Annual Report 2013

Compensation Committee

The Compensation Committee comprises three directors, two of whom, including the chairperson, are independent. Its members are Veronica John (Chairperson), Ronald Stride, and Hamidullah A. Mohib.

The principal role of the committee is to establish compensation policy for the Chief Executive Officer, members of the Management Board, and other senior managers. These guidelines include base salary, bonus, and fringe benefits. The committee also reviews the performance of senior management through a formal goal-setting and monitoring mechanism. Yearly bonuses are established based on the Bank’s financial performance against the annual budget and individual management achievement of their goals. The committee also reviews human resource policies and procedures for employees.

The committee reports to the Board and shareholders on the targets, goals, and performance of management as well as proposed changes to the compensation structure and policies and procedures. The contracts for the Chief Executive Officer and independent directors are also determined by the committee and reported to the Board and shareholders.

During the year, the committee completed the recruitment of a Deputy Chief Executive Officer who will join the bank in January, 2014, developed a plan for the recruitment of a new CEO on the retirement of the present CEO in 2015, designed a process for the selection of new directors, and approved an amended HR policy.

Risk Committee

The Board’s committee to provide comprehensive oversight and best practices in risk governance and risk management comprises Hasib Ahmed (Chairman), Hamidullah A. Mohib, and two independent Board members – Ronald Stride and Aditiya Srivastava.

The principal role of the committee is to review the Bank’s risk exposure under different products. This encompasses foreign exchange positions, asset and liabilities, capital adequacy, credit and market risk, and sovereign risk. The committee also reviews performance of the classified and non-performing loan portfolio and, most importantly, reviews and submits to the Board of Supervisors all the Bank’s policies associated with risk management. Finally, the Committee identifies unacceptable risk conditions to the full Board for its consideration and action.

The dramatic change in the business environment and market sentiment in 2013 made for a challenging year, particularly in managing risk and the need for constant vigilance. Close contact with customers, the market, and government agencies is absolutely critical. During the year, the committee approved policies covering investments in trade finance, developed guidelines for financing fuel traders, and developed and implemented the Bank’s fraud policy and underwriting standards. Working with management, the committee initiated a review of the Bank’s loan portfolio by an independent consultant and developed a process that enables consistent monitoring.

Strategy and Planning Committee

The Strategy and Planning Committee’s mission is to provide oversight to AIB’s strategic planning and annual budgeting and planning processes, as well as the development of major new initiatives.

Its members are: Brian Dickie (Chairman), Ronald Stride (both independent directors), Lutfullah Rahmat, and Hasib Ahmed.

In 2013, the committee approved planning scenarios for post-2014 and a related set of leading indicators designed to help AIB determine which scenario is unfolding. The committee also approved a three-year strategic plan, reviewed performance against the 2013 budget and business plan quarterly, and reviewed the proposed budget and business plan for 2014.

Further activities included approval of the introduction of new products, analysing the cost of funds and profitability of deposits, and evaluating approaches to improve operational efficiency and improve customer service.

Investment Committee

The Investment Committee comprises three directors – Salman Shoaib (Chairman and independent director), Hasib Ahmed, and Gokhan Erkal.

The committee’s mandate covers allocation, investment, and oversight of a portfolio of fixed income bonds. Its principal role is to oversee the Bank’s investment policy and to ensure it is modified and executed appropriately in the context of the Bank’s risk and capital specifications.

During 2013 the committee worked with the Board and management to improve and keep current the investment policy, analyse and approve alternative investments of the Bank’s surplus funds, monitored the mandate of the independent asset managers hired by the Bank and met them to discuss their performance, ways of increasing yields, and alternative investments. The committee seeks approval from the full Board when required and highlights issues that require attention.

In November, the committee assumed responsibility for approving the allocation of investable funds between different asset classes.

Audit Committee

The Audit Committee is established under the Banking Act in Afghanistan. The committee reports directly to the shareholders and the committee’s chairman, and its members are appointed at the annual general meeting. Appointments are for not more than four years and may be renewed for like periods. Members of the Board of Supervisors or the Management Board may not serve on the Audit Committee. Members of the committee are subject to the same fit and proper requirements as members of the Board of Supervisors. The committee began 2013 with five members but two left Afghanistan during the year. The remaining members are all qualified and experienced in accounting or banking.

The Audit Committee is responsible for overseeing financial reporting, compliance with risk management policies and procedures, internal controls, ethics, and management and functioning of internal audit. It is also responsible for relationships with the external auditors and meets them on completion of the annual audit and quarterly reviews.

Meetings are usually held four times a year (as in 2013) in person and in conjunction with Board meetings. The meetings are attended by the Chief Executive Officer, Head of Internal Audit, and designated Management Board members. Minutes are presented at the next Board meeting when the committee chairman reports on issues requiring Board attention.