek, members of the Management Board, on the early termination of their terms, effective December 31, 2012. Blaž Brodnjak was appointed to a five-year term as member of the Management Board on December 1, 2012. On December 31, 2012, Guy Snoeks, member of the Management Board, also handed in his resignation. His term of office expired on March 31, 2013.

Collective decision-making bodies

• The NLB Corporate Credit Committee determines credit ratings and makes decisions on the reclassification of customers, sets maximum borrowing limits and approves commercial banking investments. The committee meets once a week and comprises five members. The committee’s chairman is the member of the Management Board responsible for corporate banking. The Second Level Credit Committe, as the name implies, is at the bank's second organisational level and has been given some of the Management Board's authorisations.
• The NLB Retail Credit Committee decides on the approval of loans and other investment proposals, the conditions of which deviate from standard banking products and services and which represent additional risks for the Bank. The committee meets once a week and comprises five members. The committee’s chairman is the member of the Management Board responsible for retail banking and private banking.
• The NLB Group Assets and Liabilities Committee monitors conditions in the macroeconomic environment, and analyses the balance, changes to and trends in the assets and liabilities of NLB and NLB Group. It also adopts decisions and guidelines with respect to achieving the desired balance sheet structure of the Bank and NLB Group companies that are in line with NLB Group’s strategy and that facilitate normal operations and the achievement of the established plans of NLB and NLB Group. The committee typically meets once a month and comprises 12 members. The President of the Management Board serves as the committee’s chairman.
• The NLB Information Technology Committee confirms the annual development plan by setting priorities. It is also responsible for approving changes to priorities and for overall control in areas tied to the realization of established objectives by the envisaged deadlines and in line with the planned budget. The committee typically meets five times a year and comprises 14 members. The committee’s chairman is the member of the Management Board responsible for information technology.
• The NLB Operational Risk Committee is a collective decision-making body of the Bank’s Management Board responsible for monitoring, guiding and supervising operational risk management at NLB, and for transferring this methodology to NLB Group companies. The committee typically meets every two months and comprises 14 members. The committee’s chairman is the member of the Management Board responsible for risk management.

Advisory bodies of the Bank’s Management Board

• The NLB Price Policy Committee is a subordinate body of the NLB Group Assets and Liabilities Committee and is responsible for drafting resolutions regarding interest rates, tariffs and internal transfer prices in line with NLB’s business policy and objectives.
• The NLB Trading and Market Risk Committee is the Management Board’s coordinating and advisory body responsible for defining, adopting and supervising the implementation of the Bank’s policies and methodologies in the area of trading.
• The College of the Bank is the advisory body of the Management Board where opinions and suggestions regarding matters that fall under the decision-making authority of the Management Board are shared.
• The Strategic Conference of NLB Group and the Business Conference of NLB Group are typically convened once a year. NLB Group’s strategic and business objectives are discussed at meetings.

Supervisory Board

NLB’s Supervisory Board monitors and supervises the management and operations of the Bank. It carries out its tasks in accordance with the provisions of the laws governing banks and companies and NLB’s Articles of Association, which define the Supervisory Board’s responsibilities in Article 24. In accordance with the articles of association, the Supervisory Board has 11 members appointed and recalled by the Bank’s General Meeting of Shareholders from candidates proposed by the shareholders or the Supervisory Board.

The Supervisory Board was appointed for a term of four years at the General Meeting of Shareholders of June 30, 2009. The following members were recalled at the 19th General Meeting of Shareholders of June 27, 2012: Marko Simoneti, Rasto Ovin, Andrej Baričič, Igor Masten, Anton Macuh, Boris Škapin and Jurij Detiček. The Bank’s General Meeting of Shareholders appointed the following members to the Supervisory Board for the remainder of the term of the originally appointed members: Janko Medja, Stephan Wilcke, Klemen Vidic, Miro Germ, Miran Pleterski, Sašo Cunder and Albin Hojnik. Matjaž Schroll was appointed at the same General Meeting of Shareholders to replace Stojan Petrič, who resigned effective January 24, 2012.

At the 20th General Meeting of Shareholders of December 14, 2012, Gaël de Pontbriand was appointed to replace Jan Vanhevel, who tendered his resignation on February 7, 2011, while Marianne Økland was appointed to replace Matjaž Schroll, who tendered his resignation on August 2, 2012.

The following members of the Supervisory Board also tendered their resignations: Janko Medja (effective October 1, 2012), Miran Pleterski (effective October 11, 2012), Albin Hojnik (effective October 24, 2012), John Hollows (effective December 31, 2012) and Riet Docx (effective January 10, 2013). As at December 31, 2012, the Supervisory Board had 8 members.

Klemen Vidic (42)

Klemen Vidic received his degree in mathematical physics at the University of Ljubljana, and is currently studying at the Faculty and Institute of Actuaries in Oxford.He is employed by Zavarovalnica Triglav in the actuarial sector of the property insurance department. Prior to that, he was employed in various positions at Schneider Electric, Hermes Softlab and IBM. His job includes the identification, quantification and management of financial risks.

Stephan Wilcke (42)

Stephan Wilcke currently serves as the Chairman of the Board of Directors of OneSavings Bank Plc, as a non-executive director and investment manager at EMF Capital Ltd., and as a member of the Jersey Financial Services Commission. Prior to that, he served as Managing Director of the Asset Protection Scheme (APS), as head of the investment group at Apax Partners’ European Financial Services and as a partner at Oliver, Wyman & Company, where he began his career.

Riet Paula C L Docx (62)

Riet Docx, MSc, received her master’s degree in applied economics from the University of Antwerp in Belgium. She has been Director of the Central and Eastern Europe and Russia Directorate at KBC since 2005. From 1994 to 2004, she was Regional Director for Retail Operations at KBC. Prior to that, she was the General Director of the Omniver and Omniver Leven general and life insurance companies from 1987 to 1994. She served in various functions at Benelux Bank from 1976 to 1987. She is a member of the Supervisory Board of SD Worx in Belgium.

John Artur Hollows (56)

John Hollows, MSc received his master’s degree in law and economics at the University of Cambridge in the United Kingdom. He is an associate member of the Chartered Institute of Bankers in the United Kingdom. He has been a member of the KBC Group’s Board of Directors since 2011 and Executive Committee since 2009, and Chief Risk Officer since 2010. He was Executive Director for Central and Eastern Europe and Russia in the KBC Group from 2009 to 2010, and General Director for Central and Eastern Europe and Russia from 2006 to 2009. He was the Director of K&H Bank in Hungary from 2003 to 2006, and Director of the Asia Pacific Region at KBC Bank from 1999 to 2003. From 1996 to 1999, Mr. Hollows was Director of the Shanghai KBC Branch. Prior to that, he was employed by Barclays Bank from 1978. He is also Director and member of the Board of Directors and Executive Committee at KBC Bank and KBC Insurance, and a member of the Board of Directors of KBC Global Services.

Sašo Cunder (37)

Sašo Cunder completed his studies at the Faculty of Economics in Ljubljana and also received the title of CFA in 2005. He is employed as Director of Finance at Droga Kolinska, a member of Atlantic Grupa. Within Atlantic Grupa, he is responsible for finance in Slovenia, Bosnia and Herzegovina and Russia. Prior to that, he was employed by Deutsche Bank in London in the investment banking sector, where he worked on projects in Central Europe, with an emphasis on the former Yugoslav republics.

Miro Germ (59)

Miro Germ, who received his university degree in mathematics, spent his 30-year career working at multinational corporations Hewlett-Packard and DEC, where he headed the introduction of contemporary management approaches (Hermes Softlab and Hermes Plus), and computer-aided construction and manufacturing (Litostroj). He was educated and trained at the IECD Bled School of Management, at IMD in Lausanne, Switzerland, at Hewlett-Packard in Vienna and Palo Alto, and at EFQM in Brussels. He was appointed member of the working group of the Competitiveness Council by the Slovenian government, and served on several occasions as a judge for business excellence awards presented by the Republic of Slovenia. He is continuously active in the management of Slovenian civil society organizations in this area. He has lectured about his experiences at domestic and international conferences and has received several domestic and international recognitions.

Marianne Økland (50)

Marianne Økland holds a master’s degree in finance and economics from the Norwegian School of Economics and Business Administration where she worked as a researcher and taught mathematics and statistics. She is Managing Director of the consultancy company Avista Partners in London, which provides advisory services and raises capital. She holds the position of non-executive director at Islandsbanki (Iceland) and IDFC (India). Marianne has spent most of her career in investment banking dealing with the raising and structuring of capital in various positions at JP Morgan and UBS. She has managed transactions for nearly all the large Nordic banks and insurance companies, and worked on many of the largest mergers and acquisitions in the area. Prior to her banking career, she ran the European operations of Marsoft, a Boston, Oslo and London based consulting firm that advises large shipping, oil and commodities companies, and banks on their shipping strategy and investments.

Gaël de Pontbriand (65)

Gaël de Pontbriand graduated from the Institut d’Etudes Politiques de Paris, received his MBA at the Wharton School of the University of Pennsylvania, and received master’s degrees in economics, law and organizational sciences at various universities in Paris. Following the completion of his training in the field of banking in the U.S., he served in various functions at commercial banks in Germany, including as general director of certain banks in France and Germany. As an advisor and partner at PwC, he provided advisory services in the field of banking to numerous governments and financial institutions in Europe, North America, Central Asia and North Africa. He has worked with the supervisory boards of financial institutions in France and other countries since his retirement from his position as member of the European Advisory Committee of PwC.

Sergeja Slapničar (42) – independent external member of the Audit Committee

Dr. Sergeja Slapničar is an associate professor and Chair of the Department for Accounting and Auditing at the Faculty of Economics at the University of Ljubljana, where she has been employed since 1995.She is a member of the Supervisory Board of Krka, an independent member of the Audit Committee of Telekom Slovenije and Mercator, a Chairwoman of the conciliation committee for the testing of exchange ratios in the ownership transformation of companies under the Companies Act and an active member and lecturer at the Slovenian Directors’ Association. She is also a member of European and U.S. accounting associations.

Committees of the Bank’s Supervisory Board

• The Strategy and Development Committee monitors issues regarding the Bank’s strategic objectives and development, and drafts proposals concerning Supervisory Board decisions, primarily by discussing, reviewing and assessing the entire medium-term or long-term strategic plan of NLB and NLB Group, and the more important elements of strategic and development plans. It discusses the adequacy of NLB’s and NLB Group’s organization and corporate governance, discusses sales and purchases of participating interests in NLB Group from a strategic point of view, and discusses the annual financial and business plans of NLB and NLB Group on the basis of the adopted medium-term/long-term strategy and development.
• The Audit Committee monitors and drafts proposals for Supervisory Board decisions concerning internal audits and the legal compliance of the Bank’ operations, and for external and internal audit reports. It assesses auditing procedures, assesses and adopts recommendations or decisions related to the documents of external regulators, assesses internal controls, and assesses and recommends accounting standards and policies to be applied at the Bank.
• The Risk Committee monitors and drafts proposals for Supervisory Board decisions concerning all areas of risk relevant to the Bank’s operations.
• The Remuneration and Appointment Committee monitors basic strategic issues and drafts proposals for Supervisory Board decisions concerning the appointment and dismissal of Management Board members, determines the methods of recruiting and selecting Management Board candidates, concludes and oversees the content of individual employment contracts with members of the Management Board, oversees the remuneration of Management Board members and sets remuneration criteria and policies.

General Meeting of Shareholders

The General Meeting of NLB Shareholders meets and makes decisions at regular and extraordinary meetings, where it adopts resolutions in accordance with the law and the Bank’s articles of association. The responsibilities of the General Meeting of NLB Shareholders are stipulated by the Companies Act, the Banking Act and NLB’s Articles of Association.

The General Meeting of Shareholders makes decisions regarding:

• the Bank’s articles of association and changes thereto;
• the rules of procedure of the General Meeting of Shareholders;
• the annual report, if the Supervisory Board has not confirmed the annual report or if the Management Board and the Supervisory Board defer the decision regarding the adoption of the annual report to the General Meeting of Shareholders;
• the use of the distributable profit;
• the discharge of the Management Board and the Supervisory Board;
• changes in the Bank’s share capital;
• annual limits and characteristics of issues of securities convertible to shares, and the Bank’s equity securities;
• the appointment and recall of Supervisory Board members;
• the remuneration of and participation in the Bank’s profits by members of its Supervisory Board, Management Board and employees;
• the organization that will carry out the audit of the Bank’s financial statements; and
• changes in the Bank’s status (mergers, demergers, the transfer of assets, changes to the legal organizational form, etc.) and the discontinuation of the Bank’s operations.

Three General Meetings of Shareholders took place in the year 2012.

Representatives of NLB shareholders met at the 19th General Meeting of Shareholders on July 27, 2012. A total of 86.24% of shares with voting rights were represented. Shareholders were briefed on the approved 2011 annual report, the Supervisory Board’s report and information regarding the remuneration of members of the Management Board and Supervisory Board in 2011. Shareholders did not confer official approval upon the Bank’s Management Board for the 2011 financial year, but did confer official approval upon its Supervisory Board for the aforementioned period. The Bank’s General Meeting of Shareholders appointed PwC as auditor for the 2012 financial year.

The General Meeting of Shareholders was briefed on the resignation of Stojan Petrič from his position as member of the Bank’s Supervisory Board and appointed Matjaž Schroll to replace Mr. Petrič. The General Meeting of Shareholders recalled the following members of the Bank’s Supervisory Board: Marko Simoneti, Rasto Ovin, Andrej Baričič, Igor Masten, Anton Macuh, Boris Škapin and Jurij Detiček, and appointed the following members for the remainder of the term of the originally appointed members of the Bank’s Supervisory Board: Janko Medja, Stephan Wilcke, Klemen Vidic, Miro Germ, Miran Pleterski, Sašo Cunder and Albin Hojnik.

By amending the articles of association, the General Meeting of NLB Shareholders authorized the Bank’s Management Board (with the Supervisory Board’s consent and without an additional general meeting resolution) to increase the Bank’s share capital once or several times over a five-year period in the maximum amount of EUR 72,671,365.33 through the issue of a total of 8,707,483 new ordinary shares at a total issue value determined by the Bank’s Management Board’s decision with the Supervisory Board’s consent.

NLB shareholders present at the General Meeting supported the proposal to increase NLB’s share capital via a cash contribution in the amount of EUR 12,416,999.48 through the issue of 1,487,805 ordinary, freely transferable no-par value shares with voting rights. The issue value of one new share was EUR 41.00, while the total issue value of all shares was EUR 61 million.

Representatives of NLB shareholders met at the 20th General Meeting of Shareholders on December, 14, 2012. A total of 67.07% of shares with voting rights were represented. Shareholders were briefed on the resignation of members of the Bank’s Supervisory Board, Jan Vanhevel and Matjaž Schroll, and appointed Gaël de Pontbriand and Marianne Økland to replace them.

Based on KBC’s suggestion, shareholders decided that the Management Board should propose at the general meetings of its subsidiaries LHB Internationale Handelsbank and NLB InterFinanz that a forensic audit be conducted at both companies with the aim of thoroughly reviewing their operations, taking into account the legal provisions in the countries where the companies operate.

In order to ensure compliance with the EC’s decision, shareholders present at the General Meeting approved an increase in share capital via a cash contribution in the amount of EUR 1,858,178.92 to a total of EUR 106,589,691.84 through the issue of 222,647 new ordinary, freely transferable no-par value shares with voting rights, raising the total number of shares issued to 12,771,577. The issue value of one new share was EUR 8.35.

Representatives of NLB shareholders met at the 21st General Meeting of Shareholders on December 29, 2012. A total of 23.63% of shares with voting rights were represented. As the Bank’s largest shareholder, the Republic of Slovenia stated its clear views and expectations regarding the Bank’s capital adequacy and supported the efforts of the Management Board and Supervisory Board for NLB’s future development. There was no vote taken at the General Meeting of Shareholders on the proposal of the Management Board and Supervisory Board to increase the Bank’s capital.

NLB does not have any shareholders with special controlling rights.

NLB has no limitations on voting rights, as voting rights are attached to all NLB shares (except to treasury shares) in accordance with the law.

The ownership stake of the Republic of Slovenia increased after December 31, 2012, as a result of the purchase of the KBC stake and conversion of a hybrid loan into shares.

NLB Group corporate governance

NLB, as the parent bank of NLB Group, provides corporate governance for NLB Group in accordance with the laws of the Republic of Slovenia and the laws of the countries in which NLB Group companies operate, while taking into account internal rules.

Corporate governance, as one of the Group’s core business functions, is comprehensively regulated by the Corporate Governance Policy of NLB Group, which defines the roles, competencies and responsibilities of individual bodies and organizational units to ensure they function cooperatively and harmoniously to achieve the Bank’s business objectives.

NLB Group corporate governance is implemented:

• in accordance with fundamental corporate rules through various bodies of NLB Group companies:
• through voting at the general meetings of shareholders of NLB Group companies;
• by appointing NLB representatives to supervisory bodies;
• by proposing executive appointments for NLB Group companies; and
• through the participation of NLB representatives in various committees and commissions of NLB Group companies.

• through mechanisms for effectively monitoring operations, harmonizing business standards and disseminating information within NLB Group:
• by business area (i.e. according to the »business line« principle), meaning the principle of commercial and professional coordination within NLB Group;
• through NLB Group Assets and Liabilities Committee; and
• by convening strategic conferences and meetings of directors (where NLB Group companies discuss the development priorities of NLB Group).

NLB’s Internal Audit Center and external supervisors (e.g. the Bank of Slovenia, external auditors and local regulators) provide additional supervision for NLB Group.

In addition to established forms of corporate governance, a special organizational unit (the NLB Group Corporate Governance Directorate) was established at NLB with the aim of implementing corporate governance within the Group and by individual areas and companies.