ANNUAL REPORT 2020

Governance

The governance framework at Al Rajhi Bank is based on five Board Committees and a group of executive management committees of the first and second levels. This governance structure relies on a set of key pillars that ensure clarity and discipline of wise governance. These pillars are: The Bank’s values, design of the organisational structure, policies and procedures, the authority delegation matrix, and effective communication between the various internal and external stakeholders.

Policies related to the Corporate Governance Manual

The Bank applies the Principles of Corporate Governance for Banks Operating in Saudi Arabia issued by the Saudi Central Bank as well as the Corporate Governance Regulations issued by the Capital Market Authority. The Bank has developed its Corporate Governance Manual and the charters that regulate the Board Committees and management committees. These documents are subject to periodic review by the Board and its committees.

The Bank adopts a comprehensive set of policies and procedures that strengthen the Bank’s governance framework in line with the Board of Directors approved Delegation of Authorities (DOA) matrix to adequately reflect internal practices. At the forefront of these policies is the Related Party Transactions and Conflict of Interest Policy to better achieve transparency and integrity, while remaining compliant with the regulatory requirements under the Companies Law, the CMA Corporate Governance Regulations and the principles and guidelines issued by SAMA.

The Bank also relies on comprehensive disclosure policies and regulations that enable shareholders and stakeholders to have access to all material information and developments without discrimination and in a timely manner. This includes banking information required to be disclosed according to the instructions of the Saudi Central Bank and under the regulations of the Capital Market Authority (CMA).

The Bank pays adequate attention to the training and qualification of members of the Board of Directors and the executive management and has developed executive programs for the same. The Bank has prepared an introductory guide to assist the new Board members and provide them with the necessary information on the Bank’s strategy, financial and operational aspects, and the obligations and duties of Board members.

The Bank also implements procedures for settling customer and shareholder complaints. These procedures are monitored by the Saudi Central Bank and the Capital Market Authority. The Bank has also implemented a corporate social responsibility policy aimed at enhancing the Bank’s social role.

Corporate Governance Regulations issued by the Capital Market Authority

The Bank has given due cognisance to the Corporate Governance Regulations currently in effect, as issued by the Capital Market Authority in the Kingdom of Saudi Arabia. The following is a report on the Bank’s corporate governance practices and the extent of its compliance with the Capital Market Authority’s regulations.

GRI 102-18

Implementation and non-implementation of provisions of the CMA Regulations

The Bank applies all provisions of Corporate Governance Regulations issued by the CMA, except the following guiding provisions:

Article/Clause Requirements Reasons for not applying
Article (41) – Clause “E” The Board shall carry out the necessary arrangements to obtain an assessment of its performance from a competent third party every three years (Guiding paragraph). The evaluation is done internally on an annual basis.
Article (87) The Ordinary General Assembly, based on the Board recommendation, shall establish a policy that guarantees a balance between its objectives and those of the community for purposes of developing the social and economic conditions of the community (Guiding article). ARB has a Social responsibility Policy approved by the Board of Directors.

Board Structure

The Bank is managed by a Board of Directors consisting of eleven members, elected by the ordinary general assembly every three years. Members whose term has expired may be re-elected each time according to the Bank’s regulations.

Names of the companies inside and outside the Kingdom in which a Board member is a manager or a member of their current or previous Board.

Member name Names of companies where the
Board member is a member of
its current Boards or one of its Directors
Inside/ outside
the kingdom
Legal entity Names of companies,
in which the Board
member is a member of
its previous Boards or one
of its previous Directors
Inside/ outside
the kingdom
Legal entity
Abdullah bin Sulaiman
Al Rajhi
  • Al Rajhi Company for Cooperative Insurance (Al Rajhi Takaful)
  • Al Rajhi Capital
  • Al Rajhi Holding Group
  • Farabi Petrochemicals Company
  • Al Farabi Investment Company
  • Farabi Yanbu Petrochemicals Company
  • Farabi Transformation Industries Company
  • Indoor and Outdoor Floor Fabrics Solutions Holding Company
  • Saudi Carpet Supplies Manufacturing Company
  • Jubail Saudi Company for flooring fabric solutions
  • Green Vision for Artificial Grass Company
  • Al Ajial Holding Company
  • Fursan Travel and Tourism Company
Inside
the Kingdom
  • Listed joint stock company
  • Unlisted company
  • Unlisted company
  • Unlisted company
  • Unlisted company
  • Unlisted company
  • Unlisted company
  • Unlisted company
  • Limited liability company
  • Limited liability company
  • Limited liability company
  • Unlisted company
  • Limited liability company
Al Rajhi Bank (CEO) Inside
the Kingdom
  • Listed joint stock company
Ibrahim M. Al Romaih
  • The Saudi Arabian Investment Company
Inside the Kingdom
  • Unlisted company
  • The Saudi Arabian Investment Company (CEO)
  • National Commercial Bank
  • ACWA Power
Inside the Kingdom
  • Unlisted company
  • Listed joint stock company
  • Unlisted company
Abdulaziz bin Khaled Al Ghufaily
  • Al-Rajhi Capital
  • Savola Group
  • Savola Food Company
  • The National Petrochemical Industrial Company (NATPET)
Inside the Kingdom
  • Unlisted company
  • Listed joint stock company
  • Unlisted company
  • Unlisted company
  • Industrialization & Energy Services Company
  • Riyadh Hotels and Entertainment Company
  • Saudi Industries Development Company
  • Tabuk Agriculture Development Company
  • National Medical Care Company
  • Herfy Food Company
  • Panda retail company
Inside the Kingdom
  • Unlisted company
  • Unlisted company
  • Unlisted company
  • Listed joint stock company
  • Listed joint stock company
  • Unlisted company
  • Unlisted company
Badr bin Mohammed Al Rajhi
  • Mohammed Abdulaziz Al-Rajhi and Sons Investment Company
  • Al-Rajhi Steel Industries Company
  • Beren Company
    Al-Jazeera Company for Home Appliances
  • Al Bader Al Zahir Investment Company
  • The Saudi Company for Tourism Development
  • A support company for real estate investment
  • Mayo Osteopathy Medical Company
  • World Equestrian Resort Company
Inside
sthe Kingdom
  • A closed joint stock company
  • A closed joint stock company
  • A closed joint stock company
  • A closed joint stock company
  • A closed joint stock company
  • A closed joint stock company
  • A closed joint stock company
  • A limited liability company
  • A closed joint stock company
  • Falcon Company for Plastic Products
  • Manafea Investment Company
Inside
the Kingdom
  • Limited liability company
  • Limited liability company
Khaled bin Abdulrahman Al Gwaiz
  • Riyadh Cables Group Company
  • Emcor Facilities Management Co
  • Unique Solutions for Chemical Industries (USIC)
  • Bawan Company
  • Saudi Pharmaceutical Industries & Medical Appliances Corporation (SPIMACO)
  • Synergy Management Consulting Co.
  • Bin Ladin International Holding Group
Inside the Kingdom
  • Unlisted company
  • Unlisted company
  • Unlisted company
  • Listed joint stock company
  • Listed joint stock company
  • Limited liability
  • Unlisted company
  • ACWA Holding Company
  • ASTRA Industrial Group
  • Samba Financial Group
  • Arab National Bank
  • Swicorp Company
  • Unique Solutions for Chemical Industries (USIC)
Inside the Kingdom
  • Unlisted company
  • Listed joint stock company
  • Listed joint stock company
  • Listed joint stock company
  • Unlisted company
Alaa bin Shakib Al Jabri
  • Medical and Pharmaceutical Services Company
Inside the Kingdom Inside the Kingdom
  • Limited liability company
  • Saudi British Bank
  • Gulf International Bank
  • Construction Products Holding Company
  • Rolaco Group
Inside and outside the Kingdom
  • Listed joint stock company
  • Unlisted company
  • Unlisted company
  • Unlisted company
Ibrahim Fahad Al Ghofaily
  • Jiwar Real Estate Management, Marketing and Development Company
Inside the Kingdom
  • Unlisted company
  • Al Inma Bank
  • Al Rajhi Bank
Inside the Kingdom
  • Listed joint stock company
  • Listed joint stock company
Stefano Paolo Bertamini
  • Al-Rajhi Bank (Malaysia)
  • China Development Financial Corporation (Board member and CEO)
  • China Life Insurance Corporation
Outside the kingdom
  • Unlisted company
  • Listed joint stock company
  • Limited liability company
  • Al Rajhi Bank (CEO)
  • Standard Chartered Group
  • General Electric Group, Northeast Asia
Inside the Kingdom Outside the kingdom Outside the kingdom
  • Listed joint stock company
  • Listed joint stock company
  • Listed joint stock company
Hamza bin Othman Khushaim
  • Hassana Investment Company
Inside the Kingdom
  • Unlisted company
  • Dallah Healthcare Holding Company
Inside the Kingdom
  • Listed joint stock company
Raeed bin Abdullah Al-Tamimi
  • The Saudi Public Transport Company
  • National Gas and Industrialization Company
Inside the Kingdom Inside the Kingdom
  • Listed joint stock company
  • Listed joint stock company
  • Cooperative Insurance
  • The National Medical Care Company
  • Waseel Electronic
  • Information Transfer
  • Cooperative Real Estate Investment Company
  • Najm Company for Insurance Services
Inside the Kingdom
  • Listed joint stock company
  • Listed joint stock company
  • Unlisted company
  • Unlisted company
  • Unlisted company
Abdulatif bin Ali Al Seif
  • Arabian Cement
  • Al Ra’idah Investment Company
  • National Petrochemical Company PETROCHEM)
  • Wisayah Al Khaleej Investment Company
Inside the Kingdom
  • Listed joint stock company
  • Unlisted company
  • Listed joint stock company
  • Limited liability company
  • HSBC Saudi
  • Shared Vision Company Ltd
Inside and outside the Kingdom
  • Unlisted company
  • Limited liability company

GRI 102-22

Composition of the Board and classification of its members, as Executive Directors, Non-Executive Directors, or Independent Directors

Member name Membership Rating
(Executive/
Non-Executive/
Independent)
Abdullah bin Sulaiman Al Rajhi Non-Executive
Ibrahim M. Al Romaih Independent
Abdulaziz bin Khalid Al Ghufaily Non-Executive
Badr bin Mohammed Al Rajhi Non-Executive
Khaled bin Abdulrahman Al Gwaiz Non-Executive
Alaa bin Shakib Al Jabri Independent
Ibrahim Fahad Al Ghofaily Independent
Stefano Paolo Bertamini Non-Executive
Hamza bin Othman Khushaim Non-Executive
Raeed bin Abdullah Al-Tamimi Non-Executive
Abdulatif bin Ali Al Seif Independent

Committees of the Board of Directors

The functions and responsibilities of the Committees are specified in internal charters and regulatory requirements. The membership term is set at three years, ending with the expiration of the term of the Board. The Board of Directors has the power to appoint, reappoint, or terminate the membership of any member of the Committees. The Committees submit their recommendations and minutes of their meetings to the Board of Directors.

The following is a brief description of the Bank's Committees and their work.

A. Executive Committee

The main purpose of the Executive Committee (ExCom) is to assume responsibility for the business operations of Al-Rajhi Bank and to make quick decisions regarding urgent issues and matters related to the Bank's business. The Executive Committee shall be responsible for reviewing, following up and approving the basic financial, non-financial, commercial, investment and operational decisions related to the Bank within the limits of the powers determined by the Bank’s Board of Directors.

The committee held seven meetings during the year 2020 as follows:

Member Name
Meeting Date Abdullah bin
Sulaiman
Al Rajhi

Chairman
Abdulaziz bin
Khaled
Al Ghufaily

Member
Hamza
Othman
Khushaim

Member
Alaa bin
Shakib Al Jabiri


Member
Salah bin Ali
AbalKhail


Member
Ibrahim M.
Al Romaih


Member
Abdulatif bin Ali
Al Seif


Member
1. 17 February 2020 Their membership
began with the
eleventh meeting on
14 November 2020
2. 3 March 2020
3. 22 June 2020
4. 10 August 2020
5. 14 September 2020
6. 13 December 2020 Their membership
expired at the end of
the tenth meeting on
13 November 2020
7. 15 December 2020

B. The Nominations and Compensations Committee

The main purpose of the Nominations and Compensations Committee is to make recommendations on the nomination of Board members, Committee members and Senior Executives to the Board of Directors, preparing a description of the abilities and qualifications required for Board od Director’s membership, evaluating the effectiveness and efficiency of the Board and Senior Management, ensuring that the Bank remains compliant with the internal incentive schemes, and the rules of incentive practices issued by the Saudi Central Bank, the principles and criteria for compensation, in a manner that best achieves the interests of depositors, shareholders, and the Bank’s strategic objectives. The committee held four meetings during the year 2020 as follows:

Member Name
Meeting Date Alaa bin Shakib
Al Jabiri


Chairman
Khaled bin Abdulrahman
Al Gwaiz

Member
Raeed bin Abdullah
Al Tamimi

Member
Abdulaziz bin Khaled
Al Ghufaily

Member
Ibrahim M.
Al Romaih


Chairman
1. 30 March 2020 His membership
began with the eleventh session on 14 November 2020
2. 3 June 2020
3. 17 September 2020
4. 8 December 2020 His membership
expired at the end of
the tenth session on
13 November 2020

GRI 102-25

C. Governance Committee

The main purpose of the Governance Committee is to support and maintain the highest standards in corporate governance,
on behalf of the Board of Directors, to ensure that wise governance practices are followed in all activities carried out by the Bank. The Committee does so by conducting an annual review of the general governance framework and related mechanisms. In addition, the Committee monitors cases of conflict of interest ensuring the continuous updating of the register of conflicts of interest, reviewing requests for exemption from the governance requirements of the Bank, and coordinating with the Bank’s subsidiaries to support good and consistent corporate governance standards for all activities of the Al Rajhi Bank Group.
The Commitee also focuses on increasing awareness of the importance of governance and its activities within the Bank among all employees, shareholders and external stakeholders, conducting an annual evaluation of the performance of the Board of Directors, members of the Board and all Board Committees and Management Committees. It is also responsible for reviewing and updating the policies related to the Board of Directors and its members, the Bank’s governance and the conflict of interests, in addition to following up on the implementation of the Corporate Governance Manual and its annexes and the Bank’s Delegation of
Authority Matrix. The committee held one meeting during the year 2020 as follows:

Member Name
Meeting Date Salah bin Ali Aba Alkhail
Chairman
Ibrahim Fahad Al Ghufaily
Member
Raid bin Abdullah Al Tamimi
Member
Ibrahim M. Al Romaih
Chairman
1. 1 November 2020 His membership
expired at the end of the
tenth meeting on
13 November 2020
His membership
began with the
eleventh meeting on
14 November 2020

D. Audit and Compliance Committee

The main purpose of the Audit and Compliance Committee is to supervise the financial reporting process, overseeing the internal and external auditors, submitting recommendations to the Board of Directors and shareholders to approve, appoint and determine the remuneration or dismissal of the external auditors. In addition, to also review and approve the scope of the audit operations and their implementation, receive key audit reports, and ensure that the senior management takes all necessary corrective measures in a timely manner to address any weaknesses in controls or non-compliance with policies, laws and regulations, or any other problems identified by the auditors.

The Audit and Compliance Committee held six meetings during the year 2020 as follows:

Member Name
Meeting Date Ameen Fahad
Al Shiddi

Chairman
Abdulatif bin Ali
Al Seif

Member
Abdullah bin Ali
Al-Muneef

Member
Farraj bin Mansour
Abuthnein

Member
Walid bin
Abdullah Tamairik

Member
1. 6 March 2020
2. 30 April 2020
3. 7 June 2020
4. 18 July 2020
5. 20 October 2020
6. 5 November 2020
Their membership expired at the end of the tenth meeting on 13 November 2020

 

Audit and Compliance Committee members (other than Board of Directors members)

No. Name Committee memberships Current positions Previous positions Qualifications Experience
1.
  • Abdullah bin
    Ali Al Muneef
Audit and Compliance Committee
  • Member of Audit and Compliance Committee –
    Al Rajhi Bank
  • Member of
    Shura Council
  • Member of the Arab Parliament
  • Chief Executive Officer –
    Al Muneef Financial and Management Consultancy Office
  • Advisor – National Guard
  • Director General of Finance and Administration Affairs – National Guard
  • Head of Accounting Department, King Saud University
  • Associate Professor of Accounting Department,
    King Saud University
  • Executive Director of Financial and Administrative Affairs – King Faisal Specialist Hospital
  • Head of Accounting Association, King Saud University
  • Assistant Professor of Accounting Department,
    King Saud University
  • Lecturer at Accounting Department, King Saud University
  • Bachelor of Accounting –
    King Saud University
  • Master Degree in Accounting –
    University of Southern California, USA
  • PhD in Accounting – University of South Carolina, USA
Held many academic, leading and advisory positions in financial and management fields
2.
  • Farraj Bin Mansour Abuthnain
Audit and Compliance Committee
  • Member of Audit and Compliance Committee –
    Al Rajhi Bank
  • Board Member –
    Astra Industrial Group
  • Board Member of Petrochem
  • Member of Audit Committee –
    Almarai Company
  • Director of Loan Department – Industrial Development Fund
  • Member of the Project
    Loan Committee – Industrial Development Fund
  • Member of the Industrial Projects Performance Audit Committee – Industrial Development Fund
  • Senior Vice President of Finance and Investment – National Industrialisation Company (Tasnee)
  • Bachelor of Industrial Management – University of Wisconsin – Milwaukee
Held many leading positions in the Saudi Industrial Development Fund
3. Walid bin Abdullah Tamairak Audit and Compliance Committee
  • Member of Audit and Compliance Committee –
    Al Rajhi Bank
  • Member of Audit Committee – Real Estate Development Fund
  • Tamairak is a Chartered Accountant
  • Arthur Andersen & Co
  • Ernst & Young
  • Member of Advisory Committee of College of Management and Economics – King Abdulaziz University
  • Bachelor of Accounting – King Abdulaziz University
  • Fellowship of the Saudi Organization for Certified Public Accountants (SOCPA)
Has more than 25 years of experience in accounting, auditing and economics

GRI 102-36

E. Board Risk Management Committee

The primary purpose of the Board Risk Management Committee is to advise the Board of Directors regarding risk tolerance and risk strategy, and to oversee the Management's implementation of this strategy. This includes the management of capital and liquidity strategies, credit, and market risk management, operational risk, compliance risk, reputational risk and any other potential risks that the Bank may face.

The Committee held five meetings during the year 2020, as follows:

Member Name
Meeting Date Khaled bin Abdulrahman Al Gwaiz

Chairman/Member
Alaa bin Shakib Al Jabri

Member/Chairman
Hamza bin Othman Khushaim

Member
1. 16 February 2020
2. 26 April 2020
3. 21 June 2020
4. 15 September 2020
5. 17 December 2020

Procedures of the Board of Directors to inform its members of shareholders’ suggestions and comments on the Bank and its performance

The Bank registers shareholders’ suggestions provided through the General Assembly and notifies the Chairman of the Board of any other suggestions related to the Bank to be presented at the next Board meeting. There is also an e-mail address dedicated to the comments and suggestions of the shareholders, which is published on the official website of the Bank and on the Tadawul website. The email is directly linked to the Board Secretariat so that the Board can review the suggestions and comments of the shareholders.

The methods adopted by the Board of Directors in evaluating its performance and that of its committees and members

The Bank's Governance Committee evaluates the performance of the Board, its Committees and members through specific surveys at three levels. Evaluation is based on the Board of Directors terms of reference specified in the Bank’s Governance Manual, while evaluation of Board’s Committees and the Audit and Compliance Committee is based on their approved work regulations, and the self-evaluation of a member of the board of directors. The Governance Committee then prepares the annual evaluation report and submits it to the Board of Directors for approval. Then, the Nomination and Remuneration Committee is provided with a copy of the final report.

GRI 102-35

Remuneration of board members and Executive Management

(A) Summary of the most important provisions of the remuneration policy for members of the Board, its Committees and the Executive Management:

1. Board of Directors remuneration and compensations:
  • The members of the Bank’s Board of Directors shall receive a fixed annual remuneration amounting to SAR 400,000 on an annual basis for their membership on the Bank’s Board of Directors and their participation in its business.
  • A member of the Board of Directors receives SAR 5,000 for attending each of the Board’s sessions, whether the attendance is directly or through any of the remote communication features.
  • The Bank pays all actual expenses incurred by a member of the Board for attending the Board meetings, including travel, accommodation and accommodation expenses.
2. Remuneration and compensations for the Board members for their membership in Board Committees:
  • The Bank’s Board members do not receive additional remuneration for their membership on the Board or in Board
    sub-committees as the annual remuneration includes additional bonuses in the event that the member participates in any Board Committees.
  • A Board member receives an attendance fee of SAR 5,000 for attending each Committee meeting, whether the attendance is directly or through any of the remote communication features.
  • The Bank pays all actual expenses incurred by a Board member for attending Committee meetings, including travel, accommodation and accommodation expenses.
3. Remuneration and compensation for Audit and Compliance Committee members:
  • Each member of the Audit and Compliance Committee receives, either from within or outside the Board, a fixed annual remuneration for his or her participation in the Committee’s work, estimated at SAR 150,000 annually, provided that annual remuneration for Audit and Compliance Committee member from inside the Board shall not exceed the annual limits of annual remunerations and compensations granted to the Board member.
  • A member of the Audit and Compliance Committee receives SAR 5,000 for attending each of the meetings, whether he or she attends physically or through remote electronic channels.
  • The Bank pays all actual expenses incurred by the committee member in order to attend the committee’s meetings, including travel and accommodation expenses.
4. Granting shares:
  • The Bank does not grant shares as remuneration to any Board member, Committee member or Audit and Compliance Committee member.
5. Allocation and payment mechanisms for remuneration and compensation:
  • Compensation and remuneration due to Board members and Non-Board members are calculated on an annual basis, with the recommendation of the Nominations and Remuneration Committee and approval of the Board of Directors. Amounts are then presented to the General Assembly for approval when it next meets.
  • Remuneration can vary to reflect the Director’s experience, independence and number of attended meetings among other criteria.
  • Attendance fees are paid annually to Directors based on their attendance sheets for Board, Board Committees, and Audit and Compliance Committee meetings.
  • Payments are done through bank transfers, cheques, or any other methods, and Directors are informed of details through relevant departments.
  • Remuneration and compensations paid to directors should not exceed SAR 500,000 annually, payment of any additional due amounts will be stopped. Total amounts paid to Directors should not exceed 5% of total net profits.

GRI 102-35

6. Remuneration and compensation of senior executives:

The role of the Board of Directors includes, but is not limited to the following:

  • The Board of Directors is responsible for approving the overall design and oversight of all aspects of the remuneration system and shall not delegate this responsibility to management.
  • Although there is a Board Nomination and Remuneration Committee, the Board of Directors has ultimate responsibility for promoting effective governance and sound remuneration practices.
  • The Board of Directors shall review and, if satisfied, approve the Remuneration Policy and any of its subsequent revision/updates, on the recommendation of the Nomination and Compensation Committee, taking into account, inter-alia, the Rules on Compensation Practices of May 2010 and any future updates or revisions issued by the Central Bank of Saudi Arabia.
  • The Board of Directors shall review and, if satisfied, approve the recommendations of the Nomination and Compensation Committee regarding the level of remuneration of the senior executives.
    The senior executives for this purpose will include senior managers and all those executives whose appointments are subject to no objection by the Saudi Central Bank or other regulators.
  • The Board of Directors shall ensure that the Management has put in place elaborate systems and procedures and an effective oversight mechanism to ensure compliance of the Saudi Central Bank Rules on Compensation Practices and the Financial Stability Board Principles and Standards.
7. Structure of remuneration and compensation granted to senior executives:
  • Remuneration structures are designed for the various levels of employees in a manner that enhances the effectiveness of risk management and achieves remuneration and compensation objectives in accordance with the highest standards.
  • Forms of remuneration vary according to the position and role of the employee and may include cash payments, shares and other forms of rewards and compensation.
  • The proportion of fixed and variable remuneration components for different business lines is determined based on the nature and level of the employee's responsibilities, the field of business in which he works and their level and the general philosophy of the remuneration policy of the Bank. The Bank ensures that the total variable remuneration does not limit its ability to strengthen the capital base.
  • The remuneration structure for employees working in control functions such as risk management, compliance, internal control, etc., are designed with the aim of ensuring the objectivity and independence of these functions. In this regard, performance management and the determination of rewards and compensation for these employees are not assigned to any person who works or has any relationship with the business sector that these employees monitor or supervise.
  • When determining bonus allocations, the overall performance of the Bank is taken into consideration, while its distribution to employees is based on the performance of the employees in addition to the performance of the business unit or department in which it operates. There is no guaranteed minimum bonus or similar payment, other than an employee salary, that is not based on performance.
  • As part of the remuneration policy, the Bank may postpone a reasonable percentage of the performance bonus for a period of no less than three (3) years. The deferred bonus percentage and the maturity period are determined based on the nature of the business, its risks and the activities carried out by the employee.
  • Where the remuneration policy provides for the payment of part of the remuneration and compensation in the form of shares, criteria must be established that will be used to determine the value of the share allocation. Moreover, the allocation of shares should be subject to an appropriate stock retention policy.
  • Joining bonuses are not permitted, unless clearly aligned with long-term value creation and prudent risk taking. Any such payments should be related to performance achieved over time and designed in a way that does not reward failure. Joining bonuses should be at least linked to successful completion of probation period and where possible, deferring the joining bonuses, on terms similar to the deferred bonuses foregone from the previous company.
  • The Bank should demand from their employees that they commit themselves not to use personal hedging strategies or remunerations and liability-related insurance to undermine the risk alignment effects embedded in their remuneration and compensation arrangements.

The Bank confirms that there are no major deviations between granted remunerations and applicable remunerations policy.

(B) Remunerations and compensations paid to Board members, Board committees, and the Audit and Compliance Committee in 2020

Board
meetings
BACC
meetings
ExCom
meetings
NCC
meetings
Governance
Committee meetings
BRMC Annual
Bonus
(SAR)
Remunerations
for technical,
managerial and
consultative work
Total
(SAR)
Total paid to the
member as per
the Policy
(SAR)
No. Name No. Amount No. Amount No. Amount No. Amount No. Amount No. Amount
1. Abdullah bin Sulaiman Al Rajhi 6 30,000 7 35,000 400,000 465,000 465,000
2. Saleh bin Ali Abdullah Aba Alkhail
(Representation in the Board ended)
2 10,000 3 15,000 1 5,000 347,541 377,541 377,541
3. Abdulaziz bin Khaled Al Ghufaily 6 30,000 7 35,000 4 20,000 400,000 485,000 485,000
4. Khalid bin Abdulrahman Al Gwaiz 6 30,000 4 20,000 5 25,000 400,000 475,000 475,000
5. Bader bin Mohammed Al Rajhi 6 30,000 400,000 430,000 430,000
6. Alaa bin Shakib Al Jabri 6 30,000 5 25,000 3 15,000 5 25,000 400,000 495,000 495,000
7. Ibrahim bin Fahad Al Ghofaily 6 30,000 1 5,000 400,000 435,000 435,000
8. Raid bin Abdullah Al Tamimi 6 30,000 4 20,000 1 5,000 400,000 455,000 455,000
9. Hamza bin Othman Khushaim 6 30,000 7 35,000 5 25,000 400,000 490,000 490,000
10. Ameen bin Fahad Al Sheddi
(Representation in the Board ended)
3 15,000 6 30,000 477,869 522,869 522,869
11. Abdullatif bin Ali Al Saif 6 30,000 6 30,000 2 10,000 530,328 600,328 600,328
12. Abdullah bin Ali bin Ali Al Manif 6 30,000 150,000 180,000 180,000
13. Waleed bin Abdullah Tamairak 6 30,000 150,000 180,000 180,000
14. Faraj bin Mansour Abu Thnain 6 30,000 150,000 180,000 180,000
15. Ibrahim M. Al Romaih (A new member) 3 15,000 2 10,000 1 5,000 52,459 82,459 82,459
16. Stefano Paolo Bertamini (A new member) 3 15,000 52,459 88,125 155,584 155,584
Total 65 325,000 30 150,000 33 165,000 16 80,000 3 15,000 15 75,000 5,110,656 88,125 6,008,781 6,008,781

GRI 401-2

(C) Remunerations and compensations paid to five senior executives who received the highest remuneration from the Bank, including the CEO and CFO, in 2020

Description Five Senior
Executives
(CEO and CFO
included)
Salaries and compensations 9,060,000
Allowances 4,835,984
Periodic and annual rewards 11,600,815
Incentives schemes
Any other in-kind compensations or benefits paid annually or monthly
Total 25,469,799

Employee benefits and plans

The Bank offers its employees a number of benefits and bonuses during or at the end of the service period, according to the Saudi Labor Law and Bank Policies. The provision for employees' end of service benefits is calculated using the entitlement assessment form in accordance with the Saudi Labor Law and local regulatory requirements. The provision for the end-of-service benefits amounted to SAR 1,176 Mn.

The Bank also grants free shares to its senior employees and those of its subsidiary companies who are seen as valuable human assets that need to be retained, which helps ensure the long-term relationship with those employees. Granting of shares is subject to the approval of the Board of Directors upon the recommendation of the Nomination and Remuneration Committee.

Any penalty, sanction, precautionary measure, or precautionary restriction imposed on the Bank by the Authority or any supervisory, regulatory or judicial authority

There are no fines assigned by the Capital Market Authority.

Fines imposed by Saudi Central Bank:

Violation of: Fiscal year 2020 Fiscal year 2019
Number of
resolutions
Total amount
of fines in
Saudi Riyal
Number of
resolutions
Total amount
of fines in
Saudi Riyal
Violating the supervisory instructions of Saudi Central Bank 36 5,819,000 41 30,403,500
Violating the instructions of Saudi Central Bank related to customer protection 8 7,171,110 14 170,000
Violating the instructions of Saudi Central Bank related to due diligence 4 273,000 3 262,500
Violating the instructions of Saudi Central Bank related to the level of performance of ATMs and POS machines 0 0
Violating the instructions of Saudi Central Bank related to due diligence in combating money laundering and terrorist financing 1 250,000

Fines signed by the Ministry of Municipal and Rural Affairs:

Violation of: Fiscal year 2020
Total amount
of fines in
Saudi Riyal
Fiscal year 2019
Total amount
of fines in
Saudi Riyal
Increase of building area percentage for ATMs, lack of setbacks, visible advertising posters on branches facades and ATMs, and non-existence of licenses for some bank’s locations 2,156,600 1,717,000

Outcomes of the annual review of internal control procedures at the Bank, in addition to the Audit and Compliance Committee’s opinion on the adequacy of the Bank’s internal control system

The Bank’s Executive Management is responsible for designing an appropriate internal control system with the Board of directors’ direct supervision. The system has been designed to directly mitigate risks that could impair the realisation of the Bank’s strategic and operational objectives.
The Bank’s Executive Management has adopted a comprehensive internal control system aligned with SAMA’s regulatory requirements.

The following are some of the key components of the Bank’s internal control system:

  • The Bank has completed and approved the continuous development of the governance framework through which appropriate control tools are prepared and updated at the Bank level and the roles and responsibilities of the various levels are clarified, including the Board of Directors, the Board committees and other administrative committees.
  • The Bank has set policies and procedures that govern its business activities which are subject to a periodic review to ensure that the bank’s business is running properly in order to protect the quality of the bank’s assets.
  • The audit department monitors the adequacy of the Bank’s supervisory procedures and adheres to them, and prepares a presentation clarifying the focus and development aspects.
  • An internal committee specialised in internal control work (ICC) was formed in the Bank during the year 2020 for the purpose of following up on the observations and operations of control departments such as internal auditing, compliance, risks, account differences and other departments.
  • The Bank has a set of policies and procedures that govern its various activities. The Bank also reviews these policies and procedures periodically to verify their adequacy, efficiency and suitability for the Bank’s activities.
  • Most of the operations of the Bank are executed through automated systems, which help in reducing manual errors and reducing the chances of fraud.
  • The Bank has specialised departments for evaluating and monitoring internal control systems, including internal audit, compliance management, fraud control and various risk departments.
  • Existence of an effective Audit and Compliance Committee supervising internal and external Auditors activities in order to support and promote their independence. This Committee receives regular and periodic reports on audits carried out on different functions within the Bank.
  • The comments and reports of the Sharia group are conveyed to the audit committee to enhance the compliance.
  • Regular reviews on the efficiency and adequacy of the internal control system is carried out by Internal Audit based on an annual plan approved by the Audit and Compliance Committee, in addition to reviews of the effectiveness of internal control by the external Auditors and supervisory reviews conducted by the Saudi Central Bank.

Annual review of internal control procedures

During the year under review, Al Rajhi Bank made every effort to ensure the adequacy and effectiveness of the internal control system, in line with the requirements issued by the Central Bank of Saudi Arabia. In addition, the activities implemented during the year 2020, which included a review of the efficiency of the internal control system, contributed to providing reasonable assurances of the adequacy of the applied internal controls, in addition to confirming the existence of the systems. The Bank has in place procedures necessary to identify and evaluate the high risks that the Bank may face, the method of dealing with them, as well as the safety of their application, and this did not uncover any fundamental weaknesses affecting the adequacy of the internal control system. Accordingly, and based on the results of the internal control system evaluation work, Al Rajhi Bank has an adequate internal control system that works appropriately and is monitored and strengthened on an ongoing basis, bearing in mind that any internal control system, regardless of the level of its design and effectiveness, cannot provide absolute assurances.

General Assembly

The Bank always adheres to the concerned Government regulations in all matters relating to Ordinary and Extraordinary General Assemblies. All regulatory provisions are accompanied by sufficient information to enable shareholders to make their decisions.

Historical information of General Assembly meetings during the fiscal year:

Attendance record
No. Name The 30th
Ordinary AGM
The 31st
Ordinary AGM
1. Abdullah bin Sulaiman Al Rajhi
2. Salah bin Ali Aba Alkhail
3. Alaa bin Shakib Al Jabri
4. Khaled bin Abdulrahman Al Gwaiz
5. Ameen bin Fahad Al Sheddi
6. Bader bin Mohammed Al Rajhi
(Representative of Mohammed Abdulaziz Al Rajhi &
Sons Investment Co.)
7. Abdulatif bin Ali Al Seif (Representative of Public Pension Agency)
8. Hamza bin Othman Khushaim (Representative
of General Organisation for Social Insurance)
9. Abdulaziz bin Khaled Al Ghufaily
10. Raid bin Abdullah Al Tamimi
11. Ibrahim bin Fahad Al Ghofaily

Bank’s significant plans, decisions and future expectations

Al Rajhi Bank continued its leadership in the Retail Banking market, and the Bank intends to enhance its leadership in this sector by increasing the financing portfolio in general and real estate financing in particular. The Bank also intends to invest in the latest technologies to ensure the provision of the best banking services and products to customers, in addition to expanding the customer base

A description of the Bank's dividend policy

The net annual profits of the Bank that are determined after deducting all public expenditures and other costs and creating the necessary reserves to face doubtful debts, investment losses and emergency obligations that the Board of Directors deems necessary in accordance with the provisions of the Banking Control Law and the directives of the Central Bank of Saudi Arabia shall be distributed as follows:

  1. The sums required to pay the Zakat prescribed for the shareholders are calculated and the Bank pays these amounts to the competent authorities.
  2. At least 25% of the remainder of the net profits after deducting Zakat shall be carried over to the statutory reserve until the aforementioned reserve becomes at least equal to the paid-up capital.
  3. An amount not less than 5% of the paid-up capital, after deducting the statutory reserve and Zakat, is allocated from the remainder of the profits for distribution to the shareholders in accordance with what is proposed by the Board of Directors and decided by the General Assembly, and if the remaining percentage of the profits owed to the shareholders is not sufficient to pay this percentage, then Shareholders may not claim to pay it in the following year or years, and the general assembly may not decide to distribute a percentage of the profits in excess of what was proposed by the Board of Directors.
  4. The balance shall be used after allocating the sums mentioned in paragraphs (a), (b) and (c) above, as proposed by the Board of Directors and decided by the general assembly.

A description of any interest of the Bank’s board members, senior executives and their spouses and minor children in the Bank’s securities or any of its subsidiary companies.

A. Major shareholders:

No. Holder of interest, contractual papers and
subscription rights
Number of shares at the
beginning of year 2020
Number of shares at the
end of year 2020
Net
change
Change
%
Ownership
%
1. General Organization for Social Insurance 146,623,115 146,623,115 5.86

B. Members of the Board of Directors:

No. Holder of interest, contractual
papers and subscription rights
Number of shares at
beginning of year 2020
Number of shares at
end of year 2020
Net
change
Change
%
1. Abdullah bin Sulaiman Al Rajhi 54,186,896 54,186,896
2. Salah bin Ali bin Abdullah
Abal Khail
2,300,000 Representation in the Board ended on 13 November 2020
3. Abdulaziz bin Khaled Al Ghufaily 34,460 32,307 (2,153) -6.25
4. Bader bin Mohammed Al Rajhi 175,233 265,004 89,771 51.23
5. Khaled bin Abdulrahman Al Gwaiz 14,615 (14,615) -100.00
6. Alaa bin Shakib Al Jabri 3,846 4,000 154 4.00
7. Ibrahim bin Fahad Al Ghofaily 725,842 742,742 16,900 2.33
8. Raid bin Abdullah Al Tamimi 1,538 1,538
9. Abdul Latif bin Ali Al-Saif 61,538 1,000 (60,538) -98.37
10. Hamza bin Othman Khushaim
11. Ameen bin Fahad Al Sheddi Representation in the Board ended on 13 November 2020
12. Stefano Paolo Bertamini Representation in the Board began on 14 November 2020
13. Ibrahim bin Mohammed Al Romaih Representation in the Board began on 14 November 2020 20,924

C. Senior executives:

No. Holder of interest, contractual
papers and subscription rights
Number of shares at the
beginning of year 2020
Number of shares
at the end of year 2020
Net
change
Change
%
1. Saleh Abdullah Al Lheidan 25,000 40,004 15,004 60.02
2. Abdulrahman Abdullah Al Fadda 3,000 30,352 27,352 911.73
3. Abdulaziz Saad Resais 10,000 20,000 10,000 100.00
4. Abdullah Suleiman Al Nami 100,000 (100,000) -100.00
5. Meshaal Mustafa Al-Fadl Appointed on 1 December 2020 2,870
6 Majed Saleh Al Rajhi Appointed on 1 December 2020 76,025

Board meetings

Number of meetings: six (6)
No. Member name First
meeting
17 February
2020
Second
meeting
22 June
2020
Third
meeting
14 September
2020
Fourth
meeting
15 November
2020
Fifth
meeting
15 December
2020
Sixth
meeting
16 December
2020
1. Abdullah bin Sulaiman Al Rajhi
2. Alaa bin Shakib Al Jabri
3. Abdulaziz bin Khalid Al Ghufaily
4. Badr bin Mohammed Al Rajhi
5. Khalid bin Abdulrahman Al Gwaiz
6. Ibrahim bin Fahad Al Ghofaily
7. Hamza bin Othman Khushaim
8. Raeed bin Abdullah Al Tamimi
9. Abdulatif bin Ali Al Seif
10. Salah bin Ali Abdullah Aba Alkhail Their membership ended at the end of the tenth tenor on 13 November 2020
11. Ameen bin Fahad Al Sheddi
12. Ibrahim M. Al Romaih Their membership began with the eleventh tenor on 14 November 2020
13. Stefano Paolo Bertamini

Bank requests for shareholder register

No. Request date Request reasons
1. 5 January 2020 Company actions
2. 30 January 2020 Company actions
3. 27 February 2020 Company actions
4. 28 March 2020 General assembly
5. 25 March 2020 Profits file
6. 29 April 2020 Company actions
7. 31 May 2020 Company actions
8. 1 July 2020 Company actions
9. 8 September 2020 Company actions
10. 1 September 2020 Company actions
11. 29 September 2020 Company actions
12. 1 November 2020 Company actions
13. 2 December 2020 Company actions

Related party transactions

During its normal business cycle, the Bank deals with related parties, and those transactions with related parties are subject to the controls stipulated by the Kingdom’s legislative bodies, and the Bank has disclosed these transactions
in Note 30 of its final financial statements for the year 2020. The following is a summary of
the nature and balances of those transactions for the year ending on 31 December 2020
(all amounts are in thousands of Saudi riyals):

Type of transaction Balances
resulting
from the
transaction
Loans and advance payments 10,282,195
Potential obligations 3,664,052
Current accounts 242,323
Contributions receivable 321,512
Debtors against liabilities 169,437
Bank’s balances 188,276
Income from finance and other income 32,141
Speculation (Mudaraba) fees 72,689
Employees’ salaries and benefits (air tickets) 795
Building rentals and expenses 6,826
Contributions – policies written 721,077
Incurred and reported claims during the year 440,395
Paid claims 465,270
Board members remunerations 6,009
Short-term benefits 107,097
End of service provision 10,687

The following is the information related to the business and contracts in which the Bank was a party and in which there was an interest for a member of the Board of Directors, a senior executive, or any person related to any of their professions that took place during the year 2020:

1. Commercial contracts and service contracts (Figures are in Saudi Riyal)

No. Related party Party with direct
indirect interest
Position
in ARB
Type of relation
with related party
Relation type Period Conditions Transactions/
Contracts
amount for 2020
SAR
1. Fursan Travel & Tourism Co. Abdullah bin Sulaiman Al Rajhi Board member Owned by Board member Travel tickets for employees contract Pricing contract and annually renewable Standard conditions without preferences 978,821
2. Berain Company Badr bin Mohammed Al Rajhi Board member Board member
in the Company
Mineral water supply services For a period of one year, it is renewed automatically for
a similar period
Standard conditions without preferences 356,850

2. Rental contracts (Figures are in Saudi Riyal)

No. Related party Party with direct
indirect interest
Position
in ARB
Type of relation with related party Relation type Period Conditions Transactions/
Contracts
amount for 2020
SAR
1. Mohammed Abdulaziz Al Rajhi & Sons Investment Co. Badr bin Mohammed Al Rajhi Board member Board member in the company Lease contract for the Southern Regional Administration building Seven years – automatically renewable for similar period Standard conditions without preferences 282,373
2. Mohammed Abdulaziz
Al Rajhi & Sons Investment Co.
Badr bin Mohammed Al Rajhi Board member Board member in the company Lease contract for direct sales office in Abha Seven years – automatically renewable for similar period Standard conditions without preferences 46,000
3. Mohammed Abdulaziz
Al Rajhi & Sons Investment Co.
Badr bin Mohammed Al Rajhi Board member Board member in the company Lease contract for ATM location Five years – automatically renewable for similar period Standard conditions without preferences 40,250
4. Abdullah bin Sulaiman
Al Rajhi
Board member Board member in the company Lease contract for Al-Batha Exchange and Transfer Center One year – automatically renewable for similar period Standard conditions without preferences 632,500
5. National Gas and Manufacturing Company Raeed bin Abdullah Al Tamimi Board member Board member in the company Lease contract for ATM location One year – automatically renewable for similar period Standard conditions without preferences 126,500

3. Insurance contracts

No. Related party Party with direct
indirect interest
Position
in ARB
Type of relation with related party Relation type Period Conditions Transactions/
Contracts amount
for 2020
SAR
1. Al Rajhi Co. for Cooperative Insurance Abdullah Bin Sulaiman
Al Rajhi Board member
Board member The member holds the position of a member of its Board of Directors Comprehensive insurance policies for banks, property, business interruption, and coverage for directors
and executives
Annual contracts Standard conditions without preferences 99,466,000
Saleh Abdullah Al Zumaie Senior executive The Senior executive is a member of the Board of Directors
Saleh bin Abdullah
Al Lheidan
Senior executive The Senior executive is a member of the Sharia Board
2. Al Rajhi Co. for Cooperative Insurance Abdullah bin Sulaiman
Al Rajhi
Board member The member holds the position of a member of its Board of Directors Comprehensive car insurance policies Annual contracts Standard conditions without preferences 621,144,000
Saleh Abdullah Al Zumaie Senior executive The Senior executive is a member of the Board of Directors
Saleh bin Abdullah
Al Lheidan
Senior executive The Senior executive is a member of the Sharia Board

Statutory payments

Regular payments due by the Bank during the year consist of Zakat owed by shareholders, taxes, sums paid to the General Organisation for Social Insurance, costs of issuing visas, passports, etc.

The following table shows details of the statutory payments made during the year:

Description 2020 Brief
description
reasons
Reasons
Paid Payable until
the end of the
financial period
(not paid)
Zakat 2,032,674,042 Paid
Tax 52,089,182.65 Paid
VAT 134,017,182.59 Paid
GOSI 270,871,737 Paid
Visa and passports costs 270,950 Paid
Ministry of labour fees 2,323,743 Paid

Account books

The Bank prepares the consolidated financial statements in accordance with the accounting standards for financial institutions issued by the Central Bank of Saudi Arabia and the international standards for financial reporting. The Bank also prepares its consolidated financial statements to comply with the requirements of the Banking Control Law, the Companies Law in the Kingdom of Saudi Arabia, and the Bank’s Articles of Association.

Basel 3

The Bank publishes its quantitative and qualitative disclosure data on an annual basis. These disclosures are available in the Annual Basel Report and are available on the Bank’s website (www.alrajhibank.com.sa).

Auditors

During the Ordinary General Assembly of the shareholders, Messrs. Ernst & Young and KPMG Al Fozan & Partners were appointed as auditors for the Bank’s accounts for the fiscal year 2020. The next General Assembly, God willing, will appoint external auditors for the fiscal year 2021, based on the recommendation of the Audit and Compliance Committee in this regard.

The Board did not recommend replacing the external auditors before the end of the contract period.

Board of Directors’ Acknowledgments

According to the available information, Auditor’s report, and current market data, the Board of Directors acknowledge the following:

  • Accounting records have been prepared properly.
  • The Internal control system has been based on proper fundamentals and executed effectively.
  • There is no doubt about the Bank’s ability to continue its business.

The conclusion

The Board of Directors expresses its pleasure and pride in the positive results achieved by the Bank during the year 2020. On this occasion, the Board would like to convey its appreciation to the Custodian of the Two Holy Mosques, Crown Prince, and our wise Government.

The Bank also extends its sincere thanks to the Ministry of Finance, the Ministry of Commerce, the Central Bank of Saudi Arabia and the Financial Market Authority for their consistent coorperation and continuous support in developing the financial sector, which had a great impact and role in supporting the growth of the national economy.

The Board also seizes this opportunity to express its thanks and appreciation to the shareholders, the Bank’s valued customers and its correspondents for their support, confidence and cooperation, which has had a positive impact in furthering progress and prosperity for the Bank. It also conveys its sincere thanks and appreciation to all employees of the Bank for their sincere efforts and dedication. In addition, the Bank extends its appreciation to Sharia Board members for their loyal efforts and effective contributions to the Bank’s business.

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