SUBJECT: Corporate Governance Policy

APPROVED BY: Board of Directors

APPROVAL DATE: 25 July, 2016

EFFECTIVE DATE: 6 September, 2016

SCOPE: Butterfield Group

POLICY SPONSOR: General Counsel and Group Chief Legal Officer

NEXT REVIEW DATE: 6 September, ] 2017

1.1 Policy Statement

It is the policy of Butterfield Group (the “Group”) to exercise strong corporate

governance practices that enhance shareholder value, safeguard depositors’ interests,

ensure appropriate disclosure and transparency and promote the long-term growth and

financial viability of the Group. The Board of Directors (the “Company Board”) of

the Bank of N.T. Butterfield & Son Limited (the “Company”) will strive to maintain

the success and continuity of the Group’s business through ongoing monitoring to

ensure that the Group’s activities are conducted in a legal, responsible and ethical

manner.

1.2 Purpose

The Group is committed to following the rules of its regulators and supervisors in

both form and substance, and dealing with Stakeholders in a fair and equitable

manner. This Corporate Governance Policy (this “Policy”) shall guide the actions of

directors, management and employees of the Group.

1.3 Corporate Governance Responsibilities

1.3.1 The responsibilities of the Company Board include, but are not limited to, the

following:

a. To fulfill its duty of care by acting on a fully informed basis, in good faith,

with due diligence and in the best interest of the Group;

b. To set the Group’s “tone at the top” by promoting the Butterfield Code of

Conduct and Ethics, maintaining high ethical standards in their dealings

with Stakeholders and promoting the Group’s culture of helping

individuals, families and businesses protect, grow and optimize their

financial well-being;

c. To ensure the integrity of the Group’s accounting and financial reporting

systems, including independent audits, and that appropriate systems of

control are in place;

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d. To understand the Group’s operational structure, products and services to

ensure that an adequate and effective system of internal controls is

established and maintained to mitigate risks and protect shareholder value;

e. To oversee the process of disclosure and communications to ensure the

timely and accurate disclosure of all material matters, including the

Group’s financial situation, performance, operating results, governance

structures, material risks and policies relating to business ethics and

supervisory reporting;

f. To set and enforce lines of authority, clearly articulate responsibilities and

establish accountability for management throughout the Group to ensure

the integrity of reporting and monitoring of control systems;

g. To challenge management to operate within set strategies in such matters

as risk appetite;

h. To provide guidance to the boards of directors of the subsidiaries of the

Company (the “Subsidiary Boards”) regarding risk appetite;

i. To establish Company Board Committees (“Committees”) and nominate

qualified Company Board Committee members;

j. To select, compensate, and where necessary, replace key executives, and

oversee succession planning to ensure the success and continuity of the

Group’s business; and

k. To recognise the importance of continuing education for directors and to

commit to providing such education through continuing educational

programs, including reviewing the strategic plans, key policies and

practices, financial statements, changes in relevant laws and regulations,

and other materials on subjects that would assist directors in discharging

their duties.

1.3.2 The responsibilities of the Chairpersons of the Company Board and

Subsidiary Boards include, but are not limited to, the following:

a. To manage the affairs of the Company Board or Subsidiary Boards, as

applicable, including ensuring that the Company Board or Subsidiary

Boards, as applicable, are organised properly, functioning effectively and

meeting their obligations and responsibilities; and

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1.3.3 The responsibilities of the Secretaries of the Company Board and Subsidiary

Boards include, but are not limited to, the following:

a. To distribute information at least five business days in advance, if

practical, to permit adequate preparation regarding items requiring Board

and/or Committee approval; and

b. To archive and maintain in safe storage all Company and Subsidiary

Board, Committee and committee of each Subsidiary Board (“Subsidiary

Board Committees”) agendas, supporting documents, meeting minutes,

and any other relevant documentation.

1.3.4 The responsibilities of the directors of the Subsidiary Boards include, but are

not limited to, the following:

a. To fulfill their duty of care by acting on a fully informed basis, in good

faith, with due diligence and in the best interest of the Subsidiary and the

Group;

b. To set the Subsidiary’s “tone at the top” by promoting the Butterfield

Code of Conduct and Ethics and maintaining high ethical standards in

their dealings with Stakeholders;

c. To ensure the integrity of the Subsidiary’s accounting and financial

reporting systems, including independent audits, and that appropriate

systems of control are in place;

d. To understand the Subsidiary’s operational structure, products and

services to ensure that an adequate and effective system of internal

controls is established and maintained to mitigate risks and protect

shareholder value;

e. To oversee the process of disclosure and communications to ensure the

timely and accurate disclosure of all material matters including the

Subsidiary’s financial situation, performance, operating results,

governance structures, material risks and policies relating to business

ethics, and supervisory reporting;

f. To set and enforce lines of authority, clearly articulate responsibilities and

establish accountability for management in the Subsidiary to ensure the

integrity of reporting and monitoring of control systems;

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g. To challenge the Subsidiary management to operate within set strategies,

including an established risk appetite;

h. To establish Subsidiary Board Committees and nominate qualified

Subsidiary Board Committee members to ensure a formal and transparent

Subsidiary Board nomination and election process and to seek the

guidance of the Company Board in these considerations;

i. To select, compensate, and where necessary, replace key executives of the

Subsidiary, and oversee succession planning to ensure the success and

continuity of the Group’s business; and

j. To recognise the importance of continuing education for directors and to

commit to providing such education through continuing educational

programs including reviewing the strategic plans, key policies and

practices, financial statements, changes in relevant laws and regulations,

and other materials on subjects that would assist directors in discharging

their duties.

1.3.5 The responsibilities of the committees of the Company and Subsidiary Boards

include, but are not limited to, the following:

a. To provide oversight and assessment of specialized functions, and advise

the Company or Subsidiary Boards, as applicable.

1.3.6 The responsibilities of the Chairpersons of the Company and Subsidiary

Board Committees include, but are not limited to, the following:

a. To manage the affairs of the Company or Subsidiary Board Committees,

as applicable, ensuring that the Committees are organised properly,

functioning effectively and meeting their obligations and responsibilities

to the Company or Subsidiary Board, as applicable; and

b. To ensure the performance of, at a minimum, an annual review of the

Company or Subsidiary Board Committee’s Terms of References, as

applicable.

1.3.7 The responsibilities of the executive committees of the Company Board and

Subsidiary Boards (the “Executive Committees”) include, but are not limited

to, the following:

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a. To oversee and assess the day-to-day management of business areas and

advise the Chief Executive Officer (“CEO”) or Subsidiary Managing

Director, as applicable; and

b. To consider the occasional rotation of the chairmanship and membership

of the committees.

1.3.8 The responsibilities of the Chairpersons of the Executive Committees include,

but are not limited to, the following:

a. To manage the affairs of the applicable Executive Committee, ensuring it

is organised properly, functioning effectively and meeting its obligations

and responsibilities; and

b. To perform, at a minimum, an annual review of the applicable Executive

Committee’s Terms of Reference.

1.3.9 The responsibilities of the CEO include, but are not limited to, the following:

a. To sustain an ethical culture of integrity and legal compliance;

b. To clearly define the Group’s organisational structure and managerial

accountabilities;

c. To approve all chairperson positions for the applicable Executive

Committee;

d. To approve final amendments of the applicable Executive Committee

Terms of Reference; and

e. To emphasize and communicate the importance of strong control

functions within the Group and to promptly address and correct reported

corporate governance control deficiencies.

1.3.10 The responsibilities of the Subsidiary Managing Directors of the Company

include, but are not limited to, the following:

a. To sustain an ethical culture of integrity and legal compliance;

b. To clearly define the Subsidiary’s organisational structure and managerial

accountabilities;

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c. To approve all chairperson positions for the respective Subsidiary

Executive Committee;

d. To approve final amendments of the respective Subsidiary’s Executive

Committee Terms of Reference;

e. To emphasize and communicate the importance of strong control

functions within the respective Subsidiary and to promptly address and

correct reported corporate governance control deficiencies; and

f. To keep the respective Subsidiary Board fully informed by providing it

with appropriate and timely communication and internal reporting of the

respective Subsidiary’s performance.

1.3.11 The responsibilities of Executive Management of the Company include, but

are not limited to, the following:

a. To establish a management structure that promotes accountability, while

remaining cognisant of its obligation to oversee the exercise of such

delegated responsibility; and

b. To keep the Company Board fully informed by providing it with

appropriate and timely communications, and internal reporting of the

Group’s performance.

1.3.12 The responsibilities of the Policy Sponsor include, but are not limited to, the

following:

a. To implement policies and standards to provide appropriate oversight over

the Group’s corporate governance control systems.

1.3.13 The responsibilities of employees of the Group include, but are not limited to,

the following:

a. To communicate any problems or control deficiencies in operations,

instances of non-compliance with the Butterfield Code of Conduct and

Ethics or Insider Trading Policy and illegal actions or unethical practices

pursuant to the Whistleblower Policy.

1.4 Adherence

Employees at all levels are required to be familiar with, and adhere to, Group

Policies, Standards, applicable Procedures and Guidelines.

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1.5 Consequence of Policy and Standard Violations

It is the responsibility of every employee, as a condition of employment, to comply

with the published Policies of the Group. When appropriate, management may

pursue disciplinary action in the event of violations of policies, up to and including

dismissal. It is also the responsibility of every employee to report any suspected

violations of Standards or Procedures established in support of the published Policies

of the Group to his or her Division/Department Head (who may wish to consult with

the Group General Counsel, the Subsidiary Head of Compliance, Internal Audit or

Human Resources) and in accordance with the Whistleblower Policy. Reports may

be oral, electronic (including anonymously) or written.

1.6 Amendment and Interpretation

This Policy is in addition to and is not intended to change or interpret any law or

regulation or the Company’s governing documents (as amended from time to time) or

any Committee Terms of Reference reviewed and approved by the Company Board.

This Policy is subject to modification from time to time by the Company Board.

1.7 Reference

Standard A – Governance System

Standard B – Company Board of Directors

Standard C – Subsidiary Boards of Directors

Standard D – Company and Subsidiary Board Committees

Standard E – Executive Committees

Standard F – Sub-Committees

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STANDARD A: GOVERNANCE SYSTEM

A1.1 Background

The Group’s governance system provides a structure to establish Group objectives

and monitor performance. The governance system is intended to foster effective

oversight, transparency, sound governance and promote the Butterfield Code of

Conduct and Ethics.

A1.2 Standard

A1.2.1 Oversight

Achieving sound governance requires oversight by several distinct parties, including

the Company Board, Subsidiary Boards and individuals not involved in the day-to-

day management and supervision of business areas and internal control functions.

This allocation of oversight duties and responsibilities ensures that there are no gaps

in reporting lines and that an effective level of management control is extended to all

levels of the Group and its various Subsidiaries.

A1.2.2 Key Personnel

Key personnel must be fit and proper for their jobs. In selecting key personnel, the

Company Board and Subsidiary Boards must evaluate possible candidates as to

expertise, qualification and integrity, and any potential for conflicts of interest.

Aspects to focus on include skills and experience in relevant financial operations and

compliance and commensurate with the intended activities, and no record of criminal

activities or adverse regulatory judgments making them unfit to occupy important

positions. All decisions on key personnel must be taken in accordance with the

Butterfield Code of Conduct and Ethics.

Management contributes to the Group’s corporate governance by overseeing line

managers in specific business areas and activities consistent with established policies,

standards and procedures. Management must be willing and able to exercise effective

control over the activities of employees.

A1.2.3 Butterfield Code of Conduct and Ethics

The Butterfield Code of Conduct and Ethics serves as an organisation-wide standard

for the conduct of all employees, setting the framework for the exercise of judgment

in dealing with varying and often conflicting constituencies. In addition to providing

an overall framework for ethical conduct that goes beyond compliance with the law,

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the Butterfield Code of Conduct and Ethics sets clear limits on the pursuit of private

interests.

A1.2.4 Internal and External Control Functions

The Company Board, Subsidiary Boards, management, and Policy Sponsors shall

effectively utilise the work conducted by the internal audit function, external auditors

and other internal control functions. These functions, including independent,

competent and qualified auditors, as well as risk management, compliance, legal and

other related functions, achieve a number of important objectives across all levels of

the Group. These functions ensure the sound operation and performance of the

Group.

The Group has established appropriate control functions, including systems for

internal and external audit, risk management, financial and operational control and

legal. Specific controls of critical functions and business areas are defined within the

Group Policy Management Framework, and in documented procedure manuals.

Control functions are not merely policies or procedures exclusively performed at a

certain point in time, but rather, functions continually operating at all levels within

the Group. Although the Company Board, Subsidiary Boards and Policy Sponsors

are responsible for establishing an effective control culture, and overseeing and

monitoring its effectiveness on an ongoing basis, each employee within the Group

must be a willing, committed and active participant of these processes.

The Company and Subsidiary Boards shall require the timely correction of problems

identified by internal and external control functions of management and Policy

Sponsors.

A1.2.5 Reporting Illegal or Unethical Practices

The Group has established confidential procedures and safe-harbors for reporting

suspected or known illegal practices and unethical behavior, as set forth in the

Whistleblower Policy. Employees should closely examine such policy and report

concerns pursuant to its terms.

A1.2.6 Executive Compensation

The Company Board shall ensure that compensation policies and practices are

consistent with the Group’s corporate culture, long-term objectives and strategy, and

control environment.

A1.2.7 Know Your Structure

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Disclosure of the Group’s structure makes its objectives and nature transparent.

Organisational charts reflecting all majority-owned entities, Subsidiary Boards and

business lines must be documented and kept current. Documented organisational

charts must also exist for Company Board, Subsidiary Board and Executive

Committees.

Appropriate levels of internal reporting and communication to the Company Board

and Subsidiary Boards, and vice versa, must exist in respect to all material risk and

other issues that may affect the Group.

A1.2.8 Company Board Committee Composition

Board Committees are vital elements of the governance system. As such, Board

Committee members must be fit and proper for their roles, and capable of exercising

judgment independent of the views of management or inappropriate outside interests.

To promote adequate oversight, Board Committee composition must include a

majority of members not involved in the day-to-day management of business areas,

including a sufficient number of qualified independent and non-executive members,

to mitigate potential conflicts of interest and provide added assurance to shareholders

and other Stakeholders. Additionally, occasional rotation of Board Committee

membership and chairmanship should be considered.

A1.2.9 Director Orientation and Continuing Education

The Company Board shall establish, or identify and provide access to, appropriate

orientation programs, sessions or materials for newly elected directors for their

benefit either prior to or within a reasonable period of time after their nomination or

election as directors. The orientation will include presentations by senior

management to familiarise new directors with the Group’s strategic plans, its

significant financial, accounting and risk management issues, its compliance

programs, the Butterfield Code of Conduct and Ethics, its principal officers, and its

independent auditors. In addition, new members to a Committee will be provided

information relevant to the Committee and its roles and responsibilities. All

continuing directors are also invited to attend any such orientation programs. The

Company Board believes it is appropriate for directors, at their discretion, to have

access to educational programs related to their duties as directors on an ongoing basis

to enable them to better perform their duties and to recognise and deal appropriately

with issues that arise. The Company will provide appropriate funding for these

programs. In addition, directors will receive periodic reviews of the Group’s business

and may visit Group facilities as part of their ongoing review of the Company and its

operations.

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A1.2.10 CEO Evaluation and Management Succession

The Company Board, through the Compensation & Human Resources Committee,

will conduct an annual review of the performance of the CEO to ensure that the CEO

is providing the best leadership for the Company in the long- and short-term. If the

CEO serves as the Chairman of the Company Board, then a Lead Outside Director

may be appointed to preside over the Company Board or Committee thereof when it

meets for this purpose.

The Company Board will conduct an annual review of succession planning and

evaluate and nominate potential successors to the CEO. The CEO should at all times

make available his or her recommendations and evaluations of potential successors,

along with a review of any development plans recommended for such individuals.

The Corporate Governance Committee will have the responsibilities of the Company

Board under this paragraph and should make an annual report to the Company Board

on succession planning and work with the entire Company Board to evaluate and

nominate potential successors to the CEO. In addition, the Company Board, with

input from the CEO and other members of management as appropriate, will review

annually the Company’s program for management development and succession

planning for executive officers other than the CEO. The Company Board will also

review succession candidates for executive officers other than the CEO or other

senior managers as it deems appropriate.

A1.2.11 Director Access to Officers and Employees

Directors have full and free access to officers and employees of the Company. Any

meetings or contacts that a director wishes to initiate may be arranged through the

CEO or the Secretary or directly by the director. The directors will use their

judgment to ensure that any such contact is not disruptive to the business operations

of the Company and does not inappropriately disclose any confidential or sensitive

information in the possession of the director and will copy, to the extent not

inappropriate, the CEO on any written communications between a director and an

officer or employee of the Company.

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STANDARD B: COMPANY BOARD OF DIRECTORS

B1.1 Background

The Company Board is ultimately responsible for providing appropriate oversight to

ensure the financial soundness of the Group and the adequacy of the Group’s

corporate governance system. In this capacity, the Company Board must set the

general strategy and policies of the Group and its Subsidiaries, and determine what

governance structure best contributes to an effective chain of oversight. In exercising

adequate oversight over the Group’s activities, the Company Board must be fully

aware of material risks and issues affecting its entities, at all times.

B1.2 Standard

B1.2.1 Administration

The Company Board shall have a minimum of six (6) meetings during the course of

the fiscal year (four (4) quarterly meetings, one (1) strategic planning meeting, and

one (1) budget meeting). The quorum necessary for the transaction of business of the

Company Board shall be five (5) individuals, a majority of whom shall be

independent, non-executive directors. The Secretary of the Company Board shall

record meeting attendance for individual directors, to assess performance of their

responsibilities. Additionally, the Secretary of the Company Board shall keep written

minutes for all meetings and have minutes formally reviewed, approved and retained

as permanent records.

New directors must undergo orientation aimed at familiarising members with the

Group’s business, industry and corporate governance practices, including internal

policies and significant regulatory requirements. Directors will have ongoing access

to the advice and services of the Secretary of the Company Board, who is responsible

for ensuring that the Company Board procedures are followed and that applicable

rules and regulations are observed. To further their duties, directors may take

independent, professional advice if necessary, at the Group’s expense. The intention

to seek independent advice must be communicated in advance to the Company Board

Secretary.

B1.2.2 Compensation

It is recommended that a meaningful portion of non-executive directors’

compensation is in the form of common shares of the Company for as long as they

remain on the Company Board, to ensure the Company Board pursues objectives that

are in the best interest of the Group and its shareholders. Company Board

compensation guidelines that align compensation incentives with the long-term

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interests of shareholders must be documented, maintained and approved by the

Company Board.

B1.2.3 Company Board Composition

The Company Board must reflect an appropriate composition of directors who are

capable of exercising judgment independent of management influence or

inappropriate external interests. The number of directors that constitutes the

Company Board will be fixed from time to time by a resolution adopted by the

Company Board in conformity with the Company’s Amended & Restated Bye-

laws. The Corporate Governance Committee of the Company Board shall

periodically review the size of the Company Board to ensure that the current

number of directors most effectively supports the Company.

Independence and objectivity are enhanced by including a majority of qualified

independent non-executive directors capable of providing perspectives from other

businesses and insight into local conditions, and serving as a significant source of

management experience.

Directors shall be appointed at each Annual General Meeting to hold office until the

next Annual General Meeting or until a successor is elected.

The Company Board has a key role in identifying potential directors with the

appropriate knowledge, competencies and experience to complement existing

Company Board skills. In selecting directors, the Company Board must evaluate

possible candidates as to expertise, qualification and integrity, and any potential for

conflicts of interest that might affect their judgment, including membership of other

boards of directors. The nomination process benefits from full disclosure of the

experience and background of candidates.

In identifying potential Company Board directors, the Company Board, through its

Corporate Governance Committee has the responsibility to ensure that all policies,

practices, guidelines and/or procedures do not permit any form of discrimination.

The Company Board, through its Corporate Governance Committee also has the

responsibility to ensure that all decisions with regard to recruitment, appointment,

retention, and retirement of Company Board members are made without regard to

race, religious beliefs, gender, sexual orientation, marital status, ancestry or place of

origin.

To further promote independence of the Company Board, a clear division of

responsibility should exist in the separation of the Company Board Chairman and the

CEO roles.

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B1.2.4 Director Independence

The Company Board should include an appropriate combination of executive and

non-executive directors (and, in particular, independent non-executive directors) such

that no individual or small group of individuals may dominate the Company Board’s

decision making. The majority of the Company Board shall be composed of non-

executive directors determined by the Company Board to be independent.

The Company Board should identify in the annual report each non-executive director

it considers to be independent, and any framework under which this assessment has

been conducted. The Company Board should determine whether the director is

independent in character and judgment and whether there are relationships or

circumstances which are likely to affect, or could appear to affect, the director’s

judgment. The Company Board should state its reasons if it determines that a director

is independent notwithstanding the existence of relationships or circumstances which

may appear relevant to its determination, including if the director:

a. has been employed by the Group within the last five years;

b. has, or has had within the last three years, a material relationship with the

Company either directly, or as a partner, shareholder, director or senior

employee of a body that has such a relationship with the Group;

c. has received or receives compensation from the Group, other than

directors’ fees, participates in the Group’s share option or a performance-

related pay scheme, or is a member of the Group’s pension scheme;

d. has close family ties with any of the Group’s advisers, directors or senior

employees;

e. holds cross-directorships or has significant links with other directors

through involvement in other companies or bodies; or

f. represents a significant shareholder, which shall include a holder of 10%

or more of the outstanding voting share capital of the Company.

A “material relationship” is a relationship that could, in the view of the Company

Board, be reasonably expected to interfere with the exercise of a director’s

independent judgment and includes an indirect material relationship.

Directors must disclose whether they, directly, indirectly or on behalf of third parties,

have a material relationship or interest in any transaction or matter directly affecting

the Group that could affect their judgment. Disclosure to the Company Board may be

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made through advanced notice or at a scheduled Company Board meeting. Where a

material relationship or interest is declared, the involved director must not be

involved in any decision involving such transaction or matter. A director will be

deemed not to be independent if the Company Board finds that a director has

undisclosed material business arrangements with the Group which could, in the

Company Board’s view, jeopardize the director’s judgment.

Each of the principal Board Committees must contain a majority of independent, non-

executive directors, and the Audit Committee must be composed of solely

independent, non-executive directors.

The Company Board’s Corporate Governance Committee will have oversight

responsibility on behalf of the Company Board for the application of this Standard B,

including supervision of the annual self-assessment process.

B1.2.5 Requisite Approvals and Notifications

Requisite approval from, and notification to, the Company Board strengthens the

governance system and allows the Company Board to retain full and effective control

of the Group. No request or notification shall go to the Company Board except with

prior notification to the Secretary of the Company Board.

There must be an established process to document matters requiring prior approval

from, and notification to, the Company Board. This schedule of matters must be

periodically reviewed by the Company Board and made available upon request to the

Secretary of the Company Board.

The Company Board must approve various matters, including but not limited to:

Board and Management

a. Any appointment to or removal from the Company Board;

b. Appointment or removal of the CEO, the Secretary of the Company Board

or Executive Vice Presidents and above;

c. Board Committees’ composition and Terms of Reference;

d. Fees of non-executive directors;

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Secretarial

a. Calling shareholders’ meetings;

b. Delegating the Company Board’s powers (by resolution or power of

attorney);

c. Allotting, repurchasing for cancellation or otherwise and/or forfeiting

securities of the Company;

d. Vetting and seeking approval from the Chairman of the Company Board

for scheduling of matters outside the normal course of business;

Business Control

a. The adoption of the Company Code of Conduct and Ethics and Insider

Trading Policy;

b. The adoption of this Policy;

c. A framework for internal control functions and financial and operational

control systems;

d. Risk policy and Capital Assessment and Risk Profile (“CARP”)

procedures, including risk appetite of the Group;

Finance

a. Annual budgets;

b. Capital-raising actions and activities;

c. Annual and quarterly accounts and accounting policies;

d. Approval, and recommendation for approval to shareholders, of the

appointment or removal of auditors;

e. Prospectuses, offer documents and listing agreements;

f. Dividend policy, including setting of record dates;

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Operations

a. Strategic plans and objectives;

b. Major plans of action;

c. Adoption of profit plans;

d. Adoption of redundancy policies;

e. Adoption of remuneration policies;

f. Rules for employee retirement plans and retirement of members of the

Company Board;

g. Formations, acquisitions and divestitures of subsidiaries, associated

companies or branches in excess of 5% of the Group’s assets;

h. Major capital expenditures in connection with the acquisition of fixed

assets in excess of 5% of the Group’s net assets;

i. Investments outside the ordinary activities of the Group in excess of 5% of

the Group’s net assets; and

j. Transaction(s) with a loss exposure in excess of 25% of the Group's

available capital resources, provided, however, that the requisite approval

for this item may be given pursuant to a valid resolution of the Risk Policy

& Compliance Committee, provided, further, such approval is reported to

the Company Board at its next regularly scheduled meeting).

The Company Board must be notified in advance of the following matters:

Board and Management

a. Appointment or removal of Senior Vice Presidents, Vice Presidents, or

those with equivalent rank in the Subsidiaries;

b. Changes to management structure, lines of accountability and titles of

members of the Group’s senior management;

Secretarial

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a. Disclosure of directors’ conflict of interests;

b. Major litigation involving the Company;

Operations

a. Significant changes in policies in respect of insurance, corporate security,

treasury, credit and other aspects of risk management; and

b. All situations in which an executive officer requests the appeal of a

decision of the Credit (Executive) Committee.

B1.2.6 Risk Policy, Appetite and Profile

The Group’s risk policy, appetite and profile are closely related to corporate

governance and strategy because they specify the types and degrees of risk that the

Group is willing to accept in pursuit of its goals.

The Company Board must, on an annual basis, formally review and endorse the key

components of the CARP procedures. The Company Board has an ongoing

responsibility for ensuring and demonstrating to supervisors and regulators that the

risk policy, the level, distribution and composition of capital, the control framework

and the Group’s strategic planning are appropriately integrated and consistent with

the established and documented risk appetite and profile. The Company Board must

develop a Risk Appetite Statement that encapsulates the consideration of various risk

scenarios, establishing tolerance or target levels for these risks. To embed the desired

aggregate risk profile within the Group, risk appetite must seamlessly transfer from

Head Office to all Subsidiaries and from Subsidiaries to all business lines. Where the

Group outsources key functions, the accountability of directors and management is

not delegated to the entities providing the outsourced services, but remains with

directors and management.

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STANDARD C: SUBSIDIARY BOARDS OF DIRECTORS

C1.1 Background

Each Subsidiary Board, under the guidance of the Company Board, is responsible for

providing appropriate oversight of their entity’s business. The Subsidiary Boards

have overall responsibility for the proper stewardship of the Subsidiary in all its

undertakings. The Subsidiary Boards shall meet at regular intervals throughout the

year to discharge their responsibilities for all important aspects of the Subsidiary’s

affairs. In any instance where a conflict arises between this Standard C and

applicable law, the latter will take precedence.

C1.2 Standards

C1.2.1 Administration

Subsidiary Boards shall establish a formal meeting schedule and record meeting

attendance of individual directors to assess performance of their responsibilities.

Additionally, Subsidiary Boards will keep written minutes for all meetings and have

minutes formally reviewed, approved and retained as permanent records.

New directors must undergo orientation aimed at familiarising themselves with the

applicable Subsidiary’s and the Group’s business, industry and corporate governance

practices, including internal policies and significant legal and regulatory

requirements.

C1.2.2 Compensation

It is recommended that a meaningful portion of non-executive directors’

compensation be in the form of common shares of the Company for as long as such

directors remain on the Subsidiary Board, to ensure the Subsidiary Board pursues

objectives that are in the best interest of the Subsidiary and its shareholders.

C1.2.3 Subsidiary Board Composition

Subsidiary Boards shall have an appropriate composition of directors who are capable

of exercising judgment independent of management influence or inappropriate

external interests. Subsidiary Board composition will be defined by local legislation

and must include a minimum and maximum number of directors. Independence and

objectivity are enhanced by including a sufficient number of qualified non-executive

or external independent directors capable of providing perspectives from other

businesses and insight into local conditions, and serving as a significant source of

management experience.

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To promote Subsidiary Board independence, a clear division of responsibility must

exist in the separation of the Subsidiary Board Chairman and Managing Director

roles. Directors shall be appointed for specific terms and be re-appointed, approved

or terminated, as the case may be, as directed by jurisdictional legislation.

Subsidiary Boards have a key role in identifying potential directors with the

appropriate knowledge, competencies and experience to complement existing

Subsidiary Board skills. In selecting directors, the Subsidiary Board must evaluate

possible candidates as to expertise, qualification and integrity, and any potential for

conflicts of interest that might affect their judgment, including membership of other

boards. The nomination process benefits from full disclosure of the experience and

background of candidates.

C1.2.4 Subsidiary Director Independence

Following in the Company Board’s example, Subsidiary Boards should include an

appropriate combination of executive and non-executive directors (and, in particular,

independent non-executive directors) such that no individual or small group of

individuals may dominate the Subsidiary Board’s decision making. The majority of

the Subsidiary Board shall be composed of non-executive directors determined by the

Subsidiary Board to be independent.

The Subsidiary Board should identify each non-executive director it considers to be

independent, and any framework under which this assessment has been conducted.

The Subsidiary Board should determine whether the director is independent in

character and judgment and whether there are relationships or circumstances which

are likely to affect, or could appear to affect, the director’s judgment. The Subsidiary

Board should state its reasons if it determines that a director is independent

notwithstanding the existence of relationships or circumstances which may appear

relevant to its determination, including if the director:

a. has been employed by the Group within the last five years;

b. has, or has had within the last three years, a material relationship with the

Company or Subsidiary either directly, or as a partner, shareholder,

director or senior employee of a body that has such a relationship with the

Group;

c. has received or receives compensation from the Group, other than

directors’ fees, participates in the Group’s share option or a performance-

related pay scheme, or is a member of the Group’s pension scheme;

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d. has close family ties with any of the Group’s advisers, directors or senior

employees;

e. holds cross-directorships or has significant links with other directors

through involvement in other companies or bodies; or

f. represents a significant shareholder.

A “material relationship” is a relationship that could, in the view of the Subsidiary

Board, be reasonably expected to interfere with the exercise of a director’s

independent judgment and includes an indirect material relationship.

Each of the principal Subsidiary Board Committees must contain a majority of

independent, non-executive directors.

The Subsidiary Board’s Corporate Governance Committee will have oversight

responsibility on behalf of the Subsidiary Board for the application of this Standard

C, including supervision of the annual self-assessment process.

C1.2.5 Risk Policy, Appetite and Profile

To support the Group’s risk policy, appetite and profile, Subsidiary Boards must, on

an annual basis, formally review and endorse the key components of all locally

produced CARP procedures, Internal Capital Adequacy Assessment Process

(“ICAAP”), or equivalent. Subsidiary Boards have an ongoing responsibility for

ensuring and demonstrating to supervisors and regulators that the risk policy, the

level, distribution and composition of capital, the control framework and the

Subsidiary’s strategic planning are appropriately integrated and consistent with the

established and documented risk appetite and profile. Subsidiary Boards must

develop a Risk Appetite Statement that encapsulates the consideration of various risk

scenarios, establishing tolerance or target levels for these risks. A consolidated

version of each Subsidiary’s CARP/ICAAP procedures are produced by the Group

and made available upon request to the Bermuda Monetary Authority, the Group’s

home regulator.

C1.2.6 Code of Best Practice

Subsidiary Boards and their individual members strengthen the Group’s governance

system by:

a. Applying standards of professional conduct and high corporate values for

itself, management and employees through the Butterfield Code of

Conduct and Ethics;

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b. Communicating corporate values throughout the organisation to guide the

Subsidiary’s ongoing activities, on a consistent basis;

c. Structuring the Subsidiary Board in a way, including size, that promotes

efficiency and real strategic discussion;

d. Possessing adequate collective knowledge of material financial activities

being pursued;

e. Committing sufficient time and energy to fulfill their responsibilities;

f. Finding the right level of involvement in strategic planning and

implementation, and avoiding participation in day-to-day management;

g. Documenting a formal schedule of matters specifically reserved for their

approval or requiring their prior notification;

h. Documenting procedures for directors to, in furthering their duties, take

independent, professional advice if necessary, at the Subsidiary’s expense;

i. Documenting procedures for directors to have ongoing access to the

advice and services of the Secretary of the Subsidiary Board, who is

responsible for ensuring that the Subsidiary Board procedures are

followed and that applicable rules and regulations are observed;

j. Promoting the Subsidiary’s sustainability and soundness by understanding

and complying with governing regulatory environments, and ensuring an

effective relationship with regulators is maintained;

k. Avoiding conflicts of interest, or the appearance of conflicts, in their

activities with, and commitments to, other organisations;

l. Agreeing in advance contingency arrangements to adopt when conflicts of

interest arise which would make them incapable of properly fulfilling their

duties;

m. Completing a formal annual self-assessment of the Subsidiary Board’s

performance relative to this Policy, as well as performance reviews of

individual directors, the Subsidiary Board Chairman, and Subsidiary

Board Committees based on criteria that includes clearly defined strategic

and personal goals and objectives;

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n. Periodically assessing the effectiveness of the governance system to

identify weaknesses and implement corrective action;

o. Aligning compensation for Subsidiary Board Committee members and key

executives to the Subsidiary’s long-term business strategy to avoid

excessive risk-taking and overdependence on short-term performance;

p. Exercising due diligence in the oversight of external auditors; and

q. Setting clear limits for the Subsidiary Board and key executives on the

pursuit of private interests that might conflict with their terms of services

and duties to the Group and the Subsidiary.

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STANDARD D: COMPANY AND SUBSIDIARY BOARD COMMITTEES

D1.1 Background

The Company Board and Subsidiary Boards have authority to establish specialized

committees to advise them. This Standard provides the guidelines under which such

committees shall operate.

D1.2 Standard

D1.2.1 Specialized Committees

Specialized committees of the Company Board and Subsidiary Boards focus on

specific functions and provide meaningful leadership in specific areas. Company and

Subsidiary Boards should identify key areas of supervision and establish specialized

committees where appropriate to provide oversight, evaluate, recommend and/or

approve those matters requiring Company Board or Subsidiary Board attention.

Minimum key areas of Company Board and Subsidiary Board involvement are:

a. Corporate governance;

b. Internal and external audit functions;

c. Compliance;

d. Market, credit and operational risk; and

e. Non-executive directors’ and, in the case of the Company Board,

Executive Management’s compensation.

D1.2.2 Administration

When specialized committees are created, their Terms of Reference, composition and

working procedures must be well-defined and disclosed by the appropriate board to

establish their purpose and duties. Organisational charts must be documented to

display the committee’s relationship to such board and facilitate assessment of

effective committee structures across the Group.

Committees must promote efficiency and real strategic discussion by having an

adequate number and appropriate composition of members, and meeting regularly

based on the documented schedule, but, at a minimum, quarterly. Written minutes

must be maintained for all committee meetings, and formally reviewed, approved,

and retained as permanent records.

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D1.2.3 Terms of Reference

Terms of Reference clarify Company Board and Subsidiary Board requirements and

expectations of when and how committee responsibilities will be met. All

committees require standardized, documented Terms of Reference that include the

following standard sections:

a. Name: identifies the committee name and its general objective.

b. Mandate: establishes the committee’s authoritative instructions and

responsibilities.

c. Members Quorum and Alternates: documents the list of members,

including independent and non-executive member requirements, the

number of attendees that comprise a quorum and whether alternates are

allowed.

d. Proceedings: outlines procedures for the regularity of meetings,

recording of minutes and regular reviews of the Terms of Reference.

e. Principal Duties: establishes all decision-making and approval authority.

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STANDARD E: EXECUTIVE COMMITTEES

E1.1 Background

Executive Committees are established by the CEO or Subsidiary Managing Director

to oversee the day-to-day management of business areas, ensure sound governance

and the timely review of internal reporting. The Executive Committee established by

the CEO represents the central decision-making and policymaking body of the

Company. This Standard provides the guidelines under which the Executive

Committees shall operate.

E1.2 Standard

E1.2.1 Administration

When Executive Committees are created, their mandate, composition and working

procedures must be well-defined and disclosed by the CEO or Subsidiary Managing

Director to establish its purpose and duties. Organisational charts must be

documented to display the committee’s relationship to management and the Company

Board and Subsidiary Board, as applicable, and facilitate assessment of effective

Executive Committee structures across the Group.

Executive Committees must promote efficiency by having an adequate number and

appropriate composition of members, and meeting regularly based on the documented

schedule, but at a minimum, monthly. Written minutes must be maintained for all

committee meetings, and formally reviewed, approved, and retained as permanent

records by each committee Secretary.

E1.2.2 Terms of Reference

Terms of Reference clarify requirements and expectations of when and how

committee responsibilities will be met. All Executive Committees require

standardized, documented Terms of Reference that include the following standard

sections:

a. Name: identifies the Executive Committee name and its general

objective.

b. Mandate: establishes the Executive Committee’s authoritative

instructions and responsibilities.

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c. Members Quorum and Alternates: documents the list of members, the

number of attendees that comprise a quorum and whether alternates are

allowed.

d. Proceedings: outlines procedures for the regularity of meetings,

recording of minutes and regular reviews of the Terms of Reference.

e. Principal Duties: establishes all decision-making and approval authority.

f. Member List: states the members and the position each hold (for

example, Chair).

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STANDARD F: SUB-COMMITTEES

F1.1 Background

A committee of the Company Board or Subsidiary Board or the Executive Committee

may delegate authority to a sub-committee to achieve certain objectives if provided

for in the respective committee’s Terms of Reference; however, the committee or any

Executive Committee shall retain all responsibility for the sub-committee’s mission

and objectives and for the sub-committee’s delegated work. No decision of a sub-

committee shall be effective upon the Group unless it has been formally reviewed and

approved by the committee that sponsored the sub-committee, and such committee

has reported the sub-committee’s work and decisions to the Company Board or

Subsidiary Board, as applicable, or management as appropriate and has received

approval.

F1.2 Standard

F1.2.1 Sub-Committee Administration

a. Sub-committees are subject to the requirements under the Terms of

Reference of the committee sponsoring the sub-committee. If a sub-

committee is determined to have or need special delegated authority and

responsibilities, such sub-committee should have its own terms of

reference apart from the sponsoring committee’s Terms of Reference.

However, in no case shall the sub-committee’s terms of reference exceed

or otherwise violate the jurisdiction or authority of the sponsoring

committee.

b. Sub-committees must promote efficiency by having an adequate number

and appropriate composition of members, and meet regularly based on a

documented schedule. Written minutes must be maintained for all sub-

committee meetings, and formally reviewed, approved, and retained as

permanent records by each sub-committee secretary to be stored with

Group Legal.

c. Organisational charts must be documented to display the sub-committee’s

relationship to management and the Company Board or Subsidiary Board,

as applicable, and facilitate assessment of effective sub-committee

structures across the Group.

d. From time to time, any committee may make use of management working

groups. Working groups may be formal or informal, however all working

groups should be provided with a clearly defined function and completion

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date that is reflected in the sponsoring committee’s minutes. Management

working groups that are intended to function for more than six months

should be subject to the same practices as sub-committees.

e. The Group does not prohibit the formation of other informal meetings that

are not designated committees, sub-committees or working groups, and

encourages its staff to communicate often and freely among each other

and with peers; however, no decisions resulting from informal meetings

should be effective upon the Group without further review and approval

by a decision authority.

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DEFINITIONS

CARP: Capital Assessment and Risk Profile procedures.

CEO: the Chief Executive Officer of the Company.

Committees: the committees of the Company Board.

Company: The Bank of N.T. Butterfield & Son Limited.

Company Board: the Board of Directors of the Company.

Executive Committees: the committees established by the CEO or Subsidiary Managing

Director to oversee the day-to-day management of business areas and ensure sound

governance and the timely review of internal reporting.

Executive Management: the members of the Executive Committee of the Company Board

and Senior Officers as defined in the most recent annual report of the Company.

Group: the Company and its Subsidiaries.

ICAAP: the Internal Capital Adequacy Assessment Process.

Policy: this corporate governance policy.

Policy Sponsors: members of management charged with implementing policies, standards,

procedures and effective systems of internal control.

Stakeholders: a range of different resource providers including investors, employees,

creditors and suppliers.

Subsidiary: any Subsidiary of the Company.

Subsidiary Board: the board of directors of a Subsidiary.

Subsidiary Board Committees: the committees of the Subsidiary Board.

Subsidiary Managing Director: the person responsible for the day-to-day management of a

Subsidiary.

Terms of Reference: an outline of the purpose, function, structure and scope of a

committee’s responsibilities.