Terms of Reference - Risk Committee

1. Composition of the committee

The Board Risk Committee is a sub-committee of the Board. Each member of the Board is also a member of the Committee. The Committee is chaired by one of the Board’s independent directors. The Society’s Secretary and Solicitor, other members of the management team and external advisors (such as internal and external audit) may also attend meetings as appropriate.

2. Duties

The Committee is tasked with identifying the key risks facing the Society and determining their importance given their potential impact and likelihood of occurrence. The Committee will also ensure that the Society’s response to all identified key risks is appropriate.

More specifically, the Committee will:

i. Review the Society risk register, ensuring that all principal risks are identified and adequately managed. The Committee will also satisfy itself regarding the Society’s procedures for identifying new risks and tracking the development of all identified risks over time. To the extent that any of this work is delegated to the Management Risk Committee, an update on actions taken will be provided by that committee to the Board Risk Committee. The Committee will also ensure that the principal risks identified by the risk register are adequately considered within both the Society’s ICAAP and internal audit programme.

ii. Review the results of the suite of stress tests designed to help the Committee discharge its responsibilities and satisfy the requirements of SYSC 12 Group risk systems and control requirements and SYSC 20 Reverse stress testing. Ensure the suite of tests is developed so that it continues to support the Society’s risk governance arrangements and the work of the Committee.

iii. Review and approve the Society’s ICAAP and Capital Requirements Directive Pillar 3 disclosures. Each document will be reviewed at least annually and more frequently if dictated by market conditions. It will generally be the case that the ICAAP will be updated and approved twice annually (once following completion of the Business Plan and once following approval of the annual accounts) and the Pillar 3 disclosure will be updated and approved once annually in accordance with the minimum requirements set out BIPRU 11.3.

iv. Consider at least annually the adequacy of the Society’s risk governance arrangements. This is to constitute a general review of those arrangements, but will also consider the specific issue of whether the Society should maintain an independent risk governance structure.

v. Recommend to the Remuneration Committee the detail of that part of the Finance Director’s job description relating to risk governance, or any amendments thereto. If risk governance becomes en executive responsibility of any other executive director, the Committee will make similar recommendations to the Remuneration Committee concerning that individual’s job description.

3. Meetings

The Committee will meet at least four times per year and more frequently if considered necessary. Minutes of each meeting will be taken and circulated to each member prior to the next meeting.

MAY 2010