The Board of Directors meets monthly and has specified a list of matters reserved to itself for decision. The list includes matters such as substantial acquisitions or disposals of capital assets, acquisitions or disposals of businesses and the commencement or cessation of significant areas of business activity, authority levels, treasury policies and risk management policies.

A clearly defined Committee structure exists which enables specialist areas to be considered more fully than would be possible within a Board meeting. Subject to any matters which are reserved to the Board or a Committee, the Chief Executive of the Company is given authority to manage the day-to-day operations of the Company and its subsidiaries.

An organisation structure with formally defined lines of responsibility exists below the Chief Executive to permit proper delegation of specific authorities.

At 31 December 1997 the Board consisted of the Chairman, 12 Non-Executive Directors and seven Executive Directors. The roles of Chairman and Chief Executive are separate. The Non-Executive Directors bring a wide range of independent experience to the Board (pages 30 and 31), including judgements on issues of strategy, performance and key appointments. The Non-Executive Directors are free from business or other relationships which could materially interfere with their judgement.

All Directors have access to the advice and services of the Company Secretary and any Director who, in furtherance of his or her duties, wishes to take independent professional advice may do so at the Company's expense.

Non-Executive Directors are appointed for a specified term of three years and re-appointment is not automatic. A formal process exists for the selection of Non-Executive Directors, with appointments first being considered by the Remuneration, Senior Appointments and Nominations Committee before approval by the Board as a whole.

Board Committees

Audit Committee

• R J Chapman (Chairman)
• Lord Chadlington
• A L Coleby
• D E Cook
• R N Hodge
• P G Rogerson (appointed 1.1.98)
• P L M Sherwood (appointed 1.1.98)

In particular, the Committee's responsibilities include all statutory compliance matters, internal systems of control, the relationship between internal and external auditors, accounting policies and all other regulatory and prudential requirements. Representatives of the Company's internal audit division and its external auditors, KPMG Audit Plc, regularly attend the Committee's meetings.

Group Risk Committee

• H J Foulds (Chairman)
• J M Blackburn
• R F Boyes
• A L Coleby
• G J Folwell
• P G Rogerson
• J L Wood

This Committee reviews policy statements on market risk, credit risk, operational risk and strategic risk, policy statements on liquidity and wholesale funding and overall limits for risk. The Committee makes appropriate recommendations to the Board. It also reviews regular reports on each aspect of risk and monitors large exposures.

Remuneration, Senior Appointments and Nominations Committee

• J L Wood (Chairman)
• Lord Chadlington
• N L Colne
• D G R Ferguson
• Miss P M Leith

The Board delegates to this Committee decisions on Executive Directors' remuneration, service contracts and compensation payments.

The Board has implemented the Greenbury Report's Code of Best Practice and the London Stock Exchange Best Practice Provisions in terms of the constitution and membership of this Committee, remuneration policy and disclosure and approval of such remuneration.

Chairman's Committee

• H J Foulds (Chairman)
• J M Blackburn
• Professor J A Kay
• P G Rogerson
• J L Wood

Internal Control
Halifax plc is a large and complex financial services group. The Board of Directors has overall responsibility for systems of internal financial control throughout the Group. Such controls are designed to provide only reasonable and not absolute assurance against misstatement or loss.

The Board is assisted in its responsibilities by the Audit Committee which monitors control and the Group Risk Committee which monitors risk.

The principal features of financial control are set out below and should be seen against a wider background of high level controls and corporate governance.

• Within the planning framework the Board approves a corporate plan and a strategic plan which set out strategy and objectives for five and three year periods respectively. These are supported by an annual operating plan at business unit level.
• The Board receives a comprehensive monthly financial report based on an annual budget with monthly results, analysis of variances and consideration of key performance indicators. There is also a regular reforecasting process in place.
• Capital expenditure is subject to the disciplines of appraisal and approval. An annual budget is set subject to this approval process and it incorporates appropriate levels of authority and a post investment review.
• Group risk is reported to, and monitored by, a network of risk committees including the Credit Risk Committee and the Operational Risk Committee.
• Market risk and the generation and absorption of capital, together with the level and composition of trends in liquidity including projected demands on liquidity are the subject of regular reports to the Assets and Liabilities Committee.
• The principle of control manuals to document controls required to manage identified risks is supported by the Board and supplemented by procedural manuals at an operating level. Procedures are being developed by which management will submit self-certification statements confirming compliance with these controls and these statements will be reviewed by the Audit Committee.

The Directors and senior management of the Group are committed to maintaining a control conscious culture across all areas of the business. They are supported by an internal audit function whose terms of reference allow unrestricted access to people and information throughout Halifax plc.

Internal audit work is planned based on the risks to the Group and is presented annually to the Audit Committee for approval. The plan is reviewed regularly to reflect any change in priorities and is the subject of an annual audit report to the Audit Committee.

Systems of internal financial control, like other controls, are supported by the fundamental principles of segregation of duties, authorisation limits and documented control procedures.

The Audit Committee has monitored the effectiveness of the system of internal financial control which operated during the period covered by the Annual Report and Accounts.

Going Concern
The Directors are satisfied that the Group has adequate resources to continue in business for the foreseeable future and consequently the going concern basis continues to be appropriate in preparing the financial statements.