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Nationwide Building Society Board Terms of Reference

20 January 2021

1. Purpose

1.1 The Board is the main decision-making body of Nationwide and is responsible for governing the Society. It has overall responsibility for the business and affairs of Nationwide, the establishment of its strategy and oversight of its risk management.

1.2 The purpose of the Board is to set the strategic direction of Nationwide and is the ultimate decision-making body for all strategic, financial, regulatory or reputational matters.

2. Powers of the Board

2.1 The Board is responsible for directing, controlling and managing the business and the conduct of affairs of Nationwide and, in doing so, may exercise all the powers of the Society, subject to any relevant laws and regulations and to the Society’s Memorandum and Rules.

2.2 The Board may sub-delegate any or all its powers and authority as it sees fit, including, without limitation, the establishment of sub-committees to analyse particular issues and to report back to the Board.

2.3 The Board has authority to oversee any investigation of activities relating to Nationwide which are within its Terms of Reference.

2.4 The Board is authorised to seek any information it requires from any employee of the Society in order to perform its duties or call on any employee to be questioned at a meeting of the Committee as and when required.

2.5 The Board may obtain, at the Society’s expense, external and independent legal or other professional advice on any matter within its Terms of Reference and / or Matters Reserved for the Board.

3. Membership

3.1 Non-executive Directors of the Board shall be appointed by the Board, on the recommendation of the Nomination and Governance Committee and shall be subject to election and annual re-election by the Society’s members. The majority of Board members shall be independent Non-Executive Directors.

3.2 Executive Directors of the Board shall be appointed by the Board and shall be subject to election and annual re-election by the Society’s members.

3.3 The Board shall appoint the Society Chair. At the time of appointment as Society Chair, the director concerned shall be an independent Non-executive Director.

3.4 In the absence of the Chair and / or an appointed deputy, the remaining members present shall elect one of themselves to chair the meeting.

3.5 The Society’s members have the right to nominate candidates for election to the Board.

3.6 Appointments to the Board shall be for a period of up to nine years, provided the director still meets the criteria for membership and is re-elected by the Society’s members.

3.7 Only members of the Board have the right to attend Committee meetings. Non-members may be invited to attend meetings at the Society Chair’s discretion.

4. Secretary

4.1 The Society Secretary or their nominee shall act as the Board Secretary and will ensure that the Board receives information and papers in a timely manner to enable full and proper consideration to be given to the issues.

5. Quorum

5.1 The quorum necessary for the transaction of business shall be five members, of which the majority should be Non-executive Directors.

5.2 A duly convened meeting of the Board at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretions vested in or exercisable by the Board.

5.3 A decision of the Board may be taken by written resolution including electronic mail. A decision may not be taken in accordance with this provision if the members of the Board would not have formed a quorum at a meeting. 

5.4 The members of the Board shall be deemed to meet together if they are in separate locations, but are linked by conference telephone, video or other communication equipment.  For the avoidance of doubt, a quorum in that event shall be as set out in 5.1 above. Such a meeting shall be deemed to take place where the largest group of members of the Committee participating is assembled or, if there is no such group, where the Chair is located. 

6. Frequency of meetings

6.1 The Committee shall meet at least ten times per annum, at appropriate times in the financial reporting and strategic cycle, and otherwise as required.

6.2 Outside of the formal meeting programme, all Non-executive Director will maintain a dialogue with key individuals involved in Nationwide’s governance, such as members of the Nationwide Leadership Team.

7. Notice of meetings

7.1 Meetings of the Board shall be called by the Board Secretary at the request of the Society Chair.

7.2 Meetings of the Board shall be called by the Board Secretary at the request of any of its members if they consider it necessary.

7.3 Unless otherwise agreed, notice of each meeting confirming the venue, time and date together with an agenda of items to be discussed, shall be forwarded to each member of the Board and any other person required to attend, no later than three working days before the date of the meeting.

7.4 Supporting papers shall be sent to the Board members and to other attendees as appropriate, at the same time.

8. Minutes of meetings

8.1 The Board Secretary shall minute the proceedings and resolutions of all meetings of the Board, including recording the names of those present and in attendance.

8.2 The Board Secretary shall record any conflicts of interest reported at the meeting.

8.3 Draft minutes of Board meetings shall be circulated promptly to the Society Chair and, once agreed, to all members of the Board unless in the opinion of the Society Chair it would be inappropriate to do so.

9. Duties and responsibilities

9.1 The principal functions of the Board are set out below and a formal schedule of matters reserved to the Board is in place.

The principal functions of the Board are to:

9.1.1 Determine the strategy and policies of Nationwide to ensure its long-term success;

9.1.2 Set out the guidelines within which the business is responsibly managed;

9.1.3 Review business performance in the Society and significant Nationwide subsidiaries;

9.1.4 Determine the nature and extent of significant risks; and

9.1.5 Ensure judgements and decisions are taken with due regard to the creation or increase in conduct risks, taking proactive steps to avoid or prevent these where possible.

9.2 The Board has a general duty to ensure that Nationwide operates within:

9.2.1 The Society’s Memorandum and Rules (as amended from time to time);

9.2.2 Rules and guidance issued by competent regulatory authorities; and

9.2.3 All applicable laws.

10. Senior manager regime prescribed responsibilities and key functions

10.1 Assist the Senior Manager Function (SMF) role holder(s) in respect of their escalation of the following Prescribed Responsibilities to the Committee:

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Details of Senior manager regime prescribed responsibilities
Prescribed Responsibility Description SMF SMF Committee Status

h

Responsibility for overseeing the adoption of the firm’s culture in the day-to-day management of the firm.

Chief Executive Officer

Member

i

Responsibility for leading the development of the firm’s culture by the governing body as a whole

Society Chair

Member (Chair)

n

Responsibility for the independence, autonomy and effectiveness of the firm’s policies and procedures on whistleblowing, including the procedures for protection of staff who raise concerns from detrimental treatment

Society Chair

Member (Chair)

t

Responsibility for the development and maintenance of the firm’s business model by the governing body

Chief Executive Officer

Member

10.2 Where matters are being discussed in relation to a prescribed responsibility, the relevant SMF role holder should attend and participate in the discussion, or if they are unable to attend to ensure that they are suitably represented.

10.3 The Board should consider any escalations made to it from a Board Committee relating to specific Board Committee prescribed responsibilities.

11. Annual general meeting

11.1 Members of the Board shall attend the Annual General Meeting, prepared to respond to any questions on the Board’s activities. As a minimum, where all members cannot attend, the Society Chair, the Chief Executive Officer and one further Board member will attend.

12. Miscellaneous

The Board shall:

12.1 give due consideration to applicable laws and regulations, including the PRA and FCA’s Principles and Rules, the UK Listing Authority’s Listing Rules and Disclosure Guidance and Transparency Rules, the Building Societies Act 1986 and to the recommendations of the UK Corporate Governance Code, as appropriate;

12.2 be cognisant of the conduct risks arising (or increasing) as a result of their judgements, taking proactive steps to avoid or prevent these where possible;

12.3 work and liaise as necessary with all Board Committees as required including receiving regular updates on the activities of all Board Committees;

12.4 have access to sufficient resources in order to carry out its duties, including access to Nationwide’s Secretariat for assistance as required;

12.5 receive appropriate and timely training relevant to its activities, both in the form of induction training for new members and on an ongoing basis for all members; and

12.6 at least once a year, to review its own performance, constitution and Terms of Reference to ensure it is operating effectively and in line with PRA and FCA requirements and report the results of this review and recommend any changes necessary to the Board for approval.

12.7 For the purposes of these Terms of Reference, “the Society” shall mean Nationwide Building Society; “Nationwide” shall mean Nationwide Building Society and its subsidiaries and “Board Committee” shall mean committees of the Board of the Society


Matters Reserved for the Board

1. Strategy And Management Including Culture And Values

1.1 Responsibility for the overall direction, control and management of Nationwide and setting its values and standards ensuring it remains a trusted and sustainable business.

1.2 Responsibility for the adoption and development of Nationwide’s culture as a mutual organisation.

1.3 Approval of Nationwide’s long term objectives and commercial strategy, which should be designed to achieve long-term success, including the society plan.

1.4 Approval of Nationwide’s annual operating and expenditure budgets.

1.5 Oversight of Nationwide’s operations ensuring:

  • competent and prudent management
  • sound planning and risk management
  • an adequate system of internal control
  • adequate accounting and other records
  • compliance with statutory and regulatory obligations
  • adequate financial resources
  • fair outcomes for members and customers, communities, society, the environment and suppliers.

1.6 Review of performance in the light of Nationwide’s strategy, objectives, business plans and budgets and ensuring that any necessary corrective action is taken, including review of the business performance pack.

1.7 Any extension of Nationwide’s activities into new business or new geographic areas.

1.8 Any decision to cease to operate all or any part of Nationwide’s business which would have a major impact on Nationwide.

2. Structure, Capital And Funding

2.1 All issues or redemptions of core capital deferred shares.

2.2 Subject to paragraph 2.1, changes relating to Nationwide’s capital structure including capital raising activity, except individual capital raising transactions which are below £100 million and not part of a wider capital raising programme, which transactions can be approved by the Chief Executive Officer and the Chief Financial Officer jointly.

2.3 Subject to paragraph 2.1, any capital redemptions, except those below £200 million which are included in the society plan and where the redemption does not breach any Board risk appetite trigger, which transactions can be approved by the Board Risk Committee.

2.4 Changes to Nationwide’s corporate structure including any merger or creation, acquisition or disposal of any subsidiary or associated company, or of any significant business operation, or any other initiative which has significant strategic implications for Nationwide, including when the Society is invited to rescue another Building Society or other financial institution by way of merger or acquisition.

2.5 Any acquisition, disposal or securitisation of trading assets or liabilities with a gross book value in excess of £1billion or where there is an unbudgeted loss arising in excess of £50 million.

2.6 The acquisition or disposal of any individual non-trading asset, including freehold or leasehold property, with a gross book value in excess of £50 million or where there is an unbudgeted loss arising in excess of £25 million.

2.7 The above paragraphs (2.5 and 2.6) exclude all dealings in any trading assets as duly authorised by Board delegated authorities or under other Board Committees’ terms of reference.

2.8 Changes to Nationwide’s management and control structure unless separately approved by the Board Audit Committee or Board Risk Committee under their terms of reference.

2.9 Any change to the Society's mutual status.

2.10 The principles of any new forms of wholesale funding and capital instruments with characteristics different from those previously approved by the Board.

2.11 Any utilisation of central bank emergency liquidity support such as the discount window facility.

3. Financial Reporting And Controls

3.1 Approval of preliminary announcements of annual and half yearly results.

3.2 Approval of the distribution policy for periodic investment returns on core capital deferred shares.

3.3 Declaration of periodic investment returns on core capital deferred shares.

3.4 Approval of the annual report and accounts including the corporate governance statement and remuneration report, on recommendation from the Board Audit Committee.

4. Internal Controls And Risk Management

4.1 Approval of Nationwide’s risk appetite.

4.2 Ensuring maintenance of a sound system of internal control and risk management including:

  • receiving reports on, and reviewing the effectiveness of, Nationwide’s risk and control processes to support its strategy and objectives;
  • undertaking at least an annual assessment of these processes; and
  • approving an appropriate statement for inclusion in the annual report and accounts.

The Board may delegate certain responsibilities for approval of other aspects of risk management to the Board Risk Committee. Delegations of authority are set out in the Board Risk Committee terms of reference which is approved annually by the Board

4.3 The Board Risk Committee will advise the Board on risk matters and highlight significant risks identified through the Society’s risk reporting framework for discussion and if appropriate, approval.

5. Projects And Contracts

5.1 Non technology-related individual projects or projects that are related which are not included in the strategic investment portfolio and which in aggregate involve project spend in excess of £50 million over the life of the project. Project spend shall include, but not be limited to, third party supplier contract expenditure as well as internal spend and internal resource costs.

5.2 Contracts with third parties which involve annual spend in excess of £25 million or total life of contract spend in excess of £150 million.

5.3 Entering into individual or inter-related leases or tenancies where the annual rent exceeds £5 million, or disposal of surplus leasehold premises with an annual rental value in excess of £5 million.

6. Lending

6.1 Approval of recommendations from the Nationwide Leadership Team for:

  • lending proposals in excess of the Nationwide Leadership Team’s lending mandate;
  • borrowing propositions which, in the opinion of the Nationwide Leadership Team, fall outside the Society's normal business; and
  • acquisition of external loan portfolios in excess of the Nationwide Leadership Team’s mandate

6.2 Approval of treasury counterparty exposures in excess of the Nationwide Leadership Team’s mandate.

7. Communication

7.1 Approval of resolutions and corresponding documentation to be put forward to members at a general meeting, including proposals for amendments to the Society's memorandum and rules.

7.2 Approval of communications that are material to Nationwide including all circulars, prospectuses and listing particulars.

8. Board Membership And Senior Management

8.1 Changes to the structure, size and composition of the Board, following recommendations from the Nomination and Governance Committee.

8.2 Ensuring adequate succession planning for the Board and Senior Management following recommendations from the Nomination and Governance Committee, including any changes to the Board Composition and Succession plan.

8.3 Appointments and removals to the Board, following recommendations by the Nomination and Governance Committee, including the appointment of the Society Chair, the Chief Executive Officer, the Senior Independent Director and the selection of members and Chairs of Board Committees.

8.4 Continuation in office of directors, including:

  • at the end of their term of office when they are due to be re-elected by members at the annual general meeting; and
  • the suspension or termination of service of an Executive Director as an employee of Nationwide, subject to the law and their service contract.

8.5 Appointment or removal of the Chief Risk Officer and the Society Secretary.

8.6 Appointment, reappointment or removal of the external auditor to be put to member for approval, following a recommendation from the Board Audit Committee.

9. Remuneration

9.1 Determining the remuneration policy for the Executive Directors and other Senior Executives subject to the memorandum and rules and any member approval as appropriate. The remuneration of Non-Executive Directors shall be a matter for the Society Chair and the Executive Directors of the Board.

9.2 Determining whether the circumstances are such that the Society's members should be invited at the annual general meeting to approve the remuneration policy.

9.3 Approving the introduction of new incentive plans for Executive Directors, Nationwide Leadership Team members or any other Senior Managers or significant changes to existing plans subject to any member approval as appropriate.

10. Corporate Governance Matters

10.1 Approval of the division of responsibilities between the Society Chair, the Chief Executive Officer and the Senior Independent Director, which should be in writing.

10.2 Approval of terms of reference of Board Committees including any delegation of authority to those Committees.

10.3 Approval of additional job information statements for each of the Society Chair, Chief Executive Officer, Senior Independent Director, Board Committee Chairs and for Non-Executive Directors.

10.4 Receiving minutes and/or reports from the Board Committees and the Chief Executive Officer on their activities.

10.5 Review of Nationwide’s corporate governance arrangements.

10.6 Undertaking a formal and rigorous review annually of its own performance, that of its Committees and individual Directors and the division of responsibilities.

10.7 Determining the independence of Non-Executive Directors.

10.8 Considering the balance of interests between members, other customers, employees, the community and other stakeholders.

10.9 Receiving reports on the views of the Society’s members and employees.

10.10 Agreeing the Directors’ conflicts of interest policy and all other relevant policies.

11. Whistleblowing

11.1 Reviewing the adequacy and security of arrangements for employees and contractors to raise concerns, in confidence, about possible wrongdoing in financial reporting or other matters. The Board shall ensure that these arrangements allow proportionate and independent investigation of such matters and appropriate follow up action.

12. Recovery And Resolution

12.1 Approval of the Recovery Plan and direction of recovery actions deployed in response to breaches of R4 recovery indicators.

12.2 Approval of any decision to commence resolution activity and convene the Resolution Committee once R4 recovery indicators have breached or as indicated via regulatory engagements.

12.3 Approval of the Resolvability Self-Assessment as recommend by the Board Risk Committee.

13. Defence

13.1 Reviewing and noting the latest valuation of the Society taking into consideration the overall market and economic environment.

13.2 Reviewing and approving the overall defence planning strategy, possible scenarios and potential responses, including reviewing and agreeing the state of alert in relation to either a member / activist supported campaign for conversion, a hostile takeover and / or the overall environment.

13.3 Reviewing the ongoing appropriateness and robustness of the Society’s Charitable Assignment Scheme.

14. Miscellaneous

14.1 Approval of political donations.

14.2 Approval of the prosecution, defence or settlement of litigation or alternative dispute resolution mechanism involving sums above £25 million or which would have a Major impact on Nationwide.

14.3 Approval of the overall levels of insurance for Nationwide including Directors’ & Officers' liability insurance.

14.4 Approval of any significant changes to the rules of Nationwide’s pension scheme.

14.5 Approval of this schedule of matters reserved for Board decisions and the Board Terms of Reference.