Matters reserved to the Board

The formal schedule of matters specifically reserved to the Board for decision is as follows:

1. Regulatory/Legal Requirements

1.1 Approval of the interim and preliminary results of the Company.
1.2 Approval of any interim dividend and recommendation of any final dividend.
1.3 Approval of the Annual Report & Accounts, Summary Financial Statement of the Company and any interim statement advertised or issued to shareholders of the Company.
1.4 Appointment and removal of the Company Secretary.
1.5 Receipt of declarations of interest from Directors pursuant to Section 324 of the Companies Act.
1.6 Approval of listing particulars.
1.7 Approval of the annual report on Directors' remuneration contained in the Annual Report and Accounts of the Company.

2. Appointments, Training, Evaluation & Terms of Reference

2.1 Appointment and removal of Directors of the Company in the circumstances prescribed by the Articles.
2.2 Appointment of any Director as Chairman or Deputy Chairman of the HBOS Board or Senior Independent Director, and ending such appointments.
2.3 Determination of the independence of any Director or proposed Director of the Company, taking into account the issues referred to in the Section headed "Independent Non-Executive Directors - Definition of Independence" of this Board Control Manual.
2.4 Apportionment of responsibilities to the Executive Directors of the Company including appointments to (and removal from) the positions of Chief Executive, Chief Executive - Designate and Group Finance Director.
2.5 The scope and extent of delegations to the Chairman, Deputy Chairman and Chief Executive and Chief Executive - Designate.
2.6 Approval of the terms of reference of all Board Committees.
2.7 Performance evaluation of the Board at least once each year, and reporting (in the Company's Annual Report and Accounts) as to whether such performance evaluation has taken place and how it has been conducted.
2.8 Approval of policy on Executive Directors’ remuneration.
2.9 Approval by the Chairman and Executive Directors of the remuneration and terms of appointment of Non-Executive Directors of the Company, reflecting the time commitment and responsibilities of the role.
2.10 Ensuring that a satisfactory dialogue with shareholders takes place.

3. Management

3.1 Approval of the Group Business Plan.
3.2 Approval of, and significant changes to, Group Policies and Standards on financial and non-financial risks, including but not limited to market risk; credit risk (including large exposures); insurance risk; and operational risk.
3.3 Approval of the policy in relation to the provision of non-audit services by the external auditors, as recommended by the Audit Committee.
3.4 Approval of matters for the agenda of all General Meetings of the Company.
3.5 Approval of any material changes to the levels and nature of the insurance cover held by the Group.
3.6 Approval of, and significant changes to, the Group’s system of internal control.
3.7 Annual review of the effectiveness of the Group's system of internal controls and reporting to shareholders that this has been done. The review will cover all material controls, including financial, operational and compliance controls and risk management systems.
3.8 Approval of, on the recommendation of the Group Audit Committee, the Audit Engagement Letter.

4. Transactions

4.1 Approval of any Substantial Transaction, defined for these purposes as:
- any Class 1 or Class 2 transaction (as defined by the Listing Rules).
- any Class 3 transaction (as defined by the Listing Rules) which gives rise to any issue of securities;
- any capital and revenue expenditure, including an acquisition or disposal of financial assets (which may involve purchase, sale, outsourcing or insourcing or any other form of transfer of business), involving a total consideration (including deferred consideration if any) or, if greater, of a market value, that exceeds or may exceed:

£1 billion in the case of residential mortgage portfolios (and/or the premium (on acquisition) or net present value of any discount (on disposal) exceeds £100 million,);
£500 million in the case of other loan portfolios (and/or the premium (on acquisition) or the net present value of any discount (on disposal) exceeds £50 million; or
in any other case, approval of any individual item or series of linked transactions that would commit any Group Company to capital and/or revenue expenditure that exceeds, or may exceed £100 million;

The following business is excluded from the definition of transaction for the purposes of this approval process and are subject to the approvals process referred to:

any transaction permitted under Group Policies and Standards, (including the Group's Credit Approval processes), approved by the HBOS board.
fund management activity conducted by Asset Management, in accordance with its approved Investment Policy and Limits; and
insurance business entered into by any company in the Insurance & Investment Division in accordance with the relevant approved Business Plan.

4.2 Approval of commencement, by any Group Company, of any activity within its powers, where such business has not previously been transacted and where the activity is expected to represent, in its first full year of trading, more than 1% of gross income of the Group in the most recent financial year.
4.3 Approval of cessation, by any Group Company, of any activity previously conducted, representing more than 1% of gross expenses of the Group in the most recent financial year.

5. Guarantees/Indemnities/Securities

5.1 Approval of the provision of any guarantee, indemnity or security by a Group Company for a sum that exceeds, or may exceed, £100 million, other than approved as part of:

a lending or other financing transaction which is approved in accordance with the Group's Credit Approval processes;
the normal insurance and/or investment business entered into by any of the Group's insurance or investments businesses within the Insurance & Investment Division or International Operating Division in accordance with the relevant approved Business Plan;

subject, in all cases, to the form of such guarantee, indemnity or security having been approved by the Company Secretary, and/or Group Legal on his behalf, and notified to Group Finance (who will maintain a register of such guarantees, indemnities or other securities).

6. Subsidiaries/Associates/Joint Ventures

6.1 The Boards of Halifax plc and Bank of Scotland (the "Principal Subsidiaries") each by their approval of this Board Control Manual approves an equivalent list of matters reserved to them subject to:

their individual Constitutions and regulatory constraints;
the business/involvement considered by these Boards being restricted to the business/involvement of that Company or its subsidiaries in the proposals under consideration; and
Group Policies and Standards or other matters specifically reserved to the Board.

6.2 The Company has the powers of a sole or majority shareholder to appoint or remove directors, and exercises indirect control over the activities of its UK and overseas subsidiaries by the retention of certain powers, subject to the legal rights of minority shareholders. The Board has delegated the application of a number of these powers to the Chief Executive as set out below.

6.3 The operations of associates and joint ventures will normally be governed by the provisions of detailed agreements or constitutional documents, the terms of which should determine, inter alia, the powers of the board of the associate or joint venture, and the procedures for creating and approving business plans for the associate or joint venture.

6.4 Joint ventures and associate structures are required, wherever practicable, to meet the terms of the Group Policy on corporate governance of holdings in joint ventures and associates in place from time to time.

6.5 None of the foregoing is intended to supersede legal or regulatory requirements as to the taking of decisions by subsidiary undertakings and their directors in their own place of incorporation.

7. Share Capital and Financing

7.1 Except as delegated to Group Capital Committee and its sub-committees:

approval of any increase/reduction in the issued share capital of the Company within the Authorised Share Capital approved by Shareholders; and
approval of the issue or repayment of, or the subscription for, any share capital or debt securities or any other borrowings by any Group Company other than:
where such issue, repayment, subscription or borrowing is in the ordinary course of business and has been approved in the Group Business Plan; and/or
an issue where any Group Company or its nominee will be, or is, the sole holder of those securities and the sum to be subscribed or paid does not exceed £100 million; and/or
the issue or repayment of non-retail funds and deposits and subordinated debt in accordance with the authorities delegated by the HBOS Board.

7.2 For the avoidance of doubt, and notwithstanding section 7.1 above, options and conditional awards over the share capital of the Company may be granted to employees of the Group by the approval of the Share Schemes Committee.

8. Escalation

Not applicable.

9. Donations

9.1 Approval of any donation or any other support to a political party or other political organisation by any Group Company, either in the UK or overseas, subject to compliance with shareholder authority and the detailed legal obligations applicable to such donations.

10. Employee Share and Pension Schemes

10.1 Approval of material changes in the pension schemes and arrangements, the annual funding rates and any special pension contributions.

10.2 Approval of new employee Share Schemes and material changes in use of existing schemes.