CORPORATE GOVERNANCE

An effective Corporate Governance is one of the key facets advocated by the Bangko Sentral ng Pilipinas to promote public confidence and uphold the safety and soundness of the banking system. It is the combination of processes established and executed by the board of directors that are reflected in the organization's structure and how these are managed leading towards achieving goals and objectives. It is the overall management approach of senior executives in giving direction and controlling the entire organization, governance activities ensure that critical management information reaching the executive team is sufficiently complete, accurate and timely to enable appropriate management decision making, and provide the control mechanisms, thus, ensure that strategies, directions and instructions from management are carried out systematically and effectively.

The Monetary Board has approved in 2017 the amendments to the corporate governance guidelines for BSP supervised financial institutions (BSFIs). Such amendment is aimed at ensuring that the board of directors is composed of a collective mix of individuals who possess the competence and expertise to be able to effectively manage the financial institution, promoting an environment that fosters the critical exchange of views and exercise of objective judgment, and promoting prudence and greater accountability in line with the implementation of continuing reforms in the financial sector. The duties and responsibilities of the board of directors were streamlined highlighting accountabilities in the following areas, to wit:

1. Shaping the corporate culture and values;
2. Setting out objectives and strategies and oversight on Management's implementation thereof;
3. Appointing key members of senior management and control functions;
4. Overseeing the corporate governance framework; and
5. Adopting a robust risk governance framework.

The Bank subscribes to the philosophy of integrity, accountability, and transparency in its manner of doing business; dealing fairly with its clients, investors, stockholders, the communities affected by its environmental/social activities and the various public; professionalism among its Board of Directors, executives and employees in managing the bank and respect for the laws and regulations of the country affecting its business. Internally, it follows a philosophy of rational checks and balances as well as a structured approach to its business operations. The Board and Management believe that corporate governance is a critical component of sound strategic business management. Furthermore, the Board and the committees continue to review and strengthen the corporate governance policies to adopt consistency in the corporate governance framework of the Bank.

The year 2020 marked the start of a stronger Board for the Rural Bank of Solano. With the approved Amendment of its Articles of Incorporation and By-Laws last March 15, 2019, the bank is now under the supervision of nine (9) directors, three (3) of whom are independent directors. As a result, the Corporate Governance Committee was revived.

BOARD's OVERALL RESPONSIBILITY

The Board of Directors of Rural Bank of Solano (N.V.), Inc. acts in a manner that is consistent with their oversight functions and ensures the success of the bank by directing bank affairs and at the same time meeting the appropriate interest of its shareholders. The board is responsible for providing effective leadership and set the overall direction to promote good corporate governance by strong adherence to ethical standards and compliance with regulatory requirements.

The RBS Board is as well responsible for defining the bank's corporate culture and values, approving the bank's objectives and strategies, and overseeing its implementation. They are also responsible for the appointment or selection of key members of senior management including the heads of units that exercise control functions as well as the approval of remuneration and other incentive policies for personnel.

Finally, included in the board's responsibility is the approval and oversight on the implementation of the bank's corporate and risk governance framework.

ALL MEMBERS OF THE RBS BOARD ARE REGARDED AS LIKELY TO ABIDE BY THE FOLLOWING:

• Remain fit and proper for the position for the duration of his term.
• Conduct fair business transactions with the bank and ensure that personal interest does not bias Board decisions.
• Act honesty and in good faith, with loyalty and in the best interest of the institution, its stockholders, regardless of the amount of their stockholdings, and other stakeholders such as depositors, investors, borrowers, other clients and general public.
• Devote time and attention necessary to properly discharges their duties and responsibilities.
• Act Judiciously.
• Contribute significantly to the decision-making process of the board.
• Exercise independent judgment.
• Have a working knowledge of the statutory and regulatory requirement affecting the institution, the requirements of the Bangko Sentral ng Pilipinas, and the requirements of other regulatory agencies.
• Observe confidentiality.
• Attend orientation and training.