Governance

Corporate governance report - Principal Board committees

The Board has established a number of committees, each of which has detailed terms of reference. The four principal committees are the Audit, Balance Sheet Management, Remuneration and Nominations Committees. The Audit and the Remuneration Committees comprise only independent Non-executive Directors. The terms of reference of all these committees are available on request to the Registered Office and by visiting the 'Corporate Governance' section within the 'Our Business' part of the www.bbg.co.uk website.

During the year the Audit Committee monitored the effectiveness of the Group's risk management process and its financial and other internal control systems, including internal audit, risk management and compliance functions. The Committee also reviewed the Group's accounting policies, financial statements and external reporting responsibilities. It met with the external auditors and received all reports by them addressed to the Group. The Committee reviewed the disclosure of information to the external auditor as required by the establishing Companies Act and the governance issues for tax enhanced deals. It also reviewed the Company's risk framework and assessed the funding lessons to be learned from the "liquidity crunch". It continued to review the mis-selling compensation provisions and actions being taken to comply with the Treating Customers Fairly requirements. It also reviewed the arrangements for staff to raise concerns about possible improprieties in the area of financial reporting or other issues. The Committee reviewed its terms of reference and made a small number of changes to improve the effectiveness of the meetings.

The Audit Committee also considered the position of the internal and external auditors including any risk of conflict of interest. The Group recognises the importance of internal and external auditor independence and has adopted principles to safeguard this, as follows:

• the Group will continue to use the external auditor for non-audit work where appropriate;
• the Group recognises the need for transparency around the services being provided and for a central independent overview. This is provided by the Audit Committee which monitors audit and nonaudit fees paid; and
• there is an appropriate approval process for non-audit work to ensure that external auditor independence is not compromised.

The members of the Committee are Stephen Webster (Chairman), Ian Cheshire, Nicholas Cosh and Michael Buckley. The Board is satisfied that Mr Webster fulfils the Code requirement that at least one member of the Committee has recent and relevant financial experience.

During the year, the Balance Sheet Management Committee monitored the Group's capital position and funding policies, including the import of Basel II. The Committee approved all treasury policies and, in the latter half of the year carefully considered the impact of the turmoil in the wider market on liquidity and the measures in place to manage this. During September and October 2007, a combination of the Committee and ALCO met on a daily basis to monitor the impact of the restricted market for wholesale funding. In addition, the Committee reviewed dividend policy, secure medium term funding facilities and stress testing of the mortgage book. The members of the Committee throughout the year were Nicholas Cosh (Chairman), Rod Kent, Chris Willford, Roger Hattam and the Director of Treasury and Wholesale Banking (a senior executive).

The Remuneration Committee, during the year, reviewed the remuneration policy for the Group, including the salary, bonus and benefits arrangements for the Executive Directors and other members of the senior management team. Following changes to the Combined Code implemented in 2006, Rod Kent became a member of the Committee with effect from January 2007. George Cox stepped down as Chairman of the Committee and was replaced in June 2007 by Louise Patten. The Committee also reviewed the grants and awards of schemes established by the Company. The members of the Committee during 2007, were Louise Patten (Chairman), Rod Kent, Ian Cheshire and George Cox. Following his resignation from the Board on 31 December 2007, George Cox will no longer sit on the Remuneration Committee, otherwise the membership of the Committee is unchanged.

The Nominations Committee reviewed the composition of the Board. The Committee recommended Directors for re-appointment at the AGM and no Director took part in the discussions relating to their own reappointment. The Committee also made recommendations to the Board on the appointment of two new Executive Directors and of one Non-executive Director. External recruitment consultants assisted with the search for the new Non-executive Director. The members of the Committee, during 2007, were Rod Kent (Chairman), Ian Cheshire, Nicholas Cosh, George Cox, Louise Patten, Stephen Webster, Michael Buckley and Steven Crawshaw. Following his resignation from the Board on 31 December 2007, George Cox will no longer sit on the Nominations Committee, otherwise the membership of the Committee is unchanged.

Board meeting and committee attendance 2007

The table below shows the attendance by Directors at the Board meetings and at the principal committees of which they were members during the year. Director absences were the result of unavoidable diary clashes and, in all cases, were agreed with the Chairman in advance.