Corporate Governance

Governance System

In accordance with the applicable Banking Act (ZBan-2) and Companies Act (ZGD-1) and the rules of procedure, the Articles of Association of Nova Ljubljanska banka d.d., Ljubljana (Articles of Association) lay down a two-tier governance system, according to which the Bank is managed by the Management Board and its operations are supervised by the Supervisory Board.

Articles of Association of the Nova Ljubljanska banka d.d., Ljubljana (October 2018)

The framework for corporate governance is drawn up by Management Board and the Supervisory Board of NLB d.d. in the Corporate Governance Policy of NLB d.d., in which they undertake and publicly disclose to the shareholders, clients, creditors, employees and other stakeholders as a whole how they shall manage and supervise the NLB d.d. (further in text also: the Bank). This Policy is harmonized with and applicable together with the Corporate Governance Policy of the NLB Group, which lays down the principles and mechanisms of corporate governance in the NLB Group members (except NLB d.d.).

With the Corporate Governance Policy of NLB d.d. the Management Board and the Supervisory Board of NLB d.d. undertook that, in its work and operations, NLB d.d. shall follow the recommendations of the Corporate Governance Code for Listed Companies, that was jointly adopted by the Ljubljana Stock Exchange, the Slovenian Directors’ Association and the Managers' Association of Slovenia (adopted on 27/10/2016, entered into force on 01/01/2017). The Code is available to the public in Slovenian and English language on the website of the Ljubljana Stock Exchange. NLB d.d. discloses any deviations from the mentioned Code and special elements requested by the banking legislation annually in the Statement of Compliance with the Code, published in the business report within the Annual Report of the NLB Group and on the website of NLB d.d.

Corporate Governance Policy of the NLB d.d. (March 2019)Corporate Governance Statement of NLB d.d. (April 2019)

The Corporate Governance Statement of NLB was, in compliance with Article 70, paragraph 5, published also in the business report of the NLB Group Annual Report 2018, on web page Financal Reports (pages 127 - 141).

Composition and operation of the corporate governance bodies

The corporate governance bodies of NLB d.d. are its Management Board and Supervisory Board.

Management Board of the Bank

The Management Board of the NLB consists of three to six members, one of whom is appointed President of the Management Board of the Bank. The number of Management Board members is determined by a resolution of the Bank's Supervisory Board. The President and other members of the Bank's Management Board are appointed and recalled by the Supervisory Board of the Bank.

The President and members of the Bank's Management Board are appointed for a term of five years. They may be re-appointed after the expiry of their term of office. The President and members of the Management Board may be recalled prior to the expiry of their term of office in accordance with the applicable laws and the Articles of Association of the Bank.

Each member of the Bank’s Management Board can prematurely resign from their office by giving three months' notice thereof. A written notice must be delivered to the Chair of the Supervisory Board of the Bank. The notice term may be shorter than three months if so requested by the resigning member of the Management Board of the Bank in their notice and subject to the approval of the Supervisory Board of the Bank.

Only a person meeting the conditions for being appointed member of the management board of a bank under the Banking Act (ZBan-2) and obtaining a licence from the Bank of Slovenia or the European Central Bank may be appointed member of the Management Board of the Bank.

Before the appointment of the members of the Bank's Management Board, the Bank must – in accordance with the guidelines of the European Banking Authority (EBA guidelines) and the regulations of the Bank of Slovenia – assess whether the candidates for members of the Bank's Management Board are suitable or fit&proper. The Bank also conducts regular annual suitability assessment of the members of the Bank's Management Board during their term of office.

The Bank's Management Board may appoint collective bodies and advisory bodies, such as the Corporate Credit Committee, Corporate Credit Sub-Committee, ALCO of the NLB Group, Operational Risk Committee of NLB d.d., Group Real Estate Asset Management Committee, Development Council, Sales Board, Retail Credit Committee of NLB d.d., Bank's Transformation Committee, etc.

Presentation of the President and Member so the Management Board

Conflict of interest

Similar provisions to those applying to the members of the Supervisory Board in the event of circumstances possibly leading to a conflict of interest (more details in the chapter on the operation of the Supervisory Board of NLB d.d.) also exist for the members of the Management Board of NLB d.d. In the event of circumstances that represent a conflict of interests, the member of the Management Board must disclose these circumstances to the President of the Management Board in advance when these items on the agenda are to be discussed, and completely exclude themselves from the decision-making process.

More detailed provisions concerning conflicts of interest of the Management Board members are laid down in the Rules of Procedure of the Management Board of NLB d.d.

Supervisory Board of NLB d.d.

The Supervisory Board of the Bank is composed of nine members who are appointed and recalled by the General Meeting of the Bank from among the persons nominated by the shareholders or the Supervisory Board of the Bank. The Supervisory Board of NLB d.d. elects from among its members the Chair and at least one Deputy Chair who, in the event the absence of the Chair, holds all his/her powers.

Only those natural persons who meet the requirements and are not subject to the restrictions stipulated by the Banking Act (ZBan-2), Companies Act (ZGD-1) and other applicable regulations may be elected members of the Supervisory Board of the Bank. All Supervisory Board members must be independent experts. In accordance with the Articles of Association, persons are considered to be independent if:

- they are not and have not been in the past 24 (twenty-four) months from the date of election to the Supervisory Board,  in an employment relationship with the Slovenian Sovereign Holding, d.d., a state authority, a public agency, a public fund, a public institute or a public utility institute established by the Republic of Slovenia, or with another body governed by the public law which is an indirect user of the public budget, or with persons in which the Republic of Slovenia, the Slovenian Sovereign Holding, d.d. or the Pension Fund Management d.d. have a prevailing influence, as defined by the Companies Act (ZGD-1); or

- they have not in the past 24 (twenty-four) months held a leading or managing position in any political party in the Republic of Slovenia.

Before the appointment of the members of the Bank's Supervisory Board, the Bank must – in accordance with the guidelines of the European Banking Authority (EBA guidelines) and the regulations of the Bank of Slovenia – assess whether the candidates for members of the Bank's Supervisory Board are suitable or fit&proper. The Bank also conducts regular annual suitability assessment of the members of the Bank's Supervisory Board during their term of office.

The members of the Supervisory Board of the Bank are elected for the period lasting from the day of their election until the end of the Bank's Annual General Meeting of Shareholders which decides on the use of accumulated profit for the fourth business year since they have been elected, unless otherwise stipulated at the time of appointment of individual members. In this context, the first year is deemed to be the business year in which the members of the Supervisory Board of the Bank were elected.

The General Meeting of Shareholders of the Bank may dismiss individual or all members of the Supervisory Board of the Bank even before the expiration of their term of office. A resolution on dismissal shall be valid if adopted with at least a three quarter majority of all votes cast. A member of the Supervisory Board may submit their letter of resignation before the end of their term of office. The letter of resignation in writing shall be delivered to the Chair of the Supervisory Board of the Bank, and in the case of resignation of the latter to their Deputy and to the Management Board of the Bank. The notice period in the event of resignation is set by the Articles of Association at three months; it may be reduced, subject to the approval of the Supervisory Board.

In addition to the powers of the Supervisory Board under the Banking Act (ZBan-2) and the Companies Act (ZGD-1), the Supervisory Board also has powers as laid down in Article 24 of the Articles of Association. The Supervisory Board of the Bank adopts resolutions by a majority of votes cast. In case of a tied vote, the Chair of the Supervisory Board of the Bank has the casting vote.

Pursuant to the provisions of the ZBan-2 (Article 33), the provisions of the law on workers' participation in governance do not apply to the Bank as regards workers' representatives in the Bank's Management Board and Supervisory Board.

Presentation of the President and Members so the Supervisory Board

Conflict of interest

A conflict of interest exists in the circumstances when a private interest of a member of the Supervisory Board influences or may influence or seemingly influences the impartial and objective performing of their function in relation to the interests and objectives of the Bank. The members of the Supervisory Board must avoid conflicts of interest and carry out all measures necessary to prevent their occurrence and to manage them.

Circumstances that can cause conflict of interest as stated in the Policy on Conflict of Interest Management and Corruption Prevention of NLB d.d. and the NLB Group result from acquaintances and family relations, participation in procedures of concluding contracts, transactions and other agreements, performing of functions within and outside the NLB Group, and economic, ownership or managerial connections. The management of conflicts of interest is regulated in more detail in the Rules of Procedure of the Supervisory Board of NLB d.d.

In accordance with the provisions of the Corporate Governance Code for Listed Companies, all members of the Supervisory Board must sign a statement of independence (Attachment B to the Code) when assuming the position, upon any change or at least once annually. In the statement, they also state whether they consider themselves independent. If they have any potential conflict of interest and they consider themselves independent, they define in the statement why they think this conflict of interest is not permanent and relevant. Signed statements are published on the Bank’s website.

Statements of independence of the members of the Supervisory Board of the NLB d.d.

Committees of the Supervisory Board

The Supervisory Board appoints the committees of the Supervisory Board. A committee is an advisory body of the Supervisory Board of NLB d.d., which treats materials, and proposal for resolutions of the Management Board of NLB d.d. in individual areas and materials of the control functions intended for the meetings of the Supervisory Board and concerning the areas for which it is responsible.

A committee is composed of at least three members of the Supervisory Board. In accordance with the Rules of Procedure of the Supervisory Board of NLB d.d., the Supervisory Board of NLB d.d. has four committees, namely:

The Audit Committee monitors and prepares draft resolutions for the Supervisory Board on accounting reporting, internal control and risk management, internal audit, compliance and external audit, and supervises the implementation of the regulatory measures.

The Risk Committee monitors and drafts resolutions for the Supervisory Board in all areas of risk relevant to the NLB’s operations. It consults on general current and future risk appetite and the risk management strategy, and helps conduct control over senior management as regards the implementation of risk management strategy.

The Nomination Committee drafts proposed resolutions for the Supervisory Board concerning the appointment and dismissal of the Management Board members, recommends candidates for Supervisory Board members to the General Meeting of the NLB, recommends to the Supervisory Board the dismissal of the members of the Management Board and the Supervisory Board, prepares the content of executive employment contracts for the President and members of the Management Board, evaluates the performance of the Management Board and the Supervisory Board, and assesses the knowledge, skills and experience of individual members of the Management Board and Supervisory Board and the bodies as a whole. The Committee proposes amendments to the Management Board's policy on the selection and appointment of suitable candidates for the senior management of the NLB d.d.

The Remuneration Committee carries out expert and independent assessments of the remuneration policies and practices and on this basis gives initiatives for the measures related to the improvement in the management of the NLB's risks, capital and liquidity, it prepares proposals for the decisions of the Supervisory Board in relation to remuneration, and supervises the remuneration of the senior management performing the risk management and the compliance functions.

Their areas of activity and scope of authorities, composition, functioning and other issues are regulated by the rules of procedure of individual committees adopted by the Supervisory Board.

General Meeting

In accordance with the Articles of Association of NLB d.d., the shareholders exercise their rights in relation to the Bank's affairs at the Bank's General Meeting. The General Meeting is convened by the Management Board of the Bank. The General Meeting may be convened by the Supervisory Board, in particular in cases where the Management Board fails to convene the General Meeting on time or when a convocation of the General Meeting is necessary to ensure unhindered operations of the Bank. The General Meeting must be convened in cases laid down by law and held at least as the Annual General Meeting or as may be necessary for the benefit of the Bank.

The General Meeting of the Bank deciding on the allocation of distributable profit and on relief must be held within the first eight months following the end of the financial year, unless the legislation prescribes otherwise.

The notice of convocation of the General Meeting must be published no less than 30 days before the date of the General Meeting.

The shareholders collectively holding at least one twentieth of the share capital are entitled to demand in writing that the Management Board convene the General Meeting of the Bank.

Information on the publication of the agenda and proposals for resolutions of the General Meetings are published on the website General Meetings.

Internal control systems

The NLB d.d. must follow the provisions of the Banking Act (ZBan-2) and the Regulation on Internal Management Arrangements, Management Body and Internal Capital Adequacy Assessment Process for Banks and Savings Banks. Due to the above, the NLB has developed a steady and reliable corporate governance system encompassing the following:

  • well-defined organization with clear-cut, transparent and consistent internal relations in the area of responsibility;
  • efficient procedures to determine, measure or assess, control and monitor risks, including risk appetite, risk management strategy, ICAAP, ILAAP, and risk resolving and reporting plan, to which the Group is exposed or could be exposed in its operations;
  • inclusion of the main guidelines in the area of strategic risks in the annual review of the business plan, budget preparation procedure and adoption of other important decisions;
  • suitable internal control mechanisms that also include appropriate administrative and accounting procedures;
  • appropriate remuneration practices and policies that are in line with prudent and effective risk management, and thus promote risk management.

The appropriateness of the internal control mechanisms is defined based on the independence, quality and applicability of:

  1. the rules and controls of performance of organizational, business and work processes of the Bank (internal controls), and
  2. the internal control functions and departments (internal control functions).

Internal controls

The internal control system of the Bank is established at the level of:

a.) regular internal controls carried out though computer and/or human supervision at the level of each financial service and transaction (business activity) and business process and organizational unit.

Internal controls are established at all levels of the Bank's organizational structure, especially at the levels of commercial, control and support functions, and all financial services of the Bank. In its daily business, the Bank uses the internal document Internal Control System in NLB d.d., which lays down the internal control system and the responsibilities for its establishment, continuous operation and improvement. The Bank established the monitoring of the operations and back offices at the organizational level. NLB d.d. adjusts the scope and complexity of internal controls to the risks assumed in individual areas of operation.

If any deficiencies in the internal control performance process are established, they are considered by the Operational Risk Committee, which also adopts the relevant measures. In the event of intentional violations of the Bank's rules as defined in the Code of Conduct of the NLB Group, such cases are considered in accordance with the Integrity and Compliance Policy of NLB d.d. and the NLB Group.

b.) permanent and independent control functions performed:

- in the scope of the risk management function,

- in the scope of the internal audit function and

- in the scope of the compliance and information security function.

With the aim of ensuring appropriate financial reporting procedures, the NLB pursues the adopted Accounting Controlling Policy. The accounting controlling is provided through the operation of the complete accounting function with the purpose of ensuring quality and reliable accounting information and thereby accurate and timely financial reporting. The principal identified risks in this area are managed with appropriate system of authorizations, delimitation of duties, compliance with the accounting rules, documenting of all business events, custody system, posting on the day of business event, inbuilt control mechanisms in source applications and archiving pursuant to the laws and internal regulations.

With efficient controlling mechanism in the area of accounting reporting, the NLB ensures:

  • a reliable decision-making and operation support system;
  • accurate, complete and timely accounting data and the resulting accounting and other reports of the Bank;
  • compliance with legal and other requirements.

Internal control functions

a.) Risk management function

The risk management function is organized in accordance with the Charter of the Risk Management Function of NLB d.d. (06/11/2015). 

The risk management function of NLB d.d. is organized within the CRO, covered by the member of the Management Board responsible for risks. The CRO includes the following organizational units:

  • Global Risk,
  • Credit Risk – Corporate and Retail,
  • Evaluation and Control,
  • Restructuring,
  • Workout and Legal Support,,
  • Non-core Enterprises (as of 1 January 2016).

The head of the risk management function is the Director of Global Risk. Functionally and organisationally, the Global Risk is separate from other functions where business decisions are adopted and where conflict of interest may arise. The head of the risk management function has direct access to the Management Board of the NLB and at the same time unhindered and independent access to the Supervisory Board of the NLB and the Risk Committee of the Supervisory Board of the NLB.

b.) Internal audit function

The internal audit function is organized in accordance with the Charter of the Internal Audit Function of NLB d.d. (13/11/2018). The mission and the principal task of the Internal Audit is to consolidate and secure the value of the Bank by issuing objective assurances based on risk assessment, with consultancy and deep understanding of the Bank's operations.

The internal audit function:

- gives assurances and advice about risk management, internal control system and corporate governance of the NLB;

- carries out regular control of the quality of operations of other internal audit departments in the NLB Group and takes care of constant development of the internal audit function.

In accordance with the law, the Bank organized the Internal Audit as an independent organizational unit, which is primarily responsible to the Supervisory Board of the NLB and secondarily to the Bank's Management Board.

The Supervisory Board of the NLB must issue its approval of the appointment, remuneration and dismissal of the Director of the Internal Audit, which ensures their independence and thus the independence of the work of the Internal Audit.

c.) The compliance and information security functions

The Bank adopted the Integrity and Compliance Policy of NLB d.d. and the NLB Group (December 2016), which regulates the method and scope of the activities of the compliance function in the Bank.

The Compliance and Integrity of the NLB operates independently of and separately from the Bank's operations and covers the following areas:

  • compliance with the regulations and prevention;
  • fraud detection and management;
  • money laundering and terrorist financing prevention;
  • information security function in cooperation with other appropriate OUs of the Bank (e.g. IT);
  • personal data protection;
  • relations with the regulators (ECB and the Bank of Slovenia);
  • management of the area of compliance and integrity.

The Compliance and Integrity is an organization unit of the Bank, placed directly under the Bank's Management Board in the organizational structure. This enables the Compliance and Integrity to operate independently from other Bank's departments. The head of the Compliance and Integrity has direct access to the Bank's Supervisory Board, to which it reports separately.

The NLB also introduced the compliance function in the core members of the NLB Group. It also established a harmonized system of standards and practices in the area of compliance and integrity in the whole NLB Group, core and non-core members, in the form of special binding standards in the area of compliance and integrity.

The NLB has zero tolerance to all forms of financial crime. Its program for fighting money laundering and terrorist financing provides a solid support for numerous international efforts in fighting money laundering, terrorist financing and other criminal offences.

Disclosures in accordance with article 88 of the ZBan-2

1. Disclosure of the policy on the selection of the members of the governance body in accordance with Article 88, third paragraph, of the ZBan-2

  a.) Amendments to the Policy on the selection of suitable candidates for members of the Management Board of NLB d.d.

The Amendments to the Policy on the selection of suitable candidates for members of the Management Board of NLB d.d. were adopted at the meeting of the Supervisory Board of NLB d.d. held on 08/03/2019. The existing criteria (adequately wide range of knowledge, skills and experience) based on which the Management Board of NLB d.d. must be composed were supplemented with the following criteria: reputation, management of any conflicts of interest, independence, available time and collective suitability of the Management Board of NLB d.d. as a whole.

The procedure conducted by the Nomination Committee of the Supervisory Board of NLB d.d. was supplemented and is now divided into 6 steps.

A new provision was added, requiring that the candidate for a member of the Management Board of NLB d.d. proactively disclose a potential conflict of interest already in the selection process, as required by the provisions stipulating that the Bank must ensure the members of the Management Board are fit&proper.

When selecting members of the Management Board of NLB d.d., it is necessary to ensure collective suitability. The criterion of representation of both genders was added to the existing criteria. It is essential in the process of searching and selecting a fit&proper candidate to ensure a wide range of potential candidates with the aim of ensuring collective suitability and efficiency of the Management Board of NLB d.d. as a whole; the procedure of potential selection of external headhunting agencies is managed in accordance with the internal procurement rules.

  b.) Amendments to the Policy on the selection of suitable candidates for members of the Supervisory Board of NLB d.d.

The Amendments to the Policy on the selection of suitable candidates for members of the Supervisory Board of NLB d.d. were adopted on the General Meeting of Shareholders on 10 June 2019. The existing criteria (adequately wide range of knowledge, skills and experience) based on which the Supervisory Board of NLB d.d. must be composed were supplemented with the following criteria: reputation, management of any conflicts of interest, independence, available time and collective suitability of the Supervisory Board of NLB d.d. as a whole.

This policy promotes achieving variety in the composition of the Supervisory Board of NLB d.d., including an appropriate representation of both genders.

The procedure conducted by the Nomination Committee of the Supervisory Board of NLB d.d. was supplemented and is now divided into 6 steps.

A new provision was added, requiring that the candidate for a member of the Supervisory Board of NLB d.d. proactively disclose a potential conflict of interest already in the selection process, as required by the provisions stipulating that the Bank must ensure the members of the Supervisory Board are fit&proper.

When selecting members of the Supervisory Board of NLB d.d. it is necessary to ensure collective suitability, The criterion of representation of both genders was added to the existing criteria. It is essential in the process of searching and selecting a fit&proper candidate to ensure a wide range of potential candidates with the aim of ensuring collective suitability and efficiency of the Supervisory Board of NLB d.d. as a whole; the procedure of potential selection of external headhunting agencies is managed in accordance with the internal procurement rules.

  c.) Policy on the provision of diversity of the management body and senior management

The Policy on the provision of diversity of the management body and senior management was adopted on the General Meeting of Shareholders on 10 June 2019. The amendments to this policy expanded the group of persons bound by it, set the starting points and the goals of the policy and their pursuit.

The Policy on the provision of diversity of the management body and senior management sets the framework in the area of diversity and gender representation in the management and supervision bodies (Supervisory Board and Management Board) and senior management. It also defines the process of candidate selection and appointment (defined in more detail in the Policy on the selection of suitable candidates for members of the Supervisory Board and the Policy on the selection of suitable candidates for members of the Management Board), which enables the management body to be composed in such a way that, as a whole, it has the appropriate knowledge, skills and experience required for an in-depth understanding of the Bank's strategy and challenges, and the risks to which it is exposed. With this Policy, NLB d.d. also sets the framework for diversity with regard to education, range of knowledge, skills and experience, age, gender and international experience.

In accordance with the provisions of the second paragraph of Article 34 of the ZBan-2, the policy on the selection of suitable candidates and the policy on diversity in the selection of the management body members, the general and specific goals of this policy and the level of their achievement are disclosed in more detail in Disclosures under the third pillar of the Basel standards for the NLB Group (in accordance with Article 435(2)(c) of the CRR) in a special document that the Bank publishes annually in addition to the Annual Report of the NLB Group (chapters 4.3 and 4.4, pages 37 and 38).

2. Disclosure of the remuneration policy in accordance with Article 88, third paragraph, of the  ZBan-2

The Remuneration Policy for the employees performing special work entered into force on 01/01/2012. The Policy is annually revised and harmonised with the regulations and recommendations of the relevant code. In 2018 the Policy was partially adjusted in the scope of adjustments to the applicable EBA Guidelines, which became a binding legal act that NLB d.d. must comply with especially when setting variable remuneration of the employees whose professional activities have a material impact on the Bank's profile.

In accordance with the provisions of the third paragraph of Article 88 of the ZBan-2, the Remuneration Policy for the employees performing special work at the level of NLB d.d. and the NLB Group is disclosed in more detail in Disclosures under the third pillar of the Basel standards for the NLB Group (in accordance with Article 435(3)(c) of the CRR) in a special document that the Bank publishes annually in addition to the Annual Report of the NLB Group (chapter 15, pages 86 do 94).

Compliance and Integritiy

The based values and principles of ethical business conduct that are respected, encouraged and expected in the NLB Group are defined in the Code of Conduct of the NLB Group (May 2017). The NLB Group demands that every employee, regardless of their job or location of work, as well as every other stakeholder of the NLB Group, live in accordance with the highest standards of integrity in everything they do.

More about the values and basic principles and rules of desired conduct as defined in the Code of Conduct of the NLB Group is available on the website of NLB d.d.

In addition to respecting the laws, regulations and standards, a responsible corporate governance also includes a reliable compliance program.

By ensuring compliance with the legislation and the other regulatory requirements we make sure that the NLB, its shareholders, clients, business partners and other stakeholders as well as the employees are appropriately protected against various risks related to the area of compliance.

The NLB and also other NLB Group members expect all employees to follow our compliance standards.

Further information on the compliance program, money laundering and terrorist financing prevention, and personal data protection and information security is available at page Compliance and Integrity.

Corporate Governance novelities

In 2019, NLB d.d. upgraded the existing applications in the direction of paperless operations. First, it introduced an application in relation to the operation of one of the Bank's committees, and then it digitalized the conduct of the meetings of the Management Board and Supervisory Board of NLB d.d.

NLB d.d. assesses as a positive contribution to the development of corporate governance the decision of the Government of the Republic of Slovenia, which founded the Council of the Government of the Republic of Slovenia for Corporate Governance  in March 2019. The Council was founded as an expert and advisory body of the Government of the Republic of Slovenia. It will primarily be of assistance in decision-making about affairs in the area of corporate governance in Slovenia. The purpose of the Council is to increase the competitiveness of the Slovenian economy by improving the corporate governance in the Republic of Slovenia.

Risk Management

The Bank ensures that the daily risk taking is consistent with the accepted risk pricing. The tendency to take risks is a further agreed common level of risk, including the levels of individual types of risks that the bank is ready to take in order to achieve its business goals, strategies, policies and plans, taking into account the ability to take risks, strategies and take-over policies and risk management, as well policies on capital, liquidity and receipts of the bank.

The bank's approach to achieving risk pricing is comprehensive, takes into account the interests of the owners and other stakeholders of the Bank and is based on the policies and processes, internal controls of the bank and the corresponding responsibilities of the risk management function. They regularly report the risks to the competent directors, the Bank's Management Board and the Risk Committee within the Supervisory Board.

Each year, the Management Board and the Supervisory Board of the Bank explain the Bank's approach to the realization of the risk principle in the consolidated Statement on risk management, which is published on NLB's website d.d.

Statement on Management of Risk (April 2019)

Statement on Management of risk is also published:

- in a business report as part of the NLB Group Annual Report 2018 (pages 144 - 145);

- in a document Disclosures According to the 3rd Pillar of Basel Standards for NLB Group (in line with Article 435 (point 4) first paragraph Regulation (EU) no. 575/2013), as a special document on the subject of disclosures published every year by the bank additionally to the NLB Group Annual Report of the NLB Group (pages 6-8).