Principle One – Purpose and Leadership
The Board is collectively responsible for the long term success of the Bank. It achieves this by agreeing the Bank’s strategy, within the wider
strategy of Lloyds Banking Group, and overseeing delivery against it. The Bank’s strategy is discussed further in the Strategic Report. The Board
also assumes responsibility for the management of the culture, values and wider standards of the Bank, within the equivalent standards set by
Lloyds Banking Group. The Board’s understanding of stakeholders’ interests is central to these responsibilities and informs key aspects of Board
decision making.
Acknowledging the needs of all stakeholders is fundamental to the way the Bank operates, as is maintaining the highest standards of business
conduct, which along with ensuring delivery for customers is a vital part of the corporate culture. The Bank’s approach is further influenced by
the need to build a culture in which everyone feels included, empowered and inspired to do the right thing for customers. To this end, the
Board plays a lead role in establishing, promoting, and monitoring the Bank’s corporate culture and values, with the Corporate Governance
Framework ensuring such matters receive the level of prominence in Board and Executive decision making which they require. The Bank’s
corporate culture and values align to those of Lloyds Banking Group, which are discussed in more detail on page 80 of the Lloyds Banking
Group Annual Report and Accounts for 2021.
Principle Two – Board Composition
The Bank is led by a Board comprising a Non-Executive Chair, independent Non-Executive Directors and Executive Directors; further details of
the Directors can be found on page 10. The Board considers its composition regularly and is committed to ensuring it has the right balance of skills and experience. The Board considers its current size and composition is appropriate to the Bank’s circumstances. The Board places great
emphasis on ensuring its membership reflects diversity in its broadest sense. New appointments are made on merit, taking account of the
specific skills and experience, independence and knowledge needed to ensure a rounded board and the diversity benefits each candidate can
bring overall. There are a range of initiatives across Lloyds Banking Group to help ensure unbiased career progression opportunities. Progress
on diversity objectives is monitored by the Board and built into its assessment of executive performance.
The Board is supported by its committees, the operation of which are discussed below, which make recommendations to the Board on matters
delegated to them, in particular in relation to internal control, risk, financial reporting and remuneration matters. Each committee has written
terms of reference setting out its delegated responsibilities. Each committee comprises Non-Executive Directors with appropriate skills and
experience and is chaired by an experienced chairman. The committee Chairs report to the Board at the next Board meeting. The Board
undertakes a periodic review of its effectiveness, which provides an opportunity to consider ways of identifying greater efficiencies, ways to
maximise strengths and highlights areas of further development. Given the appointment of a new Group Chief Executive in August 2021 and
the development of the Bank’s ongoing strategy within the wider Lloyds Banking Group, the Board agreed that an evaluation of its effectiveness
would be conducted in 2022 to allow the review to cover the Board’s effectiveness in overseeing these developments.
Principle Three – Director Responsibilities
The Directors assume ultimate responsibility for all matters, and along with senior management are committed to maintaining a robust control
framework as the foundation for the delivery of good governance, including the effective management of delegation through the Corporate
Governance Framework. Policies are also in place in relation to potential conflicts of interest which may arise. All Directors have access to the
services of the Company Secretary, and independent professional advice is available to the Directors at the expense of Lloyds Banking Group,
where they judge it necessary to discharge their duties as directors.
The Board is supported by its committees which make recommendations on matters delegated to them under the Corporate Governance
Framework. The management of all committees is in keeping with the basis on which meetings of the Board are managed, with open debate,
and adequate time for members to consider proposals which are put forward. The Chair of the Board and each Board committee assumes
responsibility with support from the Company Secretary for the provision to each meeting of accurate and timely information.
Principle Four – Opportunity and Risk
The Board oversees the development and implementation of the Bank’s strategy, within the context of the wider strategy of Lloyds Banking
Group, which includes consideration of all strategic opportunities. The Board is also responsible for the long term sustainable success of the
Bank, generating value for its shareholders and ensuring a positive contribution to society. The Board agrees the Bank’s culture, purpose, values
and strategy, within that of Lloyds Banking Group, and agrees the related standards of the Bank, again within the relevant standards of Lloyds
Banking Group. Further specific aims and objectives of the Board are formalised within the Corporate Governance Framework, which also sets
out the matters reserved for the Board.
Strong risk management is central to the strategy of the Bank, which along with a robust risk control framework acts as the foundation for the
delivery of effective management of risk. The Board agrees the Bank’s risk appetite and ensures the Bank manages risk effectively, delegating
related authorities to individuals through the Corporate Governance Framework and the further management hierarchy. Board level
engagement coupled with the direct involvement of senior management in risk issues ensures that escalated issues are promptly addressed,
and remediation plans are initiated where required. The Bank’s risk appetite, principles, policies, procedures, controls and reporting are
managed in conjunction with those of Lloyds Banking Group, and as such are regularly reviewed to ensure they remain fully in line with
regulations, law, corporate governance and industry best practice. The Bank’s principal risks are discussed further on pages 4 and 5.
Principle Five – Remuneration
The Remuneration Committee of the Board, in conjunction with the Remuneration Committee of Lloyds Banking Group (the ‘Remuneration
Committees’), assume responsibility for the Bank’s approach to remuneration. This includes reviewing and making recommendations on
remuneration policy as relevant to the Bank, ranging from the remuneration of Directors and members of the Executive to that of all other
colleagues where the regulators require the Bank to implement a specific approach to their remuneration, such as Senior Managers and other
material risk takers. The activities of the Remuneration Committees extend to matters of remuneration relevant to subsidiaries of the Bank,
where such subsidiary does not have its own remuneration committee. Certain members of the Lloyds Banking Group Executive, including the
Group People and Property Director, are authorised to act upon the decisions made by the Remuneration Committees, and to undertake such
other duties relevant to remuneration as delegated to them.
Principle Six – Stakeholders
The COVID-19 pandemic continued to have an effect on the way we live, including on the Bank’s many stakeholders. The Board has monitored
the impact of the pandemic on the Group’s and Bank’s business and its stakeholders, seeking to ensure that the challenges posed by the
pandemic were addressed. The Board considered related updates from management as events unfolded, covering matters including the
continued impact on customers, colleagues, suppliers and other stakeholders, approving suitable action as required.