corporate responsibility 2018report 04 SOCIAL REPORT 2018 SOCIAL REPORT 2018 05

The Employees 94 Nurturing human capital policy 96 table of contents 05 Employee hiring 99 Discount ’s employees 98 Diversity and equal opportunity 104 The Discount values and their integration into the operation of the Bank 06 Maintaining employee rights 111 Discount Bank Summarized Sustainability Performance Table 08 Investing more in employees 120 About the report 10 Goals 136 Greetings from the Chairman and the President & CEO 12 01 Suppliers 138 Discount's eight Corporate Social Responsibility Report 14 Promotion of Responsible Procurement 140 Managing social responsibility at Discount 16 06 Goals 145 Dialogue with stakeholders 16 Discount for the community 146 The process of identifying the material topics 17 "Discount Sprint for the Future" 148 Reporting to the Global Compact 19 07 Discount volunteering in the community 152 Assurance examination 20 Investment in the community 154 Group profile and financial data 22 Goals 158 02 Discount Bank - General Overview 24 Green Discount 162 Mercantile Discount Bank General Overview 29 08 Policy 164 Credit Cards Ltd. ("ICC") – General Overview 31 "Green Credit" 165 IDB Bank - General Overview 33 Promoting green building 166 Membership of organizations and external Initiatives 35 Responsible consumption of resources 168 Social Responsibility Ratings 36 Carbon footprint 172 Commendations and prizes 37 Goals 179 Discount Bank and the United Nations' sustainable development goals 38 Corporate Governance 180 Contributing to the economy 41 09 Corporate Governance Code for the Discount Group 182 Discount Spirit 44 The General Meeting of Shareholders 183 The Board of Directors 184 Formation and integration of the "Discount Spirit" 46 03 The Bank's Management 194 Vision, Values and Everything in Between 47 Remuneration of Senior Officers 195 The Code of Ethics 50 Principal Control Functions 197 Goals 52 Prevention of Corruption 199 The Customers 54 Compliance with Regulation 202 04 Policy 56 Goals 207 Innovation 57 Epilogue 208 Services and products for the advancement of populations 60 10 Thank you's and responses to the report 209 Promotion of accessibility 69 GRI Content Index Combined with UNGC 210 Impact Investments 72 Principles of the Global Impact Initiative 219 Financial education 73 Appendices - Customers 220 Suits you better - quality of service 77 Appendices - Employees 223 Appendices - Community 231 Fairness in products 84 Appendices - Green Discount 232 Customer privacy and information security 87 List of tables and charts 233 Goals 92 06 SOCIAL REPORT 2018 SOCIAL REPORT 2018 07

Committed to the customer Making it happen Professionalism, service and innovation Initiative and determination, accepting responsibility and honoring obligations Commitment to Commitment to service Commitment Strengthening Accepting customers in crisis quality improvement to a personally ethical aspects environmental situation customized service and corporate responsibility governance The setting-up of an First place in the Intensification of thedialogue Digital workshops and additional support Marketest Index with customers and an training sessions for team for customers regarding customer increase of 9% in the number third age persons Integration of a system Replacing the air in financial crisis experience in Israel of followers on Facebook for the monitoring conditioning systems Development and offer of employee by power saving VRF of banking products embezzlement systems at fourteen intended to advance intensifying the Bank locations 5.2% 35.6% Commitment to designated populations campaign against decrease in decrease in paper innovation Advancement of corruption electricity consumption consumption Enlarging the fintech small and minute operations and the 5.6% 11.9% 4.4% businesses offering of new services increase in reduction in reduction in increase of 9% in credit and products for customer the number the number customers of Paybox, service of complaints of complaints A personally Integration of the code Installing power 7.6% NIS 10.3 iCount, and Didi (the experience and inquiries regarding the customized service for of ethics and employee saving LED light bulbs decrease in the million in favor of digital representative) satisfaction received quality of service freelance customers instruction at 22 Bank locations carbon footprint energetic efficiency

During 2018, the Bank acted towards the The Discount values and their integration integration of the values of the organization, on into the operation of the Bank the basis of the "Discount Spirit" formed in 2017

Leading change Succeeding together Identifying change as an opportunity, daring, curiosity Creation of cooperation and knowledge sharing, and openness for new ideas establishing trust, concern and honor

Leading social change Leading narrowing gaps Sharing knowledge and Nurturing of the in society advancing financial education human capital Social impact Enlarging the operation of the investments by TeleBank centers comprising NIS 16.9 means of Discount Activity with respect Nurturing managers An increase in million investment in the employment centers in Capital to financial education and the future the number of community, an increase of 4.3% peripheral areas for customers of all generation – participants in compared to 2017 A new wage agreement, which , with the aim of investment of an welfare and leisure reduces gaps and strengthens advancing financial average of programs Cooperation with the Bank's future generation skills in the society Sprint Association 105 instruction hours scholarships granted to students developing and 38 operating programs Leading an environmental per manager, compared of the Arab sector, within the to 35 hours in 2017 framework of the "Sprint Discount" for the advancement change program, financed by MDB of youth in risk situations in peripheral areas, NIS 822 Formation of new Improvement in leading to the million of "green" credit to performance internal services 48.4% reduction in gaps in solar projects advancing green evaluation processes between the increase in the number of volunteers the society energies for employees different units 08 SOCIAL REPORT 2018 SOCIAL REPORT 2018 09

Discount Bank Summarized Sustainability Performance Table Investors performance

Social Environmental

Field Index 2018 2017 2016 Field Index 2018 2017 2016 Customers Rate of justified complaints 15.1% 13.6% 17.9% Carbon Volume of emission 24,892 26,947 31,657 against the Bank footprint (in tons of CO2e) Justified complaints regarding 6 4 2 Emission per square meter 0.17 0.18 0.2 customer privacy and data protection Resources Electricity consumption 37,102,203 39,150,000 45,451,596 consumption (in Kw/h) Complaints regarding 0 0 0 product fairness Fuel consumption 623,646 621,880 613,548 (in liters) Employees1 Number of employees 5,343 5,502 5,529 Paper consumption 263 408 539 Ratio of unionized employees 89.3% 91.7% 91.0% (in tons) Green credit Credit to solar projects 822 884 736 Ratio of resigned employees 14.4% 13.0% 17.8% (in NIS millions) Ratio of female employees 60.3% 59.7% 59.2% of the Bank Ratio of female employees in 50% 49% 48% executive positions Ratio of employees belonging to 8.4% 7.7% 4.2% the under-represented population in the labor market (Discount Bank) Ratio of employees belonging to 13.5% 12.6% 4.9%2 the under-represented population Economic – corporate governance in the labor market (Discount Bank and the principal subsidiaries in Israel) Average instruction hours per 37 39 34 employee Field Index 2018 2017 2016 Suppliers Ratio of domestic suppliers 94.6% 95.3% 95.9% Economic Economic value to stakeholders 7,055 6,441 6,552 performance (in NIS millions)1 Community Investment in the community 16,900 16,200 17,200 (in NIS millions) Board of Independence of the Board 69% 67% 71% Directors of Directors Ratio of volunteers at the Bank 22.5% 14.7% 21.7% (ratio of external Directors) Commitment for investment in 10,500 - - Ratio of female Board members 23% 25% 29% Impact funds (in thousands of US dollars) 3 Average tenure of Directors 2.46 4.24 4.01

Notes: 1  The data does not include employees on unpaid leave and on maternity leave Notes: 1 Operating and other expenses with the addition of provision for taxation and dividends 2 Excluding Mercantile Discount Bank 3 Total commitments through Discount Capital within the framework of funds managing investments having a social impact alongside a financial return 10 SOCIAL REPORT 2018 ABOUT THE REPORT 11 01 About the Report

Greetings from the Chairman and the President & CEO 12

Discount's Eighth Corporate Social Responsibility Report 14

Managing social responsibility at Discount 16

Dialogue with stakeholders 16

The process of identifying the material topics 17

Reporting to the Global Compact 19

Assurance examination 20 12 SOCIAL REPORT 2018 ABOUT THE REPORT 13

Greetings from the Chairman and the President & CEO

We are honored to present the Corporate Social Responsibility Report (“CSR Report”) of continues to reduce wage gaps and strengthens the next generation of Bank employees. Discount Bank for 2018. The publication of the CSR Report reflects Discount Bank's deep commitment to the subject of social and environmental responsibility, including in matters Within the scope of its social involvement and commitment, the Bank continues to take action of corporate governance. Discount Bank continues to act in accordance with the Vision that to advance weak populations and encourage its employees to participate in activities for the was formulated in 2017 so as to give its customers growth and financial stability over time, community, thereby strengthening its social contribution as an organization and as individuals. as well as adaptability to the changing world, while creating innovative banking models In doing so, the Bank is furthering the time-honored tradition started by the Bank’s founding which provides an advanced service specifically tailored. At the beginning of this Report, we generation, whereby the Bank has been involved in and engaged with Israel’s society and present the main social impacts of the Bank from the aspect of the “Discount Values”, which its communal life. We have positioned the value of volunteering as a leading organizational were drawn-up in conformance with the Bank’s Vision and has since served as the Bank’s value, and we encourage our employees to volunteer and contribute to the community. Such organizational compass. activity is carried out in correlation and conformity with the Bank’s values as formulated within the framework of the “Discount Spirit”. This is the eighth CSR Report published by Discount Bank. The Report includes the principal subsidiaries in Israel: ICC and Mercantile Discount Bank (MDB). In this Report, we are continuing Looking to the future – we have decided that this year the Bank’s budget for donations will the process of gradually integrating the subsidiary IDB Bank to the Report. In addition to this, we be increased and at the same time we are looking for strategic investments that align with are continuing the process of testing and validating the policy and goals of some material topics. the “Discount Spirit”. Over the coming years, we will continue with this process until all the topics defined as having high materiality have been covered. Furthermore, the Bank is presenting in this Report, for the The Discount Group works determinedly and continually to strengthen aspects of corporate first time, a summary of its sustainability performance in a manner that reflects the principal governance and the Group management, which supports the integration of risk management standards of the international sustainability and corporate responsibility rating agencies. processes and aspects of fairness and decency within its ongoing endeavors.

Within the framework of the Group's activity towards the creation of joint value for the customers, In 2010, the Bank joined the United Nations Global Compact initiative. This Report constitutes Discount Bank acts to develop and to offer banking products for the advancement of target also an annual update of this initiative in respect of 2018. In this respect, we reiterate the populations, such as, small and minute businesses, freelancers, women who are victims of Bank's commitment to this initiative and to its ten principles. violence and students, while promoting access to and knowledge in the financial education field. MDB focuses on creating value for the non-Jewish customer population and for the Publication of the CSR Report was made alongside additional reporting frameworks: to the Jewish ultra-orthodox (Haredi) customer population. During the last decade, MDB, jointly Maala Organization, to the VIGEO EIRIS research body and to the greenhouse gas emission with the relevant government agencies, have developed expertise in extending credit to small reporting and recording center of the Israel Ministry of Environmental Protection. This reporting and medium businesses by means of governmental funds for the support of businesses. structure reflects the Bank and the Group's commitment for transparency and for broadening its activity in social responsibility areas, as well as the Bank’s promise to continue working This year too, we continued to expand our activity in creating innovative and advanced solutions with its stakeholders in a fair and decent manner. for our customers, and we have taken steps to improve our customer service indices. Where warranted by circumstances, we instigated measures to rehabilitate customers facing crisis On behalf of ourselves and the members of the Board of Directors and Management of the situations, and concurrently, we continued to invest in the community through the “Sprint Discount Group, we support all the volunteers being employees of the Discount Bank Group, Discount” project and have begun promoting investments with social impacts through Discount and all those involved in the social activities and projects led by the Group. Capital. This is taking place alongside the positive impact on the country’s periphery resulting from the employment of various populations in the TeleBank service centers. Likewise, ICC entered into engagements in 2018 that are promoting competition in the sector. Also this year, October 31, 2019 Shaul Kobrinsky Lilach Asher-Topilsky we invested substantially in employee development and empowerment. The wage agreement Chairman of the President & CEO drawn up in the latter part of 2018 is based on a shekel salary increment – a mechanism that Board of Directors 14 SOCIAL REPORT 2018 ABOUT THE REPORT 15

Mercantile Discount Bank ("MDB") and ICC data had been changed or corrected, this – the reporting is at the "Core" reporting level, fact is expressly stated. Discount's and as regards many topics, they are very near to the "Comprehensive" reporting level. The CSR Report complements the About Eighth Moreover and following on from the previous corporation's financial statements. Whereas Report, we are continuing the process of one presents the corporation's financial Corporate Social including the subsidiary IDB Bank in the performance, the second presents the Report. This process is being implemented manner in which things are done, the degree gradually in light of the differences in the of importance that the corporation attributes the Report Responsibility regulatory, social and economic environment to the aspirations of its stakeholders, and its 1 in which the companies in Israel operate, efforts to make progress in areas requiring Report compared to the environment in which improvement. The CSR Report is an expression of Against the background of the subsidiary operates, and the Bank's commitment to social developments regarding the issue requires the exercise of considerable care We at Discount believe that this Report of corporate responsibility reporting, and in the inclusion of information about IDB will serve the variety of categories of our responsibility issues and of their in view of the importance that the Supervisor Bank. Moreover, IDB Bank is in the midst stakeholders (customers, employees, importance as part of the Discount of Banks attributes to the activity of banking of assimilating a complex and challenging suppliers, shareholders, the community and corporations in this respect, the banking strategic plan, which requires substantial environment), and will assist in promoting Group's organizational culture. corporations heading the banking groups, management resources. dialogue, intensifying relationships and The Report is intended to serve the in accordance with the Reporting to the heightening cooperation. Public Directives, are required to publish The CSR Report is not just a reporting Bank’s stakeholders and to assist in reports concerning corporate responsibility framework, but a platform for ongoing Compilation of the data and its validation for a period of up to two years. In this respect, dialogue between the corporation and its were performed with the assistance of many promoting dialogue, strengthening in 2005 (for 2003-2004), Discount Bank was stakeholders and in the process of writing functions at the Bank and at the principal relationships and heightening the first bank in Israel to publish a CSR this Report, the Bank strives to describe subsidiaries. The final draft of the Report Report, and since 2014 the Bank has with maximum transparency its activities was examined and approved by members cooperation. published a CSR Report annually, as an in relation to topics that are of interest to of the Bank's Management. expression of its commitment to social its stakeholders. responsibility issues, and it will continue Publication of the Report to do so in the future. The Report addresses, in the relevant The CSR Report in Hebrew may be contexts, the activities of the different viewed on the Bank's website3 and This Report has been prepared in accordance divisions of the Bank, including the senior in English on the Bank's Investor Relations with the GRI Standards: Comprehensive levels of management. The data presented page4 , on the GRI's Sustainability Disclosure Option, and it reviews the Bank's processes in in the Report were processed according Database5 and on the GC website6. In Israel. The report has successfully undergone to the reporting of the Discount Group's addition, Bank employees may view the the GRI Materiality Disclosure Service. various units, striving to build a data base Report also on the employees' portal. In that will enable a comparison with data certain cases, the Report includes reference For the principal subsidiaries2 in Israel – from past years. The calculation methods to details presented in the Bank's 2018 that are used have been noted in the places Annual Report and 2019 quarterly reports. where the relevant data are presented. The These are available for perusal at the Bank's 1 102-45, 102-48, 102-49, 102-54. Report does not contain any data that are website – see above). (a translation into 2 In order to reflect, to the stakeholders, the in contradiction with the data presented English of these reports is to be found on reporting position in these companies in a in previous CSR Reports published by the the Investor Relations page, see above). transparent and orderly manner, the Index contained in the Appendix to the Report assigned Bank. In cases where previously published The reports are available for perusal (in separate columns to MDB, ICC and IDB Bank. It should be noted that, in the sections that describe policy or work processes at Discount Bank. the description refers also to MDB and ICC, unless 3 www.discountbank.co.il expressly stated otherwise. On the other hand, 4 www.discountbank.co.il/IR in view of the different environment in which IDB Bank operates, where the description refers to 5 http://database.globalreporting.org this subsidiary, this fact is expressly stated. 6 http://www.unglobalcompact.org/participant/12568-Israel-Discount-Bank-Ltd 16 SOCIAL REPORT 2018 ABOUT THE REPORT 17

Hebrew) also on the "Magna"7 website of to strengthen the management of the social contracted workers (who are referred to in the Israel Securities Authority and on the responsibility field at the Bank and reflects the “Responsible Procurement” Chapter). "Maya"8 website of the Tel-Aviv Stock the importance attributed by the Bank to Exchange Ltd. this subject. The director’s task is to Promoting an open discourse with the intensify the social responsibility Bank’s stakeholders, including involving In certain cases, the Report refers to the awareness of Bank employees, as well as them in the process of mapping the material reports of MDB and of ICC. These reports of its stakeholders, and to formulate plans topics, is done with the aim of creating a in Hebrew are available on the website of of action to achieve the goals designated better understanding of the needs and MDB9 and on the website of ICC10 (in English for this area. The director reports to the wishes of all the stakeholders and to adapt – annual reports only). head of the Human Resources and the Bank’s conduct and its policy in a way Properties Division, who is in charge of that will respond in an optimal manner to managing social responsibility at the Bank. these needs. The dialogue platforms are that was employed in two main spheres: that The Bank’s principal subsidiaries in Israel, numerous and varied, and include inter of the stakeholders and that of the Bank. MDB and ICC, have social responsibility alia, "round table" meetings, surveys, Managing directors who report to the Head of Human conferences and discussions in accordance The first sphere: identifying and updating Resources and Administration Division with the character of each stakeholder. the topics that are material to the Bank’s social and to the CEO of ICC, respectively. At IDB stakeholders for 2018. Firstly, the review Bank, a Community Development Officer of the material topics was broadened in responsibility has been appointed for the purpose of line with the requirements of the examining handling matters relating to the Community bodies in the field of sustainability and at Discount Reinvestment Act (“CRA”). This officer is The process of corporate responsibility. The topics were responsible for administering IDB Bank's also correlated with the material topics The Bank has a social responsibility community development program and for identifying the for the banking sector, alongside focused director appointed by the Bank`s ensuring that this bank meets the 12 testing of these topics in relation to their Management. The appointment is intended procedural requirements of the CRA. material topics relevance to the Bank’s activity. This process was conducted for the Bank by the Material topics are defined as topics sustainability and corporate responsibility having economic, environmental group at BDO Consulting. The examining and social aspects where the organization bodies that were reviewed are Bloomberg, Dialogue with has a substantial impact on its stakeholders FTSE, MSCI and Maala. Subsequently, a 11 or where the organization itself is impacted review was conducted of the stakeholders’ stakeholders by them. Within the framework of the positions with regard to the identified Corporate social responsibility preparations for the 2018 Corporate Social material topics: a sample of customers, reporting rests on the approach Responsibility Report, and in accordance employees, suppliers, socio-environmental that, in addition to its shareholders, the with the requirements of the GRI-SRS organizations and the professional corporation must be accountable to the Standard according to which this Report community in the corporate responsibility society and the environment in which it is being written, the Bank had conducted area. This positions review was conducted operates, and that it must broaden its a process for validating and updating the using dedicated questionnaires, with each dialogue and cooperation with all categories material topics, which defines the corporate questionnaire including various statements of its stakeholders. A "stakeholder" is anyone responsibility topics to be reported and from the world of corporate responsibility that Discount Group influences or is at what scope and order of importance. on topics that were identified as being influenced by: customers, employees, material. The review participants were shareholders, the community, the The process of validating the materiality asked to rank each topic according to its environment and suppliers, and even matrix was carried out as a follow-up to the level of importance to the reporting in the process of identifying the material topics Bank’s Report. The questions were rated that were identified in the 2017 Report, while on a scale of 1-5 (with 1 being the lowest 7 https://www.magna.isa.gov.il/details.aspx?reference=2014-01-017514&file=2&id=01160 8 http://maya.tase.co.il/bursa/report.asp?report_cd=885621 validating and updating the methodology rating, and 5 being the highest). As part 9 http://www.mercantile.co.il/MB/private/about-mercantile/financial-reports/annual reports 10 http://www.cal-online.co.il/he-il/Cal/CalServices/about/pages/financialReports 11 102-40, 102-42, 102-43, 102-44 12 102-46 18 SOCIAL REPORT 2018 ABOUT THE REPORT 19

The material topics matrix Material topics - reporting boundaries13 5.0 A material topic in the Report The GRI topic Limit of the impact Fairness of products Customer privacy and information security Regulatory compliance Socio-Economic Compliance Within the organization Prevention of corruption 4.8 Regulatory compliance Prevention of corruption Anti-corruption Within the organization Accessibility for persons with disabilities Fairness of products Marketing and Labeling Within and outside the organization Customer service 4.6 Diversity and equal opportunities Diversity and equal opportunity Non-Discrimination Within the organization Diversity and Equal Opportunity Customer privacy and Customer Privacy Within the organization 4.4 information security Work environment and terms of employment Accessibility for persons Accessibility Within the organization Involvement in the local community with disabilities 4.2 Environmental and social risk management Corporate governance Maintaining Human rights Work environment and Employment Within the organization Training and development conditions of employment of employees Labor-Management Relations 4.0 Customer diversity Occupational Health and Safety Accessibility regarding

Discount Group disadvantaged populations Social / Environmental products Corporate governance Corporate Governance Within the organization Responsible procurement 3.8 Management of the environment field Training and development Training and Education Within the organization Indirect economic implications of employees Advancement of financial education The customer experience - Within and outside the organization 3.6 (customer service)

Economic performance 3.4 The second sphere: identifying the topics that are material for the Bank. Like the 3.2 Reporting stakeholders’ review, a review of positions was conducted among the Management Stakeholders and the Board of Directors of the Bank and to the Global 3.0 3.0 3.2 3.4 3.6 3.8 4.0 4.2 4.4 4.6 4.8 5.0 of its principal subsidiaries in Israel – ICC and MDB. Compact Corporate governance Customers Employees Environment Community The Bank joined the United Nation At the end of the process, the Bank updated Global Compact initiative in the order of importance of the material September 2010 and since then submits topics as obtained from the weightings of an annual progress report regarding the of the updating of the methodology that the stakeholders’ positions on the one hand Bank`s social and environmental activities. took place in 2018, weightings were given and the positions of the Managements and This report, as well as previous CSR to the stakeholders’ positions against the the Boards of Directors on the other. The Reports, constitutes an annual progress standards of the examining bodies that outcome of the process is the identification report in respect of each of the years in were reviewed. of the ten most material topics for the the period 2013-2018 respectively. An reporting. Consequently, and due to the Appendix to this Report includes an index greater importance of the topic, the reporting comprising a cross-reference table between in the Report has been expanded with reportable items in accordance with the regard to “Accessibility for Persons with Global Compact initiative and their Disabilities” in the “Customers” Chapter. reference in this Report.

13 102-47 20 SOCIAL REPORT 2018 ABOUT THE REPORT 21

receives a payment to cover the time it one of the two in accordance options. These steps examine at a higher focus Assurance invests in this process. Furthermore, it I hereby declare that Discount Bank is level, the performance indices relating should be noted that neither the Institute indeed in compliance with the scope of to each goal and the presentation of the examination nor Mr. Liad Ortar (who performed the disclosure and reporting requested at this impact of the reporting organization in work) has any consultative business level and is demonstrated compliance the light of these measurable indices. The Bank's CSR Report has relationship with Discount Bank and with the three principles presented above. undergone an assurance that the quality assurance process was Congratulations on your good work, examination by an outside, objective body conducted independently and without This report, the eighth of its kind, Liad Ortar - The Center for Quality Assurance of bias. In the framework of the quality continues to show a trend of noteworthy CSR Reporting that operates within the assurance process, a draft of the report professional development. In particular, framework of the CSR Institute at the was examined, comments were made I wish to note the enlargement of the College of Law and Business - which and this quality assurance statement consultation process with stakeholders determined that Discount Bank meets was drafted. and the inclusion of new groups in this the requirements In Accordance with the significant process. GRI Standards: Comprehensive option. Work approach Manager of the Corporate Social The Report presents fairly Discount Bank's The object of the quality assurance Remarks regarding the report: Responsibility Institute activities for the given period. process for the corporate social Presentation of quantitative data The College of Law and Business Furthermore, the Report is balanced and responsibility reports is, first and regarding the materiality matrix – in the properly presents Discount Bank's foremost, to improve the quality of the reported year, Discount Bank has made an October 2019 activities in the various material topics, reporting products by means of providing important step in the process of forming both for activity in Israel’s financial professional feedback. As part of the the material issues to be reported by segment and also for the Bank itself. process, it is examined whether the report moving to the gathering and presentation adequately complies with three central of data in a quantitative format, based Quality Assurance Statement: principles: upon the methodological gathering of data DISCOUNT BANK - 2018 from stakeholders. This is a significant CORPORATE SOCIAL 1. Inclusiveness – relating fully to the step in improving the reporting product RESPONSIBILITY REPORT topics arising from the reporting and the ability to compare later on one process itself and from the reporting report to another, assuming that the Introduction entities, as well as the inclusion of measurement methodology would be The Corporate Social Responsibility a wide range of stakeholders’ in the maintained as is. In view of this move, Institute is an independent public body reporting. presentation of the graphic product as a that works to promote the concept of table showing the weighted average mark Corporate Social Responsibility. The 2. Materiality – relating to the topics for each issue is warranted. Indeed, this Institute operates within the framework of that are material to the Company’s tool would not make it possible to relate the College of Law and Business, which operations. the level of importance to the Bank or to is a private college (recognized by the the stakeholders; nevertheless, it would Council for Higher Education) for the study 3. Responsiveness – reporting regarding provide an orderly list of marks and make of law and business administration. The topics raised by the stakeholders. it possible to understand which are the Institute’s work includes, inter alia, the most material issues for reporting, and convening of professional meetings, the Findings which issues are less material. writing of reports, research and market This is the eighth report published by the Intensifying the impact measurement surveys, the “conversion” into Hebrew of Bank. It joins the trend of sustainability based on the SDG's – The connection applied methodologies from the rest of reporting adopted by the whole of the made by Discount Bank to the the world, etc. In August 2019, Discount Israeli banking sector, with this being sustainability goals is important and Bank requested that the Institute instigate in conformity with the requirements in line with the global trend regarding a quality assurance process with respect of the Supervisor of Banks. The report sustainability reports. The primary to its 2018 corporate social responsibility adopts the latest reporting standards connection presented in earlier reports report. of the GRI and the SRS, while complying was only the first step, and it is to be with the broad reporting framework expected that future reports would It is hereby declared that the Institute known as ”Comprehensive option", include the required continuing steps. 22 SOCIAL REPORT 2018 GROUP PROFILE AND FINANCIAL DATA 23 02 Group profile and financial data Discount Bank - General Overview 24

Mercantile Discount Bank General Overview 29

Israel Credit Cards Ltd. ("ICC") General Overview 31

IDB Bank - General Overview 33

Membership of organizations and external Initiatives 35

Social Responsibility Ratings 36

Commendations and prizes 37 NIS NIS Discount Bank and the United Nations' sustainable development goals 38 182 9,020 million 789million Branches in The total economic value Provision for Contributing to the economy 41 Israel produced by the Group taxes in 2018 24 SOCIAL REPORT 2018 GROUP PROFILE AND FINANCIAL DATA 25

The Bank offers services to different the subsidiary, Tafnit Discount Asset segments of customers: households, small Management Ltd. (hereinafter: "Tafnit") Discount Bank and minute businesses, which manages securities investment Group customers, medium and large business (for portfolios for private customers, General overview details as to the definition of the segments corporations, not-for-profit organizations Ltd. (hereinafter: see page 224 of the 2018 Annual Report; for and institutional bodies; “the Bank”) was incorporated in details regarding the distribution of operations Non-financial investments and profile and Israel in 1935 as a public company under according to the main segments of operation underwriting - the subsidiary "Discount the Companies Ordinance. The Bank is a see pages 228-240 of the 2018 Annual Report; Capital Ltd." is engaged in investments banking corporation having a banking license for details regarding the distribution of in companies, in private equity funds, in under the provisions of the Banking Law operations according to geographical areas venture capital funds, in the investment financial (Licensing), 1981. see page 240 of the 2018 Annual Report). banking field, as well as in initiating and The Bank has a banking subsidiary in Israel - assisting public offerings and private The Bank was established by the late Mr. Mercantile Discount Bank Ltd. (hereinafter: company, through a subsidiary. Leon Recanati in the name of "Eretz Yisrael "MDB") - a serving data Discount Bank Ltd.", in cooperation with the customers in all fields of financial activity. International activity founders, the late Mr. Joseph Albo and the The international activity of the The economic value produced by late Mr. Moise Carasso. The offices of the The activities in Israel include additional Discount Group is conducted by a the Discount Group results from Bank and its first branch office were at first fields of operation, including: subsidiary company in the , located at No. 39, Yehuda Halevi Street in Credit cards - The Bank controls “Israel IDB Bank, which is the largest of the Israeli its being a large economic entity, Tel Aviv. In 1939 the offices of the Bank were Credit Cards Ltd.” (hereinafter: "ICC") banks operating abroad, and at the present one of the five major banking relocated to No. 27, Yehuda Halevi Street and and “Diners Club Israel Ltd.” (hereinafter: time operates branches in the New York area, in the fullness of time were transferred to 23 "Diners", a company wholly owned and and in . This bank has groups in Israel, which offers Yehuda Halevi street, the site on which the controlled by ICC), which issue and market representative offices in Latin America and Discount Tower is situated today, in which “VISA”, “Diners” and “MasterCard” credit in Israel. The international activity is its customers comprehensive most of the Head Office units of the Bank cards, both for domestic and overseas use; characterized by business-commercial banking services in all areas of are located. Securities portfolio management - banking and private banking. financial activity. During the years of its operation the Bank has Discount Group Holdings Structure15 developed a chain of branches and a wide variety of commercial banking activities in Israel Discount Bank LTD. all banking spheres. As from December 3, 2013, the Bank turned into a bank having no core controlling interest and is subject Banking Corporations Banking Capital Markets and Credit Cards to the instructions applying to Corporations Abroad Investments Companies Companies

corporation having no core controlling 100% 100% 100% E - 71.8% V - 79% interest, in accordance with the Banking Mercantile Discount Discount Bancorp, Inc. Tafnit Discount Israel Credit Cards Act (Legislation amendments), 2012. Bank Asset Management1 (ICC) Domestic Operations 100% 100% 100% Israel Discount Bank Discount Capital Diners Club Israel The Discount Group grants its of New York customers comprehensive banking 55% services in all areas of financial activity, through 18214 branches in Israel, (106 Discount Capital Underwriting branches of the Bank and 76 branches of 100% Mercantile Discount Bank Ltd.) direct banking and digital banking. Discount Manpikim

Notes: 1 Directly and Indirectly. 14 The number of branches as of December 31, 2018. 15 102-45 26 SOCIAL REPORT 2018 GROUP PROFILE AND FINANCIAL DATA 27

Goals and business strategy gradually during the course of the coming The activity of the Bank's investor The challenges and central issues in 2018 The updated strategic plan years. relations unit is based on the concept that were: transparency, cooperation and a fruitful The Bank is engaged in realizing 3. Development of Innovative Banking dialogue create value for both sides and Issuance of bonds (Series "M" and Series the vision of the Bank in accordance Models enable stakeholders to make long-term "N") - Through its subsidiary Discount with its multiannual strategic plan that was The Bank is developing and putting to the educated investment decisions. The Bank's Manpikim Ltd. (hereinafter: "Manpikim"), approved in 2014 and updated in 2016 and test a number of solutions and innovative Management believes in strengthening the Bank completed on December 24, 2018, in 2018 in accordance with market banking models, with a view of expanding to and preserving relations with investors in the issuance of bonds in two new series developments. The strict implementation new customer populations and to additional securities of the Bank, and has even defined bearing a fixed non-linked shekel interest in recent years of the strategic plan led the platforms and services, as part of the value this field as part of its strategic focusing rate, in a total amount of NIS 1,493 million. Bank to a consistent and continuous track offer by the Bank. For additional information, for the coming years. The move of raising this debt capital was of improvement in profitability and in return see the 2018 annual report (pp. 14-15). part of the multiannual financing strategy on equity, in volumes which support both Principal operations and intended to expand and diversify the Bank's the most outstanding growth of the credit Dialogue with the investors central events during 2018 financing sources mix. portfolio, in the targeted segments in 2018 was the fourth year of operation particular, and in the distribution of The first and principal layer of implementing the strategic plan A new wage agreement at the Bank - dividends, starting with the first quarter of communication with investors in announced by the Discount Group in August On January 9, 2019, the Bank's Board of 2018, and all this while maintaining and securities of the Bank is the layer of 2014. In 2018, the Group continued to Directors approved the wage agreement even improving capital adequacy. At the regulatory reports - reports in accordance implement its multiannual strategic plan, for the years 2019-2021, reached after same time, the Bank has achieved a quantum with instructions and guidelines of the comprised of its three layers: continued intensive negotiations conducted in the leap in its digital capabilities, which positions Supervisor of Banks and in accordance with growth and efficiency, transformation in preceding months between the Bank's it in the forefront of technology and user the provisions of the Securities Act and the traditional banking and development of Management and the heads of the experience in the banking sector. Regulations under it. These reports include innovative banking models and continuing representative committee of the employees annual, quarterly and immediate reports. establishing the capital, technological and and representatives of the Federation of The updated strategic plan is based on a human infrastructure that will enable future Labor. leading goal: leading in the Bank's customer The Bank maintains an additional layer of growth. satisfaction by means of customer adapted communication with investors in securities This agreement follows the previous wage banking, and comprises three principal of the Bank (existing and potential), as well The data for the year 2018 indicates the agreement, signed in November 2016 (see layers: as with other parties (such as: analysts and continuing growth momentum and the the 2016 annual report, p.21), which together research agencies) in Israel and abroad, by significant improvement in the performance form a breakthrough in the field of the 1. Continuing growth and efficiency means of the investor relations unit of the of the Bank and the Group, even exceeding compensation method in the banking sector. This layer represents a continuation of the Planning, Strategy and Finance Division. This the outline of the multiannual strategic plan. The wage increment mechanism stated in original strategic plan from 2014, which communication is bi-directional - from the The credit portfolio continued to grow, inter the new agreement is also based on a shekel includes the following tiers: Bank outwards, through conference calls, alia, in the light of the growth in the retail A. Efficiency and stringent management presentations and other materials assisting segment, with a focus on the mortgages of expenses. in the understanding of the Bank's results segment and the large businesses segment. B. Customer focused growth. and its operations, maintaining meetings C. Assimilating a change supporting and conferences of the Bank's Management The activity of the Group during 2018 organizational culture. with such stakeholders, distribution of comprised a direct continuation of its D. Focus and reducing non-core-business updates regarding events and more; and activity in 2017, this in accordance with activities. in the other direction - from stakeholders the strategic plan of the Group and within inwards, through the reflecting of opinion the framework of the implementation 2. Transformation in traditional banking and analysis of the relevant stakeholders and thereof. The management of the capital In order to prepare for the expected providing Management and the Chairman of the Group is strict. The Group's financial significant changes in the banking field, of the Board (and alongside the decision base continues to be solid. The Common which stem from regulation, technology, making process on relevant matters, also Equity Tier 1 ratio amounts to 10.24% and the customer expectations and competition before the Board of Directors) with feedback liquidity coverage ratio amounts to 124.8%. image, the Bank defined in 2018, as part of on the results of the Bank and its activities, This is the capital infrastructure that allows the refreshing of the strategic plan, a new as well as the integration of such contents the Group to continue growing. retail operating model to be implemented in the decision making process at the Bank. 28 SOCIAL REPORT 2018 GROUP PROFILE AND FINANCIAL DATA 29

amount of wage increment and not on a wage in the organizational culture, improvement of innovate and add smart insights to "Didi" - the continuing preparations and upgrading increment denominated in percentage. This the infrastructure, improvement of customer digital assistant in the Discount application of the infrastructure supporting the digital mechanism continues to reduce the wage experience and advancement of innovation - which helps in the smart management of preparations and preparations with respect differentials and strengthens the future aspects. the bank account. The service is based on to data protection and cyber aspects; generation of the Bank's employees. The advanced analytic capabilities and artificial agreement was signed on February 21, 2019. The implementation of efficiency measures intelligence. For additional details see "Discount Campus" - preparations for For further details, see the 2018 annual report also continues, including the "Lean" "Innovation" in the Chapter "Customers" below. the construction of the Discount Campus (p. 317). processes, basing the activity of the banking continued in the reported period. For service center, reducing the floor space being Additional Issues additional details, see the 2018 Annual The continuation of the uncompromising used by the Bank, including the merger of Change in the organizational structure Report (p. 308), and the Chapter "Green implementation of the strategic plan - with branches and the continuing vacating and - a new division was established in 2018, Discount" below. the refreshment of the strategy, the project sale of buildings (used by branches and the the Digital and Data Division, with the aim map has been updated, so that as of the end head office), as well as additional measures of creating an overall insight regarding of 2018, the Group is conducting 25 strategic leading to direct savings in Bank expenses. the digital, data and innovation worlds, projects. The Change Management formed in in order to increase the management 2014, continues to lead the coordination of the The administrative focusing on and the focus on this subject. In addition, the Mercantile change programs, assist in their realization, improvement in the Group's management Subsidiaries Division was turned into monitor and control their progress and report processes continues, inter alia, by way a Group Management and Regulation Discount Bank to Management and the Board of Directors. of strategic guidance with a cross-group Division, with the matters being the The monitoring and control over the progress outlook, utilization of business and responsibility of the Division being changed General overview of the strategic projects is conducted by a operational synergies, including from accordingly; Mercantile Discount Bank ("MDB") celebrated unique implementation mechanism, which the aspect of strategic projects, digital in 2018 100 years of operation. includes financial and other goals attached to preparations, preparations with respect to Signing of an agreement with LeumiCard each project. Furthermore, a periodic follow- regulation and more. - is a central part of the implementation of The financial activity in Israel up in respect of the progress of the projects the Strum Act, a joint issuance agreement of the banking institutions is performed by several circles – project The "Discount Spirit" – The "discount spirit" was signed on March 29, 2019, between that served as the basis for the foundation managers, head of the Change Management, is composed of the vision, the values and the the Bank and LeumiCard, which is based of MDB began in 1918, with the conquest members of Management in charge of the code of ethics. A widespread move was made upon the business understandings reached of Palestine by the British, when the Anglo- projects and Management itself in full. in 2018 for the integration of the "Discount by the parties. In accordance with the Egyptian Bank, operating at the time in Egypt, spirit". Also integrated was the code of ethics, agreement, the Bank issues credit cards established three branches: in Jerusalem, which was formed in the framework of the together with LeumiCard as from February in Jaffa and in Haifa. Later on, in 1921, a The growth and improvement momentum "Discount spirit" and was approved at the 2019 (the date of application of the duty fourth branch was opened in Nazareth. In in the Bank and Group performance beginning of 2018. For additional details, imposed by the Act to conduct issuance 1925, "Barclays Bank DCO" (a bank owned see the Chapter "The Discount Spirit" below. operations by means of more than one by the British Bank "Barclays Bank" which continues, and the Bank is continuing operating company); provided to the authorities its transformation in traditional Fintech and Innovation - The Bank adjusts all over the British Empire) acquired the itself to the changing world and is active in 2018 retirement plan - during the shares of the Anglo-Egyptian Bank, thus banking while developing new banking creating innovative banking models that reported period, the Bank's Management turning it into a part of the Barclays Bank models and promoting innovation in the would provide customers with advanced has diligently worked on an additional Group. In 1971, "Barclays Bank DCO" changed service modified to their needs. Within this retirement plan. For additional details, its name into "Barclays Bank International". field of Fintech. framework, the Bank continued the moves see the 2018 annual report (pp. 21-22); for the development and advancement of Mercantile Discount Bank (MDB) was The strategic teams at the Bank and at the cooperation agreements signed by the Bank The Bank and the Group companies incorporated in October 1971, by Barclays subsidiary companies had acted and continue in 2017 with the fintech companies "PayBox" continue to devote and invest considerable Bank International of England (hereinafter: to act vigorously in the strict implementation and "iCount". Moreover, the Bank continues to managerial efforts and attention to the "Barclays Bank") and by the Discount Group, of the many projects emanating from the preparations required to deal with leading under the name of: "Barclays Discount Bank strategic plan, including the business and developing risks, including business Ltd.". focusing on growth, in the credit field in model risk, manpower and qualification particular, among the targeted populations, risks, model risks, privacy protection and Soon after its incorporation on December as defined by the strategic plan, the change fairness aspects. This, alongside the 7, 1971, MDB acquired all the assets and 30 SOCIAL REPORT 2018 GROUP PROFILE AND FINANCIAL DATA 31

liabilities of the Barclays Bank branches in Report of this company)). In the course of 2016 plan - The Board of Directors of MDB Israel (by that time some 40 Barclays Bank the last decade, the bank, in cooperation with approved in the second half of 2016, a Israel Credit branches had been in operation in the State relevant governmental agencies, developed strategic plan, prepared by Management of Israel). expertise in the granting of credit to small of MDB with the assistance of external Cards Ltd. ("ICC") and middle market businesses by means of consultants. The plan is intended to On February 28, 1993, following the governmental funds supporting businesses. intensify the activity in the retail segment, General overview acquisition by Discount Bank of all the The bank provides to its customers, among including the focusing on designated ICC was incorporated in 1979 interests of Barclays Bank in MDB, the other things, divers services regarding their segments of population, in respect of as a private company under the Bank changed its name into "Mercantile securities operations through a wide layout which the bank has acquired over many Companies Act. The company is engaged Discount". The Bank is defined as a of consultants located at the bank branches years specialization in providing banking in operations and in the "banking corporation" under the Banking and markets credit cards offered by ICC services, as regard to both households development of payment solutions and Act (Licensing), 1981, and it holds a banking and Diners club. and small businesses. financial products. ICC is considered an license under the said Act. MDB is a private "auxiliary corporation" under the Banking company that is wholly owned and controlled Furthermore, MDB has international relations Principal activities and Act (Licensing), 1981. Discount Bank holds by Discount Bank. The larger part of the Head with brokers, enabling customers to transact events at Mercantile Discount 71.8% of the equity rights and 79% of the Office of MDB is located in the "Yovel" Tower business also on foreign securities markets. Bank in 2018 voting rights in ICC. The First International in Tel Aviv while another part is located in The Bank offers its customers an array of The year 2018 was the fourth work Ltd. holds the rest of the the city of Holon. online banking services by means of the year for the implementation of the rights in ICC. The company offices are telephone and the interactive internet strategic plan of MDB. located in Givataim. MDB is engaged in financial commercial website. activity and provides services to all operating Two noteworthy developments took place The main two lines of business of ICC are segments, including: diverse credit activity This comprehensive framework of operation in 2018: the issue of credit cards and the clearing and foreign trade and currency and foreign enables MDB to provide to its customers the of transactions made by credit cards (for currency services. In the mortgage loan full range of banking and financial solutions The signing of a wage agreement for the years additional details, see pp. 34-36 of the field, MDB offers its customers services and grant them professional service of the 2019-2023 - This agreement includes, inter Hebrew version of the 2018 Annual Report through mortgage centers operating within highest level, through diverse communication alia, the termination of linkage to changes of this company). the branches. The bank specializes in lines for all banking products prevailing in in the wage terms applying to business, from small and minute businesses the market, adapted to the specific needs employees, starting with the year 2019. This ICC focused in 2018 on improving and to commercial businesses, in all sectors of of the customers. The said services are agreement was signed following the conduct the economy, and in providing services to the provided through a countrywide network of of fair and professional negotiations that may strengthening existing cooperations Arab population and to the ultra-orthodox branches, numbering 7616 branches. greatly contribute to labor relations at MDB, alongside the creation of new long-term Jewish customer population ((for additional as well as to ability of MDB to grow and face details, see pp. 61-62 and pp. 311-330 of The strategic plan of the challenges of the business environment cooperations the Hebrew version of the 2018 Annual Mercantile Discount Bank in general and the competition in the banking The Board of Directors of MDB sector in particular. The income of ICC is composed mostly approved in 2015 a strategic plan of commission fees on the operation for the years 2016-2020. The plan contains Acquisition of Municipal Bank - On November of credit cards and on the providing of two main lines of action: the one - expansion 13, 2018, MDB signed a merger agreement payment solutions, as well as from credit of retail operations (households and small with Municipal Bank (formerly – Dexia Bank). financing income paid by its customers: businesses), within the framework of which, Within the framework of the agreement, and credit card holders and trading houses. MDB is intended to focus on designated subject to the fulfillment of the conditions ICC has several subsidiary companies and sections of the population, in respect of precedent stated therein, including one affiliate, through which it provides to which this bank has many years of confirmations by the Bank of Israel and by the customers a part of its services, including: experience in the granting of banking Competition Commissioner, Municipal Bank Diners Club Israel Ltd. (franchise holder services matching their unique needs. The will merge with and into MDB. The merger is of the global Diners Club chain, which other - streamlining operations by means expected to expand the growth centers of is engaged in the issue, marketing and of strict management of operating expenses MDB to additional fields of operation and operation of "Diners" credit cards, valid and improvement in income structure. would comprise an important layer in its in Israel and abroad), C. A. L (financing) future growth. For additional details, see the Ltd. (operates as the financial arm of the 16 Number of branches as of December 31, 2018 report for the second quarter of 2019 (p. 120). company for the purpose of providing 32 SOCIAL REPORT 2018 GROUP PROFILE AND FINANCIAL DATA 33

credit to holders of the company's credit The strategic plan of ICC for the implementation of the Increase cards), Diners Finance Ltd. (engaged in On May 23, 2017, the Board of in Competition and Reduction in financing the credit for a part of Diners Directors of the company Centralization in the Banking Market in IDB Bank credit cards), Iatzil Finance Ltd. (engaged approved the strategic plan for the years Israel (Legislation Amendments) Act, 2018 in providing financing services to trading 2017-2021. The formed plan, with the (the "Strum Act"), ICC signed operating General Overview houses through the discounting of "VISA", assistance of external consultants, took and issuance agreements with Bank Israel Discount Bank of New "MasterCard", "Diners", "American Express" into consideration the changes expected Leumi and Hapoalim Bank. The joint York also known by its and "IsraCard" credit card vouchers) and to take place in the credit card market, issuance operation started in February registered service mark, "IDB Bank", is a ICC Deposits Ltd. - all of which are wholly in view of the enactment of the Increase 2019, having an additional significant full service commercial bank licensed by owned subsidiaries of ICC. in Competition and the Reduction in potential increase of the customer base the State of New York and a member of the Centralization in the Banking Market in of ICC. Federal Deposit Insurance Corporation In addition, ICC has a 20% stake in the share Israel Act, 2017. For additional details, (FDIC). IDB Bank's liquidity and capital ratios capital of Shlomo C.A.L Ltd. (a company see the 2018 annual report of ICC (pp. In 2018, ICC continued the growth trend are strong and it is ranked by Crain's New providing credit to private individuals 18-20 of the Hebrew version). in credit granted to the private sector, York Business as one of the largest interested in purchasing new vehicles by while establishing an infrastructure for commercial banks in the New York area. leasing transactions), and a 10% stake in Principal operations and the expansion in credit products for IDB Bank is a wholly owned subsidiary of the share capital of Casponet Ltd. (which is events at ICC in 2018 existing and new customers adapted to Israel Discount Bank Limited, (IDB Ltd.). engaged in installing and operating of cash The financial and banking world their needs, and while strictly maintaining withdrawal machines at trading houses). has experienced immense fairness and decency in sales alongside changes that change the business model educated risk management. ICC issues, markets and operates directly and the image of the financial world. ICC, The year 2018 was the first year in which "VISA", "Diners" and "MasterCard" credit similarly to its competitors is facing In the clearing and payment solution IDB Bank made a strategic change effort cards, valid in Israel and abroad, and is also complex market challenges, among which field ICC acted to expand its product engaged in joint issue agreements with are: the intensification of competition basket, while making them accessible over the whole year. Eleven strategic banks participating in the arrangement. in the market in view of the rise in the through direct lines of communication, programs were conducted ICC is also engaged in the clearing of number of financial entities offering in order to make the granting of credit transactions made by "VISA", "Diners" and credit, of customer clubs as well as the and the clearing processes at the trading "MasterCard" credit cards, valid in Israel development of means of payment serving houses more efficient. In this respect, IDB Ltd. began its operations in New and abroad, as well as by the "IsraCard" as an alternative to credit cards. Alongside the successful operation of GAMA as a York City in 1949, when it established a brand (in Israel only). all these, Regulation is tightening creating coordinator should be noted. This, within representative office. At that time there a new reality for ICC, such as the outline the framework of an agreement signed were only a few employees and limited for a reduced cross-commission and the with GAMA last year, which is considered contact with the public. In 1962, IDB Ltd. implementation of the Credit Data Act, a forefront in this area in the credit card became one of the first foreign banks to 2016. field. Likewise, ICC has introduced the open a branch in New York when the New cooperation with "Alipay" Company and York State banking law was changed to In view of these challenges, ICC focused signed an agreement with "Tencent", the allow foreign banks to operate branches in 2018 on improving and expanding its Chinese technology giant, within the in the city. In 1967, Israel Discount Bank customer base, by strengthening existing framework of which ICC will provide in Ltd. acquired the Hias Immigrant Bank and cooperations alongside the creation of Israel settlement services for "WeChat", changed the name to IDB Trust Company, new long-term cooperations. the largest digital purse in the world. an FDIC-insured banking institution. Ultimately, in 1980, the branch's assets Attention and considerable resources Alongside all this, ICC acted to strengthen were transferred to the renamed, wholly- have been devoted to the introduction its technological infrastructure, owned IDB Ltd. subsidiary, Israel Discount into the market of the " Shufersal " Club conducting a line of long-term Bank of New York ("IDBNY"). IDBNY also and to the renewal of the cooperation infrastructure projects with a focus took over a major portion of the western with El Al Company regarding the FlyCard on the upgrading of the core systems, hemisphere banking operations of its Tel- Club. For additional details, see the 2018 which are intended to increase its ability Aviv parent. Subsequently, the Bank took Annual Report (p. 290). to offer innovative solutions and optimal on more contemporary nomenclature with response for its customers. the registered service mark "IDB Bank." In Moreover, as part of the preparations March 2000, IDB Bank became a wholly- 34 SOCIAL REPORT 2018 GROUP PROFILE AND FINANCIAL DATA 35

owned subsidiary of Discount Bancorp, strategic programs were conducted: Inc., a Delaware formed to hold its shares. 1. Commercial banking – turning into Membership of leaders in the segments of operation IDB Bank provides domestic and of the bank organizations international, personal and commercial IDB Bank's broad range of banking 2. Private banking in the US – banking services to its U.S. and foreign services include Personal and Business development of a full range of private and external clientele through its main office in accounts, Cash Management, Checking banking products , branches in Staten Island, Accounts, Money Market Savings 3. International private banking – growth Initiatives Brooklyn, and Short Hills, NJ, in addition Accounts, U.S. Dollar and Foreign in changing scenery to branches in Beverly Hills and Downtown Currency Time Deposits, Credit Cards, 4. Business in Israel – full leverage of The Bank is a member of various Los Angeles, California; and Aventura, ATM/Debit Cards (for personal accounts), the position of the bank as the largest organizations. Among the prominent Florida. IDB Bank also maintains an Safe Deposit Boxes (New York main office Israeli owned bank in the United States organizations in which the Bank takes an International Banking Facility at its main only), Online Banking, Money Transfers, 5. Coverage model and sales processes active role on a current basis, may be office; and representative offices in Chile, Lockbox Facilities, Safekeeping and – getting organized for sales mentioned Maala Organization - an umbrella Israel, Mexico, Peru and Uruguay. Custody of Securities, Money Orders 6. Enlarging the product range – organization of the leading companies and Direct Deposit of Social Security intensifying relations of the bank operating in the Israeli market, which IDB Capital Corp. is the Bank's broker- and other recurring payments. 7. Improvement of operations – efficiency promotes corporate responsibility issues dealer, and a wholly owned subsidiary in order to enable sales and develops standards for responsible of IDB Bank. Through its broker-dealer subsidiary, 8.  Modernization of the information management in Israel, the Union of Banks IDB Capital Corp, IDB Bank is able to technology – preparing the bank for – an umbrella organization for all banks IDB Bank specializes in the following offer investment products such as U.S. the future operating in Israel, the aim of which is to areas: U.S. Private Banking, International Government and Agency Securities, 9. Optimizing investments and finance – maintain an effective dialogue regarding Private Banking, Middle Market Lending, Corporate Stocks & Bonds, Offshore supporting the full financing systemic issues with governmental agencies, Asset Based Lending, Commercial Real and Domestic Mutual Funds and Capital needs while maintaining maximum as well as with the public and private Estate Lending, Trademark Financing, Market Instruments. Furthermore, IDB profitability environment, and the Israeli Marketing Union Factoring, Trade and Finance (Import, Capital Corp can customize a bond 10. Performance and system – a union of companies that market and Export and Standby Letters of Credit, portfolio to the customer's specifications management culture – accepting advertise in all lines of industry, services Documentary Collections, Bankers' (subject to availability and prevailing responsibility and other sectors. In addition, the Bank Acceptances). rates), starting with an investment of 11. Human resources, payroll and change joined the Global Compact initiative of the 500,000 US$. management – an organization of United Nations (see below). MDB is also a persons having a high level of skill member of the Union of Banks and of the The strategic plan of IDB Bank and a culture of change Israeli Marketing Union. ICC is a member In December 2017, the Board of of the Israeli Marketing Union. Directors of IDB Bank approved a The monitoring and reporting of the projects five-year strategic plan for the years 2018- are conducted locally to the SMT, to the In addition, social responsibility issues 2022. The plan is based upon growth while Board of Directors of IDB Bank and to are reported by the Bank to the following intensifying the old established personal Israel by the head of staff of the strategic entities and initiatives: relationship of IDB Bank with its customers, change. All projects have been conducted in selected segments in which the bank has in accordance with the program, and expertise and many years of experience, optimization of the investments and finance as well as leveraging the position of IDB was successfully completed in the second Bank as the largest Israeli owned bank in half of 2018, following the achievement of the the United States. determined goals. The other programs are Reporting to investors by means of "Vigeo continuing also during 2019, in accordance Eiris" and "FTSE4Good" Principal activities with the plan. Analysis for investors in ESG issues, of IDB Bank in 2018 which examine corporate responsibility The year 2018 was the first year in During 2018, no material changes were made performance. In June 2019, FTS4Good which IDB Bank made a strategic to the framework of the regulation of IDB informed of the ratification of Discount change effort over the whole year. Eleven Bank or to external frameworks relevant to it. Bank as a participant in its indices series. 36 SOCIAL REPORT 2018 GROUP PROFILE AND FINANCIAL DATA 37

BDI rating - the best companies to work friendliness to small and middle market Innovation (the Europe, Middle East and Africa for - The rating examines what is important businesses Index – The Small and Middle Region), conducted within the framework of for employees, what are their expectations Market Businesses Agency at the Ministry the annual convention held by the Gartner Reporting to the Ministry of Environmental from the work place and what are the most of Economy and Industry publishes this Company. Discount Bank was one of nine Protection regarding emission of desirable places to work for. In 2018, the Index twice yearly. The rating weighs four contestants who reached the final stage in greenhouse gases Bank is positioned in the 16th place in the parameters: volume of credit, cost of credit, the financial industry innovation field, and a comprehensive annual report, which at rating and ICC is positioned in the 28th commission charged and review by financial won the prestigious prize for the structured the present time is submitted voluntarily, place. consultants. The Index published in respect service system on the Discount Application, reviewing the emission of greenhouse of the 2018 reports, placed MDB in second which succeeds in the synergic integration of gases by the Bank and measures taken to BDI Code - A business leadership index place in the banking system. artificial intelligence (AI) mechanisms with reduce it. A report in respect of 2018 was rating approximately 500 companies in human response. submitted in September, 2019. the market. In 2018, the Bank was awarded the 19th place in the rating. In 2018, MDB Discount Bank was named in 2018 as a was positioned in the 130th place in the superbrand in Israel - for the sixth consecutive rating and ICC in the 109th place. Commendations year. The aim of the International Superbrands Organization is to identify and name in each UN Global Compact IDB Bank - Currently, IDB Bank's overall and prizes country the brands that have demonstrated a strategic policy initiative by corporations Community Reinvestment Act (“CRA”) brand and marketing excellence in the local which have committed to accept, support ratings are as follows: Discount Bank market. The Organization is active in some and apply within the framework of their “Outstanding” by the Federal Deposit The computer excellence competition for seventy countries around the world. Since area of influence, a set of basic values Insurance Corporation (“FDIC”) - CRA 2018 - In 2018, the Bank won nine awards in 2008, the Organization is also active in Israel. regarding human rights, standards Performance Evaluation performed as of the 2018 IT Awards Competition, granted for for work and environment conditions June 6, 2017, and the report was issued technological projects implemented during ICC and combating corruption. The social on August 31, 2017. the year. This was in addition to winning the Superbrand in Israel - ICC was also responsibility reporting since the year "Champion of Champions" title for the third nominated in 2018 as a "Superbrand" in 2013, comprises progress reporting for “Outstanding” by the New York State consecutive year. The four categories, in which Israel, for the ninth year in a row. the relevant years. Department of Financial Services the Bank won the nine awards are: (“NYSDFS”) - CRA Performance Excellence in computers - ICC won this year Evaluation was performed as of Digital transformation and innovation; six awards for excellence in computers December 31, 2016, and the report was Data (Data analysis, analytics, AI, BIG DATA for 2018, within the framework of the issued on April 5, 2018. and BI); competition of the "People and Computers" Social Domination and control, data protection Group, 2018 IT Awards, in respect of the The above ratings are the same as the and cyber; following projects: "Real time retrieval of Responsibility prior 2014 FDIC and 2013 NYSDFS CRA Creation of differentiation and obtaining the secret code"; "the meaning behind the examination ratings. competitive advantage, improvement of text" project; establishment of a new Flash Ratings business processes and "Chat BOT". Data Center project; credit monitoring Mercantile Discount Bank – The banks' project; "Cal2deliver"project; "Digital "Maala" rating for 2018 - In June 2019, In 2018, Discount Bank reached the first place dashboard" project. "Maala" published its rating for 2018. The in the "customer experience" category of the Bank has been rated in the Platinum Plus prestigious British competition – Financial Ms. Irena Fortnik, VP Technologies and category (awarded to companies with an Innovation Awards 2018 – conducted by the Operations at ICC, has been chosen as the absolute score of over 90). The rating is London Institute of Banking & Finance, held in excelling CIO in the "role model imitated" based on criteria detailed in a number of London. The prize was awarded to the Bank category for 2018. central areas of corporate responsibility. for the integrated service of "Didi" (the digital The rating allows the rated companies to assistant on the application), customer insight be included in the Maala Index on the Tel and correspondence with a bank officer. Aviv Stock Exchange. Discount Bank also reached the first place ICC was included for the third consecutive in the 2018 international competition for year in platinum rating. digital innovation EMEA Gartner Eye on 38 SOCIAL REPORT 2018 GROUP PROFILE AND FINANCIAL DATA 39

IDB Bank businesses in various ways, among crisis, in relevant cases, with the aim of The American advertising corporation which, promoting convenient solutions assisting them to revert to normal activity; Crain's New York Business, exposes for management of business (such as - women worthy of note in the banking iCount) and development of a designated Prevention of discrimination – opposition and financial industry. On March 15, 2019, and adapted service for freelancers; to discrimination of any kind whatsoever, Crain's New York announced the winning and application of this principle when hiring women worthy of note in the banking and "Family program" - a program enhancing employees, promoting them and determining financial industries, among whom were: the financial power of customers having their employment terms; family ties who hold different accounts Lisa Baum, EVP and Chief in charge of with the Bank, by focusing on the needs of Employment of populations which are loan activity at IDB Bank; the customer and his family, turning them under-represented in the labor market into a single financial group enjoying a - Employment of handicapped persons, Andrea Kantor, SVP Head of the Banking variety of singular services and benefits, persons of Ethiopian origin and ultra-orthodox Group for health services, education and in accordance with the combined data of (Haredi) women, employment of persons with not-for-profit organizations at IDB Bank. Bank found five goals being most relevant to the participants in the program; special needs and employment in the summer the operations of the Bank, which are setout months of youth having vision deficiencies; Women at the top echelon of banking below accordance with their relevancy to Financial education - making the financial elected by the Los Angeles Business the Bank's activities. The Bank's efforts language accessible to all age ranges, Promotion of peripheral areas – expansion Journal – the paper announced the women for the advancement of these goals are inter alia, by increasing the awareness and of the activity of the telephone call centers elected winning esteem for outstanding extensively described in the relevant parts importance of long-term savings, sensible (TeleBank), comprising employment centers leadership, knowledge, qualifications and of this report. financial conduct, investment channels in in peripheral areas for different populations, achievements in the banking field, among the pension savings field and more. including populations under-represented in whom were: Kuwan Kim, Senior VP and the labor market; regional manager of IDB Bank in California. "Impact investments" – investments creating an impact, social impact in the ICC operates a service and sales center in ultra-orthodox (Haredi) sector by means Ashdod. Goal No. 8: of the subsidiary Discount Capital. Employment fairness and Employment of persons belonging to Discount Bank economic growth MDB focuses on the granting of unique minority population groups - MDB is one of Meaning of the goal for Discount Bank: banking services and on the creation of the largest employers of persons belonging and the United As part of its business activity, the Bank value for customer populations with specific to minority population groups; contributes to the growth of the economy needs, including the non-Jewish population Nations' and the society in Israel. and the ultra-orthodox population. "Sprint Discount" - cooperation with the "Sprint for the Future" Association, which sustainable The Bank aspires to be the best bank for develops and operates programs for the its customers, enabling economic growth advancement of youth at risk in peripheral development and financial stability over a long period of areas, with a view of reducing social gaps time, by providing adapted, professional and increasing social mobility by means of and fair banking services. Goal No. 10: education and knowledge; goals Reducing inequality 193 member states of the United The Bank diligently maintains its employees' Meaning of the goal for Discount Bank: Nations adopted in September 2015 dignity, proper labor relations and employee The Bank views with importance the the new agenda for the sustainable rights, in accordance with the law and labor diversification in employment, while offering The development goals include 17 goals development towards the year 2030, by agreements. employment opportunities to populations in covering a wide range of sustainability means of determination of the global goals the community which are under-represented for sustainable development – (the The activity at the Bank: in the labor market. issues. An analysis of the corporate Sustainable Development Goals (SDS's). Promotion of small and minute businesses - social responsibility aspects activity of one of the strategic focus points of the The activity at the Bank: An analysis of the corporate social Bank is the small and minute businesses Customers in a financial crisis – measures Discount Bank, found five goals being most responsibility aspects activity of Discount segment. The Bank assists these for the rehabilitation of customers in financial relevant to the operations of the Bank. 40 SOCIAL REPORT 2018 GROUP PROFILE AND FINANCIAL DATA 41

Granting donations and sponsorships – The activity at the Bank: Assistance to students - the Bank and MDB rules for the treatment of conflict of interests coordination of human and financial "Fintech and innovation" - The creation offer students a variety of finance solutions designed to protect the Bank from improper resources in activities in aid of children of innovative banking models intended to designed to respond to their special needs. or illegal operations; and youth at risk and distress situations, provide customers with advanced services MDB operates a unique program for the conducted mainly in the education and adapted to their needs. In doing so the Bank promotion of higher education in the minority "Whistle blower" mechanism - a "hot line" knowledge fields, for the leverage of invests in several innovative initiatives in the population groups. has been established at the Internal Audit personal and social success of the said fintech and innovation fields, such as iCount, Division for the handling of anonymous target populations; PayBox, and "Didi" the digital representative; calls in respect of suspicion of fraud and embezzlement, improper accounting Increasing competition – ICC has Promotion of environmental credit - treatment, non-compliance with the conducted "competition raising" moves, extending credit to the solar energy field; provisions of the law or material deviations both by engagements regarding the joint Goal No. 16: from the Bank's procedures. Furthermore, a issuance with Bank Leumi and with Bank Sponsorships in the environment field. Peace, justice and strong circular in this matter has been published to Hapoalim, and by engagements in the field institutions the employees, in which it is clarified that the of customer clubs (Shufersal and FlyCard). Meaning of the goal for Discount Bank: Bank's Management shall not allow any action The Bank holds the funds and financial assets taken against employees who bona fide had of its customers. In such operations, the most submitted complaints. A similar mechanism basic condition for conducting business is operates at the principal subsidiaries. Goal No. 4: the confidence that the customers show Quality education towards the Bank. Goal No. 9: Meaning of the goal for Discount Bank: Industry, innovation and Seeing the education field as a generator of Accordingly, Discount Bank diligently infrastructure personal and social success of the individual, maintains the rules of ethics and conducts Contributing Meaning of the goal for Discount Bank: and activity promoting quality education its business in a legal and fair manner, abiding Within the framework of its strategic plan, and learning opportunities. by the provisions of the law and regulations to the economy the Bank aims at implementing technological in its operations, and acts to combat bribery The Bank maintains daily relations means which will intensify customer The activity at the Bank: and corruption. with the local business community experience, and aspires to lead the personal "Sprint Discount" program - the flagship and its members. The Bank is also and humane service experience, based on program of the Bank for the advancement The activity at the Bank: positioned in the meeting point of those listening to and understanding the customers' of education and knowledge in geographical Ethical Code - based upon the Bank's vision wishing to save or deposit funds and those needs, while creating innovative and clear and social peripheral areas; and values and comprises a compass for who wish to draw money for investment solutions. the employees, directing them towards and development of their business. The proper, ethical and appropriate conduct; Bank constantly provides a variety of The principal subsidiaries have a code of financial and investment solutions to ethics of their own; business entities and to various sectors of customers. Corporate governance code - application of the 'best practice" policy with respect to The economic value produced by the corporate governance,: the code is based Discount Group results from its being upon the provisions of the law and regulations a large economic entity, one of the five applying to the Bank in this field; the principal major banking groups in Israel. The Bank's subsidiaries have also adopted a corporate operations and its business results create governance code; value for its shareholders. The Group pays taxes to the authorities as prescribed Avoiding conflict of interests within the by law, employs a large staff and thus Board of Directors - in addition to abiding contributes to the livelihood of many by proper conduct of banking business families. The Group purchases services directives, the corporate governance code and products in a substantial volume, most of the Discount Group states that the Board of which in the local market. of Directors shall determine a policy and 42 SOCIAL REPORT 2018 GROUP PROFILE AND FINANCIAL DATA 43

The economic value created by the Discount Group Moreover, some of the Group's measures An additional indirect impact worth in the field of employee recruitment mentioning is the Bank's investment in its 2018 2017 2016 are intended for the empowerment of flag ship project in the field of contribution In NIS million certain populations and to increase their to the community - "Sprint Discount". The The total economic value produced by the Group1 9,020 78,325 77,967 participation in the labor market. The Group project focuses on the advancement of acts to promote employment in peripheral youth at risk in peripheral areas with a view Total economic value distributed by the Group to 7,055 8,76,441 8,76,552 areas and promote the employment of of reducing social gaps and increasing its stakeholders2 Economic women from the ultra-orthodox sector social economic leadership by means of values 3 Total retained economic value 1,965 1,884 1,441 (see Chapter "Employees" below), as well education and knowledge. Provision for taxes on income from ordinary as employment of special needs personnel 789 747 741 operations (see chapter "Discount for the Community" Number of Group employees6 9,407 9,374 9,401 below). MDB is one of the largest employers Employees in the Arab sector. Salaries and related expenses 2,851 83,204 83,169

Number of branches in Israel4,6 182 188 200 The Discount Group offers services to Credit to the public6 167,078 150,868 142,904 customers by means of a widespread Customers branch network in the various regions of the Of which: housing loans6 32,924 28,893 25,764 country. This branch network contributes Credit to small and minute businesses6 33,595 30,825 29,124 both to the availability of financial services Payment to suppliers 1,389 1,457 1,264 in peripheral areas in the country (alongside a variety of online banking services) and Suppliers Purchase in Israel 94.6% 95.3% 95.9% and to employment in these areas. The Group community Contributions and investments in the 16.9 16.2 17.1 specializes in providing services to the community5 non-Jewish population and to the ultra- orthodox Jewish population by means of Notes: 1 Inter est income, net (interest income less interest expenses) together with non-interest income (non-interest financing income, Mercantile Discount Bank. (See Chapter commissions and other income). "Customers" below, "A wide disposition 2 Oper ating and other expenses (including among other: salaries and related expenses, municipal tax, donations and community investments) with the addition of provisions for taxes and dividends. of branches - servicing a wide variety of 3 The difference between the economic value produced by the Group and the economic value distributed by the Group. customers"). 4 Br anches of Discount Bank and branches of MDB. 5 The volume of monetary donations and indirect investments having a monetary value. 6 Data as of December 31, of each of the years. 7 Reclassified - see Note 1 C 5 ot the financial statements as of December 31, 2018 (p.117). 8 Reclassified - see Note 1 C 6 (3) ot the financial statements as of December 31, 2018 (p.118).

Financial data of MDB and of ICC are in the 2018 Annual Report (p.240). Data presented in their annual reports for regarding the distribution of the overall 2018, available on their respective Internet credit risk of the Discount Group according websites. Financial data of the Discount to economic sectors are presented in the Group is presented in the 2018 annual report 2018 Annual Report (pp. 61-62). of Discount Bank, which is available on the Bank's website. Indirect economic impacts The Discount Group is acting towards Data regarding the activity of the Discount promoting various benefits in favor Group by operating segments are presented of the public. Among the services in favor in the 2018 Annual Report (pp. 224-243). of the public may be mentioned the extensive Data regarding the activity of the Discount activity with regard to financial education Group by geographicl areas are presented (see chapter "Customers" below). 44 SOCIAL REPORT 2018 DISCOUNT SPIRIT 45 03 Discount Spirit

Formation and integration of the "Discount Spirit" 46

Vision, Values and Everything in Between 47

The Code of Ethics 50

Goals 52 46 SOCIAL REPORT 2018 ABOUT THE REPORT 47

Core processes and strategic projects - added value and shape our customers' tuning all processes and projects in order experience at every point of contact with the Formation and to reflect the new values; Bank. Discount integration of Internal communication - creation of We are eager to provide service and an activity for the delivery of messages committed to do so at the highest professional the "Discount encouraging integration all over the Bank, mainly standards, from a sincere and true desire to by means of two communication platforms: work in our customers’ best interests. "FaceBank" the organizational portal and Spirit Spirit" "Morning Magazine" issue, which includes It is important to us that we create value over In the beginning of 2017, with the different articles from all units of the Bank. time for all our stakeholders. The way we treat passing of two and a half years since our customers, colleagues, partners and The Discount spirit incorporates the the beginning of the implementation of the Measures were taken during 2018 for the suppliers is how we would have them treat vision, values, rules of conduct and strategic plan, which outlines the activity in integration and implementation of the us: with fairness and integrity, consideration all the core fields of operation and supporting “Discount Spirit” in the strategic projects and respect. the Code of Ethics, which guide the fields of Discount Bank's operations, the that the Bank is leading, in organizational operations of Discount Bank on its way to need was found for outlining the organization's development processes, including spirit, in order to create a change-supporting performance evaluation, training programs, We shall endeavor to become the best become the best bank for its customers. organizational culture, that would assist the and the way in which outstanding employees Bank for its customers, permitting organization in succeeding to reach its are selected. Furthermore, a separate plan business goals, with this process being was formed for integrating the Code of over a period of time, growth and complementary to the Bank's strategy. The Ethics, the aim of which is to raise awareness financial solidity by means of adapted, Bank's Management decided to begin a regarding the Bank’s new Code and to make process for the formation of the "Discount employees familiar with it so as to form a professional and fair banking. Spirit", which consists of three tiers: basis and platform for resolving the ethical dilemmas that arise in the workplace. As a financial organization, we are Formation of a vision; committed to work diligently in order to Formation of values and conduct rules; The integration of the “Discount Spirit” was be deserving of the public’s trust. Beyond Formation of a Code of Ethics. carried out through additional organizational compliance with all laws and binding measures, such as: new employee absorption, procedures, all our deeds and actions are The vision of the Bank was formed and position-orientated training, and so forth. conducted transparently and fairly so as to approved in the first quarter of 2017. All These measures were taken in order to create fulfill the Bank’s commitment to create and members of the Bank's senior forum an organizational culture supportive of encourage economic and social growth. participated in this process. In the first change, that aligns with the Discount Group’s quarter of 2018, the Bank completed the strategy and its business goals. It is important to us to feel proud of our move for the formation of the Bank's values, workplace and to this end we encourage a principles of conduct and the Code of Ethics. challenging, supportive and pleasant work Some 400 managers participated in the move environment. We believe in the people who for the formation of the "Discount spirit". Vision, Values work with us and invest in strengthening them. The integration of the vision into the Bank All of us together – the Bank’s Management, in 2018 included four main lines of action: and Everything the managers and the staff – are committed to continuing to promote the Bank’s Management - determining policies and in Between momentum of change, and the continued making value directed decisions, providing future growth and success of the Discount "role models", monitoring and control; Our Vision Group is the goal we constantly see before us. We at Discount believe that it is up Managers - responsible for the to us to make our customers choose We at Discount are committed to the integration in the field, in the branches us anew every day. We understand that, in customer, leading change, making it happen and in the Head Office units; order for this to happen, we need to create and succeeding together. 48 SOCIAL REPORT 2018 DISCOUNT SPIRIT 49

Our Values on a customer-orientated organizational infrastructure that enables a dialog between Committed to the customer Leading change Vision and the company and its customers. Values at the ICC offers its customers an array of sophisticated financial tools and off-banking Principal credit products, through development of the data world as a platform that enables it to better understand its customers’ needs and Subsidiaries desires. As part of its attitude to leveraging We guarantee a professional and We see change as an opportunity innovative technologies so as to empower speedy response We are curious and daring The principal subsidiaries have adopted the customer, ICC is leading an ongoing We customize innovative solutions We are open to new ideas the vision and values appropriate to each process of digital transformation that We provide a convenient, available and such company’s character and activity17 emphasizes giving the customer added transparent service value and developing new service channels We confer an exceptional service The values of Mercantile aimed at providing the customer with fast, experience Discount Bank efficient and accessible service. MDB operates in accordance with values We are aware of our customers’ changing We identify change as a growth incorporated in three layers: human, IDB Bank - Our Vision needs and think from their perspective in opportunity and display a constant organizational and inter-personal. It's not what we offer; it's how we offer it. order to provide them with a professional curiosity for learning and self- With us, it's personal. and speedy response with explicit added development. We dare to go beyond our The ICC vision value. We endeavor on tailoring innovative comfort zone, to break out of known ICC aspires to realize the dreams, needs and We dedicate ourselves to providing quality solutions to the customer’s needs and boundaries and to adopt new ideas. We wishes of its customers with gratification and service, personalized attention and provide them an exceptional service display flexibility and act speedily and responsibility, at any time and at any place. innovative products that further the success experience, with emphasis on availability, diligently in order to adapt our operations In accordance with this vision, which is being of our clients. We merge time-honored simplicity, convenience and transparency. to the changing world. implemented with professional integrity, tradition with cutting-edge technology to innovation and courtesy, the communication create a secure, productive environment language of ICC is in the spirit of the slogan where long-term, multigenerational Succeeding together Making it happen of "ICC- what is good for me", and is based relationships can grow.

We cooperate and share knowledge We are innovative and determined We establish a trust relationship We take overall responsibility We are considerate and respectful We stand by our commitments

We cooperate, share knowledge, consult and We work with enthusiasm and think together, thereby creating a multiplier determination to achieve added value effect. We establish a trust relationship and results to the highest standards. and relate to each and every person eye to We take responsibility for our work eye, with consideration and with respect, from A to Z and display diligence, in order to create a work environment that initiative and resourcefulness in order is supportive, positive and challenging and to achieve our objectives. We stand by

an atmosphere that encourages personal our commitments and strive to surpass 17 For further details about the values of the principal subsidiaries in Israel, see the Corporate Social and professional development. expectations. Responsibility Report for 2017, p. 49. 50 SOCIAL REPORT 2018 DISCOUNT SPIRIT 51

been developed in this field, and which Operating together with her is the Ethics different levels within the organization, emphasizes social and environmental Committee, whose responsibility is to for the purpose of launching the updated The Code of responsibility, preventing bribery and form a policy in the matter of ethics, code of ethics; A dedicated booklet corruption and protecting the complaining monitor the absorption processes and accompanying a kit was distributed to Ethics worker on ethics issues, the existing deal with dilemmas and ethical issues. managers which contained guidelines regulation and the requirements coming Representatives of the Bank's units for running team meetings aimed at At the beginning of 2018 a new from social bodies. officiate in the Committee. raising awareness and at providing Code of Ethics was approved at tools to identify and deal with ethical Discount Bank. The new Code of Ethics The Bank's Board of Directors and The absorption processes integrate dilemmas; Learning material on this topic was drawn up as part of the process of Management see great importance in courseware, the designated Intranet site, was also distributed together with a “Read forming the “Discount Spirit”, which is the absorption of the Code and in turning which contains a collection of dilemmas and Sign” document. Concurrently, the the organization’s ethical and behavioral it into an integral part of the culture of and extended information regarding Ethics Committee, which is charged with basis in building the desired the organization. Following the drafting organizational ethics, integration of handling ethical dilemmas, convened in organizational culture within the of the Code, a plan for its methodical ethical dilemmas with professional and order to draw-up an assimilation plan and organization. The Code of Ethics relates deployment was drawn up, so as to managerial qualification processes, as monitor the plan’s actual implementation. to moral and ethical behavior and primarily ensure that the Code would be deployed well as examining and updating the core to values of fairness, honesty, respect effectively within the organization. organizational processes in the fields of The reporting mechanisms are an and transparency in its ongoing conduct human resources, customer experience, anonymous telephone line and forms vis-à-vis various categories of The executive in charge of ethics at supplier management, etc. – all in the addressed to the Ethics Committee also stakeholders, the principal of which are the Bank is Ms. Yafit Gariani, member spirit of the Code of Ethics. for consulting purposes. No approaches employees, customers, the business of Management and - Executive were made to the Committee in 2018. environment and the community. Vice President, Head of the Human Thus, as part of the Code of Ethics’ Resources and Properties Division. absorption process in 2018, meetings The Code of Ethics is available for perusal The Code of Ethics was drawn up in a were held at forums of managers at on the Bank's website. process that included examining the codes of ethics of other financial bodies in Israel and abroad, examining the Bank’s existing Code of Ethics, an in-depth examination of the standards that have 52 SOCIAL REPORT 2018 DISCOUNT SPIRIT 53

discussions at the branches with the Reporting and Consultation Channels assistance of the learning partners and The Code of the regional management. Ethics of the ICC The officer in charge of Ethics at ICC is Mr. Principal Barak Nardi, a member of Management - Deputy CEO and Head of the Strategy and Resources Division. The Code of Ethics The Ethics Committee, Voice mail for The direct and Subsidiaries of ICC was approved in 2014. with an approach via the making an approach indirect managers organizational portal anonymously: 03-9438811 Mercantile Discount Bank New employees engaged by the company MDB’s Code of Ethics reflects the receive an information manual concerning leading values of the Bank. The officer ICC’s Code of Ethics as part of the in charge of ethics at MDB is a member of process of inducting a new employee. Management, Ms. Liat Friedman - VP Head With the aid of a learning program, they of Human Resources and Administration are required to study the rules and ways Division. to act when facing dilemmas that arise Supervision and control bodies, The Ethics Officer, Ms. Yafit Gheriani including the internal audit tel: 03-5145536 in the organization; they also have to function and the compliance and fax: 076-8890418 The Code of Ethics, which was launched at sign that they have read and understood enforcement array email: [email protected] the end of 2016, continued to be integrated the principles of the Code of Ethics. during 2018 along four routes: Furthermore, once in every two years all company employees must undergo Training - as part of their position training, compulsory learning in the matter by new bankers receive training on the Code way of interactive learning. of Ethics and its importance. Furthermore, a discussion is held regarding ethical The Code of Ethics of ICC is available dilemmas. The members of the Ethics to the employees on the organizational goals Committee and the learning partners portal of the company and the general received a refresher course on leading public is able to view it on the Internet future goals discussions on ethical dilemmas and held website of the company. As a goal for 2019, the Bank has set itself the task of continuing to integrate discussions on this topic at conventions Discount the values of the “Discount Spirit” among the managers, with emphasis on for managers, following which the branch IDB Bank leadership in a changing workplace and a digital environment. managers led discussions with their staff IDB Bank's Code of Conduct is undergoes (approx. 100 discussions). each year a process of validation and approval by the Risk Committee of the Structure and processes - the Ethics Board of Directors and is subsequently Committee held three meetings in 2018 ratified by the Board of Directors. It at which it formulated solutions to was last approved in March 2019. All ethical dilemmas that had arisen in the employees and directors annually field and discussed the deepening of acknowledge that they have read and the absorption. understood the standards and principles contained in the Code of Conduct. Every Channeling - solutions formulated to new employee is given a copy of the ethical dilemmas by the Ethics Committee Code of Conduct. The Code of Conduct were published on the employees' portal. is administered by the Office of General Counsel in partnership with Human Control - the Ethics Committee has Resources, and is available on the Bank’s monitored the conducting of the intranet for all employees to access. 54 SOCIAL REPORT 2018 THE EMPLOYEES 55 04 The Customers

Policy 56

Innovation 57

Services and products for the advancement of populations 60

Promotion of accessibility 69

Impact Investments 72

Financial education 73

Suits you better - quality of service 77

Fairness in products 84

Customer privacy and information security 87

Goals 92

about 482 50 84% 86,650 10.5 33,595 thousand active thousand customers satisfied with Facebook followers million US$ commitment million NIS the volume subscribers to the customer surveys the last service received at for impact investments of credit extended to online services the branch (score of 9-10) through Discount Capital small businesses 56 SOCIAL REPORT 2018 THE CUSTOMERS 57

Conduct of the service is based on the The following branches and extensions were following principles: shut down in 2018: the Ramat Aviv in Tel Aviv Policy Branch, the Neighborhood B Extension in The Focus on the customer - specialization Ashdod, the HaTikvah Neighborhood Branch The vision of Discount Bank: "We according to segments (customer arenas) in Tel Aviv, the Tel Ganim Branch in Ramat shall endeavor to become the best instead of products - providing appropriate Gan and the Daniel Branch in Bat Yam. Also, Bank for its customers, permitting over a services and products in accordance with the Tel Aviv Collections Center was relocated period of time, growth and financial solidity the characteristics and unique to another, existing property of the Bank. Customers by means of adapted, professional and fair requirements of each segment; banking." One stop shop - a comprehensive service In 2018, the Bank discontinued the provision to the customer at one service point; of teller services at 13 branches. Within The Bank aspires to be a leader in In view of the vision, the Bank aspires to be Team service - provides a response for the framework of the preparations for the experience of personal and a leader in the experience of personal and a more comprehensive service at one discontinuing the teller services, clear people-oriented service, based on listening address at the branch; guidelines have been prepared intended people-oriented service, based on to and understanding customer needs, while Multi-channel - enables the customer to to ensure measures which would reduce, as listening to and understanding creating clear and innovative solutions and perform banking operations everywhere, far as possible, the inconvenience caused by strives to create value for its customers at any time, in every channel and the discontinuation of the service. Included customer needs, while creating clear in the various banking fields of operation. individually customized; in the above, the branches at which teller Expert banking - provision of various services had been discontinued would and innovative solutions and strives Within the framework of assimilating the professional services in the credit and have on duty, for a period of three months, to create value for its customers vision, the Bank adjusts to the changing investment sectors, including customizing a banker who would instruct customers world and creates innovative banking models the product to customers’ needs and having difficulty in using the online services providing customers with an advanced service requirements; and also would enable customers to reach tailored to their needs. Inter alia in this respect, Service initiative - forecasting customer nearby branches where teller services are the Bank has invested in several innovative needs and adaptation of product and available. initiatives in the fintech and innovation fields. services; The Bank works to integrate a culture of service The integration of standards for handling MDB continues its operations and and insists on processes of learning lessons customer inquiries and the continued disposition in accordance with the outlined in connection with customer relations and reduction in complaints; strategy. dealing with customer inquiries. Easy and convenient communication with the Bank’s customers through emails to The Bank is willing to open an account for the banker. customers, and provide them with service, subject to the provisions of the law and A system supporting customer focused Innovation accepted banking considerations. From time marketing was integrated at the Bank's service The Bank adapts itself to the changing to time, the Bank offers different population layouts. This system places the customer world and acts to create innovative banking segments unique solutions and campaigns, at the center and customizes the products models, which will provide its customers on a purely economic basis, without involving according to his needs and preferences. with a sophisticated service suited to their irrelevant considerations of race, nationality, needs. religion or gender. The scaling down of the branch layout Among the goals of the Bank's Discount Bank works toward promoting Within the strategic program of the strategic plan, is the goal of the fairness and decency in service - values that Discount Group, it has been decided implementation of technological means and constitute an integral part of the ongoing to reduce real estate areas held by the Bank intensifying the customer experience. Among business activity - inter alia, by promoting and the Group, among other things, in view the measures taken in this field may be noted transparency and by providing full disclosure of the reduction of the labor force. In view the establishment of the Digital and Data to customers, including the information that of the aforesaid, a downward trend is evident Division, within the framework of which the has to be provided to customers regarding in the amount of real estate space used by Digital Wing, a Fintech and Innovation Unit, the banking products and services offered the Bank (see the 2018 Annual Report, p. a PayBox Application Management Unit and to them. 309). a CDO (Chief Digital Officer) Subdivision. 58 SOCIAL REPORT 2018 THE CUSTOMERS 59

The Digital Wing leads the solutions concept collective collection of funds for a defined Access permissions to an account within The customer service that Discount Bank in three principal content spheres - direct purpose by means of establishing a closed the iCount service - as part of the “Open operates within the framework of the channels, the CRM and customer concept group for this purpose. The Bank has Bank” strategy and collaborations between sophisticated initiatives in the fintech and current account. The Wing is responsible acquired an exclusive license from the Discount Bank and the systems and websites fields is also available to MDB’s customers. for charting the course through the world company for the operation of the application of third parties that provide banking services of content, for planning the customer’s and website in Israel, as well as several to businesses - the Bank has launched, for Direct channels future travels, for upgrading the bankers’ assets and services that enable the the first time in Israel, a development based The Bank is constantly working to work environment and aligning it with the application and website to be operated on API infrastructure. With the aid of this provide its customers with an changing reality, and for the deployment independently. infrastructure, customers of the Bank that advanced experience regarding its direct of innovative tools, services and solutions use the iCount system are able to grant channels. The Bank strives to continuously aimed at improving the customer experience The technological changes required for the this system access permissions by digital enhance the range of services it provides, and customers’ satisfaction. application’s operation by the Bank have means, and thereby receive on the iCount while emphasizing a user-friendly service been developed in the product. system information regarding balances and - above all else - an exceptional customer The Bank adapts itself to the changing from their account with the Bank. experience. During 2018, the Bank continued to expand world and acts to create innovative payment activity under the PayBox brand "DIDI" - a digital representative in the At the end of 2018, the Bank had approx. banking models, which will provide its name by means of the application and application 482 thousand active subscribers to the website with customers of all banks in Israel. DIDI, which constitutes a breakthrough and online services. customers with a sophisticated service is the leading BOT in the Israeli banking suited to their needs iCount system. At the end of 2018, MDB had approx. 266 The first technological-business application thousand active subscribers to the online The Fintech and Innovation Unit acts for in the banking sector in Israel, which In December 2017, the Bank began services. the creation of cooperation with fintech implements an open banking concept the gradual roll out of a new service companies and the integration thereof into an interface with third parties. It is for customers using the banking application, In 2018, services and products were in value offers to customers, as part of implemented using one of the world’s which enables them to correspond and developed and made available to customers the banking work environment and of the most advanced Application Programming converse with a digital representative on on the business website, the private systems of the Bank. Interface (API) platforms, which enables the application by the name of DIDI. DIDI customers application, the Internet website a secured link based on a global standard. offers a unique and innovative way for digital for private customers, the capital market The PayBox Unit is working to expand the banking activity, thus changing the way in world and in the customers’ communications Bank’s payments activity by means of the In August 2017, the Bank entered which customers use the application. The with the banker, the availability of general application and the website. into a cooperation agreement with conversation with DIDI is held in an open information and accessibility - all while a fintech technology company which has language and is based on advanced artificial placing emphasis on the customer Advanced initiatives developed a system for the management intelligence, which - on the one hand - experience and functionality. For further in the fintech field of accounts and cash flows for small and enables the text input by the customer to details, see the 2018 Annual Report (pp. PayBox medium businesses, operating by means be deciphered and - on the other hand - 356-359). A payments application allowing the easy of an Internet website and mobile application enables a smart, self-learning robot to hold transfer of funds. It is possible also to under the "iCount" brand name. a conversation. DIDI is able to provide Most of the customer services that Discount transfer funds directly to a contact person, customers with information regarding their Bank operates within the framework of the or alternatively send a payment request In accordance with a signed agreement, accounts, to refer to executing banking direct channels is also available to MDB’s and collectively collect funds. Discount Bank and MDB let their business transactions, to assist customers in getting customers. customers securely connect their business oriented with the application and to bring In April 2017, the Bank entered into account with the iCount accounting system, up insights based on artificial intelligence Technological accessibility an agreement with a startup and thereby let them benefit from advanced regarding important events that have taken for the older population company in the fintech field by the name business management tools. place on the account. The Bank is working copiously in of PayBox Payment Solutions Ltd. ("the order to help different populations, company"). The company has developed The service is unique and groundbreaking for including the older population, in the a cellular phone application and a designated the Israeli banking industry and, during 2018, integration of the correct and safe use of Internet website under the PayBox brand additional types of insights were added to online services. This, due to the belief in name, which facilitates the transfer of funds Didi’s capabilities, which assist the customer the advantages that such services may bring between private individuals, as well as the in the smart conduct of financial activity. to these populations (availability of the 60 SOCIAL REPORT 2018 THE CUSTOMERS 61

service, time saving, unique experience, 2019, the deployment of “preference in line” Implementation of the "Mobile First" etc.) and the understanding of the difficulties was completed and this is also reflected in concept, while making the websites of that accompany the changes in the manner the line management system. Innovation the company accessible in a responsive of use of the services and the adoption of version adapted to the size of the screen new technologies. is ICC of the user; "Vocal visual" answering service used Within this framework, the Bank invests In 2018, ICC continued to lead the as a supporting tool in conversations considerable efforts in the planning and Services and process of digital transformation with the service centers; design of the interfaces and the digital and in modifying its assets and products Integration of designated tools processes, while especially emphasizing products for the to the challenges of the digital revolution, supporting the customer in the digital the simplicity of the processes, their including the introduction of new products assets, including an advanced search intuitiveness and the language in which advancement of and services. As part of its approach to in the company's websites; they are presented. focusing on the customer, the company An innovative payment through the populations has been working on developing a data Cal4U application for the purchase of The Bank operates in two principal channels: world as a platform that will enable it to digital vouchers that can be used in a Alongside the diverse financial better understand the needs of its variety of chains in different sectors: The digital channel - In 2017, the Bank services which the Bank provides customers and their wishes, through fashion, beauty, leisure and food. introduced "Didi" - the digital to all classes of customers, it develops personal and unique customization. representative on the Bank's application, designated services for specific populations, All the above have been added to the which, inter alia, provides a response such as small businesses, minority Among the main services that ICC offers services introduced in prior years, and have also to the needs of the older population populations, students, etc. its customers are the following: been improved during the year, such as: (see above). The Bank considers, that accessibility to the various digital services The Bank is aware of the changing needs An online loan process - immediate, Ordering a credit card online - by means of "Didi" removes a central of its customers and acts to provide a within 3 minutes! development and integration of a block existing at the present time with professional response having added value. Blocking a card that has been lost or designated service for the ordering of respect to the use of digital services by Discount Bank is one of the large financial stolen and replacing a defective card a credit card online, both on the desktop a part of the said population. All this, corporations and has a considerable impact directly via the application; platform and on the mobile platform; alongside the continued communication on the economy; therefore, it is active in Voice search via the Cal4U wallet Online credit products - access to credit - content and clips - describing new advancing the different populations, while application; products for private and business products and services available online, diligently adapting solutions to their unique Online secret code viewing on digital customers by means of all digital at the branches and in the different media. needs. assets; platforms in general and by the mobile Blocking standing orders and platform in particular; The service channel - At each branch Discount - the Bank transferring them from one card to Transfer of funds by means of the mobile where teller services are being for the family another; phone - integration of a service for the discontinued, the Bank places a banker Discount is the first bank in Israel Fast and simple transaction search real-time transfer of funds between whose job is to assist customers in to market a unique program that according to a large number of criteria; customers of ICC; obtaining service by means of the grants special benefits to customers who Accessibility to the chat service directly Personal design for the credit card - a automatic machines, with special are family members - “the Family Program”. from the website or from the application; designated digital asset enabling ICC attention to the older customer card holders to personally design their population, and to instruct them in the The Bank offers its customers a unique credit card - a service only available in use of the mobile application and of the program, which is designed for existing Israel. operations website, in order to make it and new customers who are related to one easier for customers to execute their another. The idea is to connect several From the viewpoint of ICC, the digital transactions through these channels. customers who are related to one another means offer to a customer an innovative having different accounts, to the "Family user experience, which links the execution Customers over eighty years of age are Program" in the Bank's systems, and thus of a transaction, the receipt of information entitled to preference in line for service. provide financial strength to the family and the world of benefits in a simple and This is brought to the attention of the public cell. The program allows the utilization easy fashion. by relevant signs and by video clips on LCD of the family's power and grants family screens at the branches. At the beginning of members benefits having financial values 62 SOCIAL REPORT 2018 THE CUSTOMERS 63

in accordance with the benefit program Business Family - the program grants accordance with customer needs customers to transact business chosen by them. benefits to customers that manage their (business development/ investment in independently, directly from their place business account, private account and machinery and equipment). The balance of business. The connection to the family group grants accounts of family members at Discount of credit in the funds as of December 31, the family members participating in the Bank. 2018 - NIS 115 million (December 31, 2017 Freelancer service program, benefits, and everything, of - NIS 165 million). Discount Bank introduced in 2017 course, while strictly maintaining bank Promotion of small Business credit card - The Bank offers a new service for freelancers, which confidentiality so that none of the parties and minute businesses a "business key" credit card to its includes a personally adapted benefit plan joining the program share or are involved in Within the framework of the strategic customers. This card provides business and innovative digital services. the accounts of the other family members. plan, the small and minute owners with a unique service through businesses segment has been defined as the use of a “key-type” credit card, which Approximately 300 thousand freelancers The Bank offers its customers a unique one of the focus segments, on which the enables them to receive a variety of conduct business in Israel, comprising 7.6% Group is to focus, as a central growth engine. benefits on the products and services of the total workforce in the market. A study program, which connects a number of In the activity in 2018, emphasis was placed appropriate to the business customer made by the Deloitte Research Company found customers with different accounts, who on the automatization of credit processes and its activity. that the number of freelancers in the local in the small business segment, among SMS business packages - A package labor market grew by 33% in the years 2009- have a family connection, thereby giving customers having a debt of less than NIS that allows extension of current account 2014. Despite the growth in this labor market the family unit financial strength 1 million. Furthermore, the focus on the services. Receiving messages regarding segment with its particular needs, there exists segment continued, with an emphasis on the following matters are available: notice in Israel no organization that incorporates The principal products of the family program increasing the activity with existing in advance as to the termination of a and provides support to freelancers. are: customers, attracting new business guarantee, outstanding balance of Exemption from commission on money customers and the basing of growth upon guarantees relating to the account, With a view of identifying the target transfers in Israeli currency between improving the models for the rating of collection of post-dated checks (balance population, the Bank had conducted a study accounts of the family members business customers as a supporting tool and payments), checks serving as focused on the targeted population, its needs participating in the program; for the granting of credit. collateral (balance, payments and and difficulties prevalent in this field. The "Family plus" - offsetting interest on shortage vis-à-vis the defined amount), idea behind the plan being offered by the overdrawn accounts against the accounts The services provided to these customers order of check books, dishonored checks, Bank to freelancers provides a response to of the other family members. The program include: etc. the principal requirement of the group - lack allows the customer to enjoy the setting Service to small and medium "Business +" website and application - of economic certainty, and the difficulty that off of interest charged on their overdraft businesses - The Bank's customers that An application and designated website arises from the payment terms of "current so long as one or more family members are small and medium businesses obtain for business customers that present month plus" prevailing in the Israeli market. participating in this benefit has at that services commensurate to their volume comprehensive data regarding the time a credit balance on their current of operations, this in order to provide accounts of the business and allow In order to face these challenges, Discount account, in accordance with the principles professional service appropriate to the Bank has established a unique term package of the program; customer's characteristics. Customers for freelancers, which has solutions and tracks "2go key" card - a rechargeable card in having a volume of operations of up to adapted to their needs. Thus, for example, the name of the child provides parent NIS 15 million and indebtedness of up the package offers a bridging loan, "current security and control over expenses, to NIS 4-5 million, obtain services from plus on our account", in an amount of up to starting from the age of fourteen. An the business banking teams at the Bank’s NIS 30 thousand at an attractive interest rate, exemption from card fees for customers branches. Customers having higher granted against future cash inflows, in order participating in the family program; volumes of operations and indebtedness to allow the customer to conduct an ordinary Saving for higher education - monthly than those stated above obtain services manner of life with no debts while awaiting savings for fifteen years with a gift from from the Bank's business centers. payment for his work. The Bank also offers Discount Bank of a full year’s deposits; Small business funds - Since 2012, a credit facility in an amount of up to twice Family loan - all-purpose loans at Discount Bank has operated from its own the average salary recorded in the previous preferential terms for members of the resources credit models for the financing half year, pension savings, assistance with family program; of funds for small businesses. The fund marketing and with constructing a business Family deposit - shekel deposits at is designed for Bank customers with plan, and additional benefits - such as a preferential terms for members of the revenue turnover of up to NIS 15 million. business organization loan, exemption from program; Different classes of funds exist in various fees, and so forth. 64 SOCIAL REPORT 2018 THE CUSTOMERS 65

Customers in a financial crisis a broad and comprehensive service that the covenant’s inception through the end financial education at the shelters through Households and small businesses - As includes the whole range of business of 2018, more than 600 female victims of the “Banks Adopt a Shelter” program. The part of the Banking Division’s Collections services that the Bank offers its customers, violence have to date received assistance volunteers from the Bank work on broadening Wing, a special-purpose team was taking an overall perspective of their from the banking corporations. the financial knowledge of the women and established in 2018 to coordinate the business needs and providing close, fair on providing personal support to the women collection procedures with households and professional support. The Bank Discount Bank has appointed the staying in the shelter. and small businesses, prior to embarking extends to such customers a unique service manager of mortgage public inquiries to on legal proceedings. In May 2018, use that is based on communication and be the coordinator for this topic and has began to be made of a lawyer as early as understanding the business’ needs at the strengthened its personal connection with Discount Bank has appointed the the stage of sending a warning letter to time of crisis, with the primary aim of these the shelters that look after female victims manager of mortgage public inquiries customers and prior to instigating legal efforts being the customer’s successful of violence. The women are assisted by proceedings, with the aim of reaching an rehabilitation. The company’s success suggesting relevant financial advice in to be the coordinator for this topic arrangement with the customers at a stage returning to normal business operations accordance with the special circumstances and has strengthened its personal where it is still possible to rehabilitate creates added value for the company as of each individual case. Within the framework their activity and return to stable a source of self-generated profit and for of these activities, the Bank cooperates with connection with the shelters that look operations. Furthermore, the team initiates the economy as a whole as a source of the social workers at the shelters in providing after female victims of violence from time to time - almost every quarter livelihood for numerous families, while at whatever support is needed to the women - special collections that include, in the same time creating value for the Bank staying in the shelter. In June 2019, the Banking Supervision appropriate cases, an easing of debt as a result of the customer’s healthy and Department and the Association of Banks in repayment terms, in accordance with the varied business activity. When the Bank is contacted by the shelter Israel, in conjunction with the banks and the economic position of the debtor, aimed via the social worker, the coordinator acts credit card companies began implementing at the rehabilitation of the debtor and Economic strengthening for in cooperation with the Debt Monitoring a pilot project that expands the application giving him a second chance. Concurrently, female victims of violence Unit, with the branch management and with of the “Banking Availability” Covenant, the team works in cooperation with other In recent years it has become more other relevant units and the case is examined which deals with providing assistance parties such as: the “Needy Debtor” widely understood that the with the aim of assisting and preventing to female victims of violence staying in Department at the Law Enforcement and population in shelters for female victims of any deterioration in the woman’s situation. shelters and halfway homes, whereby it Collection Authority, the Legal Aid Bureau violence, who have mostly been forced to Together they go over the account printouts, will be possible to provide support to both at the Ministry of Justice, etc. flee their homes without any support and check whether there are standing orders or female and male victims of violence that resources, lacks the means to survive and direct debits that, owing to the woman being in are not in shelters and halfway homes, but manage from a financial aspect. These the shelter, are superfluous, examine whether have contacted centers for the treatment A special-purpose team was established women’s economic dependence on their there are outstanding loans and whether of family abuse that are run by the Ministry in 2018 to coordinate the collection abusive husband/partner could continue or assistance can be provided by easing the of Labor and Welfare. There are currently even intensify, sometimes even leading to repayment schedule, and so forth. 103 such centers in Israel to which some procedures with housholds and small their returning home - even though this is 1,000 men and women turn for help each bbusinsses, prior to embarking on legal not actually what they want. Along with this, the “Banking Availability” year. Covenant calls for the banks to provide procedures In view of this and as part of the Banking MDB is also a partner in the Covenant and Supervision Department’s desire to promote in its associated endeavors and provides a Companies - in 2014, a special-purpose the economic independence of women, it was personal and humane response to women unit was set up as part of the Special Credit decided to support female victims of violence who contact it. As part of the aforesaid, Wing with the aim of attending to active staying in shelters and halfway homes. To MDB partners financial eduction activity companies that are in difficulty and to this end, the “Banking Availability” Covenant and women’s empowerment for female assist them with rehabilitation and recovery was drawn up in January 2016 with the aim of victims of violence in the Arab sector. ICC measures that will enable them to return assisting female victims of violence to embark assists women and provides a personal to stable operations - rather than having on a new and independent economic path. and rapid response, while helping them to them be subject to legal proceedings. This Partnering in this initiative are: the Association utilize in full their financial rights. is a designated team whose sole purpose of Banks in Israel, the banks and credit card is to assist with the business’ rehabilitation companies in Israel, the Banking Supervision More suitable for students and to return it to stable operations. The Department, the shelters for female victims With the aim of making higher unit’s team provides such companies with of violence, and social organizations. Since education accessible to all 66 SOCIAL REPORT 2018 THE CUSTOMERS 67

youngsters, the Discount Group is offering period (of up to four years) during studies Most of the customers of MDB belonging a variety of loan models that are intended and beginning the long-term repayment to the household segment of this bank to answer the special needs of students. of the principal amount one year after Services AND receive banking services by means of MDB Thus, for instance, with respect to a loan completion of studies; branches, 36 of which are located in the of the "Degree with peace of mind" class products for Acre Region and the Nazareth Region (where at Discount Bank, the repayment period Financial tranquility for the student - there is an absolute majority of the Arab is up to eight years, and the repayments cooperation with the academic population), as well as additional branches of the principal of the loan may be deferred institutions by means of a tuition fees the advancement in others places in Israel, including: Rahat, for three years, while enjoying especially fund, whereby - in most cases - the East Jerusalem, Wadi Nisnas in Haifa, Jaffa low repayments during the studies period. institution pays the interest on the loan, of populations and more. A loan for the splitting of tuition fees is while the student repays only the principal granted against the presentation of a amount; at the principal Service to the Haredi payment voucher (also to the parents of customer population the student). The payment voucher may Encouraging higher education in the subsidiaries MDB operates 11 branches at the be split into up to ten payments without Haredi sector - within the framework of heart of the Haredi community. The interest and linkage (the first payment cooperation between the bank, the Haredi MDB branches are located countrywide, mostly made in cash). Professional Advancement Fund and MDB specializes, inter alia, in providing in the Jerusalem, Bnei Braq, Ashdod and the Council for Higher Education, students services to small and medium businesses Netivot areas, as well as in additional areas The overall repayment period for loans receive a subsistence loan during their and in providing services to the Arab and with a high Haredi population concentration. to students studying abroad for higher study period and, upon graduation, receive ultra-orthodox Jewish populations. The bank specializes in the development degrees, is seven years, and the repayment a scholarship of 40% to 70% of the loan of products and the granting of dedicated of the principal amount of the loan may (depending on the subject studied), with MDB views the retail segment as a central services for the Haredi customer population. be deferred for up to twenty-four months. the remaining balance of the loan being target of its business development and is The bank has a special unit to deal with Loans to students for any purpose are also repaid over a long period. focused on the appropriate disposition associations and organizations belonging available at attractive interest rates. of branches in this sector, as well as on to the Haredi community, which handles improving the service to its customers. many hundreds of customers. Furthermore, In recent years, MDB has also introduced Student loans the bank operates branches in areas with special credit products for the student Within the framework of this segment, MDB a high Haredi population concentration with population, which are especially tailored in the years 2015-2018 provides to private customers, typified by business hours that are convenient to this to their needs and abilities, with a special 2018 2017 2016 2015 household activity, a variety of banking population.

focus on peripheral areas, in the Arab sector in NIS millions services and financial products, including and in the Haredi sector: services regarding credit, housing loans The small and medium Discount 99 156 195 214 Bank and the capital market. MDB provides these businesses segment Tuition fee loans granted at the services to customers of this segment The small and medium businesses branches - students may finance tuition MDB 418 450 455 351 through an array of its branches, which segment at the MDB is one of the fees by a long-term loan, with a grace at the end of 2018 numbered 76 branches outstanding segments in the activity of countrywide and by means of the TeleBank, the bank and is, accordingly, a central target the mobile application and the Internet in its business development. Within the website. framework of this segment’s activity, MDB provides varied banking services and The service to the general customer population of the Bank in the private sector, is based upon many years of The outstanding balance of acquaintanceship and the granting of personal consulting and service, both at loans extended by MDB within the branches and through additional marketing framework of the funds for small channels (Internet, TeleBank, etc.), as well as on through involvement in the community and medium businesses amounted at and adapting to its needs. the end of 2018 to NIS 480 million. 68 SOCIAL REPORT 2018 THE CUSTOMERS 69

financial products to small business Association, for the purpose of granting as part of their duties, provide service to customers (individuals and companies). long-term credit to Association members the public, upon starting their job, and also Around one half of the customers of MDB who wish to renew and purchase equipment Promotion of annual refresher courses for all the Bank’s who belong to this segment live in and manufacturing facilities, and in this employees. communities where the population has an way upgrade the industry and increase accessibility absolute "non-Jewish" majority and receive production capacity and competition. The The above stated relates also to MDB and banking services by means of branches outstanding balance of the loans granted Approx. 20% of the population of to ICC. of the bank, 36 of which belonging by this fund amounted as of December 31, Israel is defined as having disabilities organizationally to the Acre and Nazareth 2018 to NIS 28 million. of varying degrees - physical, emotional or Accessibility modifications at properties - regions and additional branches in other intellectual, including cognitive, either the Bank has completed making accessibility regions and communities around the ICC permanently or temporarily. Discount Bank modifications to buildings and infrastructure country. Service to micro businesses - ICC provides attaches considerable importance to making that it possesses for the benefit of persons acquiring services to micro trading houses its services and properties suitable for with disabilities. Modifications have been Governmental funds for the support of through aggregators. When a trading house persons with disabilities and makes made at the Bank to furniture, signage, business - during the past decade, MDB applies to ICC and, during the joining accessibility modifications. Hence, in access routes, service points and waiting has developed, in cooperation with relevant process, is identified as a micro business, accordance with the Equal Rights for areas, a solution for height differences government agencies, expertise in the it is directed to an aggregator, which will Handicapped Persons Law, the Bank has between levels, modifications to devices granting of credit to small and medium contact it regarding the engagement for appointed an Accessibility Coordinator who for self-use, disabled bathroom, and businesses through governmental funds clearing services. The aggregators with leads and coordinates the accessibility so forth. Moreover, the Bank is working for the support of business. which ICC collaborates specialize in operations at the Bank and serves as an with the local authorities to make access providing a solution to the needs of a micro address for any approach in the matter. The routes to branches accessible - from the Small and Medium Businesses Fund - The merchant through the use of advanced Bank conducts a "Discount accessible" allocation of handicapped parking spaces Ministry of Finance informed the Bank on digital technologies that enable the micro project, within the framework of which, the through to accessibility modifications from January 17, 2016, of its decision to accept business to execute transactions. Bank made accessibility modifications in the beginning of the street to the branch the offer of MDB (and its institutional accordance with the new regulation, both entrance. partner) as one of the winners in the IDB Bank from the aspects of building, infrastructure tender. The balance of loans within the Credit to the local community - Under and environmental modifications and the Service accessibility at the branches - the framework of the Fund which MDB granted the Community Reinvestment Act (CRA), aspects of modifications for accessibility various branches of the Bank have aids and its customers (jointly with the institutional IDB Bank is required to help meet the to service. assistive services such as: body), amounted as of December 31, 2018 credit needs of the local communities in to NIS 778 million (2017 - NIS 480 million). which they are located. IDB Bank’s CRA For the purpose of the project, the Bank “Audio induction loops” - assistive activities (i.e., community development has entered into engagements with several listening technology that helps with The corporate banking segment lending, qualified investments, grants, and entities specializing in the subject of hearing directly within the ear, cutting Within the framework of this community development services) are accessibility for people with disabilities, in out background noise; segment, MDB provides a variety evaluated approximately every three years by which authorized professionals operate, who Two-way hearing system - a system for of banking services and financial products federal and state regulators. This, in order to accompany the Bank, providing guidance enhancing voice volume, which is installed to large business corporations. The assess the bank’s record in helping to meet and advice on the modifications required at teller stations where there is a partition; business of such customers is typified by the credit needs of all the communities it for easy access. significant complexity and sophistication serves, including low-to moderate-income - and, accordingly, the bank provides to neighborhoods, consistent with safe and Within the framework of the project, these customers financial products, mostly sound operations. Information regarding necessary accessibility modifications have in the credit field, tailored to their activity IDB Bank’s CRA activities is available to been made to the Bank’s properties and and specific needs - taking a comprehensive the public through the CRA Public File to its services following the performance view of their varied businesses. maintained at each of IDB Bank’s seven of a comprehensive survey. Accessibility branch locations. Furthermore, the FDIC and modifications have also been made to A fund for the renewal and purchase NYSDFS make IDB Bank’s CRA Performance the Internet marketing website and to the of production facilities - MDB has a Evaluation available to the public through operations website, and to the application designated fund, established in 2015 their respective website. and, in addition, training sessions are held for in conjunction with the Manufacturers' Bank employees on the topic of accessibility - both training sessions for employees who, 70 SOCIAL REPORT 2018 THE CUSTOMERS 71

"Call-Hear" - a system for calling a service Line management points - access to persons with hearing or sight impairments; representative at the entrance to a branch; points for persons with sight or hearing translating into sign language; providing Access to written information - including impairments, as well as for those in Promotion of accessibility to the telephone service forms, documents and information wheelchairs and persons of small stature. center; service without waiting in line for pamphlets in accordance with the accessibility the eligible; and permitting entry to service customer’s needs, including conversion For further information regarding animals. At the same time, the Internet of information into audio files, digital accessibility at Discount Bank and the at the principal website and the application are being files or braille writing for customers with disposition of branches with accessibility made accessible in accordance with the impaired sight; can be viewed on the Bank’s website. recommendations of the Israeli standard Translation into sign language - with subsidiaries for Internet accessibility (IS 5568) at an the aid of a professional interpreter at Digital accessibility on the website and AA level and with the guidelines of the meetings with the Bank representative; application - For some time now, the digital Accessibility at MDB W3C organization’s document WCAG 2.0 Discount TeleBank - modifying the call revolution has resulted in the Internet and MDB is making its branches and its self- regarding web accessibility. routing at the telephone service center applications becoming the main channel used devices accessible for persons with by simplifying the language, slowing down for obtaining many services, including disabilities. The bank has an accessibility MDB has completed the modification of the audio speed and removing the banking services. Discount Bank provides officer who coordinates the topic of the buildings and infrastructure in its background music; its customers with browsing services via an accessibility at the bank and serves as possession for persons with disabilities. Correspondence with a banker on the Internet website that complies with statutory the address to which inquiries on this Discount application; requirements, including the Equal Rights topic are directed. The bank is working on Accessibility at ICC Service without having to wait in line - for Disabled Persons Regulations, 2013. providing accessibility at its properties - ICC offers its service to a broad and diverse for holders of a disabled card; Moreover, the website conforms with the from modifying furniture, service counters, range of customers, including customers Service animals - permitting entry to recommendations of the Israeli standard signage, the branch entrance, height with disabilities. As part of the concept of service animals, including a service (IS 5568) for Internet content accessibility levels, parking, and services, through to providing a broad and inclusive service, ICC animal that is being trained. at an AA level and with the guidelines of the making access to the branch from the offers diverse accessibility arrangements W3C organization’s document WCAG 2.0 street accessible, in coordination with - ranging from the physical accessibility of Access to devices for self-use: regarding web accessibility, which deals the local authorities. At the branches the “ICC House” building, where the public ATMs - access to ATMs and making height with Internet standards. At the same time, themselves, there are aids and services reception area is located, through to making adjustments for persons in wheelchairs, Discount Bank’s application for cellular intended for persons with disabilities, the telephone service accessible. The as well as the possibility of receiving phones and tablet devices conforms with including dedicated systems for people physical accessibility includes accessible audio guidance; the accessibility requirements of the Israeli with hearing or sight impairments. These parking at the complex, accessibility of standard (IS 5568) at an AA level and with include “Step-Hear”, an audio signage and the entrance door, passageways, signage, Information desk (Discount Mashov) - the guidelines of the W3C organization’s wayfinding solution for the sight impaired, accessible furniture and bathrooms. In the access to terminals for receiving document WCAG 2.0 - both for the IOS which enable such persons to be provided public reception area, accessibility to service information and executing transactions operating system and also for the android with audio information, as selected by them is provided through representatives who will in the accounts by oneself at branches, operating system. and in accordance with their location, audio read out forms, the use of assistive audio with the service being modified for induction loops, a two-way audio system, systems, escort and direction assistance, persons with sight or hearing disabilities; Claim regarding accessibility - On and Call-Hear system for calling a service service without having to wait in line for those September 2, 2018, a claim, together with a representative at the entrance to a branch. so entitled, and so forth. Furthermore, in motion for its approval as a class-action, was Concurrently, accessibility modifications the sphere of service accessibility- service filed against Automatic Banking Services have been made to self-use devices, representatives trained in the provision Ltd. and against 11 banks, including Discount including making adjustments to the height of accessible service, making the voice Bank and MBD. The amount of the claim for of ATMs and making it possible to receive response system accessible, setting all the members of the group is estimated audio instructions; providing accessibility to up a written communications team that at NIS 10 million. devices for executing account transactions can provide a comprehensive solution independently (“Mashov”); and providing for customers with disabilities. Service The cause for the motion is the failure to accessibility to line management points. accessibility is achieved through the use of provide full accessibility to the banks’ ATMs Moreover, as is the case at Discount Bank, writing tools, such as the “Chat” channel, on- in accordance with the Equality Law and MDB is making its services accessible to line forms, a dedicated fax line and contacting the Accessibility Regulations. The plaintiff persons with disabilities, including providing the company's accessibility coordinator suffers from a sight impairment and is a accessibility to written information for either by email or regular mail. Moreover, Continue on page 72 72 SOCIAL REPORT 2018 THE CUSTOMERS 73

Continue from page 70 other services are provided on request, such customer of one of the banks. She alleges and in the United States. The Fund’s first as the reading of documents over the phone, that she visited several branches and found “closing”, as well as the signing of Discount translating into sign language, with advance a system whereby there was no ATM that Capital’s investment commitment, took coordination, and so forth. The company’s was accessible for persons with disabilities. place in March 2018. Discount Capital’s Internet websites have been made accessible An expert for the plaintiff carried out an commitment of US$ 7.5 million is part in accordance with the accessibility guidelines examination at branches of the banks of total commitments of US$ 50 million. of Israel Standard 5568 - “Internet Content throughout the country and his examination Additional investors have since joined Accessibility Guidelines” at an AA level. This revealed that, as alleged, this problem is the Fund and the final closing of the fund Israeli standard is identical to the guidelines systemic and ignores an entire group that is expected to take place in the coming document of the international organization warrants equality and due consideration; in months in an expected scope of US$ 70 that deals with web standards - Web content light of this, the plaintiff has decided to file million. Discount Capital’s share in the Fund Accessibility Guidelines - WCAG 2.0. the motion against all the banks. The claim after the final closing will be 13.3% - but the returns on the different investment against Automatic Banking Services Ltd. not more than US$ 10 million. channels, as well as the growth in credit to Further information regarding accessibility at is that it is the company that controls the households. In recent years, the Banking MDB and ICC can be viewed on the companies’ ATM market. The claim against the banks 12 Angels Fund - The Fund was founded Supervision Department has also taken a websites. is that they have not taken the trouble to by KamaTech for the purpose of helping lead in the process of financial education, make the machines accessible for persons ultra-orthodox Jews (Haredi) integrate into in conjunction with the Association of Banks IDB Bank with disabilities. Israel’s high-tech scene, and particularly into in Israel and all the banks. IDB Bank complies with applicable provisions early-stage startups. The investors in the of the American with Disability Act (ADA). The On August 30, 2019, a verdict was handed Fund are some 30 of the leading entities in From a holistic viewpoint of the customer's ADA requires that disabled persons be afforded down with regard to the Bank and five other Israeli high-tech infrastructure. In December needs at any point of time during the the same access to public accommodations respondents that approved the petitioner’s 2017, Discount Capital signed a commitment changing stages of life, starting with and given the same employment opportunities motion for the withdrawal of the motion for to invest US$ 0.5 million in the Fund, this the opening of a young person account, as nondisabled persons. The ADA is made approval. In the verdict, the Court ruled that, being part of the Fund’s US$ 3 .5 million in continuing as a conscript, a student, a young up of five titles; the two that apply to banks even if there is room for small improvements total commitments. family, a mature family, a person facing are Title I, Employment, and Title III, Public (which the banks have agreed to perform at retirement and through to post retirement, Accommodations and Services Operated by their discretion), the banks are fulfilling their the Bank has devised appropriate study/ Private Entities. Specifically, ADA prohibits obligations and are ensuring - by various lecture material on the subject of financial discrimination against persons with disabilities means - that the banks’ ATM’s are accessible education, in order to assist its customers in in the areas of employment practices, access to people with disabilities. Financial making educated decisions, and has created to physical facilities, and goods and services financial products, all of which are intended offered to the public. education to increase its customers satisfaction. The present financial world is much more complex than the one with In its contact with its customers and the Impact which the public was familiar a decade or public at large, the Bank strives to make the two ago. The choice of financial products financial language accessible to the full investments has become wider and the products range of ages and initiates many activities, Impact investments are investments themselves more complex. Furthermore, such as: whose purpose is to create a in view of changes in regulation, in the customer conventions at the branches measurable, beneficial social or pension savings field in particular, the on matters of sensible financial conduct, environmental impact, in conjunction with individual is increasingly required to make family economics and the capital market; generating a financial return. In 2018, complex financial decisions. The public lectures to organizations/corporations Discount Capital invested in two impact debate has widened to also become a at their request; funds thereby becoming one of the leading financial debate - the growing life lectures on pension planning for adults; investors in this field in Israel. expectancy, the importance of long-term Lectures at academic institutions on savings, the consumer culture, sensible financial matters intended for young Bridges Israel Fund - The Fund is associated financial conduct, the cost of living, adults. with Bridges Venture that manages investment channels regarding pension impact investments in a scope of more savings, the choice of a mortgage loan, the The conventions are designed to simplify than US$ 1 billion in the United Kingdom low interest in the market which challenges understanding and make the financial language 74 SOCIAL REPORT 2018 THE CUSTOMERS 75

accessible to the customer public. The Digital banking training sessions were to the family: us and our money, pre-nuptial, Printed media - conventions focus on explaining basic terms, held for third agers in 2018. The first part pre-childbirth, divorce; content relating to professional literature while presenting to customers the various service was a joint collaboration with “Tuesdays housing and mortgage issues; content The Bank leads the subject of arrays and the modification to customer needs in Suspenders”, within the framework of relating to ongoing economic management: development of booklets dedicated of the consulting services available at the Bank. which senior citizens listened to a 25-minute preparing for religious holidays and vacations, to providing knowledge enrichment to In these conferences, customers also receive lecture before the movie they had come a monthly family budget, how to get out of customers: a booklet for children of responses to their questions. to see; in the lecture, they were asked to the red, loans, deposits and savings; content elementary-school age, a booklet of tips and come to the branches to receive half an relating to retirement: pension savings, a capital market booklet. It is the Bank's In the wake of these conventions, customer hour’s personal training from a banker. The preparation for imminent retirement; as well intention to continue developing activity in readiness to increase their involvement in second part consisted of a month and a as a glossary of capital market terms, that all fields - frontal, digital and printed - while important financial decisions during the half’s training at the branches. covers numerous concepts. continuing to collaborate with leading parties various stages in life is noted. The feedback in this field. supporting the conventions indicate the The Bank of Israel is expected to repeat this satisfaction of the participants and their activity in 2019, this time in conjunction wish to continue being invited to similar with the local authorities. Lectures and workshops activities. The Bank offers a range of lectures and workshops, including: The Bank conducts also intra-organizational Since the date of starting the financial activity for the enrichment of Bank Enrichment lectures employees and their family members, by Budget management An experiential lecture, presenting an image of the individual's financial education activity, all of the Bank's means of a capital market workshop of Correct financial conduct in conduct and the way to improve it: eight meetings, which takes place at the an economically challenging "It'll be OK" - regarding our economic management culture; branches have participated in over 650 period Bank's meeting rooms and at the Discount The breaking of myths - "all inclusive vacation"; different events College. Some 25 persons participated in Overdraft, loans and credit, management of the monthly budget - getting out of the red; each such activity, and over twenty such Couples and money, children and money, retirement age and money; Focused activity is conducted from time to workshops have been held since this activity time is a certain area, such as the financial was started in 2012. Economics between the A lecture to freelancers on the subject of financial conduct. education week in the Haifa and Northern business and the family Region, and sometimes an activity is Furthermore, the financial education unit Know about money Lecture to youngsters in junior high and high schools. conducted simultaneously in several regions is working intensively to locate new lecture Capital market nationwide. content regarding financial matters, in the The Israeli economy A lecture describing in a light, experiential manner events taking place in spirit of the times, for the enrichment of vis-à-vis global recovery capital markets in Israel and abroad and preparations to be made for a year The activity of the Bank in the financial participants in financial knowledge. and the low interest rate in advance, including the economic challenges which face investors in the education field is conducted at no charge capital market at the present time. and is open both to Bank customers and to Internet media Psycho-finance The relationship between making economic decisions and investments those who are not customers of the Bank. Development of a designated Internet You and your finances in the stock market, and personal psychological characteristics. website - the Bank presents on its Real estate investments, An analysis of the residential real estate market as an alternative Since 2012, the date of starting this activity, principal website, under the heading of risk or opportunity investment, latest trends in this sector by geographic distribution, when through the end of 2018, all of the Bank's "Family and financial education", a broad to invest in real estate and who should. branches have participated in over 650 range of content dealing with financial Workshops different events. education, this as part of the Bank's coverage Capital market workshop 3 meetings, 2 subjects per meeting for the family, modified to the various stages Micro and macro, their Meeting 1 - Macroeconomics + Bonds; Meeting 2 - Mutual funds + ETN's; Financial education forum in life, and presenting life events. This begins relation to private Meeting 3 - Shares + Psycho-finances; The workshop provides participants The Banking Supervision Department with content for children of primary school investments and savings with basic tools for understanding the financial world and becoming established a Forum in 2016, which age, continuing with middle and high school familiar with basic concepts of the capital market. includes the Association of Banks in Israel, age; content regarding issues relating to "Mixed" workshop Family economics; Pension; Capital market. as well as all the banks operating in Israel, servicemen; pre-enlistment, soldiers on with the aim of expanding the activity on the active service and pre-demobilization; Seniors field - Israeli economy; Psycho-finances; Analytical reading of the financial press. financial education subject of financial education. Discount contents relating to students; budget Bank participates in many of the Forum’s planning, cutting back expenses, enjoyment Pension consulting Guidance regarding the pension products currently available and regarding the importance of investing for one’s pension years. committees. of benefits, in between jobs; content relating 76 SOCIAL REPORT 2018 THE CUSTOMERS 77

of the Banking Supervision Department, a senior female manager at MDB Suits you Financial conducted a financial education workshop at a female victims of violence shelter in better - Quality education at the Arab sector; of service the principal Additional activity - Employees of MDB conduct from time to time financial “Discount suits you better” is a education workshops for youth groups concept that aligns with the Bank’s subsidiaries in different frameworks, including commitment to its customers and promises youngsters of Ethiopian ethnicity within professionalism and excellence at every in Israel a collaborative framework with the "Rakia" interface. The Bank offers customers - MDB and ICC, as does Discount project in the Tebeka Association; who expect a reachable, accessible and Bank, view the absorption of convenient service - multi-focus and financial education as an important layer "Cal Lada'at" on YouTube - A set of eleven multi-channel banking that provides Survey of customer satisfaction with of their activity in aid of the community, video clips providing information on a optimal solutions over a variety of service and accordingly, employees volunteer, within variety of financial concepts, in a clear, channels, with the aim of bringing about banks’ quality of service. A survey first the framework of the project "A Different common and in simple language. For an improvement in the personal and digital conducted by the Banking Supervision Lesson", to impart basic banking and budget example: interest and prime interest rate, services coverage that the Bank renders management terms to school children, loans, revolving credit, non-banking credit to its customers. Discount Bank is thus Department in 2018, which examined through cooperating with the "A Different facility, banking credit facility, safe able to provide a personal touch, a more customer satisfaction with the services Lesson" Association and with other purchasing on the Internet, immediate efficient and high-quality service over a organizations engaged in financial education debit card, non-banking credit, CPI linkage. variety of channels, while maintaining provided to them at the banks where (for additional details, see the Chapter These video clips have received hundreds the family character of the Bank. they maintain their accounts. "Discount for the community" in this report). of thousands of views. Discount Bank’s service concept places Additional measures by the companies for the customer front and center and sets to receive the value proposition that is best the field’s advancement: itself a goal of service excellence. The and most suited to them. Bank aspires to create for its customers A financial education workshop a personal service experience, whereby The Bank is performing a series of ongoing initiated by the Banking Supervision they will continue to choose it as their and special-purpose surveys in order to Department - MDB participates in a Forum bank. evaluate the satisfaction of customers. initiated by the Banking Supervision These are made by telephone calls and by Department for the advancement of In order to create a lead in the Bank's SMS. The surveys are directed at customers financial education. The topic of the customer satisfaction by means of of the Bank, and in certain cases, for activity in 2018 was digital empowerment customer-adapted banking, the Bank is comparison purposes, also at customers for senior citizens. Two bank employees focusing on a number of principal topics: of competitor banks. The surveys measure gave lectures to hundreds of senior citizens both short-term satisfaction indices (such within the framework of the “Tuesdays in development of communication channels, as satisfaction at each interface with the Suspenders” program using educational including the upgrade of digital channels Bank), as well as long-term satisfaction material produced centrally and with the and the opening of new communication indices (such as hypothetical market share participation of all members of the banking channels; and recommendation index). sector in Israel. Subsequently, some 1,000 upgrading of service centers (including senior citizens, who are customers of the the branch disposition, the TeleBank and The surveys include also measurement of bank, received personal guidance at their the back office); different indices breaking down satisfaction branches regarding digital products; formation of a synchronized multi-channel into different components: the provider of management platform that ensures service, the branch, the Bank in general, A financial education workshop held at customer service quality; service channel, the product, the marketing a female victims of violence shelter - producing information-based business offer. Within the framework of a further initiative perceptions aimed at enabling customers 78 SOCIAL REPORT 2018 THE CUSTOMERS 79

Surveys conducted by the bank channels: at the branch, at the TeleBank and The following measures were adopted within Class Survey Population Description at the investment centers. The measurement the framework of feedback and improvement relied mainly on the customer satisfaction procedures: the findings and results were Branches After making contact with the Bank, A daily survey on a permanent private and business customers and basis, approaching customers index from the most recent service received presented to all heads of divisions and customers receiving information who have received service from a at the unit (80%). In addition, branches were departments at designated meetings; each from consultants at the branches banker measured on their dealing with inquiries and service manager received a detailed report Branches With no communication with the Daily review on a permanent basis, their telephone response, which comprised of the findings and an analysis of the results; branch for over thirty days approaching customers who have 20% of the index computations. improvement targets have been defined for had no contact with the branch for each head of department at a KPI level; and, Ongoing over thirty days Approx. 50,000 surveys of customers units requesting assistance in structuring surveys TeleBank TeleBank customers A daily survey on a permanent (telephone and SMS) were performed during their improvement plans and establishing basis, approaching customers who have received service from a this year. a dialogue with users of the service have TeleBank banker been provided with professional assistance. Investment centers Customers of investment centers A daily survey on a permanent In addition, a convention was held to honor basis, approaching customers 2018 service quality index data outstanding service managers and managers who have received service from a of outstanding units, which was attended by center the President & CEO, as well as by members Satisfaction Private banking customers A special-purpose survey of management. Satisfaction Customers of the TeleBank A special-purpose survey % mortgage center approaching customers interested 100 in taking a mortgage Rating of compliance with Furthermore, the date for the next survey has Satisfaction Business center customers A special-purpose survey target for dealing with been set for the last quarter of 2019. inquiries and telephone Satisfaction Browsing on the Bank's application A special-purpose survey responses1 Integration of service values in the Special- Satisfaction Browsing on the Bank's Internet A special-purpose survey purpose website organizational culture - In order to strengthen surveys Customer interface Customers of the five largest banks A special-purpose survey the service value within the organizational experience % culture, the Bank applies several measures: 83.8 designated staff meetings on the subject “Marketest” survey: Customers of the five largest banks A special-purpose survey customer experience - who have had contact with the bank Satisfaction with the of service and service films projected at service experience post contact the branches within the framework of the “Marketest” survey: Business customers of all the banks A special-purpose survey "Morning magazine"; focused assistance customer experience Note: 1 Target for dealing with inquiries and telephone responses - measurement of compliance to branches having relatively low service with the SLA determined for responding to ratings, through apprenticeship/training the customer that contacted the branch and In order to further improve the Bank’s service, investment centers and at TeleBank, and is awaiting a response from it, in addition sessions; ongoing measurement of service Discount is acting on a number of levels: comprise an infrastructure for drawing to compliance with the SLA defined for the providers at the branches, at the TeleBank and branch’s telephone responses. conclusions and for analyzing the strengths at the investment centers; integration of the Quality of service index - the main work tool and weakness of providing the service. In service index target in the "excelling branch" for evaluating the quality of service at the situations where immediate involvement Internal services survey - Discount believes competition; control tasks for the team; and Bank. The survey examines, on an ongoing is required, the unit manager contacts the that improvement in the level of internal meetings of the Head of the basis, the customer's service experience soon customer in order to provide a personal service will contribute to higher satisfaction Division with outstanding managers and with after the time the interaction occurred - a visit response. of the bankers and to providing tools and managers who failed to reach service targets. or a telephone call to the branch. The survey infrastructure for improving customer presents a range of parameters regarding the Measurement is performed throughout service. The survey was distributed during Dialogue with customers various aspects of the service, which may be the year with the aim of obtaining findings October 2018, for the fifth time at the Bank, In order to maintain a continuous considered as indices reflecting customer reflecting the operations of the branch, on in a cross-organizational format. The dialogue with customers and to experience, such as: professionalism, a current basis and in real time, and of being results of the survey serve as a base line understand their needs and wishes, Discount personal attention, availability, initiative and able to provide attention and an immediate for a continuous process of measurement customer recommendation regarding the response to customers, as required. and improvement. The survey measured 425 service and the Bank. The measurement data different services provided by the different are conveyed on a current basis to managers In 2018, the service experience of the divisions to customers of the Bank and of the of the business units at the branches, at the customer was measured over a variety of subsidiaries. The response rate was 91.6%. 80 SOCIAL REPORT 2018 THE CUSTOMERS 81

Bank operates several communication page with 160,000 followers, who regularly The extent of compliance with the annual in formulating solutions to problems with channels: follow the marketing activity of the target serves as a basis for remuneration customers; and he assists in the drawing of company published on this page, the varied at the branches; conclusions and in organizational learning. Official Facebook page of Discount Bank- services offered by the company to As of the end of 2018 the Bank's Facebook customers and more. The page provides comparative analysis and implementation In practice, the average complaint response page had approx. 83,560 followers (as of an online solution to customers through - the surveys are analyzed for the time was 16 days in 2018, the same as in 2017. the end of 2017 - 76,240 followers). The a “private messaging” service through identification of weaknesses in customer Bank's Facebook page serves as a platform which are received customer approaches, satisfaction with the Bank either absolutely The Commissioner has the authority to for the ongoing distribution and publication questions and comments, and immediate or relatively in comparison to competitor compensate customers. He has to report of marketing activities in various segments answers are given to customers. The Diners banks. Also analyzed are trends of the handling of complaints - once every six and areas and also serves as a platform Company, a fully owned subsidiary of ICC, satisfaction among different populations months to the Bank's Management and once for chats with browsers and for customer also has a Facebook page, with over 40,000 in order to identify changes in the indices. a year to the Bank's Board of Directors. The service. Consequently, inquiries are followers, and an Instagram page, with The findings and insights are examined Management and the Board of Directors received from browsers, both in open chats over 13,000 followers. by the Customer Experience Subdivision have to discuss these reports soon after and in private messages, and these are in order to perform an in-depth examination submission thereof. fully attended to within a short period of Maintaining customer and/or a change of policy, as required. time; satisfaction The findings and insights are delivered Material deficiencies revealed as a result of The Bank acts on several levels with also to the various business parties in attending to complaints and data regarding Twitter account - Discount Invest - The respect to maintaining customer charge of customer relations policy. complaints received and dealt with have to Bank is active on the Twitter social network satisfaction: be reported by the Commissioner to the - under the hashtag "Discount Invest". On Customer inquiries Banking Supervision Department once every this account, the Bank publishes management in accordance with survey The Bank attributes great importance six months. information regarding market data (in findings - survey data with a low mark on to listening to its customers and to Israel and abroad), economic and capital the satisfaction index, are (subject to the encouraging customers to inquire about any Management and the Audit Committee of the market reviews by experts on behalf of consent of the customer) referred to the matter or problem. The natural and immediate Board of Directors receive a report regarding the Bank and other practical information branch manager for further attention. The address is the business official who services the deficiencies, the material findings and for the benefit of customers; branch manager is responsible for referring the customer, in a branch or in other business the cross-organization deficiencies. back to the customer in order to try to units. Instagram account - The Bank operates understand the reasons for the The Commissioner is required also to publish on the Instagram social media channel, dissatisfaction of the customer and, to In the Proper Conduct of Banking Business to the public once in each year, on the Bank's through which browsers are exposed to the extent possible, to try to improve Directive dealing with the handling of public Internet website, a concise description of campaigns and current updates satisfaction by solving the problems raised complaints, the spheres of responsibility the Bank's policy in the matter of treatment accompanied by inspiring photos and video by the customer; and powers of the Public Complaints of complaints, the process of treatment of clips; Commissioner are defined, as well as rules a complaint and data regarding complaints service targets - branches are allotted for the proper handling of public complaints received and dealt with. Social media at ICC - ICC has a Facebook annual targets of satisfaction indices. by a banking corporation. The function of the Public Complaints Commissioner is to The Bank is required to publish on the Internet coordinate the handling of complaints and website and in the Branches the service inquiries made by customers on different covenant adopted by the Bank. The service Marketest Index During the past decade, The Marker magazine has published banking issues, including mortgages, interest covenant has been available to the public the annual Marketest Index of “Customer Experience in Israel”. calculations, treatment and service. on the Bank's website since March 2015, after having been approved by the Board of The Marketest Index examine experiences and positions The Commissioner deals with complaints and Directors. of customers of the largest corporations in the market, inquiries with the various units at the Bank, operating in different sectors, such as: finance, hotels, the Banking Supervision Department, the In 2018, the Bank dealt with 2,769 inquiries, cellular and more. The index is based on the parallel index in Israeli Police and various external parties; he compared to 3,047 inquiries in 2017. The ratio draws up findings for the business functions, of complaints found to be justified stood the United States (ACSI). The Bank was rated in 2018 in the first the branches, the collection functions and at 15.1%, compared to 13.6% in 2017. For place with respect to customer satisfaction regarding the for the Legal Counsel Group; he provides further details, see the appendices in the connection with the Bank interfaces. assistance and guidance to Bank employees “Conclusion” Chapter below. 82 SOCIAL REPORT 2018 THE CUSTOMERS 83

satisfaction and the integration of service IDB Bank Quality of values in the organizational culture, applies IDB Bank has adopted a Complaint Policy also to MDB. ("the Policy") that provides a mechanism service at whereby all complaints from customers or The quality of service is measured by non-customers (collectively: “Complaints”) the principal the Net Promoter Score (NPS). The data are given prompt, courteous, and fair attention are delivered regularly and comprise regarding any aspect of the bank’s products subsidiaries an infrastructure for the drawing of or services. The Policy delivers a consistent conclusions. MDB conducts, on a regular and constructive approach to investigating basis, a telephonic survey testing customer and responding to Complaints. Tracking and MDB satisfaction (following contact with the logging Complaint information provides the MDB adapts itself to market conditions as bank). The findings of such surveys bank with an opportunity to identify potential an innovative and progressive bank and is (analysis and management), comprise an an ongoing basis the service experience compliance issues and opportunities to constantly working to be up-to-date and annual target for the customer satisfaction of the customer soon after the time of strengthen and enhance the bank’s products, relevant. Within this framework, the bank indices. interaction - a telephone call to the center. services, and/or customer relations. It is an offers its customers direct banking services The survey presents to the managers the essential tool for identifying weaknesses in that enable them to receive information and ICC strong points, which should be maintained, staff training or with a particular product or to execute transactions anywhere and at The service department of ICC has a and the aspects that need to be improved service and for differentiating between a any time. Concurrently, the bank is actively vision and values regarding the provision regarding the interaction of the center one-time occurrence or a recurring problem. continuing to provide frontal services at of quality service, ICC stringently conducts with the customers. Complaints may indicate a failure in bank its branches, to customers who feel that daily satisfaction surveys among its processes that, had the bank not been made it is important to them to have a personal, customers (both private customers and Measurement is being conducted through a aware of this as a result of the Complaint, human contact with the bank. trading houses), within the framework of special-purpose surveys system named "My could have resulted in violation of a law, which various parameters are examined Attentive", which allows the measurement regulation, or bank policy. The Policy, and The starting point for the bank in providing which measure the customers’ general of each question in the surveys and information obtained from its adherence, the service is that the customers want satisfaction with the company, with the provides an image of the situation per will also help to: to receive a service that is personal and service and with the professionalism of employee over a period of time, as well excellent, readily available and fast, familiar the company’s representative, and NPS as according to the measured parameter. recognize early warning signs; and understanding, professional and fair. measurement (Net Promoter Score; identify confusion in connection with International recommender index). The In cases where the answers given to Complaints or potential issues with a The bank continues to maintain a personal scoring by the NPS is a part of the targets the survey are rated as being below product or service; connection with its customers and lets of the Key Performance Indicator (KPI) of expectation, or where they include a verbal address customer concerns; every customer choose the personal service the service department. Furthermore, the comment that needs to be addressed, the highlight potential violations of laws and/ suitable to him - direct contact with the company analyses recurring and onetime feedback is examined with reference to or regulations; branch at face-to-face meetings with the events in order to improve the quality of the feedback provider and is attended to validate and strengthen controls and bankers or telephone conversations with service and customer satisfaction. accordingly. identify trends; the branches, in parallel of course, with Continue on page 84 the options of initiating contact with a call In order to test and evaluate private center and making contact via the various customer satisfaction, the company ICC - Average scores of satisfaction survey digital channels. conducts satisfaction surveys immediately On a scale of 1 to 4, with 4 denoting "excellent" upon conclusion of a conversation and The service coverage is tailored to the approach to the service center, as well Private customer Trading houses customer so as to provide response each as a club survey conducted following the customer’s diferent needs in the manner issuance of the card. most suitable for him. In order to evaluate satisfaction of trading 3.38 3.35 2.89 2.65 The above stated in relation to Discount houses, the company conducts a "survey As regards As regards As regards As regards Bank, regarding the improvements made to following contact", which comprises the satisfaction assessment of satisfaction assessment of service, including evaluation of customer central tool for testing the quality of professionalism professionalism satisfaction, maintaining customer service at the center. The survey tests on 84 SOCIAL REPORT 2018 THE CUSTOMERS 85

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protect the Bank’s reputation; as a whole, including the formation and Bank, which assist employees in providing provide a competitive advantage, e.g., quality Fairness in characterization of products being offered service in accordance with Bank values, a of service; by the Bank to customers, in accordance service being of value also to customers. assist in third party service provider products with requirements that change from time to Thus, for instance, the systems of the Bank monitoring. time, proper disclosure to customers with assist the fair and transparent conduct, Proper disclosure - respect to the different products, including while providing proper disclosure of In 2018, the bank received a total of 26 information regarding the risk components inherent therein, and all data and information relevant to the complaints: 11 of these related to system topics products and services the adaptation of the solutions offered execution of a transaction; also existing (primarily, online banking) and 6 were related Banking corporations are required by the professionals of the Bank to the is an administrative infrastructure which to branch errors not having any connection by law to abide by proper disclosure needs of customers and changing market regulates proper criteria and manner of with other identified trends. requirements in everything relating to the requirements. conduct; regulation supporting information information which is provided to customers sessions are conducted regarding the Preparations for improving regarding the banking product or service, Compliance with the provision of the law and consumer credit field, which establish service and reducing complaints including pursuant to the Banking Law regulation is enforced on a current basis by fairness and decency values; frontal at the principal subsidiaries in (Customer Service), 1981, the Banking Rules means of various control and supervision guidance sessions are held on a variety Israel (Customer Service) (Proper Disclosure and systems - the Chief Compliance Officer, of compliance matters with the assistance At MDB, the ratio of complaints found the Delivery of Documents), 1992, and the compliance officers and trustees and the of distance learning and updates, which to be justified in 2018 stood at 12.7%, Banking Rules (Customer Service) Internal Audit function. help in the absorption of different issues. compared to 16.3% in 2017. At ICC, the ratio (Advertisements Directed at Minors), 1995. of complaints found to be justified in 2018 The central principle of this legislation is The Chief Compliance Officer is actively While launching new operations/ stood at 24.5%, compared to 17.8% in 2017. the duty of proper disclosure (transparency) involved, inter alia, in the preparations For further details, see the appendices in the toward the customer and the preservation for regulatory updates and toward the products of the Bank, messages “Conclusion” Chapter below. of his right to receive advice and service introduction of new operations and products delivered to Bank customers are from the bank. by the Bank. Moreover, the Chief Compliance Officer monitors the rectification of material examined by control functions that The Bank strictly adheres to the directives deficiencies and failures in matters of verify, inter alia, that the messages applying to it in this respect and maintains compliance and submits - to the President strict control procedures. & CEO, to the Bank’s Management and to the don't mislead customers and are Board of Directors, as well as to the CEOs delivered in a proper and fair manner. At the base of the above subject are found of the subsidiaries where he also serves as fairness and decency values comprising an the Compliance Officer - quarterly and/or The guidance sessions are designed for all integral part of the current business activity, annual reports on matters of compliance, Bank employees and managers, and some of interwoven with the day-to-day operations which include a summary of his activity these are designed to align with the special of the Bank and comprise a guideline for during the reported period. work environment concerning designated the operations of Bank employees. The products and employee populations. The above stated requires development and In accordance with guidelines of the infrastructure is validated and updated maintenance of an organizational culture, Banking Supervision Department, prior to from time to time in accordance with the which positions the customer and the the launch of new products/operations, the regulatory environment and the business business fairness and reliability at the heart Bank performs an orderly and systematic activity of the Bank. These also assist with of the decision-making processes conducted process ensuring the identification and the audit side of compliance enforcement both by the authorized organs of the Group, evaluation of all risks inherent in the new of the provisions of the law and regulations and by the three lines of defense, and in product/operation, while examining their and in deploying the compliance culture particular the risk taking units. effect on the risk profile and verifying the throughout the organization. suitability of the infrastructure and controls In view of the above, and as part of the overall supporting their operation. The said process In order to promote fairness and proper risk management concept, and in particular, has been established in a designated policy disclosure at the Bank, the Bank acts on a the compliance and regulation risks, the and in supporting work procedures applied number of levels: Bank acts in order to impart and integrate by the Bank and the Group, mutatis mutandis. proper and fair business principles and values Promoting transparency - The Bank acts, into the banking operations of the Group Structured infrastructures exist at the inter alia, for the establishment of the said 86 SOCIAL REPORT 2018 THE CUSTOMERS 87

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values in the core documents and the basic the published Code of Ethics was received Fairness in documents of the Bank and conducts ongoing in 2018. Customer operations to integrate them in the field. products at Among other things, the Bank emphasizes In 2018, no significant fines and/or non- privacy and transparency as well as adequate and proper monetary sanctions were imposed on the the principal disclosure provided to the Bank's customers, Bank. It should be noted, however, that a information including the information and adaptation monetary sanction was imposed on the Bank subsidiaries which have to be provided to customers - as described in the “Corporate Governance” security with respect to banking products or services Chapter below. The aforesaid in "Fairness in products" is applied granted or offered to them. The importance of maintaining and also with respect to MDB and ICC. Services in different languages protecting reliability, strength, Launching activities and advertising new The Bank is working to provide availability and survival of information ICC and MDB products - An additional layer in which the different services in a variety of technology is ever growing in view of the ICC is also a signatory of the advertising ethical values of fairness and decency are being languages for the convenience of all its enormous technological development in code, and no complaints were received in 2018 reflected is the introduction process of new customers: recent years and its implications for the Bank, regarding violations thereof. MDB has not signed operations/products of the Bank, as well as in view of the cyber threats, which are growing the aforementioned Code of Ethics. the marketing and advertising operations the Hebrew, English and Russian, Arabic in severity and frequency, and in view of the of the Bank. Messages delivered to Bank and French languages can be used on the marked growth of the use of information IDB Bank customers (including potential customers) marketing website; technology products compared with human- IDB Bank adheres to all applicable federal and state are examined by control functions that verify, Hebrew is the language used on the operated products. Therefore, the Bank views laws, such as Truth in Savings Act (Regulation inter alia, that the messages do not mislead operations website, though English may the protection and safety of information as DD), Truth in Lending Act (Regulation Z) and Acts customers and are delivered in a proper and also be partly used; a central goal and invests considerable dealing with Unfair, Abusive or Deceptive Practices, fair manner. marketing pamphlets, which are placed resources in protecting the information in requirements pertaining to proper and timely in the branches for the customers' its possession. disclosure of terms and conditions relating to Proper disclosure in publications - The Bank convenience, are written usually in Hebrew, its deposit and lending product and services. strictly applies several basic principles in the and in certain cases, according to needs The Bank stringently adopts an array of advertising and marketing of its products: or demand, designated leaflets are also actions and measures for safeguarding Services in different languages at produced in other languages (English, customer data in data bases, in order to the principal subsidiaries Truth in advertising - Strict measures are Russian, French and Arabic); protect them from impairment in durability taken in the publication of valid information, ATMs provide guidance in Hebrew, Arabic and exposure to a change to the data. This MDB which is being properly examined prior to and Russian, and with the use of an activity is carried out in accordance with MDB has extensive activity among the Arab its release. international card, also in English; the provisions of the law and the regulatory population and the Ultra-Orthodox ("Haredi") the Information Desks interface operates agencies. population and, accordingly, the required Social correctness - The Bank publications in Hebrew, English, Arabic and Russian. adjustment is made to the bank's operations are being edited in a respectable and adequate It is possible to receive statements of vis-à-vis the different segments of the population. manner while strictly maintaining social account in Hebrew or English, where the The Bank works diligently to safeguard The marketing approach in the Arab sector is correctness and avoiding impingement of language of the account is marked as banking confidentiality and the privacy generally made in Arabic (including video clips, populations, beliefs, etc. English; leaflets, etc.). Furthermore, in the Arab sector At branches servicing a large number of of the customer and the information branches, the response in the branches and the Ethics - The Bank is committed to the foreign residents, such as the Netanya, in his account, and does everything it primary telephonic response (computerized), is advertising ethical code adopted by Bat-Yam, Ashdod and Herzliyah Pituach in Arabic. Also, the approach to the Haredi sector advertisers and television channels and branches, service is provided also by can to identify malfunctions and prevent is made considering the "language" in practice includes principles designed to protect values English-speaking bankers and those who their repetition. (without photographs that might offend public (such as human dignity), populations (such speak an additional foreign language, such feelings and with a text that is appropriate to the as children), etc. The said code is obligatory as French or Russian; The Bank works diligently to safeguard Haredi sector). both as regards production of marketing At the line management points, the service banking confidentiality and the privacy communication as well as the products is provided also in English and Russian. of the customer and the information in ICC themselves. At the Nazareth and East Jerusalem his account, and does everything it can At ICC, service at the ICC call center is provided in branches, the service is provided also in to identify malfunctions and prevent their Hebrew, English and Russian. No complaint with respect to a violation of Arabic. repetition. 88 SOCIAL REPORT 2018 THE CUSTOMERS 89

Six cases were examined in 2018: one case Conduct of Banking Business Directives, of such subjects. The Bank's operational the Bank is involved in the approval of all the of an employee extracting information and particularly Directives Nos. 357 and sites, which provide service to customers Bank's procedures, in order to ensure the from a customer’s account and five cases 361, on the basis of which a cyber defense over the Internet, are protected by several early identification of operations causing of employees extracting information and and data protection strategy and policy have layers of defense, which include protection data protection risks and cyber defense. conducting transactions on accounts of been drawn up, as approved by the Bank's components for hardware/communications family members, even though they were not management and Board of Directors. and services providing information regarding Mitigating the exposure to cyber risk through authorized to operate the account. Further attacks and hostile addresses. Infrastructure purchasing insurance. See the document, to the examination that the internal audit Except for the protection of the computer systems are monitored and reported to the "Disclosure according to the third pillar of function initiated and conducted on this system, the defensive actions are intended to data protection center. Basel and additional information regarding matter, control reports have been developed provide a response to the important business risks", published together with the 2018 Annual to monitor access of certain units’ employees processes of the Bank. In this way, a defense As part of risk management, the Bank Report (pp. 78-79). to customers’ accounts, on which no request layer focused on a comprehensive-business investigates various incidents, gains insights has been made by customers to perform viewpoint risk would be strengthened. and draws conclusions. Such insights, Aspects of physical safety, to the extent that transactions. together with data and cyber protection they might be connected to data protection, For further details, see the document, surveys, enable the Bank to map gaps that are managed and implemented by the Bank's Four cases were revealed at MDB: two cases “Disclosure according to the third pillar of should be rectified and determine priorities security officer, in conjunction with the data of employees extracting information and Basel and additional information regarding in the treatment thereof, which are integrated protection manager. conducting transactions on accounts of risks”, published together with the 2018 into the work plan. family members, despite the fact that they annual report (pp. 83-86). The abovementioned processes are applied were not authorized to operate the account. Data protection and cyber defense activities also with respect to MDB. In 2018, there was no occurrence of one or are implemented in accordance with the In 2018 ICC received two privacy protection more cyber incidents that materially affected strategic plan, as approved by the Bank's complaints that were found to be justified. the products or services offered by the management and Board of Directors. MDB received no banking confidentiality Bank or by the Group, their relations with complaints in 2018. customers or the competitive conditions. The development and maintenance of systems and projects are closely No complaints were received by IDB Bank Protection of the accompanied by professional mentors. in 2018 concerning breaches of customer Bank's websites privacy and losses of customer data. In accordance with the Bank's policy In accordance with the risk outline and with on this topic, systems preventing Proper Conduct of Banking Business Directive Data protection risks unauthorized access as well as systems Nos. 357 and 361, risk surveys and penetration and cyber protection monitoring and identifying deviation from tests are performed at required frequencies, The principal potential damage authorized activities are integrated into the following which, mitigation measures are involved in the impairment of data Bank's systems. Protection of the Bank's implemented and the required reports protection includes impairment of privacy marketing and operations websites is submitted. and confidentiality of information regarding continuous. the Bank, its customers and employees, Access to information and the levels of financial damage, realization of cyber threats, The Bank operates a data protection center authorization are controlled by designated distortion of data stored in the Bank's that operates continuously throughout the teams and systems, and the administration systems, impairment of the availability and year (24 hours round the clock, 365 days a processes and management tools undergo survival of systems and information, year), the objective of which is identifying significant improvement and reorganization. impairment of the business of the Bank and risks, breaches, exposures and vulnerabilities its reputation. in the data protection system, and which The Bank takes ongoing action to raise is responsible, among other things, for the awareness and to improve the organizational Data protection and cyber defense at identification and warning of any activity culture from the aspect of data protection, the Bank are regulated and directed intended to damage the Bank's websites which among other things includes training, in accordance with various regulatory or its customers (by means of imitation publication of policy documents, manifests provisions, including the Privacy Protection sites). Furthermore, within the framework and marketing tools. The Bank has established Law and the regulations promulgated of the internal audit, a department operates in procedures most of its operations and thereunder, the Computers Law, Proper in the IT field, performing ongoing audits processes, and the data protection unit at 90 SOCIAL REPORT 2018 THE CUSTOMERS 91

the physical component, the chip, with 2017, a new terminal is to be connected systems of the company to receive, process the card reader, communications and the only to the new debit cards system, except and transmit files and messages in the new Customer payment application. for the several exceptions specified - with formats, as defined by Automatic Bank respect to which connection to the old Services (ABS) in the "EMV credit" system, privacy at ICC In addition, the Organizations have system will be allowed. as well as making the relevant changes prescribed provisions to create economic to the interface between the three credit Technological preparations in incentives for the replacement of the In accordance with instructions of the card companies. the credit cards field existing, old terminals, which do not comply international organizations, ICC has As part of its attempts to reduce with the aforesaid standard, by means of prepared for the transformation to the use ICC has completed the preparations for the phenomenon of misuse of a Liability Shift mechanism. of "smart cards". In the issuance field, ICC the transition to the use of smart cards stolen or counterfeit credit cards, the issues at present - on an ongoing basis - in accordance with the directives of the international Visa organization, the The said instructions state that in case of VISA, MasterCard and Diners smart cards. international organizations. MasterCard Worldwide organization and forgery/misuse of a card: These preparations include modifying the the international Diners Club organization Where a smart card is acquired by a systems operated by the company and (“the Organizations”) take various steps merchant which had not installed a smart the definition of the smart card profile as to improve the security level of the credit acquiring device, the acquirer will bear regards producers of the cards. cards that bear their brands and to comply the costs; with the EMV standard. This standard is Where a card which is not a smart card, ICC has also begun to prepare for the a collection of specifications developed is acquired by a merchant that has issue of VISA and MasterCard smart cards by the Organizations with the aim of installed a smart acquiring device, the having "Contactless" capabilities. These providing a uniform and secure format for issuer will bear the costs. preparations are expected to be completed payment transactions using chip charge in the first quarter of 2019. cards, which have special features that In accordance with the Proper Conduct support the standard, thereby making it of Banking Business Directives, the In the acquiring field, ICC is preparing for harder for such cards to be used by preparations have to be completed by infrastructure in accordance with the EMV unauthorized parties and/or for them to January 2019, other than in the case of standard, which includes adjusting the be counterfeited (hereinafter: “Smart small trading houses (whose transactions Cards”), when used in conjunction with turnover with clearing agents does not ATMs or POS terminals. exceed NIS 5 million) for whom the mechanism will go into effect on January 1, 2020. It should be noted that, on December ICC has begun to prepare for the issue 24, 2018, a draft circular was published of VISA and MasterCard smart cards pursuant to which it is proposed that Proper Conduct of Banking Business Directive having "Contactless" capabilities. No. 472 be amended, whereby the Liability These preparations are expected to be Shift mechanism (prescribed in Section 15 of the Directive), insofar as it relates completed in the first quarter of 2019 to gas stations, will go into effect on January 1, 2022. The specifications relate to both Contact and Contactless card transactions and In addition, instructions have been are based on identifying the cardholder prescribed by the Bank of Israel regarding through the input of a secret code (PIN) the connection of smart terminals and dynamic protections, using digital and timetables to comply with these signature authentication and by combining instructions: with effect from August 1, 92 SOCIAL REPORT 2018 THE CUSTOMERS 93 goals goals presented in previous report future goals

Activities in a wide range of segments, economic sectors and credit products, Opening an information website in English, which - from the aspect of the information - will Done in order to create an optimal distribution of the portfolio. be identical to the operations website in Hebrew. Lectures to youngsters in conjunction with the "Sprint" association and lectures aimed at Discount Expanding the services coverage to the customers while increasing the risk persons about to enter the third age, in conjunction with the Banking Supervision Department. Done adjusted return. Collections from households and small businesses - conducting a pilot mediation project on debt cases, prior to instigating legal proceedings. Continuation of the upgrading of the digital channels and directing activity Done to these channels. Performing a periodic accessibility examination of service, buildings, infrastructures and environment, that will be conducted by the Accessibility Coordinator. The Bank shall avoid credit operations involving concern for impairment of A new app aimed specifically at business customers. Done the reputation of the Group or of the Bank, inter alia, with respect to money laundering and the financing of terror. Seven new versions of the business app.

Attaching additional customers to the new communication channels, coded An increase in the number of versions of the app for individuals in a year, as a tool to provide Done mail and communication application for correspondence with a banker. value to customers. Maintaining a high level of customer satisfaction in using the app. Continuing the deployment of the CRM system upgrading the management Done of relations with the customers at the branches and the TeleBank. MDB Opening an additional branch to serve the ultra-orthodox (Haredi) population in Beit Shemesh.

Continuing the improvement and upgrading of the service and speed of Done response with respect to the process of extending mortgage loans.

Adapting the sale of unique products to customers of this segment and Done approaching sections of designated customers in this segment. Discount Discount Partially Expanding the use of online channels, focusing on the upgrading of the Done designated website for customers of this segment - "Business +" and a designated application for business customers.

For 2018 a goal of up to 18% was determined for justified complaints, out Done of all complaints received by the Bank and complaints received through the Bank of Israel.

Done At least 30 financial education activities at branches/organizations.

Done A financial education lecture for freelancers.

Done Leading in customer satisfaction in using the banking application.

Increasing the number of versions in the year, as a tool for rapidly providing Done value to the Bank’s customers.

A financial education activity month was planned for 2018 - four lectures on Done digital banking aimed at the third-age population.

Intensifying operations in the small business segment - increasing the customer base while focusing on reducing the customer attrition rate, increasing the Done number of customers using banking products and increasing the ratio of customers accepting credit. 94 SOCIAL REPORT 2018 THE EMPLOYEES 95 05 the Employees

Nurturing human capital policy 96

Employee hiring 99

Discount Bank’s employees 98

Diversity and equal opportunity 104

Maintaining employee rights 111

Investing more in employees 120

Goals 136

9,407 5,489 45 16.1 61.4% 50% employees at employees at Discount Bank Average age of Discount years - average seniority at of Discount Bank's women in management Discount Group (including employees on unpaid Bank's employees Discount Bank employees have academic positions leave and on maternity leave) education 96 SOCIAL REPORT 2018 THE EMPLOYEES 97

the members of their families. The Bank Nurturing of also participates in financing welfare Nurturing the human capital activities in aid of the employees. the human The Bank encourages diversification and equal employment opportunities policy for underrepresented populations and capital at It is important to us to take pride their integration in suitable positions, Employees in our workplace and we therefore while maintaining a fair and respected the principal promote a challenging, supportive and work environment. The Bank adopted a policy of directed pleasant work environment. We believe subsidiaries in in the people that we work with and invest The Bank insists on protecting the management of personnel, based in making them stronger (“the Discount dignity of employees, of proper labor Spirit”). relations and on protecting employee Israel on the understanding that human rights, in accordance with the law and capital is a central factor in Discount Bank adopted a policy of directed labor agreements. The Human Resources Mercantile Discount Bank (MDB) management of personnel, based on the and Properties Division is responsible, the Bank’s progress and success. understanding that human capital is a through the Division’s staff and through As is the case for Discount Bank, MDB Therefore, the Bank works to develop central factor in the Bank’s progress and the Human Resources Units distributed promotes a people-orientated management success. Therefore, the Bank works to throughout the Bank’s various divisions, policy and acts to nurture its human the human resource from a long- develop the human resource from a long- for dealing with employees, which capital, through the operation of numerous term perspective, by means of and laying guides the employee from his hiring management systems for its development. term perspective, by means of and a foundation for outstanding, forerunning until termination, including from the laying a foundation for outstanding, leadership, expressed as a basis for aspects of: salary, welfare, occupational ICC the organization's empowerment and development, guidance and professional forerunning leadership, expressed growth. Concurrently, the Bank places training, etc.. Management of ICC views the human as a basis for the organization's emphasis on promoting the realization of capital as a strategic key in achieving the professional and personal aspirations the success of the organization, and empowerment and growth of its employees, by providing them accordingly, invest in employee training with a range of career-development and development, in their personal and opportunities, while focusing especially professional progress, in compensating on developments in the labor market of them for qualitative performance, their the banking world - at present and in the welfare, their attachment to the business future. core aims, and in an open dialogue with them with the aim of creating frankness The Bank operates many systems that and fairness. support the development and nurturing of the human resource, including As part of the above, ICC operates on sophisticated evaluation and feedback a number of central levels, including mechanisms. The management training maintaining proper labor relations, and development systems assisting, development, training and the mobilization inter alia, employees in coping with the of employees, the creation of a leading professional and managerial challenges and strong leadership, diversity and equal they face. Discount Bank also attaches opportunities and investment in diverse considerable importance to the welfare activities for the welfare of employees and of its employees and takes measures to their families. promote this, through varied enrichment opportunities during free time and through providing social and economic support in times of crisis for its employees and 98 SOCIAL REPORT 2018 THE EMPLOYEES 99

Breakdown of Discount Bank’s Average age and average seniority of the employees employees by gender Discount Bank MDB ICC Discount's December 31, 2018 Average age 45.0 44.3 36.3 employees Average seniority 16.1 16.9 8.3 Employees of the Bank and the 40% 60% principal subsidiaries in Israel men women Academic education Discount Bank MDB in numbers December 31 Employees of Discount Bank and the principal subsidiaries18 2018 2017 2016 2018 2017 2016 The percentage of academics within 61.4% 59.4% 57.5% 56.7% 53.2% 52.2% 5,489 1,499 1,830 522 the total number of employees The percentage of academics within 2018 9,340 85.8% 84.2% 82.5% 61.3% 60.0% 56.1% the total number of managers 5,666 1,536 1,618 487 The percentage of academics within 55.0% 52.8% 50.8% 54.5% 50.2% 50.3% 2017 9,307 the total number of clerical staff 5,702 The percentage of academics within 1,557 1,590 479 58.5% 56.4% 54.3% 56.1% 52.4% 51.7% 2016 9,328 the total number of female employees The percentage of academics within 66.0% 64.2% 62.5% 57.4% 54.4% 52.7% 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 the total number of male employees Discount Bank1 MDB ICC2 IDB Bank Note: The data does not include employees of software houses. Notes: 1 The data includes employees on unpaid leave and on maternity leave. The definitions data used in preparing the table have been changed. The data for previous year has been changed accordingly. 2 The data for the years 2016-2017 has been improved. as the race, gender, religion, nationality, Employee age or disability of candidates. Breakdown of Discount Bank’s employees by employment categories1 hiring The Bank views the transfer of employees 3,681 1,215 447 between positions as an opportunity for 2018 5,343 Each year Discount Bank hires professional development and enrichment 3,853 1,285 364 continuously hundreds of new of its employees, and encourages such 2017 5,502 employees for a variety of positions. The transfers. The Bank publishes on the locating of candidates is conducted through employees' website, notice of vacant 3,917 1,304 308 a wide variety of hiring means (social positions inviting employees to submit 2016 5,529 networks, the Bank's Internet website, their candidature. 4,149 1,386 314 manpower companies, "a friend brings a 2015 5,849 friend" campaign, employment fairs etc.) In 2018, 85% of the executive positions - which allow a variety of candidates to were manned by Bank employees. 59% 0 1,000 2,000 3,000 4,000 5,000 6,000 expose themselves to the positions being of the professional positions (which do Tenured4, under personal agreements and members of Management5 Temporary Employees3 Outsourcing2 offered by the Bank and to submit their not comprise of teller positions, service Notes: 1 The data do not include employees on unpaid leave or on maternity leave. candidacy. In the process of hiring and teams or telephonic banking, which 2 Including software houses and workers engaged in the TeleBank service centers. 3 T emporary employees - the employment terms of such employees are mainly regulated in several special collective placement of new employees, emphasis is are not intended for employment in an agreements in which said employees’ employment terms and the period of their employment are set forth. placed on compatibility between the needs outsourcing format and which are not 4 T enured employees - the employment terms of such employees are regulated in the Labor Charter, special collective agreements and various employment arrangements. of the candidate, his wishes and values, managerial positions) were manned by 5 P ersonal contracts - employees whose employment terms are anchored in personal contracts with the Bank and for and those of the Bank. Bank employees. During that year, ICC whom the provisions of the Labor Charter and the collective agreements, which apply to employees with the status of manned 76% of the managerial positions “tenured” employees, do not apply. The placement of employees at the Bank is and 54% of positions in general, by The growth in outsourcing in 2018 stems mainly from the growth in employing workers at the TeleBank made solely on a professional basis, while company employees. During the same service centers. For additional details regarding the Bank's employment data according to the various categories and the changes that took place therein, see the 2018 Annual Report (pp. 315-317). considering the candidate's skills and his year, MDB manned 96% of the managerial suitability for the position, and without positions by bank employees. 95% of 18 102-48 involving irrelevant considerations such the professional positions (which do not 100 SOCIAL REPORT 2018 THE EMPLOYEES 101

comprise of teller positions and which approx. 89.3% of total employees. Bank and the Employees’ Representative It is noted, that in accordance with a are not managerial positions) were also After deducting the number of workers Committee signed on February 21, 2019, special collective agreement of June manned by bank employees. employed by external factors, the number a wage agreement. 2011, in the matter of employment of of employees stands at 4,896 and the tellers by the Bank, the starting wage The Bank employs a small number ratio of those covered by the collective This agreement as well as the predecessor for tellers and TeleBank employees shall of teenagers, according to age and agreements reaches approx. 97.4%. agreement signed in November 2016, not be less than the minimum wage plus conditions permitted by legislation, constitute a breakthrough as regards the 5%. It should also be noted that, at the during their summer vacation, within the Bank participation in the budget of the remuneration method prevailing in the starting salary level for similar positions, framework of projects to the benefit of the Employees’ Representative Committee banking sector, being based on monetary there is no gap between the salaries of community (see in Chapter Discount for - The Bank contributes monthly to the wage increments and not on percentage women and salaries of men. the community, "Employment of visually budget of the Employees’ Representative based increments. This mechanism impaired teenagers"). Apart from these Committee, in an amount of almost triple continues to reduce the wage differences cases, the Bank does not employ children the monthly amount contributed by the and strengthens the future generation of Wage differences between female in any way or form, either directly or employees. Five of the 21 Committee bank employees. For additional details, and male employees through manpower agencies. members are central officers of the see the 2018 Annual Report (p.317). Male wage against female wage1 Committee engaged on a fulltime basis 2018 2017 and receiving a full salary. Employees The agreement applies to the years Labor relations Management -15.0% -9.1% Labor Relations at the Bank are of the Bank's fulfill different duties 2019-2022 and includes, apart from Senior managers2 5.1% 9.8% based on the Labor Charter, within the framework of the activities wage increments and awards based on collective labor agreements and the different of the Committee in aid of the welfare returns, also the updating of the maximum Other managers 6.7% 4.9% employment arrangements that are of employees, and the Bank even covers amounts of salaries and recreation pay in All managers 5.1% 7.1% formulated mainly in discussions between in full the costs of office premises respect of "B" generation employees, the Clerks 9.2% 8.4% the Bank’s Management and the employees’ provided for use by the Committee. The increase in 2020 of the minimum amount Notes: 1 The computation represents the representative committee. The year 2018 Bank participates also in financing the of the monthly wage used for calculating average of wage difference averages was marked by good and respectful labor operations of the Retirees' Committee the severance pay to all Bank employees in the different employment grades. The comparison is based on payroll relations that are based on attentiveness in aid of the retirees of the Bank all over to NIS 6,500, an increase at the rate of data and on the manpower position in and cooperation, while maintaining industrial the country. 7.5% in the contributions of the Bank December. peace. to provident funds of most employees, 2 Br anch manager and above. Organizational changes - Item 4 of the and the provision in full of severance pay Rights of association - The tenured collective agreement dated April 2, (subject to the finality of the provision). The comparative table presented employees of the Bank are organized 2000, in the matter of the definition above shows that the wage difference within the framework of the national of the Bank's units, stated that the For additional details regarding labor was reduced in 2018 compared to the Employees’ Representative Committee. Bank's Management shall forward its relations at the Bank, see the 2018 Annual difference prevailing in 2017. They are entitled to vote for or be elected proposals regarding the definition of Report (pp.315-317). to the Committee, and comprise approx. units and management duties, and a joint 73.6% of all the Bank's employees, which discussion will be held during fifteen days The starting wages are not engaged through outside factors. from date of forwarding the proposals to The Bank insists on the payment the managers' representative committee. of decent wages to its employees, A majority of employees which are engaged At the conclusion of the discussions, if the even in excess of the minimum wage stated under collective labor agreements19 - As parties have not reached an agreement, by law (which in December 2018 amounted of December 31, 2018, the Bank engaged the matter will be forwarded to the Bank's to NIS 29.12 per hour and NIS 5,300 per 5,343 employees. This figure includes President & CEO, whose decision will be month). Accordingly, the starting wage for all of the Bank's employees, as well as final. The period was shortened from 15 most of the new employees beginning work workers providing services to the Bank days to 7 days by the collective agreement as temporary employees, was in December by way of different outside factors. Of the dated November 30, 2016. 2018, between NIS 29.12 and NIS 35.69 per above, 4,769 are tenured employees and hour. The starting wage of most employees temporary employees, engaged under New wage agreement - Following lengthy earning a monthly wage in a temporary collective agreements and constituting negotiations that had started in 2018, the status (including tellers) stood in December 2018, at approx. NIS 6,000 per month. 19 102-41 102 SOCIAL REPORT 2018 THE EMPLOYEES 103

2019, any wage agreements and updates vice presidents and approximately 40 IDB Bank Labor of terms of employment entered into by employees engaged under personal The employees are not members of a labor Bank Leumi as from that date, shall no agreements21. union21. longer apply to MDB. relations at The agreement signed in 2016 included, The starting wages at the The principal items of the agreement: among other things, singular and higher principal subsidiaries in the principal detachment of the linkage between the wage increments to employees earning Israel wage terms, work terms and related terms low wages. In addition, changes have subsidiaries applying at MDB from the terms applying at been made to the arrangements that had MDB Bank Leumi during the agreement period; been in practice prior to the signing of the The starting wage payable to most MDB in consideration for the said detachment, agreement in the matter of "jubilee awards". temporary new employees in 2018 was Labor relations at MDB, except for a onetime award of 2.5 monthly salaries For additional details see the 2018 Annual NIS 32.12 per hour. The basic wage of a those having a personal employment will be paid to the employees; a wage Report (p. 318). The agreement expired at new employee amounted to NIS 5,300 per agreement, are principally based on a increase at the rate of 3.1% (not including the end of 2018, and the parties continued month. It is noted that at this primary wage basic labor agreement, "Labor Charter", a seniority increment of 0.8%) in each year to act in accordance therewith until the level, and for similar positions, there is and complementary collective agreements. of the agreement; a gradual updating of signing of a new agreement in June 2019. no difference between the wage paid to Apart from these agreements, Management the minimum amount of the monthly salary The wage level at ICC is decided based women and the wage paid to men. of MDB and the employees representative serving as a basis for severance pay. on accepted criteria in the employment committee sign from time to time market and in accordance with employee ICC agreements in respect of specific issues. Organizational changes - The special performance. The company meticulously pays a fair The terms of employment of members collective labor agreement of 2002 states wage, which is in excess of the minimum of Management of MDB are regulated by that where Management takes a decision Organizational changes - The collective wage. The beginning basic wage payable to personal engagement agreements. to merge branches or groups, the decision labor agreement of 2011 states that employees starting work as from January shall be brought to the attention of the the company is entitled to introduce 2018, is NIS 5,500 per month in respect The collective labor agreements existing employees representative committee organizational and/or technological and/ of a full-time position. Most employees at MDB are subject to Section 5 of the together with the presentation of the or operational and or structural changes, are also entitled to incentive payments in labor agreement of May 17, 1968, relevant data, and an intensive discussion is such as the merger of units, integration addition to the basic wage. The beginning namely, the validity of the agreement to be held with the committee with respect with other centers, the closing down of wage payable by the company is higher by shall be automatically extended for two to the implications of the decision upon units in accordance with changing work 3.8% than the mandatory minimum wage. additional years, unless one of the parties the employees involved. Management of requirements, etc. Material changes that to the agreement informs of his intention MDB may act upon the merger decision only have a material impact upon the employees Wage differences between to make changes thereto. The rate of after fourteen days have passed since the would be brought to the attention of the female and male employees at workers employed under collective labor date of notifying the committee regarding employee representative committee no the principal subsidiaries in agreements in MDB amounts to 91.46%20. the decision. later than fifty days preceding the planned Israel implementation date of such change. In Tenured employees of MDB are organized ICC the case where no agreement has been MDB within the framework of a national Labor relations at ICC are based upon reached regarding changes that have a A comparison shows that no gap exists representative committee. The ratio of partnership and trust between Management material impact upon employees of the between the average salary of female the organized employees, who are entitled of the company, the national committee company, then each of the parties retains managers and the average salary of male to be elected to the committee or to elect and the employees. A new collective labor his rights without prejudice. managers. The average salary of female the committee's members, is 81.12%. agreement was signed in 2016 for the years clerks is lower by 19.1% than the average 2016-2018, which follows the agreements Work on the day of rest - duty personnel salary paid to male clerks (compared to At the beginning of December 2018, the of the years 2011 and 2015. from the IT group, Risk Management, as 18.6% in 2017). Management of MDB and the national well as credit representatives, work on representative committee of employees The first collective labor agreement at ICC, rest days specified in the Hours of Work ICC of this bank signed a wage agreement which regulates all labor relations in the and Rest Act, 1951. Work on these days A comparison of men's wages and women's for the years 2019-2025. The agreement organization, incorporates all employees requires a special permit, which is filed by wages shows a gap of approx. 20%. states, inter alia, that as from January 1, of ICC, excluding department managers, the company and extended once a year.

20 102-41 21 102-41 104 SOCIAL REPORT 2018 THE EMPLOYEES 105

recruitment processes, which are employee was appointed as head of the instructors in cooperation with instructors Diversity performed using selection and team and at the end of 2018, the team of the supplier. engagement systems customary in the numbered 17 employees. It should be and equal market, emphasis is placed on finding a noted, that during the years a number of The unique contribution to employment congruence between the needs, wishes female employees from among the team in peripheral areas made by the TeleBank and values of the candidate and those had been promoted to other positions centers stems from the fact that it involves opportunity of the Bank. within the framework of TeleBank (such the training of employees for up-to-date Discount Bank believes that every as compliance, Internet support center banking positions, while supplementing employee is entitled to fair and Engagement of employees from and the mortgage center). knowledge gaps, where required, in equitable treatment, free of discrimination the Arabic society contrast to the prevalent approach in based on race, age, gender, color, sexual As part of the Bank's aspiration Employment in peripheral peripheral areas, of creating employment orientation, ethnic background, physical to promote the employment of areas opportunities in the traditional industries. disabilities, religion or political affiliation. populations that are under-represented As part of the encouragement of The Bank encourages diversity and in the labor market, the Bank has started employment in peripheral areas, Employment of retirees acceptance of the other and takes pains to cooperate with the initiative "Collective the Bank has established during 2016 in Retirees of the Bank wishing to to provide a fair and respectful work impact" - which aims at encouraging the Nesher a Call Center. The operations of return to work, are employed at environment. employment of persons belonging to the the TeleBank call center in Nesher, within the TeleBank and in the branches, finding Arab sector and their progress. An in- the framework of which are employed in it an additional rationale to their daily In order to create a tolerant organizational depth diagnosis has been made by persons belonging to different sectors routine. These retirees have integrated culture and one that is accepting representatives of the initiative at the of the population, Jews, Arab, Muslims, within the framework of the different of the other, Discount Bank acts to Bank's Nesher Call Center. The Bank is Druze and Christians, were enlarged to a centers and provide service to customers advance segments of society that are acting to integrate the recommendations large extent in 2017. The Nesher extension of the Bank. The Bank employs retirees underrepresented in the labor market, of the diagnosis. serves as the central extension of at the branch network in banker and teller including through recruitment of employees TeleBank, and as at December 31, 2018, positions. The Bank profits from the from the Minorities society, from the Employment of persons from numbering 124 employees, of which 32% knowledge and experience which the ultra-orthodox (Haredi) society, from the ultra-orthodox (Haredi) belong to the Arabic society. This employee retirees bring with them, while the retirees Israel’s geographical periphery, as well society population is progressing in the enjoy the young and varied work as employees with disabilities. A distinctive team of ultra-orthodox development routes of TeleBank creating environment. female employee is engaged by diversity in the work teams and in the The Bank’s actions to further the realization the online banking unit ("TeleBank") at managerial echelon (the said data include Multicultural environment of its policy: Discount Bank. The team was formed in employees engaged by the extension on As seen from the above description, 2013, and is engaged in responding to outsourcing arrangements). TeleBank operates in a multi-  Engaging employees with special needs phone calls regarding diverse banking sector environment, crossing age, and integrating them in positions at the matters made by all Bank customers. Most During the last quarter of 2017, the Bank community and religion. As a result, the Bank in accordance with their abilities of the candidates have no prior began transferring a part of the telephonic Telebank Management applies measures and in accordance with the Bank's needs. employment background or experience. banking operations to outsourcing basis, creating acceptance perception within Discount Bank took this action prior to They are being trained in banking matters, the scope of the operations conducted all sectors. This is expressed in unique legislation on this topic going into effect including training regarding a in peripheral areas being among training, in the adaptation of goals and and is prepared to comply with the new computerized work environment unfamiliar the considerations for choosing the assignments in accordance with strengths requirements on the subject; to them, and integrate into employment companies participating in the project. and abilities, in designated ceremonies, Employment of persons coming from at the call center as Bank employees with A teleprocessing center in Dimona started and in noting the Holidays of all religions underrepresented populations and their a status of temporary employees. operations in December 2017, and a new (Jewish, Christian, Muslim and Druze). integration in positions at the Bank in call center was opened in Kiriyat-Gat accordance with the Bank's needs; This act included the cooperation of during 2018. In 2018, TeleBank stepped-up its Cooperating with bodies that specialize in a Rabbi, who instructed the Bank as understanding of the needs and the employee recruitment and placement in regards preparing offices and special At present, the number of outsourcing modification of social activities at the order to advance and integrate employees work environment suitable for the needs workers at the extensions amounts to center for employees of the sector, with from these segments of the population of women from the Haredi society, as approx. 100 employees, all of whom, as a multi-sector and deep perception in an adapted work environment; well as providing transportation from stated, are engaged in peripheral areas, integrating the Holidays of all religions In the employee selection and and to their place of residence. A female after receiving full training by TeleBank together - Chanukah alongside Christmas, 106 SOCIAL REPORT 2018 THE EMPLOYEES 107

noting the month of Ramadan including In accordance with the collective labor Druze and Cherkess holidays. Ethiopian descent - the reported estimate an Iftar meal at the Center to break the agreement signed in November 2016 by the Ultra-orthodox Jews ("Haredi") - there is is based on the number of employees fast, an event in honor of Ramadan at the Bank and by the representative committee no clear definition of the term "Haredi". who had elected to voluntary state their President's House for Discount employees of the employees, 48 temporary employees Many Bank employees maintain the country of origin. of the sector, and more. with disabilities, who had already been Jewish tradition to one degree or another employed by the Bank for several years, and a number of them would definitely In order to create a tolerant were converted into the status of permanent define themselves as "Haredi". Therefore employees of the Bank, thus promoting and Discount Bank and MDB have no data in organizational culture and one that is securing their employment position, as is this respect. accepting of the other, Discount Bank the case with all permanent employees, Persons with disabilities - the estimate and since then, they are escorted on a stated below is based on the following acts to advance segments of society current bases at the units in which they sources: employees engaged as part that are underrepresented in the labor are positioned. of a special effort to employ persons with disabilities. In addition, a review market, including through recruitment In accordance with the instructions of the has been made of employees reporting of employees from the Minorities society, Follow-Up Committee established in terms withholding tax exemption due to having of the general collective labor agreement in disabilities and reviewing the number from the ultra-orthodox (Haredi) society, the matter of employment of persons with of employees reporting the holding of a from Israel’s geographical periphery, as disabilities, applying to the Bank, the Bank disabled certificate. The said estimate joined entities engaged in recruitment and does not include absent employees well as employees with disabilities placement of workers with disabilities, such due to lengthy illness and employees as the rehabilitation group of the Ministry engaged on part-time basis due to lengthy Furthermore, TeleBank receives support of Defense and the "Esek Shaveh" initiative, illness. This evaluation does not comprise and leading professional assistance from which guide business sector organizations measurement in accordance with the the "Collective impact" company, which in promoting employment of person with Expansion Order. aspires to promote employment in the disabilities. business sector within the Arab society. Furthermore, the Board of Directors of the 22 Employment of EMPLOYEES WITH Bank has approved in 2018, a work plan that Employment of underrepresented populations in the labor market DISABILITIES includes the formation of a recruitment plan Discount Bank Employment of persons with and the prioritization of employment and 5139 282 27 disabilities is a central issue of advancement of persons with disabilities. 2018 448 importance in the Bank's activity in aid of 5120 the community in Israel, even before the Summarized employment 280 25 2017 Expansion Order, encouraging and enlarging data regarding the 425 employment of persons with disabilities, underrepresented populations 577 137 20 entered into effect. As part of its policy in in the labor market 2016 234 the matter of employee recruitment, and The Bank's policy does not require 555 126 23 the shaping of the Bank's organizational Bank employees to provide details 2015 204 culture as being tolerant and as one that regarding their affiliation to particular 0 50 100 150 200 250 300 350 400 450 accepts the other, the Bank promotes population groups, such as those mentioned acceptance of persons with disabilities below. Accordingly, the Bank has no data Arabs Persons with disabilities Ethiopian descent and their integration in positions at the regarding employees having the following Notes: 1 The data is not in accordance with the Expansion Order. Bank in accordance with their capabilities characteristics, and the data presented 2 A wide-range improvement was made in 2017 regarding the counting of employees in the different categories. It was not and the Bank's needs. below constitutes an estimate based on practicable to make the aforesaid improvement in the 2016 data, retroactively, and accordingly it should be emphasized that Discount Bank’s data for 2017 and 2018 is not comparable to the 2016 data, and it should not be concluded that the the sources stated below. difference in the data reflects a net recruitment in 2017. In accordance with the provisions of the 3 For details regarding employment of older employees (50+), see employee annexes in the "Epilogue" Chapter. Expansion Order, the Bank appointed in Arabs - the estimate stated below is based 4 The estimate of persons with disabilities excludes staff employed on a part-time basis due to prolonged illnesses. 5 The data was improved in 2018. The data for the years 2015-2017 was improved accordingly. January 2014, an officer responsible for the on the number of employees electing to employment of persons with disabilities. take their vacations on Moslem, Christian, 22 102-48 108 SOCIAL REPORT 2018 THE EMPLOYEES 109

Haredi sector. Female and male staff time, ICC maintains constant relations in integrating employees with disabilities Diversity of the Haredi sector are also employed with associations that engaged in in a variety of positions in the different at the bank's head office. integrating different populations into sections of the company. and equal the workplace, including "Kav Mashve" Employment of employees with Association encouraging employment IDB Bank disabilities - MDB engages employees of academics from the Arabic society, Equal employment opportunity - as opportunity with disabilities and continues to prepare and "Tech Career" Association engaged discussed in the Code of Conduct of for the implementation of regulations in in integrating workers of Ethiopian origin IDB Bank, the bank provides equal at the this respect. For this purpose, the bank in technological positions. opportunities to all applicants and has appointed an officer responsible employees without regard to race, principal for the employment of persons with Engagement of employees from peripheral color, religion, sex, sexual orientation, disabilities.According to the work plan areas - ICC encourages employment in national origin, age, disability, genetic in this matter, the bank held in 2018 peripheral areas. In this framework, a status, citizenship status, marital status, subsidiaries exposure meetings for the Management sales and service center was opened in military or veteran status or any other and other factors of the bank and a letter Ashdod, which serves as an employment legally protected category in accordance in Israel regarding this matter was distributed to hub for residents in the area, and helps in with applicable federal state and local law. employees of the bank. the development of the economy in the MDB southern part of the country. Anti-harassment/anti-discrimination/anti- Engagement of employees from the The bank also held meetings with several retaliation policy - IDB Bank is committed Arabic society - MDB is one of the major bodies engaged in recruitment and At the end of 2018 the Centers numbered to providing a professional and productive employers in the Arabic society. Most placement of employees with disabilities. 181 employees (157 employees at the work environment free of discrimination, of the managers and staff of the bank at In addition, the bank has joined the end of 2017). harassment and retaliation. The bank will 35 branches located in northern Israel "Esek Shaveh" initiative, which assists not tolerate discrimination or harassment, and in other parts of the country (such organizations of the business sector in Employment of employees with including sexual harassment, by any as: Rahat, East Jerusalem, Wadi Nisnas the promotion of employment of persons disabilities - As part of the preparations employee, vendor, customer, or visitor or in Haifa, Kafr Qasim and more) are of with disabilities. made in respect of the Extension Order retaliation for reporting or participating in Arabic society. In addition, members for encouragement and increasing an investigation regarding discrimination of the Arabic society are employed in ICC employment of persons with disabilities, or harassment. This policy applies while on various positions at the bank's head Engagement of employees from the the officer in charge of human resources bank business, at bank-sponsored events, office. different segments - In this framework, at ICC has been appointed as officer or when interacting with bank employees ICC operates a service and sales center responsible for the employment of off-premises and/or not during normal Employment of persons from the ultra- in Upper-Modi'in, serving as an integral persons with disabilities. By means of bank business hours. The bank will take orthodox (Haredi) society - MDB has a part of the service department, adapted recruitment and classification, training disciplinary action, up to and including number of branches in Haredi populated to the needs of female employees of and apprenticeship processes adapted to termination of employment against anyone areas, and many of the male and female the ultra-orthodox (Haredi) society, their need and capabilities, ICC succeeded found in violation of this policy. staff at these branches belongs to the residing in the area. At the same 110 SOCIAL REPORT 2018 THE EMPLOYEES 111

Employment of underrepresented populations in the labor market Complaints regarding professional training in the matter of MDB discrimination of employees prevention of sexual harassment and The Bank's and MDB's the manner of handling complaints, in 454 12 Managements have placed accordance with legislation. 2018 466 emphasis on preventing discrimination, and this principle is applied upon engaging Clarification of complaints is conducted 441 12 2017 453 employees, advancing them and seriously by the responsible officer, determining their wage terms. With respect with no delay and in a thorough and to the issue of retirement on grounds of discreet manner. In exceptional and 0 100 200 300 400 500 age, the Bank, MDB and ICC act in sensitive cases the Bank even appoints Arabs Persons with disabilities accordance with the law. an external examiner for the clarification of the complaint. In cases where sexual No actions claiming discrimination were harassment has been established, filed in 2018 against the Bank, against disciplinary action is taken with full Employment of underrepresented populations in the labor market MDB or against ICC. seriousness and severity. ICC The procedure of the Bank regarding 5 52 3 140 "Prevention of sexual harassment and Maintaining pestering on sexual grounds at the Bank" 2018 200 is delivered to each new employee of the 5 51 2 125 the rights of Bank, is posted on notice boards at the 2017 183 different units of the Bank and is published on the intra-organizational communication 4 43 4 125 employees website and on the procedures website 2016 176 Prevention of sexual of the Bank. 4 43 4 125 harassment 2015 176 The Bank views with great The Bank uses comprehensive learning in importance the maintenance of a the matter of sexual harassment, which is 0 50 100 150 200 respectful, equitable and safe work distributed to all employees of the Bank Arabs Persons with disabilities Ethiopian descent Ultra-Orthodox (Haredi) environment, which is clean of sexual once in each period. New employees are harassment and pestering on sexual required to study the learning, which is grounds, and acts incessantly to prevent mandatory learning within the framework Notes: 1 The data is not in accordance with the Expansion Order. 2 For details regarding employment of older employees (50+), see employee annexes in the "Epilogue" Chapter. such events within its premises and to handle of courses introducing the Bank. 3 The estimate of the number of Ultra-Orthodox employees in ICC is based mainly on the number of employees engaged in an optimal manner cases brought to its in the service and sales center in Modi'in Illit. attention. Due to the importance attached by the Bank to this issue, an internal audit is The Bank has appointed an officer performed once every few years examining responsible for the prevention of sexual the treatment of this matter by the Bank, harassment, who is in charge of the the last of which was performed in 2018. inquiry of complaints and submission of conclusions and recommendations Four cases were examined in 2018 - three to the representative of the employer - a of which by the responsible officer of position held by the Head of the Human the Bank. Harassment at a low level had Resources and Properties Division. Also been found in one of these cases and appointed was an additional responsible disciplinary action was taken against the officer, who serves also as a substitute perpetrator. In another case examined by in case of need, as well as two regional an external examiner, it was not found to responsible officers (for the Northern and be sexual harassment. the Jerusalem regions). It is noted that the responsible officer had undergone The Bank's liability for the payment 112 SOCIAL REPORT 2018 THE EMPLOYEES 113

of severance pay to employees at the employed for defined time periods (temporary with offers for early retirement at improved 80 employees participated in retirement rate of 100%, upon termination of their employees) and/or those employed according terms. The retirement of tenured employees is workshops held in January 2019 as well employment, including at retirement to personal employment contracts. The subject to the consent of the retiring employee as additional 102 employees who had age, as required by the Severance dismissal of employees belonging to the and is not compulsory (dismissal), and it retired under the early retirement plan. Compensation Act, is fully covered by said populations generally takes place at the promotes goals such as the reduction in deposits in severance pay funds as well end of the contractual employment period, the average cost per employee position, For details regarding employee rights as by assurance policies. or on background of dissatisfaction from the refreshing of the employee lines and regarding severance pay, retirement and the employee's performance or breach of efficiency. pension payments, see Note 23 section "A" Retirement and dismissal discipline, as well as on grounds of efficiency to the 2018 Annual Report (pp. 174-176). measures and reductions adopted by the In August 2018, the Board of Directors of the Conducting dismissal procedures while Bank. Termination of employment of whatever Bank approved an efficiency plan, following Employee claims relating to maintaining and respecting the rights of reason is effected only after explaining to the the outline formed by Management and labor relations employees employee the circumstances and reasons for following an approval in principle by the In 2018, Bank employees filed with Relations of the Bank with tenured the dismissal and giving the employees the Supervisor of Banks. In accordance with the Labor Court two actions against employees, being the majority of Bank opportunity for stating in full their counter- the plan, some 230 tenured employees would the Bank relating to labor laws. One action employees, are based on the Labor Charter claims, and following serious consideration be able to retire prematurely at preferential has been erased with the consent of the and on agreements with the representative of each case by the Bank. terms (for additional details see the 2018 parties and the other has been concluded committee of employees, according to which, Annual Report, pp.187-188). with the erasure of one of the requested except in criminal cases, employees may The Bank's liability for the payment of reliefs and with the rejection of the other not be dismissed unless in exceptional severance pay to employees at the rate of As part of the integration of the retirement relief. circumstances. Consent of the representative 100%, upon termination of their employment, plan, the Bank put at the disposal of committee is required for the dismissal of a including at retirement age, as required by prospective retirees pension consulting Six actions filed in the years 2013-2017 tenured employee, in the absence of which, the the Severance Compensation Act, is fully services provided by an external company, were concluded in 2018: Three of the matter is referred to arbitration. From time to covered by deposits in severance pay funds paid for by the Bank, which assisted the actions were concluded by verdicts issued time the Bank encourages tenured employees as well as by assurance policies. employees in their decision whether to accept by the Regional Court and by an appeal to retire voluntarily prior to reaching retirement the retirement offer and which track to choose. instance, in which the actions had been age, at preferential terms, as detailed below. Early retirement rejected; one action has been erased A more flexible administrative approach exists The Bank encourages from time to time the Until December 31, 2018, 134 employees and two actions have been concluded in the case of termination of employment of early retirement of tenured employees by retired within the framework of the plan. in compromise agreements without non-organized Bank employees, who are approaching defined employee populations Seven additional employees signed admittance by the Bank of any of the retirement agreements in 2018 and retired claims raised therein. at the beginning of 2019, all of them within the framework of the plan. Employee remuneration Data regarding the retirement Total number of retired Of which: number The principal salary components employees of early retirement Preparation for retirement of tenured employees are the base of employees employees Retirement from work constitutes the end salary which includes a seniority 2018 235 157 of a chapter in life and the beginning of increment, representation and signature

1 a new chapter involving changes on the fees for each employee based on his Discount Bank 2017 106 15 social, economic, psychological and health seniority and position. The base salary 2016 394 312 levels. The Bank offers employees and their constitutes the basis for salary increments 2018 49 18 spouses workshops for the preparation and for the payment of split working hours’ towards retirement. Participants in these remuneration at the rate of 2.5% of the MDB 37 10 2017 workshops obtain information regarding a base salary (for each split working day, 2016 54 32 variety of subjects, such as a healthy way of to eligible employees), shift remuneration life, physical and mental health, nutrition, (to eligible employees), overtime and the 2018 4 - relevant legal aspects, economic aspects, 13th month salary and long term service ICC 2017 3 - retiree rights, testaments and inheritance award. Some of the payroll components and more. In addition to the workshops, of the employees are linked to the CPI. 2016 2 - personal consulting is offered to those In cases where the CPI is negative, the Notes: 1 The data relates to tenured employees only. interested therein. employees' wages are not reduced and 114 SOCIAL REPORT 2018 THE EMPLOYEES 115

the negative CPI is setoff against the rise In accordance with the collective respect of these sabbatical days. For of an award based on the return to all Bank in the CPI in following months. Employees agreement in the matter of pension dated monthly employees, the payment is employees, in an average amount of 1.5 are also entitled to various additional June 2011, a provision of the full amount made without condition of minimum monthly salaries for each employee. The benefits in accordance with their of severance pay at the rate of 8.33% was seniority. A minimum service period award is paid in acknowledgement of the employment status. Bank employees are determined, including the finality of the of three months is required by law for joint effort leading to the achievements also entitled to a long-service award equal provision (pursuant to Section 14 of the hourly workers. In addition, with respect of the Bank in 2018. to several monthly salaries plus additional Severance Pay Act and with this being to employees engaged on an hourly vacation days, at the end of 20, 30, and in relation to temporary employees and basis, the day of Purim and the Ninth of For details regarding the award for 2018 to 40 years of service in the Bank. A collective to employees who have become tenured Av are considered unpaid leave days. the President & CEO, see the 2018 Annual labor agreement dated November 22, 2007 employees after the date of signing the Tenured employees, who do not belong Report (p. 286). specified that new employees shall not agreement and to veteran employees who to the Jewish faith, are being paid in be entitled to “long-service vacation” or have elected this option voluntarily, from full in respect of absence on their own For details regarding awards to officers in to wage components for nursery school the date of their having elected to do so). religious holidays. 2018, see the 2018 Annual Report (p.186, and summer camp. The item in the item 8). collective labor agreement of June 2011, In accordance with the Expansion Order For additional details regarding regarding the updating of grading and increasing the provisions for pension in "remuneration", see "Disclosure according Officers and members of the stages, changed the components and the economy, starting with July 2016, to the third pillar of Basel and additional Management group terms mentioned above, applying to the share of the employee in provident information regarding risks", which is tenured employees engaged or converted contributions shall not be less than 5.75% available for perusal on the Bank's website. The ratios presented in the Table below to this status as from January 1, 2012. In and the share of the employer shall not were calculated in the following manner: addition, certain components have been be less than 6.25%. Respectively, since Special remuneration to Numerator - shows the cost of cancelled in their respect and maximum January 2017 the share of the employee managerial personnel remuneration as recorded in the financial salary levels have been determined has increased to not less than 6% and that A managerial rank employee who statements in respect of senior officers according to grading. of the employer to not less than 6.5%. The has been promoted is entitled to in the related year (excluding payroll tax). share of the employer in contributions to a 5% salary increase from the salary table Working overtime by employees eligible an insurance fund/provident fund which (provided that at least 12 months have Denominator - shows the cost of for payment in this respect is contingent is not a pension fund will include, if the elapsed since the date of his last remuneration as recorded in the on prior approval of their superiors. employee so elects, the purchase of loss entitlement to such increase due to financial statements in respect of all Attendance reporting at the Bank is of work ability insurance for the employee, promotion). The collective labor agreement other Bank employees and contractor made by means of an attendance clock on condition that the rate of contributions of June 2011, regarding the updating of employees (excluding officers) in 2018 (excluding exceptions). in the employer's share shall not be lower grading and stages, includes changes in (and excluding payroll tax), and which than 5%. Furthermore, the minimum rate some of the employment terms applying have been employed by the Bank at the Most of the Bank’s employees are entitled of the employer's share for severance pay to new tenured employees becoming Bank end of the relevant year. to recreation pay in an amount significantly shall apply to the full amount of the insured employees of this status as from January higher than the amounts provided by employee wage, at the rate of at least 1, 2012. In this connection, maximum For the purpose of calculating the cost law. Employees are also entitled to 6%, in accordance with the agreements salaries have been determined according of employees, it has been assumed that: pension contributions, to provident fund applying thereto, at the work place and no to classes in line with the accepted 1.  The cost was grossed-up to a full time contributions and further education less than the average wage in the Israeli administrative grades at the Bank. position for part-time employees; funds contributions, in accordance with economy. 2. The average provision customary at the agreements signed with the Bank. Employees in the last three senior grades Bank for vacation pay, jubilee vacation  Payment in respect of public holidays (senior manager, Assistant to the President pay and pension expenses is expected For severance pay and provident fund and sabbatical days. The Bank is closed & CEO, Senior Assistant to the President & in respect of an employee earning a contributions, the Bank includes the basic for business on nine sabbatical days CEO) are entitled to receive a car from the median wage; salary, global overtime for provisions defined by law, as well as on Purim Bank and full funding for one telephone 3. Expenses in respect of severance pay (according to grade), 1/12 of the (Jewish holiday) and on the Ninth landline in his home. have been included based on current employee’s 13th month salary and other of Av. In a year in which elections actual cost with no actuarial component. additional benefits. Employees defined as are held for the Knesset or for local Awards to employees and a “pensioner” of the Bank, are also entitled authorities, the elections day is also managers in 2018 to certain benefits after their retirement. considered a sabbatical day. All Bank On March 10, 2019, the Board of employees are being paid in full in Directors approved the payment 116 SOCIAL REPORT 2018 THE EMPLOYEES 117

The ratio between the average cost of remuneration of the senior officer group and not indicate sexual harassment, though the average cost and mean cost of remuneration of all employees23 MAINTAINING the conduct of the defendant has been found deficient. In view of the fact that the 2018 2017 defendant had terminated his office at the 1 Ratio of average Ratio of mean Ratio of average Ratio of mean THE RIGHTS OF The senior officer group cost2 cost2 cost2 cost2 bank on the background of the complaint, prior to the submission of the findings, no Discount Bank 7.95 times 9.03 times 8.01 times 9.20 times EMPLOYEES AT disciplinary measures against him have been recommended. Furthermore, the 3 MDB 4.62 times 5.95 times 5.47 times 7.13 times THE PRINCIPAL requirement for greater attention at the bank to this matter has been clarified and ICC3 5.98 times 8.70 times 5.89 times 8.42 times SUBSIDIARIES IN pointed out, as recommended. Notes: 1 Chairman of the Board, President & CEO, members of Management, Internal Auditor. 2 The remainder of the employees and contract workers. Likewise, an additional complaint was 3 The format of the calculation was changed in 2018. The data for 2017 has been changed accordingly. ISRAEL submitted in 2018, according to which, a female employee of one of the units was Prevention of sexual sexually harassed by a fellow employee Work on days of rest harassment at the principal of the unit. The process of inquiry of In accordance with the Working subsidiaries the employees had not brought to light Hours and Rest Act, employing a unequivocal findings; therefore no worker on the weekly rest days is forbidden, MDB disciplinary measures have been taken, unless permitted by a permit as stated in Each new employee beginning work at especially as the complainant was posted the Act. Guards and security personnel of MDB has to study the learning regarding to another unit for continuation of her the Bank are employed on the weekly rest prevention of sexual harassment and must employment, with no connection or days according to a general permit issued read and sign the Articles of the company knowledge of the inquiry being conducted. by the Minister of Labor for the purpose of in this matter. The principal provisions of As a result of the above, the requirement guard duties on the weekly day of rest. the Law are posted on notice boards, on for greater attention to the provisions Moreover, the Bank, ICC and a number of which are also posted the names of the of the Law by the relevant unit has been companies providing services to the Bank officers in charge of handling complaints. clarified and pointed out. have a special permit from the Ministry of The Articles are also published on the Labor, Welfare and Social Services for the internal portal of the bank. Any complaint ICC employment on the weekly rest days of or clarification in this matter is handled The officer in charge of prevention of computer operators, data protection and discreetly and with complete attention sexual harassment at ICC is entrusted with standby personnel. The said permit is being in an optimal and quick manner to the the inquiry of complaints and submission extended from time to time in accordance extent possible. In cases where sexual of conclusions and recommendations to with the terms stated therein. harassment is found punitive sanctions the VP Human Resources, who serves also are taken accordingly. Moreover, MDB as the employer's representative for the has appointed a responsible officer in purpose of taking decisions. Each new accordance with the Law, who takes employee beginning work at ICC has to charge of the inquiry and submits study the learning regarding prevention conclusions and recommendations to of sexual harassment and must read and the VP Human Resources, who serves sign the Articles of the company in this also as the representative of the employer matter. The principal provisions of the for the purpose of taking decisions in Law are posted on notice boards, on which the matter. are also posted the names of the officers in charge of handling complaints. The A complaint was submitted in 2018, Articles are also published on the internal alleging sexual harassment in one of the portal of the company, and once a year, an units. The inquiry of the complaint was all-organizational learning is performed 23 102-48 conducted by appointing an external that includes knowledge examination. examiner. The findings of the inquiry did 118 SOCIAL REPORT 2018 THE EMPLOYEES 119

In cases where sexual harassment is found of MDB participated in preparation for holidays and sabbatical days at Payment in respect of public punitive sanctions are taken accordingly. retirement workshops in 2018. MDB holidays and sabbatical days at MDB acts in a similar manner to Discount IDB Bank Two complaints were received in 2018 ICC Bank. Furthermore, hourly workers at MDB Most of the legal holidays kept in New regarding sexual harassment: The company's liability for the payment are granted a day off at the expense of York State and certain religious holidays of severance pay to its employees, on the the bank on Purim and on the Ninth of Av. kept in Israel are designated as holidays 1.  It came to the knowledge of the accepted basis of one monthly salary for of IDB Bank when they fall on a working employer that an employee of a each year of service, is fully covered by Payment in respect of public day. The Human Resources Department contractor company supplying services deposits with severance pay funds, by holidays and sabbatical days at provides employees with a list of the to ICC had been exposed to remarks assurance policies and pension funds and ICC designated holidays each year, which of a sexual nature made by a supplier by the provision recorded in the books of The company operates in a reduced is approved by the Board of Directors of ICC. The inquiry disclosed that no the company. The part of the severance format on nine sabbatical days defined of IDB Bank. complaint had been submitted and that pay not covered by deposits in a defined in the law as well as on Purim. Working the information was made known after deposit plan, as stated above, is treated on these days are only the employees Awards to employees and the engagement had been terminated. by the Group as a defined benefit plan permitted by a work permit issued by the managers in 2018 in the Notwithstanding the above, a clarifying (within the meaning of the term in accepted Ministry of Economics, to work on the principal subsidiaries and guiding discussion has been held accounting principles), according to which, Sabbath (approximately 29 employees). with the supplier. a liability is recorded in respect of employee Election Day is also a sabbatical day MDB rights. whenever general elections to the Knesset The award in respect of the year 2018 2. It came to the knowledge of the are held. The said sabbatical days are fully equaled 1.3 times of the salary on an employer that an email containing Employee claims relating paid to all employees. Payment to monthly average. The award was paid in 2019, as material of a harassing nature had been to labor relations at the employees is made with no reservations. follows: 0.45 of the bonus which comprise sent to an employee of ICC and to an principal subsidiaries Payment to hourly employees is made a fixed component - was paid in April 2019. employee of an outside contractor. only if they were scheduled to work on that The balance, being 0.95 of the salary, has The inquiry disclosed that the emails MDB day. Employees not of the Jewish faith, been paid later on in 2019. had been sent separately to each of the Two actions were served in 2017, both who are off from work on their religious employees and at different times from claiming unlawful dismissal. The hearing holidays are fully paid for these days if ICC different external email addresses. of the two actions have not yet been they had elected them as their sabbatical ICC paid an annual award in respect of An attempt to locate and connect the completed. days. 2018 to managers and employees in source of the email addresses to a accordance with the remuneration policy specific factor had failed. Furthermore, ICC For additional details regarding approved by the Board of Directors. An a conversation held with an employee of Two actions were served in 2018. One remuneration at MDB see "Disclosure award in respect of the year 2017 has a contractor suspected by the offended action by an employee of an external according to the third pillar of Basel and been paid to all employees and managers, employees to be the sender of the company providing catering services to additional information regarding risks - including senior officers. For details emails, did not indicate any connection the company. The Claimant alleges that additional disclosure as of December 31, regarding remuneration plans for the between that person and the emails. his assignment for work on the company's 2018" (pp. 100-107 of the Hebrew version). President & CEO, to company employees The said employees had not filed a premises had been rejected on ground This report is available for perusal on and managers, see ICC's 2018 annual complaint and there was no repetition of his medical condition (HIV carrier). MDB's website. report (p. 137 of the Hebrew version). of the case. Another action was filed by a candidate for employment who had been rejected For additional details regarding the Retirement and dismissal at during the recruitment process. This remuneration plan for the CEO, employees the principal subsidiaries action was withdrawn by the Claimant and management of ICC, see ICC's 2018 at the beginning of 2019. For additional Annual Report (pp. 127-129 of the Hebrew MDB details, see the Annual Report of ICC for version) and "Additional Disclosure The bank's liability for the payment of 2017 (pp. 234-235). according to the third pillar of Basel" as severance pay to its employees is covered of December 31, 2018 (pp. 59-66 of the by deposits with severance pay funds and Employee remuneration at the Hebrew version). The said reports are by appropriate provisions. principal subsidiaries available for perusal on the company's website. Preparation for retirement - 21 employees Payment in respect of public 120 SOCIAL REPORT 2018 THE EMPLOYEES 121

"Managerial reserve" - selective training Investing more for a position in the primary managerial grade. In 2018, the Bank began the 464 99% 1,070 in employees development and adaptation of training managers An average annual of the Head Office staff for leadership challenges and the skills participated in the meeting rate of satisfaction enriched their Human resources required in the changing reality marked in which the vision and from instruction knowledge through development by uncertainty, by building preparedness values of the Discount courses the "choosing to Human resources development for the digital era, by developing agile Spirit had been introduced learn more" initiative and the organizational abilities, by managing employee development at the Bank are derived from generation gaps and by the ability to the strategic focuses, from the focuses analyze, understand and adapt business of the annual work plans and from the information - all this in order to provide 105 80% Bank's organizational culture. Thus value to customers. employees of Bank employees reinforcing the Bank’s ability to address representing branches have have participated in successfully its business and "Managerial drive" - assimilation of a participated in a workshop professional and behavioral organizational challenges. Accordingly, management concept that enhances for the prevention of instruction sessions the development of the human resources employee effectiveness through violence at the branches in 2018, focused on the following issues: creating a connection and enabling conditions. In 2018, activity was Manager development conducted at 5 Wings, for the mapping The changing reality forces the of an organizational situation report for Personal programs consultants"), a learning program for Bank to prepare for changes in the the purpose of forming and improving The personal development programs the development and preservation of labor world. During 2018, alongside the a plan. are conducted in a number of ways: professional achievements in the credit building and strengthening the managerial Assisting and advising managers entering a field, training sessions for bankers in the echelon of the Bank, through the Building a broad reserve for new position and/or advising and on the job digital fields and accessibility workshops development of managerial leadership key positions - securing business managerial training. During 2018, some 120 for new employees (34 workshops supporting the strategy and the Bank's continuity and compliance with the managers obtained assistance in addressing provided training for 338 employees and values, the Bank started the adaptation requirements of Proper Conduct the challenges of the position, or as part of managers). of development activities to changes in of Banking Business Directives by a team development process, or assistance Integration of strategic projects in the order to prepare managers for the future means of management and reduction regarding other organizational changes. organization - during 2018, the Bank world. of risk in key positions. In 2018, the focused on the integration of CRM systems Bank conducted a process for the Professional training in the Banking Division, on the integration Leadership program for senior identification of key positions and In 2018, training has been focused of a new credit system in the Corporate managers - the program for increasing key personnel at the Bank - employees on three main issues: preservation Division and on the integration of the the leadership capabilities of the having unique expertise at the know-how of professional qualifications and training Code of Ethics in the organization (for senior management echelon has been level, control of systems, processes, for positions, integration of strategic more extensive information regarding successfully completed, in which etc., or having such extensive influence, projects in the organization and the the integration of the Code of Ethics, see participated fifteen selected managers which might put the Bank at risk in formation of an infrastructure for the the Chapter "Discount Spirit"). of the "reporting to Management" level. case of their departure. Measures conduct of effective learning. Formation of an infrastructure for have been formed for the reduction effective learning - in the fourth quarter "Executive training room" - 150 managers of risk in respect of the identified key Preservation of professional of the year, the Bank started a pilot for the participated during 2018 in the "executive personnel, and detailed plans have been qualifications and training for positions - examination of the effectiveness of digital training room" - a practical-applicative designed for risk reduction, which are During this year, a comprehensive learning, based on the Kirkpatrick Model. training increasing the managerial in different stages of implementation. response was provided for professional An additional learning infrastructure abilities based on the Discount Spirit needs by means of training that dealt with integrated in 2018 was the "Choosing to values. Also conducted was a training Managers' website - Strengthening the qualification of employees for core learn more" initiative - a series of short program for the strengthening of management professionalism by banking positions, as well as ongoing on- lectures, by internal and external lecturers, managerial capabilities for designated means of current publishing of articles/ the-job training. Included in the above, is where the student chooses the lecture populations (most of whom team leaders) tools/TED video clips in the matter of an enrichment program for investment that interests him and independently for approx. 110 participants. management. consultants at the Bank ("University for registers to it. 122 SOCIAL REPORT 2018 THE EMPLOYEES 123

Data regarding average annual training hours per employee motivating employees. The feedback organizational culture, with an emphasis on 2018 2017 2016 2015 interview is intended to survey an performance and service. The Bank acts to employee's performance and functioning promote dialogue and openness with its Frontal instruction days 26,052 29,536 26,335 26,130 during the past year, to retain and employees. The dialogue is conducted Interactions of self-study 43,757 37,016 39,914 37,200 reinforce the strengths and achievements, through a number of central channels. to identify what needs improvement and Average annual training hours per employee1 to set goals for the upcoming year. At the FaceBank same time, the feedback conversation An organizational portal, in the format of 2018 2017 2016 2015 is an opportunity for open dialogue with news sites on the Internet. This allows Clerk 36 40 35 35 the employee. updating on news and current updates at Average training Manager 38 35 28 31 the Bank, and invites an open dialogue with hours The process during 2018 emphasized the senior Management on subjects that are Total 37 39 34 34 integration of the Discount Spirit values. the center of discussion in the organization. Notes: 1 The data is based upon the number of employees at end of year. The data relates to frontal instruction only. The requirement for the setting up of goals Since its establishment, the FaceBank was and the linking of goals from the level of used, among other things, for providing The growth in training hours for managers in 2017, stems mostly from activity for the formation of the vision senior Management to the employee level current updates to the employees regarding and values of Discount Bank. has been communicated and integrated in the new strategic plan and regarding cross- the process. The process of performance organizational projects operated within evaluation and feedback in respect of the the framework of which, and for reporting Training days at Discount Bank performance for 2017 was conducted in news regarding the marketing and services 13% 15% 26.5% 9% 5% 7% 19.5% 5% 2018. field. FaceBank includes, among others, a designated site "Human resources for Following the drawing of conclusions and you", which includes detailed information benchmark, the Bank formed during the regarding employee rights, training and 100% second half of 2018, a new performance development programs, social responsibility, Computer and technology Management and leadership Customer relation management Compliance and regulation evaluation process (towards the 2019 and more. The portal is managed by the Credit to businesses External study and miscellaneous Basic banking Financial consulting appraisals) which is goal oriented and Bank's Spokesperson, a fact that allows focuses on forward looking and on future full synchronization between the external development directions. information layout and the intra-organizational Nurturing excellence and employee motivation processes conducted information system. providing feedback on a current basis. Furthermore, in 2018, In 2019 the performance appraisal and In accordance with the Bank's outstanding managers were selected and feedback process was conducted in respect Organizational internal communication strategy, which encourages undergone professional training at IDB Bank. of performance in the year 2018. The said The Bank is investing in the development of performance culture and cultivating evaluations were performed in respect of open and two-sided communication with excellence, several remuneration An emphasis on the determination of 99% of employees. its employees, while strengthening their mechanisms have been determined at the personal performance goals for all relations and commitment to the strategy and Bank intended to appreciate and compensate employees was placed in 2018, these goals of the Bank. With a view of broadening outstanding employees, who had attained being derived from the work plan of the employees' knowledge and understanding as their business goals and awarded high Bank and its strategic focuses. Towards to the Bank's total activities and to promote appreciation marks by the annual the performance of the evaluation process, performance, a variety of communication performance evaluation measures. In this the Bank has conducted training sessions 99% lines were also used during 2018, including framework, the Bank conducts different regarding the process designed for new of employees 'Senior Forum' - a quarterly meeting led by competitions, at the branch and regional evaluation managers as well as refreshing received feedback regarding the President & CEO; "Morning magazine" the performance in 2018 levels, and Vice Presidents award knowledge sessions for senior evaluation - a weekly television newscast presenting remuneration to outstanding employees managers. subjects standing at the core of the Bank's at the different divisions, as well as special endeavor. remuneration awarded annually by the Feedback interviews - The feedback Organizational culture and President & CEO to a number of outstanding conversations comprise an annual dialogue with employees "The Managers" website - An internal employees, at a festive ceremony held at process forming a most important In 2018, the focus was placed on the website, which contains tools and content the Bank, in addition to integration and management tool in guiding and design of a change supporting for managers for the integration of cross- 124 SOCIAL REPORT 2018 THE EMPLOYEES 125

organizational processes stemming from the The "Human resources for you" collection was conducted online by way of recommendation for the Bank's internal Bank's strategic plan, as well as enrichment Center - Within the framework of a a system of surveys, and covered approx. assistance funds; and development content. The website is move for the upgrading of the service 20% of all Bank employees. Advising the officers in charge in facing open to the entire manager population of provided to Bank employees by the Human difficult situations and special events; the Bank. During 2018, the distribution Resources and Properties Division, the Promoting the employees’ Accompanying employees in case of frequency of the content was increased, "Human resources for you" Center was welfare death of a first degree family member, including reading and perusal of different launched in order to serve as one clear Welfare services operated in the Bank including insertion of an internal obituary material: professional articles (in Hebrew address for all Bank employees with Ever since its establishment, Discount notice, sending a funeral wreath and and translated), TED video clips, different respect to any approach in the matter Bank has been known as an organization providing condolence set to the bereaved tools for personal appraisal and improvement of human resources, and to provide a having special sensitivity to the needs family. and work tool for employee management. uniform and professional response to all and welfare of its employees. Already in In addition, when the organization holds approaches. The operation of the Center 1976, the Bank began to operate welfare The referral to the welfare services of the events considered as cross-organization allows also control over the response time services in an institutionalized manner, Bank is generally done by the employee events, the website presents auxiliary and to employee approaches. Approaches becoming one of the first organizations himself, or by referring parties, such as explanatory material (such as guiding and to the Center may be made through in the economy to do so. The welfare supervisor, human resources manager preparatory pages regarding a performance different routes: telephone, email or services at the Bank serve as a connecting in the unit, peers at work, etc. In 2018, evaluations event, background material for service envelops. and supplementary link in addition to the the Welfare Unit dealt with 765 enquiries the assimilation of the Code of Ethics, etc.). community services. The very foundation (821 enquiries in 2017). During 2018 some 13,449 approaches of the Bank's supportive welfare field is to Communication with the Senior Forum - were received (an increase of 27% as take a position that positions the Bank as Managers' involvement in treatment The Bank operates a designated channel compared with 2017), of which 2,104 one which sees itself as a partner to the process - The Bank encourages the for communications with the Senior Forum approaches by telephone and 11,315 difficulties of its employees and wants involvement of the immediate superior at the Bank and at the Group. The Forum approaches by email. Approx. 81% of to assist them as much as possible in in assisting an employee in distress with consists of some 120 executives in the Group the approaches were with regard to dealing with them. the professional support and guidance who, through this channel, receive current attendance and payroll. Service surveys of the Welfare workers. updates and reports on a daily basis. conducted by the Bank show that 94.5% Treatment and prevention in two circles Treatment of group pressure situations - of employees participating in the surveys are integrated into the supportive welfare Support and assistance in a pressure "Round tables" - In order to be attentive to have expressed high satisfaction from field, as follows: assisting the individual situation, such as war, terror events, the needs and challenges arising at the Bank, the service. - the worker and his family and the robbery or sudden death of an employee, "face to face" meetings of the President & CEO development of welfare programs and is accompanied at times by group or of one of the members of Management Position Survey to groups of employees having a joint therapy, which provides a solution are held with managers and employees. In recent years, within the interest. for the mutual need or difficulty of a framework of the participation group of employees, simultaneously, "Management in the field" - Monthly tours of the Bank in the BDI survey - "100 best Assisting the individual in addition to and as a complement to by members of Management visiting the places of employment", a survey is being The Bank aspires to assist the individual branches and field units, accompanied by conducted with participating Bank in coping in a better way with his/her members of their senior staff. employee relating to their position on problems and needs, so that he/she will issues relevant to the Bank. The results be able to function properly both at home of the survey are analyzed according to and at work, in good times and in bad. In various sections based on divisions of this framework, the Bank employs two office/field, age, gender and seniority. welfare officers who are at the disposal Multi-annual trends in the organization of the employees in providing assistance 94.5% are also analyzed as well as trends in and treatment in personal, familial, health, of employees comparison to the benchmark of the economic matters etc. participating in the financial system, in order to identify Further support channels include: surveys have expressed high satisfaction from differences and concentrate efforts to Providing information on and referrals the service of the "Human reduce them, respectively. to services in the Bank and the community resources for you" Center in order to make the most of rights and/ The survey relating to the year 2018 or treatment, as needed; was conducted in December 2018. Data Preparation of social reports, as a 126 SOCIAL REPORT 2018 THE EMPLOYEES 127

individual counseling. In 2018, some In 2018, there were 6,100 participants in at the Head Office units offer dietetic Designated employee populations, such 11 events of group pressure situations these activities, compared with 5,887 and healthy choices. as: storekeepers, maintenance staff, etc., were treated (17 events in 2017). participants in 2017 (the data does not have been trained with respect to hazards include pre-retirement workshops and Work environment tests - The safety that are mostly encountered by them. Welfare and leisure programs participation in trips). officer of the Bank performs occupational As part of the aspiration for the cultivation environment monitoring tests, control over Within the framework of maintaining the of the human resources in the organization Promoting health performance of occupational medical safety of employees in their workplace, and the maintenance of the familial work The Bank views with great tests as well as tests regarding suspicion the Bank has established a group of environment characterizing the Bank, importance the promotion and of electromagnetic radiation stemming safety trustees at the branches and the Bank invests in the welfare of its maintenance of its employee's health. from the electricity network or due to air Bank premises, who perform current employees, accompanies them at the As part of promoting this issue the Bank quality in the work environment. These are safety tests at their units. Accordingly, significant crossroads in their life, notes offers its employees the opportunity of performed by qualified external entities environmental tests are performed from personal events and looks after their medical examinations, participation in and by the relevant performance factors at time to time for the identification of welfare also outside working hours. In sports activities and enjoying healthy the Bank. Furthermore, the safety officer hazardous factors, and for maintaining this framework, the Bank gives presents nutrition. The Bank also strictly conducts initiates tests for radiation caused by the a safe and healthy work environment for to employees on Holidays, birthdays, environmental tests in accordance with electricity network and tests of air quality Bank employees. Where safety events weddings, birth of an offspring, Bar/ the law. following the identification of hazardous are discovered, these are examined Bat Mitzva, enlistment of employee factors by safety surveys performed at the and investigated in order to maintain children, completing 25 years of service, Medical tests - In 2018, some 150 Bank's units. In 2018, 23 electromagnetic a continuous improvement process in etc. Furthermore, a festive event in employees received blood insurance by radiation tests, five air quality tests and the matter. collaboration with the representative donating blood, (148 employees in 2017). four Radon gas tests were performed. committee of the employees is held for 140 employees, retirees, and their spouses The Bank does not have a safety children of employees starting first grade had medical survey tests performed in Safety in the workplace committee, nevertheless, the manager in together with a present (school bag and 2018, (188 tests in 2017). In 2018, some Section 41 of the Labor Charter charge of the Properties and Construction contents). 225 tests were performed on the Bank's states that the Bank shall adopt Group conducts periodic discussions on athletes (220 tests in 2017). all measures required to maintain physical safety matters. Varied enriching and leisure activities - work conditions preserving the health The Bank offers its employees different The Bank's employees and family of the employee in his work. after work activities, workshops and members are entitled to participate lectures on various subject adapted to in medical and dental insurance The Bank has appointed a safety all Bank employees and their families, at arrangements under improved terms. This officer who coordinates the safety and different locations around the country. matter is being handled by the Employee occupational health issue at the Bank. Representative Committee. Each year, the Bank distributes to all its employees a safety learning, which Sport activities - the Bank has 24 sports includes information regarding hazards teams registered with the Workplace at the Bank's premises and branches, and League representing the Bank in different inter alia, encourages the employees to sport competitions. identify hazards at their work environment and report them to the competent Healthy nutrition - Insistence on employee functions. The Bank operates a safety test health includes their nutrition and tests program for the identification of hazards are performed on the quality of the food and for providing a safe work environment, served in the Bank's units. Likewise, the as well as maintaining the safety of meals served at the Discount College and customers visiting the Bank premises. 128 SOCIAL REPORT 2018 THE EMPLOYEES 129

processes with a focus on planning and from the process pertaining to their units. 76% of employees participated in non- Investing more placement. teleprocessing training on the various Professional training sites of the bank. in employees in Managerial development The learning supports the implementation Training of managers - A course was held of the bank's business strategy and 48% of the non-teleprocessing training in 2018 for training of employees for their comprises a necessary layer in the training activities were conducted at the branches the principal first managerial position, in which thirteen of an employee for his duties and in and at the Regional Managements new managers participated (mostly from maintaining his professional qualifications (excluding tutorial training). subsidiaries the branch network). and in improving his performance. Professional development and training The number of frontal instruction Human resources development Newly appointed managers are are conducted in accordance with the hours amounted to 42,800. In addition, in principal subsidiaries accompanied by a tutor manager as well procedures and policy, while maintaining an 19,300 interactions were made in self as assisted by an organizational advisor. In up-to-date knowledge and internal control, teleprocessing study. Mercantile Discount Bank 2018, some 4 new managers were assisted. risk management and compliance, required During 2018, the Bank promoted for the promotion of a uniform standard of management and leadership training, as The establishment of regional investment professional level in aid of providing full follows: centers has been supported by five service to customers. investment center team leaders, who 52.7 Locating reserves conducted a forging process for the work Integration of the compliance culture average study hours The bank has conducted a process for teams of the new investment centers. As part of the support of this process, per employee at MDB locating management reserves from a variety of frontal and digital learning among bank clerks and department The managerial staff of 55 branches activities have been conducted in 2018, heads, in order to secure qualitative obtained service management tools, and the and self-study layouts at the branches have professional/executive continuity at the change was led by a workshop accompanied been developed and fifteen study sessions ICC bank, for supporting medium and long- by organizational consultants at the were held for branch managers, compliance ICC runs a managers’ development term planning process at the bank and branches, being part of the integration of trustees and bankers. In addition, a risk program, which provides tools and skills for supporting the administrative and the managed service and the CRM system. management learning course was held to managers helping them to lead their units professional development of employees for some thirty participants, who are to success. During 2018, some 30 managers and managers. The mapping process at Apprenticeship Skills - two workshops considered key factors in the field. participated in the program (64 managers the branch layout of 75 branches, at the have been held for the development of in 2017). 13 managers participated in the investment consulting layout, at the ultra- apprenticeship Skills for managers, with As part of the support in this process, "Synergy program", a development program orthodox (Haredi) business center and at the participation of seventeen department a variety of frontal and digital learning in cooperation with JOINT Israel, which five regional managements was completed heads at the branches who had not activities were held in 2018, and self- combines managers in ICC with board in 2018. In total, 136 department heads participated in the workshop in the past. learning layouts at the branches were members of associations and social and 586 bankers had been evaluated, by developed. Compliance conference for organizations designed for members of means of interviews with unit managers Following the locating of reserves, compliance trustees at the branches management and departmental managers. and designated evaluation centers. the development process has begun. with 169 participants, fraud conference The implementation has began of the Eighteen managers have participated in for 120 branch and Head Office units Management of ICC believes in the organizational and individual insights a workshop providing tools for personal representatives and fourteen seminar days development of the executive echelon. regarding the training and development and managerial development and have for branch managers, compliance trustees Some 70% of the managers of ICC have processes and the human resources received a summing-up of the insights and bankers were held. Also conducted were grown within the company into managerial 41 training sessions for the compliance positions. Several programs are in operation functions at the units of the bank, with a in order to develop the executive echelon: Training days at MDB - 2018 focus on the branch network. Development program for managers 11% 13% 15% 16% 14% 5% 1% 25% Approx. 81,400 organizational study hours entering office as well as for managers were conducted in 2018, of which 18% being already in office; 24 100% teleprocessing learning . Managers meeting (expanded Credit General Current Management Computer Deposits Foreign currencies/ Compliance accounts and Soft Skills foreign trading and Regulation 24 Does not include "on-the-job" (OTJ) tutorship 130 SOCIAL REPORT 2018 THE EMPLOYEES 131

management forum) - once in every assistance for managers as support there is online training that is required for in respect of the previous year is quarter meetings are held for the for organizational changes - following Compliance and Regulatory purposes and performed at the beginning of each updating, forging and strengthening of the conduct of a diagnostic process, a as best practice in the financial industry. year. Mid-year discussions are held in the executive echelon; designated development and training Lastly, IDB Bank released an online training the months of July/August); Executive training room - enrichment program is devised. system named Udemy to its employees, The granting of an annual award based learning meeting regarding a variety of which allows participation in training on the annual employee evaluation; subjects, the aim of which is to continue CAL College courses in different fields of interest. The "Proactive" excellence program - and develop and cultivate managers and An organizational training program for Participation in these courses forms a esteem for outstanding workers of provide them with management tools the development and enrichment of part of the personal development of the the different departments, and an and skills; the employee, allowing each employee employees. annual esteem program for selected Inspiration creating communication for to register and participate in a variety outstanding workers of the company, managers - designated communication of professional courses and training Nurturing excellence and which includes a gift, public esteem and delivered on a monthly basis, dealing with programs suitable to his position and providing feedback in the a luxury trip abroad for the "Proactive" the different world of management and his personal and professional needs. principal subsidiaries team. include articles/lectures/ TED videos The courses and training programs are and more; advertised on the company's Internet portal MDB During 2018 two processes of evaluation Development of managers entering and include: technological courses and The Bank grants appreciation and and feedback were held. The annual office - Managers' training course training programs, proficiency workshops remuneration to outstanding employees. evaluation and feedback process - this entering their first managerial office in and meetings in matters of process The annual promotion of employees process is conducted at the beginning of the organization. During 2018, some 30 management and knowhow in the credit includes a differential component which the year and includes a forward looking managers participated in the course (in field. Existing alongside this program is a appraises and encourages excellence. evaluation and feedback focusing on both 2017 - 26 managers). training program regarding the organization personal and organizational growth. The as a whole, covering cross-organization The annual feedback discussions process assists in focusing the personal Personal development matters, including business projects, serve as a platform for the evaluation capabilities of each employee in a manner Personal attention is provided by the regulation and employee duties. In view of employees, their performance and that would contribute to personal growth organization to managers entering of the fact that the company focuses on commensurate remuneration with the aim and for the realization of the company's managerial positions, as well as in case credit, many training programs have been of encouraging a culture of transparency strategy, of organizational changes, as part of conducted in this matter: strengthening and dialogue that fortifies the obligation the change management process. ICC of knowhow and skills regarding the sale of the employees towards the organization Evaluation of employees was made in operates an assistance and support of credit within the general representative focused on results, and comprises a tool 2018 using a form reflecting the skills program for managers upon entry into a population. for the identification and nurturing of required from employees and managers first managerial position, which includes excellence. for achievement of the strategy and personal attention, an absorption kit and IDB Bank business goals. The annual evaluation an orientation workshop that reviews Professional level employees are In 2018 an evaluation was made in and feedback process for 2018 included all knowhow and professional factors sponsored by the bank to complete their respect of 100% of employees. Feedback conversations and provided a summing- supporting the appointee in his duties continuing education credits to uphold discussions were made in respect of up evaluation for 100% of the company's as manager. In addition, ICC operates their professional licenses. In addition, 99% of the employees. As in every year, employees taking part in the process (all a conclusion drawing session was held employees participate in the process, Data regarding employee and manager training inputs at ICC: in order to improve the process. excluding new employees). Type of training Population 2018 (hours) 2017 (hours) ICC IDB Bank Managers 28 hours per manager 28 hours per manager ICC views excellence with importance Performance Evaluations - Generally, Entering Employees 8 hours per employee 8 hours per employee and encourages its employees in this annual performance of employees is the position respect: evaluated by their department supervisor 198 hours per 232 hours per Representatives1 Ongoing performance measurement; or manager at the end of each year. This Representative Representative An annual and semi-annual employee evaluation incorporates factors, including, On the job training Employees and managers 16 hours per person 16.5 hours per person evaluation process, which sets but not limited to, the quality and quantity professional and personal development of their work, attendance and punctuality, Notes: 1 A "representative" is defined as one who provides telephonic service to customers (service representatives, service and sale representatives, trading house service representatives, etc.). Representatives receive intensive training for about targets as well as measurement of their cooperation with the members of the one month, upon entering this position. performance in the past year (evaluation department, and their ability to achieve 132 SOCIAL REPORT 2018 THE EMPLOYEES 133

compliance with Bank rules, regulations, of relationship between the workers and Meetings on the subject of "Ethics, as a supporting tool for managers of policies and procedures. The evaluation the organization, their acquaintance with decency and fairness" were held in the different units in order to introduce is discussed with the employees and any the company's activities and strategy and 2018 within the framework of manager improvements both at the personal areas requiring improvement are brought the strengthening of the bond between development courses conducted during management level and at the cross-unit to his attention. them, as part of the advancement of the year. For additional details regarding matters level. targets and the company's business the Code of Ethics, see the Chapter The manager conducts a mid-year growth. Communication includes a variety "Discount Spirit" and the ICC website. Welfare activity at the performance evaluation, which, inter alia, of means, including: principal subsidiaries includes: what's working well, what could Position Survey be working better and how the employees  Organization wide visual communication In recent years ICC participates in the BDI MDB are performing against their objectives. (on computer screens, screen savers survey "100 Best Companies to Work for". As regards the individual and the family, and posters); The results of the survey were analyzed the bank invests in annual vacation, All new employees are initially subject to  The quarterly extended management according to different sections and an finances summers schools during a probation period of 90 days in order to forum; analysis was made of multi-annual trends vacations, finances higher education evaluate their performance during that Round table meetings of the different within the organization and trends as for employees and their children and so period. grades with the CEO; compared with the benchmark of the forth. Bank employees enjoy the service Campaign for the encouragement of financial sector in order to identify gaps of a cafeteria and of subsidized catering Incentive Compensation Plans - IDB Bank internal mobility of employees and and concentrate efforts for reducing services. In addition, the Employee implements Incentive Compensation progress to an additional position in them, respectively. No such survey was Committee holds once a year a bonding Plans to reward employees for their the organization. conducted during the years 2017-2018. leisure day for all bank employees in an performance. There are specific plans Approximately 37% of company employee amusement park, noting the children of designed for each Line of Business as The organizational Internet portal of participated in the survey conducted in the workers who are starting first grade well as for the administrative functions. ICC allows every employee to find all 2016, resulting in ICC rising to the 26th and gives them gifts. the information regarding the terms place in the rating. Organizational culture and of employment, the collective labor At exceptional events (such as outbreak dialogue with employees in agreement, employee benefits and Every two to three years, ICC conducts an of war) the bank assists and supports the principal subsidiaries in welfare, rules of conduct, current updates, organizational employee survey. The most employees located in inflicted areas by Israel possibility of direct approach to the CEO, recent of these was conducted in 2016 providing psychological support, hotel and more. The portal includes, inter alia, with 93% of the employees participating accommodation where required, and MDB professional knowhow with respect to the therein. accommodation at other employees of MDB has an employee Intranet portal, company and its products, the Cal College the bank. which includes extensive information program for professional enrichment The survey results are presented to the serving and enriching its employees. The and training, managers portal, open company's Management as well as to all ICC bank is upgrading the intra-organizational positions and the process of the online manager, and are serving as a basis for Over and above wage terms, ICC provides communication in order to maintain an submission of candidacy, the employee preparing a comprehensive plan is devised diverse benefits and services designed open and two-way communication with representative committee website and for the gaps, both at organization and for the welfare of employees and their the employees, while strengthening their hundreds of professional information unit levels. The position survey serves families. As regards the individual and his commitment and linkage to the strategy sites. and the goals of the bank. In order to sense the mood, challenges and questions Integration of Organizational Ethics of employees, meetings at various levels, ICC views with great importance the group discussions and round-table maintenance of organizational ethics. feedback processes, Management in The code of ethics of ICC comprises the field trips and visits to branches are a valued identity of the organization, conducted, similarly to Discount Bank. according to which the employees are required to conduct themselves with ICC responsibility, integrity and in accordance ICC invests in ongoing and open with proper rules of conduct, which serve communication with its workers and as a basis for the current operations and managers, in order to increase the sense the business success of the company. 134 SOCIAL REPORT 2018 THE EMPLOYEES 135

family, ICC invests in annual vacations, in MDB invests in encouraging rich sport Safety in the workplace at the The Company has a safety committee, gifts for children of employees enlisting activities in different fields and it principal subsidiaries which in accordance with Regulations the IDF, financial assistance in case of promotes ten sport teams registered with meets at least eight times in each year, need and more. the Workplaces League, which represent MDB reviews the safety reports, uncovers the bank in the "Sportyada" sport games. MDB has appointed a work safety officer deficiencies and monitors the treatment of Furthermore, employees enjoy subsidized as required under the Organization of safety deficiencies. The safety committee catering services, cafeteria, periodic The bank performs tests for the existence Labor Inspection Act, 1954. The bank at ICC is composed of three to four bazaars for the sale of products at of radon gas, as required. has devised a safety policy, internal managers, seven to eight employees and reduced prices, a variety of enrichment safety checks have been conducted, and the external safety consultant. activities and lectures on different topics. ICC procedures have been written regarding The handling of safety and hygiene in ICC this subject. IDB Bank Furthermore, in a similar fashion to is similar to that performed at Discount IDB Bank is compliant with all Federal Discount Bank, ICC accompanies its Bank. Similarly to 2017, two radiation As part of his duties, the safety officer and State, as well as local Laws and employees at sensitive moments in their and air quality tests were conducted coordinates the safety, hygiene and Regulations as it relates to safety in the lives and provides assistance on the death in 2018 at all the company's premises. fire subject, performs examinations workplace, this include annual fire drills, of a first-degree relative; it encourages Likewise, at least once a year, radiation at the branches and provides guidance emergency evacuation procedures in managers to be involved in the treatment surveys and routine periodic surveys of concerning deficiencies requiring accordance with the local requirements processes and in assisting an employee work conditions are performed. rectification. for all the bank's work sites. in distress. ICC employees enjoy significant health ICC IDB Bank benefits, which include periodic medical The manager of logistics and assets at ICC The bank provides a qualitative program examinations, medical insurance, and is responsible for the safety field. For this for employee benefits, which includes psychological attention. Entitled to purpose, the company is being assisted by health, dental, vision, life assurance medical tests are all employees of age an independent external safety consultant options, as well as different Employee 35 and over with at least one year of for the current operation of the whole Assistance Program and various service with the company. The company safety field. As part of the company's Disability programs, all as governed by the organizes twice a year blood donation work plan, mandatory study material federal law regarding benefits to retired by employees, and once a year offers on the subject of safety and hygiene is employees (ERISA) and by federal, State employees flu vaccination. distributed annually to all employees, and local legislation. which includes, guidelines regarding the In addition, ICC operates a workout gym manner of conduct intended to minimize Promoting health at the and classes and invests in encouraging the number of accidents at the workplace. principal subsidiaries a rich sport activity in many spheres. ICC has four teams registered with MDB the Workplaces League, competing in MDB employees enjoy a social safety net, different sport competitions, in which fifty which includes a variety of insurances: life employees and managers participate. assurance for employees and spouses, health insurance, surgery insurance, personal accident insurance, dental care insurance for employees and family members, and loss of work ability insurance for employees. Bank employees of a determined age and seniority are entitled to a comprehensive medical checkup. 136 SOCIAL REPORT 2018 THE EMPLOYEES 137 goals

goals presented in previous report future goals

The translation of the multi-annual strategic plan into a human Translation of the multi-annual strategic plan into the human resources resources strategy, including specific planning of resources Done strategy, including specific planning of the resources, definition of new the definition of new engagements, identification of redundant tasks, identification of redundant tasks, change of the recruitment profile. engagements, changing the recruitment profile.

The adaptation of leadership and management concepts for Adaptation of the management and leadership concepts to the implementation the implementation of the strategic plan, to the continuation of Done of the strategic plan, to the continuation of the implementation of the "Discount the realization of the "Discount spirit" and to the management Spirit" and to the management of the change in the digital environment. of the change in the digital environment.

Encouraging the concept of organizational learning and personal Encouragement of an organizational learning concept and of a personal Discount responsibility for development and qualification. Encouraging Done Discount responsibility for development and training. Encouragement of significant Bank significant career changes, training for changing tasks and Bank professional career change, training for changing tasks and development development of digital skills. of digital skills.

Creating an open, clear and structured dialogue for the construction Creation of an open, clear and structured dialogue for the construction of Done of personal goals for employees. Assistance in identifying personal goals for the employee. Assistance in identifying opportunities for opportunities for development and professional growth. development and professional growth.

Creation of employment opportunities in peripheral areas, including Done training and apprenticeship enabling successful integration into Creation of employment opportunities in peripheral areas, including training the banking world. and apprenticeship enabling successful integration into the banking world.

Continuation of effective management of the labor force and Continuation of effective management of the labor force and its cost - the Done its cost. principal challenge in the years 2019-2020 was the strict and restraining management of the labor force and its cost, in a way that would ensure efficiency and restraining of the payroll expense. Assistance for the branches in the processes for the continuing upgrading of services to customers - Accompaniment of the Accompanying the branches in the process for the continuation of the upgrading procedures in continuation of the transfer of operations from of customer service - accompanying the processes at the branches with Done the branches to expert centers, in order to step-up both the the aim of creating maximum availability of the bankers for the continued activities and the business development of the Bank, as well development of the business of the Bank and for granting an upgraded Mercantile as, in continuation of this move, improvement and upgrading of Mercantile Discount service experience to customers (by way of continuing the improvement and service level at the branches. Discount upgrading of the level of service and of the professional level of the bankers). Bank Bank Providing supportive tools to the bank's units. Development and Providing supporting tools to the units of the Bank - development and Done enrichment of employees by means of training, mobility and empowerment of the employees by means of instruction, mobility and personal development. personal development.

Efficiency and saving. As part of the manpower management at the Bank in 2018, the Human Resources Division continues to Efficiency and saving - Continuation of the support given to efficiency and Done support efficiency and saving measures conducted at the Bank, saving processes conducted by the Bank, from the view point of the human from the aspect of human resources. resource. 138 SOCIAL REPORT 2018 CHAPTER NAME 139 06 Suppliers

Promotion of Responsible Procurement 140

Goals 145 140 SOCIAL REPORT 2018 CHAPTER NAME 141

of operation, who provide the Bank with mechanized, from the stage of setting-up products and services on a current basis the request and until the stage of issuing Promotion of and in accordance with demand. the order to the winning supplier, thereby Suppliers bringing transparency to the whole process, Responsible Procurement at Discount Bank is mostly including the commercial discourse with the performed in a centralized manner for all suppliers. The making of the information Discount Bank views with importance units of the Bank, by means of the Central accessible to the functions at the Bank the long-term creation of value for Procurement Procurement Department, operating as who approve the issue of the order allows part of the Planning, Strategy and Finance an insight at all stages of the commercial all its stakeholders, among whom Discount Bank has made a Division. The Department is responsible negotiations, from the stage of the primary are also its suppliers, and therefore commitment to conducting for the formation of a procurement price offer and until the conclusion of business fairly and to acting on the basis specification for the internal customers, the transaction, including an in-depth the Bank treats them with integrity, of professional and personal integrity. where required, and for locating suitable assessment of the alternatives. fairness, concern and respect Discount Bank views with importance the suppliers, screening them, obtaining offers, long-term creation of value for all its conduct of negotiations, engagement and Ethical conduct stakeholders, among whom are also its ongoing servicing of relations with them. regarding suppliers suppliers, and therefore the Bank treats The Bank approaches suppliers them with integrity, fairness, concern and The Procurement Department is responsible inviting them to submit price offers. respect. for both technological purchases and The Bank chooses providers of services general purchases. The procurement of under bidding processes, while strictly The Bank strictly honors its agreements manpower services, including manpower in maintaining the confidentiality of the with suppliers and non-adverse utilization the technological field, is the responsibility submitted offers, beginning with the identity of its position towards them, endeavors to of the Human Resources and Properties of the offerors and ending with the contents prevent damage to integrity, prohibits the Division. The procurement of property of the offer, while aspiring to increase the granting of benefits and favors, promotes or its rental is the responsibility of the trust of the offerors in the procurement transparency and fair competition, construction and real estate department, processes. maintains confidentiality and data being also a part of the Human Resources protection and does everything possible and Properties Division. Already during the bidding stage, the to prevent corruption and improper conduct. Bank agrees with its suppliers the terms As part of the department’s ongoing of payment, in accordance with the date Discount Bank chooses suppliers on operations, existing agreements are of delivery of the goods or services. the basis of professional, objective and re-examined and new procurement Furthermore, the Bank strictly adheres businesslike considerations, while striving requirements are challenged. to the agreed payment dates, in order to for engagement with suppliers meeting maintain proper business relations and the following requirements: The procurement process is being fully cooperation with its suppliers. It is noted

Compliance with and maintenance of the provisions of the law; Strict observance of legal and fair About About employment conditions; Maintaining the quality of the environment; 94.6% 5%-6% 45% 2,430 Having an ethical code and a commitment of the purchases of ICC’s of the Bank's operating suppliers to its values; made by the Bank total purchases are and other expenses with whom the Bank Adhering to the norms and standards are from suppliers foreign purchases. excluding payroll conducted business described in the Bank’s Code of Ethics. operating and expenses, in 2018, in a total employing workers in 20181. amount of approx. in Israel. NIS 1.4 billion. The base of suppliers of Discount Bank

includes different suppliers operating in Note: 1 A major part of the non-payroll expenses is with respect to the acquisition of products and services from entities in various areas and having different volumes Israel – local manufacturers and service providers, and importers of products that are manufactured overseas. 142 SOCIAL REPORT 2018 CHAPTER NAME 143

The Bank has appointed an officer to Social procurement be responsible for this matter and has To the extent possible, the Bank, engaged the services of an independent MDB and ICC engage with parties Promotion of accountant in respect of monthly sample employing handicapped persons or those that the payment process is controlled and tests to be performed according to the with special needs. The Bank’s procurement Responsible that it is being conducted in accordance law. Where deficiencies are found, these of gifts for the holidays is done through a with the commercial terms agreed upon are rectified by the suppliers and the Bank supplier ("Hameshakem") that employs when ordering the products and services. monitors the actual rectification thereof. employees with disabilities. Individual and Procurement welfare gifts are bought from companies The content of this section applies also It should be noted, in particular, that upon and associations that promote the integration at the to MDB and ICC. changing service suppliers in these areas, of employment of persons with disabilities. a comprehensive examination is performed Wine is bought from the “Tulip” Winery, which Principal Fair employment and to ensure that contractors’ employees is defined as a supplier that operates safeguarding rights of whose employment had been terminated, according to a social business model and Subsidiaries contractors’ employees receive the full rights due to them in employs persons with disabilities. As a rule, Within the context of its purchases, respect of their period of engagement the Bank stringently endeavors approach the Bank also acquires labor with the Bank. suppliers that show an affinity for this topic. Mercantile Discount Bank (MDB) services. MDB and ICC purchase from associations, Purchases by MDB are made in four main No complaints were filed against the such as AKIM, Beit Issie Shapiro and others, groups: technological purchases – IT, In 2012, the Intensification of Enforcement Bank and ICC by contractors’ employees at Chanukah and Purim, personal packages marketing purchases, office premises of Labor Laws Law, 2011 took effect, the in 2018. One complaint was filed in 2018 of sweets, which are distributed by employees and maintenance purchases and general aim of which is "to intensify enforcement of by a contractor’s employee in MDB of MDB during their different activities in purchases. The general purchases are labor laws and make them more effective". regarding the non-payment of wages. aid of the community. The total scope of generally made centrally for all units of The Law imposes a broad responsibility The complaint was referred to a payroll this type of procurement is not material. the bank by means of the administration on employers, as purchasers of services, inspector for checking and it was found and payments department of the Human for the enforcement and safeguarding that the employee’s claims were baseless. ICC has worked consistently over many years Resources and Administration Division. of the rights of personnel engaged on with "Hameshakem" Company, engaging it Most of the purchases are made jointly with their premises in guard, security, cleaning Promotion of a responsible for work suitable for handicapped workers the purchases of the parent company. The and catering duties. Moreover, the Law supply chain and those with special needs. department is responsible for drawing up prohibits entities ordering services from In recent years, Discount Bank, the purchase specifications as required by entering into contracts with contractors in conjunction with the Maala No complaints regarding discrimination were the internal customers, where applicable, where such contracts do not guarantee Organization, has approached selected raised in 2018 on the part of suppliers. The finding appropriate suppliers, their screening, basic wage terms for the personnel suppliers, having a medium size scope content of this section applies also to MDB obtaining offers, negotiating the purchase, involved. of operation, with an offer to join the and ICC. engagement and ongoing servicing of activities of the Organization and to relations with them. The Bank strictly observes the fair increase their commitment to the raising employment of persons working at its of standards and their potency, and to Acquisition of manpower services, premises and the violation of rights of increase their responsibility all along the including manpower in the technology outsource workers is taken seriously. The supply chain, while at the same time field, is the responsibility of the Human engagement contracts with companies maintaining quality and excellence in the Resources and Administration Division. providing cleaning and security services services/products being supplied. It should The purchase or rental of buildings and the comply with the provisions of the law. be noted that a number of suppliers have purchase of technology is the responsibility responded favorably to this initiative. of the Operations and IT Wing. Marketing In the engagement agreements of the Bank procurement is the responsibility of the with providers of services, the contractors At the beginning of 2018, the Bank Marketing and Business Promotion Wing. are required to confirm, among other approached 12 of its large suppliers things, that they abide by the provisions suggesting that they join the initiative, ICC of the Intensification of Enforcement of and ultimately two companies joined the Purchases by the company are mostly Labor Laws. Maala rating. Continued on next page 144 SOCIAL REPORT 2018 CHAPTER NAME 145

Continued from previous page

made in a centralized manner (about 93%), goals by means of the procurement department, operating within the framework of the Comptrollers Division. The central Goals presented in the previous report Cooperation with suppliers who employ employees procurement at ICC is responsible Done for technological purchases, general with disabilities. purchases, purchases of property and Being achieved on Continuing strict integrity, fairness and transparency its maintenance, the rental or purchase an ongoing basis towards suppliers. of buildings, engaging manpower and Being achieved consulting services, including manpower and monitored, Maintenance of a high service level (SLA) to internal in the technology field, credit cards including KPI for customers. improvement purchase, purchase of sales promotion and marketing services, excluding advertising Discount Being achieved and media. and monitored, Replacement and refreshment of the active suppliers including KPI for base in a scope of approx. 5%. improvement ICC conducted business in 2018 with 850 Completion of the mechanization of the procurement suppliers, in a total amount of approx. Done procedures in order to purchase quality products NIS 400 million. and services at the most beneficial terms.

Being achieved on Continuous search for possibilities and Also at ICC, the submission of offers for an ongoing basis opportunities for greater efficiency and savings. transactions in significant amounts is done through a "quasi- tender" process, into a locked box or by an electronic offer future goals box. The time for opening the envelopes is determined in advance and is done in the Continuing cooperation with suppliers who employ employees with disabilities. presence of at least three participants. The Continuing strict integrity, fairness and transparency towards suppliers. contents of the offers are documented in Maintenance of a high service level (SLA) to internal customers. a protocol, and where these are complex and not easily documented in a protocol – The “Large Purchase Committee” was Discount Replacement and refreshment of the active suppliers base in a scope of the original offers are signed to preserve formed in 2016 but became active in approx. 5%. their authenticity. 2017. The Committee’s primary goal is Drafting and assimilating a Group procurement policy. to support the procurement process at Continue the process of approaching the Bank's suppliers with the aim of the bank by ensuring the bank’s funds IDB Bank adding them to the Maala index. IDB Bank currently operates a are committed appropriately and are in decentralized procurement model line with the bank’s policies. The Large whereby departments are responsible Purchase Committee meets on an ad for making procurement decisions for hoc basis and is comprised of the bank’s the acquisition of goods and services. Chief Financial Officer, Chief Operations Under this model, departments and & Information Officer, Chief Internal Audit, their designated Vendor Relationship Head of International Private Banking, Managers (VRM’s) are responsible for Controller, and Head of Procurement (the the entire Source to Pay (S2P) process Committee’s Secretary). of their respective area except for the Purchase Order (P.O) generation. The P.O Under the guidance of the CFO, the generation process falls exclusively under procurement department is currently the responsibility of the procurement working with IDB Bank’s senior management department which reports to the Chief in centralizing the procurement function Financial Officer. at IDB Bank. 146 SOCIAL REPORT 2018 DISCOUNT FOR THE COMMUNITY 147 07 Discount for the community "Discount Sprint for the Future" 148

Discount volunteering in the community 152

Investment in the community 154

Goals 158

NIS approx. approx. approx. approx. The granting of

16.9million 15 1,202 140 11,760 96% 215 of investments in Thousand hours of volunteering different participants in the of graduates of the "Sprint" scholarships the community voluntary work employees volunteer sites "Sprint" programs in program have completed high on behalf of the 2018, in 268 centers of school studies with a full Nissim Alagem operation matriculation certificate Foundation 148 SOCIAL REPORT 2018 DISCOUNT FOR THE COMMUNITY 149

The Bank focuses human and society (Jews, Ultra-Orthodox, religious, financial resources on activities secular, Arab, Druze and Bedouins) together Sprint in aid of children and youth at risk situation, with which it launched a program that principally in the education and knowledge became the Bank's flagship program program Discount fields. This, arising from the concept that "Discount Sprint for the Future". Over the these fields comprise the generator for passing years the Bank was an important personal and social success of the said partner in the growth in the scope of for the Arab target populations, with a focus on social operations and budgets of the Association, and geographic peripheral areas. assists in the structure of unique projects society for the and partnerships with government agencies, As an expression of this concept, Discount such as the Israeli Ministry of Education In 2008, Mercantile Discount Bank Bank operates towards the creation and the Israeli National Insurance Institute, in participation with the Sprint of social and economic prominence, and also has founded a student scholarship Association, developed a unique program encourages its employees to volunteer foundation. for the promotion of higher education in community in aid of the community, and endeavors the Arab society. Within the framework of to tighten the bond with the community The "Sprint for the Future" Association this program MDB grants annually to Discount Bank is working for the in the different projects. This by means initiates and operates unique and innovative students over seventy scholarships for of a designated unit within the Human programs for advancement of education academic studies. MDB sees in this community with a comprehensive Resources and Properties Division. and knowledge, Self-empowerment and contribution an important pillar in the management approach that views the for providing tools for social-economic advancement of education in the Arab The social activity of the Bank in the leadership for weak populations of all society, and in the younger generation in activity for the community as part community is expressed in four layers: social segments and strives to integrate particular. of the business, social and cultural them in the academy, in employment and The flagship project "Discount Sprint in the society in Israel. The Association The scholarships are granted on the basis commitment. In 2018, the Bank made an for the Future"; operates eight central programs: of socio-economic considerations and organizational effort to intensify V olunteering in the community; on the level of academic achievement, Investment in the community; "Sprint for Industry" program is designed while ensuring geographical dispersion volunteering in line with the P rivate museum "Herzlillienblum". to prevent youth in distress from dropping and providing response to all layers of out of school, lead them to technological the Arab society. In consideration for the Discount spirit. Discount Bank, MDB and ICC have and professional studies and integrate scholarship, students volunteer in providing determined general principles regarding them into the military and industry. The study assistance to children residing in their the granting of donations, while maintaining Program had begun as a "start-up" financed area. As a result thereof, 95% of the students discretion of the subsidiary companies in by the Bank and developed into a national improved their academic achievements. accordance with their fields of operation. program of the Ministry of Education with a budget of NIS 60 million, and operating MDB continued its contribution in 2018, at 200 high schools all over the country; granting 105 study scholarships at a total "Discount amount of approx NIS 525 thousand. "Sprint for Atidim" ("Sprint for Excellence") program leads students having a potential Within the framework of the program to Sprint for the for excellence in sciences to obtain a high date: grade matriculation certificate enabling Future" them entry into leading university faculties NIS 4.3 million was granted (engineering and science); 4.3 as scholarships to students; Discount Bank's Flagship Project in the community "Sprint for the Academy at high schools" Thousand hours of community In 2005, the Bank joined the "Sprint program assists teens with a matriculation 70.8 volunteer work; for the Future" Association with a certificate track, having difficulties in view of advancing education and schooling studying, to complete their high school Students from 68 locations in the social and geographical periphery in studies with a matriculation certificate 442 have participated in the the State of Israel, in favor of all sectors of and integrate in the academy; program. 150 SOCIAL REPORT 2018 DISCOUNT FOR THE COMMUNITY 151

board and in this framework participate, certificates complying with university "Sprint for engineers" The Bank joined the "Sprint for the inter alia, in the design of the work plans entrance requirements; A dropout rate of less than 9%. Future" Association with a view of of the Association. Employees of the Bank take part in voluntary activity within the Approx. 87% of the students have completed "Sprint for the academy at high schools" advancing education and schooling in Association’s programs, including in the their high school studies with matriculation 96% complete studies with a matriculation the social and geographical periphery adoption by Bank branches and Banks units certificates of average grade of 85 and over, certificate. of schools participating in the project and the with science orientation. 56% of whom with a in the State of Israel, in favor of all accompanying and mentoring of students summa cum laude award and average grades The Nisim Alagem Foundation sectors of society by senior officers of the Bank ("Mentor of over 95. Program"). Representatives of the Bank "Sprint for industry" The Foundation is named after "Sprint for engineers" program leads youth at are members of the audit committee of the late Nissin Alagem, who of the students who started risk of all segments of society from peripheral the Association and the Bank's Accounting passed away in 2006. Mr. Alagem has the program at the 10th social and geographic areas, towards Division provides accounting and payment 100% grade have not dropped worked at the Bank for forty years, serving advanced technological and diploma studies; services for the Association. out until the end of the 12th in his latest office as Executive Vice in required fields in the employment market; grade; President, Head of the Commercial All programs of the Association are being of the 12th grade students Division. Since the establishment of the "Sprint for the Academy" program assists accompanied by evaluation and internal participating in the program Foundation 2,000 scholarships to 99.6% have taken matriculation graduates of the programs of the Association control researches that are based upon data exams; students have been granted, in a total to integrate in the Academy. The students of the Ministry of Education, the Ministry amount of NIS 9.6 million. The said of the students completed receive advice, mentoring and assistance for Economic Affairs and schools. A part 88% their studies with a amount includes both scholarships in initial job placement. In 2007 the Bank of these programs are being accompanied matriculation certificate; funded by the Bank and by MDB as well established a scholarship fund, which grants by an independent evaluation research as scholarships funded by private donors completed studies with a hundreds of scholarships annually; performed by the "Szold Institute for Social 70% technological matriculation who requested that their donation would Research". The results of the research certificate; be used for scholarships granted through "Sprint for public technological service" made in recent years indicate a high level of the Foundation. In 2018 some 215 of the whom join program provides young persons engaged in achievements and compliance with the aims 40% technological units of the scholarships were awarded, compared National Service a wide cover of professional of the Association's programs .The results IDF; to 211 scholarships in 2017 (including training and qualification in the computer of the research regarding the "Sprint for scholarships under the "Sprint" program of the graduates continue to and Internet fields, in the line of integrating Industry" program indicate a clear and proven 35% practical engineering studies; for the Arab sector). cloud computing systems (Office 365). turnaround in the prevention of the dropout During their service, the youngsters engage of students at risk from the education system in the communication field at educational as well as directing them to a professional institutions. At the end of their service, the future in trades and profession required by program will promote and encourage the the military and by industry; participants to continue in their studies and Discount Sprint for employment in the communication field,  of the high school academic programs the Future 98% young persons have participated in and will help them in integrating into the graduates have integrated into further General data the programs of the Association at work circle. studies; as of December 2018 11,760 268 activity locations "Open Valley Sprint" program (a new 92%  of the academic graduates initiative) - The program is intended for young have integrated into qualitative persons participating in the programs of professional work; graduates of the programs the Association, and it's aim is to develop 28 of the Association during its initiative and innovation among youth. 75%  of the graduates of technological thousand years of activity education (youth at risk) integrated years of activity, of which The Bank is a party to both the financial into work with the military and 13 years in partnership with 19 the Bank support of the Association and the industry. promotion and advancement of its activities. 600 Representatives of the Bank’s Management "Sprint for Atidim" students a year at are members of the Association's executive Over 97% were entitled to matriculation universities and colleges 152 SOCIAL REPORT 2018 DISCOUNT FOR THE COMMUNITY 153

publications on the different organizational Voluntary activity at the Ben- Ratio of volunteering employee25 Discount media and is acting incessantly towards Shemen Youth village out of total employees of the Bank the expansion thereof. Employees of the Human Resources % and Properties Division have 21.7% 22.5 volunteering in 25.0 Hereinafter are several examples taken volunteered for work at the Ben-Shemen from the variety of voluntary activities in Youth Club, where the "Sprint Discount" 18.2% 18.4% the community different areas: program is in operation. The employees 20.0 The Bank sees the volunteering have renovated the square in front of the 14.7% value as a leading organizational Association for the dormitories planting a lawn and plants, 15.0 value, and strives to increase the scope of Advancement of Education in painting and pampering the students of the its volunteering activities, while encouraging Village with different food stalls. This activity Tel Aviv- Jaffa 10.0 its employees to take part in the different This Association for the served also as a means for bonding the long-term voluntary activities. Many units Advancement of Education in Tel employees of the Division and reinforcing of the Bank have adopted volunteering Aviv- Jaffa acts in aid of weak populations the unit pride. Many of the employees of 5.0 focuses, in respect of which they conduct from the aspect that everyone is entitled the Division are longstanding volunteers different activities and encourage their to live in dignity and have equal opportunity, of units in which they are employed and 0.0 employees to participate therein. The with a focus on babies, children, youth, which have elected to join also the activity 2014 2015 2016 2017 2018 voluntary activity of the Bank's employees women, families, elderly persons and of the Division. Notes: The data relating to volunteer data was improved in 2017 following retirement is diverse, providing assistance and support Holocaust survivors. The cooperation of plans, therefore a decline is reflected in to a broad range of populations in Israel, the Bank with the Association continues The said activity served as an experimental the rate of volunteering at the Bank. including children and teenagers, over many years and is intensifying, and operating model for annual volunteering handicapped population, soldiers, the infirm, includes employee voluntary work and within the divisions, which, in the light of its the elderly and more. financial assistance. Units of the Bank adopt success, was expanded later on to further Average hours per employee25 most of the clubs of the Association in Tel divisions and other regions. The wide scope volunteering activity Aviv, Jaffa and Bat-Yam. In addition, 25.1 continued also during the year 2018, within significant and widespread voluntary activity "Make a wish Israel" the framework of which volunteering Bank involving the packaging of food parcels is An international organization, the 25.0 23.1 23.5 employees contribute their time and warm- conducted by employees of the Bank in the aim of which is to realize the wishes 19.2 heartedness. food center of the Association. Personal of children suffering from life threatening 20.0 relations are also created with Holocaust diseases. 12.5 Promotion, encouragement and the survivors. 15.0 widening of the scope of volunteer work Through this organization, the Bank at the Bank, conducted by the social realized also in 2018, two wishes of sick "A Different Lesson" 10.0 responsibility unit, includes initiation Association children, and representatives of the Bank of projects, long-term accompaniment A Different Lesson acts to promote have participated in moving meetings with 5.0 and the funding of voluntary activities equal opportunity, widening of the children and their families, when the in cooperation with unit volunteer horizons and development of thinking for realization of their wishes was uncovered. coordinators. As a general rule, all voluntary children at risk, and to encourage significant 0.0 2014 2015 2016 2017 2018 activities are coordinated with the relevant involvement by the public in the education 1,202 employees volunteered in 2018 at Notes: 1 The calculation is based on total social organization, in accordance with system. This activity continued in 2018, different volunteering centers. These volunteer hours per year in relation the special needs presented before the and in the framework of which, Bank volunteers worked at some 140 locations to the number of volunteering employees in that year. beginning of activity. At the end of the employees lectured on banking subjects performing in total approx. 15 thousand 2 The data for 2017 were improved. activity, its effectiveness is examined and gave lessons regarding self volunteer hours. having in mind additional activities. empowerment to children, fifth and sixth graders at the "Sokolov" school in Bat-Yam. Most of the voluntary activities of the The project ended with a ceremony held at employees are carried out after working the private Herzlillienblum Museum, in hours. The Bank takes pride in the number participation with the children, Management of volunteers and in the variety of activities, of the school and the volunteers, and providing them with a platform through included an experiential tour of the Museum. 25 102-48 154 SOCIAL REPORT 2018 DISCOUNT FOR THE COMMUNITY 155

The control over the use of the actual of associations supporting and employing contributed funds and its effectiveness is population with special needs. Investment in the community performed taking into consideration the The scope of investment by the Discount Group in the community totaled NIS 16.9 million nature of the project and the amount of the “Discount Fund” at the “Ezra LeMarpeh” in 2018. contribution. A high level of involvement Organization Distribution of the investment of the Discount Group and control exists with respect to projects The Fund was established in August 2007, and where the contribution is of a significant the activity of which continued uninterrupted 3% 23% 1% 7% 8% 37% 21% amount, while the level of involvement and also in 2018. The objective of the fund is control regarding projects enjoying smaller to provide financial assistance in cases of 2018 contributions, is low. acute and exceptional medical conditions. The Fund has been founded as collaboration % % % % % 2% 18 2 3 4 26 45% The Bank also contributes on a current basis, between the Bank and the “Ezra LeMarpe” 2017 office and computer equipment no longer Association. Applications for help received in use by units of the Bank, to associations by the Bank are referred to the Association 100% requiring such equipment. for examination of the case and its various People with special needs Health Indirect and miscellaneous aspects. In cases where the Association Education and knowledge Other social targets expenses  Adoption of IDF units Herzlillienblum During 2018, the Bank granted sponsorship approves the request, assistance is given to entities and activities promoting goals in from the Discount Fund in the association. areas of community fields and in activities Notes: 1 Direct expenses in respect of a financial education project were included in 2017 for the first in aid of weak populations, as well as in "Ezer Mizion" Association – Personal reserve time under "Education and knowledge". 2 For additional details regarding the scope of investments in the community of the Discount health, sporting, cultural, artistic and A donation of NIS 100 thousand, funded Group, see the 2017 Annual Report, p.317. educational, environmental protection and jointly by the Bank's Management and by business. These sponsorships enable the the representative committee of the Bank's Total investment of the Discount Group in the community relevant organizations to raise funds for their employees, was granted in favor of "personal in NIS millions operations, expose their operations to the reserve" named after Discount Bank and its 8.9 8 general public and pay respect to the factors employees at the "Ezer Mezion" Association. involved in their operations. The reserve assists in the financing of the 2018 16.9 examination of bone marrow samples, 7.7 8.5 Various projects thus helping to save life. In the case that 2017 16.2 Assistance to families in need compatibility is found with bone marrow Also in 2018 the Bank rallied to assist families of donors included in the reserve, the 7.7 9.5 in need towards the Passover and the Jewish patient requiring bone marrow implant is 2016 17.2 New Year Holidays. In this framework, the informed, and the Bank will receive the moving 7.1 9.2 Bank had purchased magnetic cards which information that life had been saved through 2015 16.3 were distributed to families in need by its donation. Bank employees, in accordance with lists 6.1 10.3 provided by the Welfare Departments of Local Ramon Foundation 2014 16.4 Authorities around the country. Since 2013, the Bank is a copartner of the "Ramon Award" program, marking quality, 0 2 4 6 8 10 12 14 16 18 Social products bazaar excellence and leadership, founded by the Monetary donations Donations of equivalent monetary value In 2018, seven social products bazaars late Rona Ramon in memory of Ilan and Asaf were held at premises of the Bank, where Ramon. This partnership is expressed in Bank employees were able to buy different financial support and voluntary activity. Within Donations and Sponsorships Way, A Warm House for SMA Children, the products made by persons with disabilities the framework of the program, young persons The Bank's Management annually Israeli Spirit, Aleh Negev, Tech Career, acting within the framework of various excelling in their studies and especially allots a donation budget. Among Greater than Life, Krembo Wings, Heart associations, such as: "Beit Miriam", "Amichai outstanding in their community volunteer the donations extended by the Bank in 2018, Wish, the Jordan River Village, Sun Rise, Association", "Ohel Sarah", "Encouragement work are chosen as leaders of social change. may be noted the donations to the following the Association for the Wellbeing of Israel's Village" "Hayim Association", "ALUT", "AKIM", The elected youth undergo a several months' associations: "Sprint", the Ramon Soldiers ("Adopt a Combat Soldier"), and Yeladudes" and more. All income from sales course increasing their proficiency and skills, Foundation, Zoharim Village, the Lotan more. is dedicated towards the continued activities during which they obtain tools for leadership 156 SOCIAL REPORT 2018 DISCOUNT FOR THE COMMUNITY 157

as well as meet figures having influence over Employment of visually impaired teenagers In 2018, seven new works of art by a young held in 2018 within the framework of the Israeli society. In honor of her activity , the “Ofek Liladenu“ (Our Children’s horizon) contemporary artist were acquired, at a total project. late Rona Ramon was awarded the Israel Association - The Bank has formed a cost of NIS 149 thousand. Prize for Life Work for 2019. partnership with this Association, which "Herzelilinblum" accompanies families of blind or visually The Bank's art collection is considered one Banking and Tel Aviv Nostalgia Private Woman2Woman program impaired children and teenagers. The "Work of the quality collections of Israeli art and Museum For the fourth consecutive year, Discount in the Horizon" program trains teenagers guided tours of the collection are conducted Bank provides sponsorship for the for work including employment during the at the Discount Tower. 68 tours were made Woman2Woman program, operated by summer vacation. Since the year of 2005, during 2018, in which some 1,700 visitors veterans of the 8200 Intelligence Unit Forum. the Bank employs these teenagers during have participated (as compared to 56 tours The program is designed to promote young the summer months at the branches and during 2017, in which some 1,650 visitors women having a potential for excellence, at units of the Bank, after providing them have participated). by connecting them to impressive and with training at the Discount College. In this influential women holding key positions framework, 27 teenagers were employed by In 2018, the Bank continued cooperation with The Herzelilinblum Museum, founded by in all areas and professions. the Bank in 2018. various museums, lending them works from the Bank in 2009, is located in Schiff House, the art collection of the Bank. one of the first houses in Ahuzat Bayit. The Executive Vice President Human A school bag for each pupil The Museum forms an integral part of the Resources and Properties at the Bank Since 2017, the Bank participates in the Additional activities in 2018 relating to the Bank's social responsibility concept, and serves as a mentor in this program, and the "School bag for each pupil" social project, art collection: is open to the general public free of charge. Bank is promoting additional cooperations, the aim of which is to create a bond between including participation in professional citizens of this country through mutual The book "100 years of Israeli art in the The Museum exhibits the economic panels and conventions creating added guarantee and joint responsibility for the collection of Discount Bank" was launched history of Israel simultaneously with the value in the advancement of women's benefit of the public. The Bank promotes in March 2018 at the Herzliyah Museum of development of the City of Tel Aviv by professional careers. this project by encouraging its employees Contemporary Art. The book is a product of showing original historical objects together to donate school bags, thus assisting pupils a long and comprehensive research of the with films and advance technological “Adopt a combat soldier” Project coming from weak populations to begin their collection edited by Mr. Yona Fischer, an means. For the past fourteen years, Discount Bank school studies on an equal footing with no Israel Prize laureate. is a partner in the Friends of the Association feeling of being different. The building, declared as preserved building for the Wellbeing of Israel's Soldiers "Adopt "Pictures from Family Life" exhibition, from under strict limitations, has undergone a Combat Soldier" Project. The Bank adopts Arts the Discount Bank collection and guest artists. over three years a detailed restoration and “Squadron 916” of the Israel Navy, which Discount's art collection comprises The exhibition was opened in October 2018 preservation process. In 2011, the building is responsible for the security of Israel’s a fascinating and varied assortment at the Eretz Israel Museum in Ramat Aviv, was declared a heritage site by the Society southern coast, and the Regiment "Tiger" of making over more than fifty years and and was open to the public until the end of for Preservation of Israel Heritage Sites, of the Artillery Corp. The Bank supports includes sculptures, paintings, tapestries, the year. and is one of some one hundred similar the said units with a monetary contribution video art and photographs. sites around Israel. of NIS 100 thousand per year for each unit "Credit point" - Within the framework of for the welfare of the soldiers as well as The collection is managed by an advisory the sponsorship granted by the Bank to the The activities conducted at the private with current volunteer work by branches committee numbering four external experts annual support event of the "Israeli Spirit" Herzlillienblum Museum: of the Bank located in the areas adjacent (museum curators and such like) and two Association, a sponsorship was also granted to these units. Servicemen of these units representatives of the Bank. The committee in 2018 for the exhibition by providing Tours and workshops - Tours and different are invited to participate in various events convenes several times a year discussing professional assistance and attracting artists workshops are being conducted at the of the Bank. new acquisitions and the structure of the who donated their works to the event. The Museum, led by a skilled team of guides, all collection. The committee operates since Association raised an amount of NIS 400 of them employees of the Bank. Inter alia, As part of the current relations with these 2004 and its members are appointed on a thousand from the sale of the art works. economic tours for children and adults, combat units and following an examination voluntary basis for a period of three years. and workshops for middle and high school of their needs, joint activities of the units In recent years the collection has been "A stage for the Artist" project. In 2018, students on subjects of economics and with employees of the Ashdod and Zfat mapped and examined by the committee, Discount Bank continued the project intended civics are being conducted. branches were held in 2018, and a gift was with emphasis on acquiring works that will to support and provide exposure to artists granted to the units at each meeting. complete the collection and represent young and to encourage creativity and original art Since its opening in May 2009 and until artists. of different classes. Four exhibitions were the end of 2018, the Museum hosted 370 158 SOCIAL REPORT 2018 DISCOUNT FOR THE COMMUNITY 159

thousand visitors. Cooperation with different entities - The parent in particular) in the ultra-orthodox Herzelilinblum Museum is recognized by MDB - sector. The Association provides support In addition, the Museum hosts social the museum department of the Ministry in various fields including education, and organizations, associations and business of Education and forms part of the study involvement in this activity the bank participates. Within entities and enables them to hold program in matters of economics, civics the framework of this cooperation, the bank conventions, seminars and lectures in and the financial education field. grantet in 2018 some 300 scholarships to conjunction with guided tours. In 2018, in and mentors of the ultra-orthodox community, some 85 events were held for corporations, Within the framework of visits to the who in consideration for the scholarship business forums and organizations. Museum, Students deal with economic contribution to assist in their studies school children of development in Israel, acquiring knowledge second to eight grades, who are orphans Exhibitions at the Museum - Herzelilinblum regarding the capital market, banking and the community or belong to a single parent family. presents permanent exhibitions and business as well as in socioeconomic changing exhibitions on varied and different theories by which they examine present The work for the community of MDB Cooperation with the "A Different Lesson" subjects relating to the characteristics issues of the Israeli reality. During the is an integral and significant part Association - During 2018, employees of the of the house. Among the outstanding academic year, some 100 tours per quarter of its overall activity and organizational bank conducted enrichment study courses exhibitions held at the Museum in 2018, on an average are being conducted for culture. The activities in the community at schools of the Arab and ultra-orthodox may be mentioned: school children of seventh to twelfth grade. are diverse and include financial sectors, in which the pupils acquired basic contributions, sponsorships and practical concepts of banking subjects, with "The Zionist side of the Coin 1947-1954". The Museum was closed in June 2019. The participation in community projects, as a focus on issues such as management of The exhibition, which was opened in July Bank is examining alternatives for use of well as activities of employees in the a responsible budget and the importance 2018, presented the processes, difficulties the building and enables the public access community. MDB has chosen to focus on of savings. and dilemmas facing the leaders of the State to the building to get an impression of the the promotion of education and knowledge, from the economic aspect in the initial period preservation work that had been done. alongside diverse activities in other fields Sponsorship for excelling athletes – In 2018, following its establishment, by means of also. This is in pursuit of advancing the the MDB signed a sponsorship agreement photographs, texts and rare exhibits. future generation and contributing to an with Israel's high jump champion – Chanin advanced and valued society. Nasser from the Arabe village.

The activity includes several central Activity in aid of the community conducted goals projects: by employees of MDB - Employees of the bank participate in voluntary work, Goals presented in the previous report "Sprint Mercantile" project - For details, including: financial education workshops see above under "Sprint Discount". and assistance in studies, participation Done Increasing the contribution of the Bank to the community. in Holiday parties at welfare homes, old Increasing the rate of volunteering of employees, on a personal and collective Discount Done "Computer for each child" project - For age homes and hospitals (as part of these basis, by 20%. Bank the past decade MDB has participated in activities, Bank employees distribute gift Creating a favorable and appreciative atmosphere regarding the volunteering Done this project involving the contribution of parcels purchased within the framework value and its importance. computers, software and instruction for of social purchasing), the collection of Expanding the number of employees involved in social work initiatives at ICC, children of low means families. Over the medication in cooperation with the "Friends ICC Done and increasing the total of voluntary work hours of company employees by at years, the Association has distributed for Health" Association, and more. least 5%. thousands of computers to children and in addition, provided them with software, future goals instructions and study courses regarding Increasing the contribution of the Bank to the community. the different software. In the years in which MDB participates in the project, it donated Increasing the number of volunteering employees on a personal and group basis, by at least Discount approximately 1,500 computers. 10%. Bank Creating a favorable and appreciative atmosphere regarding the volunteering value and its "Yad Eliezer" project - MDB has joined importance. the "Yad Eliezer" Association, engaged Expanding the number of employees involved in social work initiatives at ICC, and increasing ICC in providing assistance and support to the total of voluntary work hours of company employees by at least 5%. thousands of families in need (single 160 SOCIAL REPORT 2018 DISCOUNT FOR THE COMMUNITY 161

holder in respect of any transaction made transaction, and to contribute the rounded- ICC - through an ICC credit card at trading off amount to chosen associations. Discount houses participating in the program, and involvement concurrently, a donation is made to the The friendship line of Orly and Guy - A Capital - 'Fair Chance for Children' Association. project operating within the framework of the TV morning show of "Orly and Guy" in and "A different lesson" - ICC participates on Channel 13 TV and provides response involvement in the project of the "A different lesson" to persons entangled in bureaucratic red- contribution to Association active in promoting equality of tape or in economic distress. ICC provides in and opportunities in education. Employees and assistance on a current basis to customers the community managers of the company come to schools referring to the friendship line with the contribution to of low socio-economic background, request for assistance in matters such as The work of ICC in the community and pass classes mostly on matters of the spreading of repayment of debts, the is performed while emphasizing financial education, the credit card world granting of rebates, etc. In the course of the community the connection to the core business and and more. At the conclusion of the activity 2018 ICC helped many customers applying the company's vision: realization of dreams, and towards the end of the academic year, for assistance through the friendship line. "Or Shalom" Association – the needs and wishes at any time and place. the students are invited to the offices of Association deals with children and ICC for an enriching and experiential visit. Supporting sport - ICC supports Israeli youth at risk who had been removed from Following are examples: athletes throughout their training with their homes by the Welfare Authorities and "Synergy" - Powerful leadership alongside the aim of reaching new achievements. are being treated in "off-home" frameworks. "ICC is to wish and dream" - The flagship contribution to the community. ICC, ICC grants sponsorship to Noga Geller, a In the years 2017-2018, Discount Capital program of social endeavors, which together with Israel Joint, participates windsurfer and member of the Israeli Team supported the Association in activities which aligns with ICC's business vision, which in the "Synergy" program, which integrates on her way to the 2020 Tokyo Olympics. were extra-curricular to the basic framework emphasizes the realization of dreams and senior managers of ICC in executive As part of the sponsorship, the athlete financed by the States. These activities, needs at any time and place. The program boards of social organizations and receives financial support. This activity combining contributions and voluntary work, marked the sixth year of operation. Within associations on a purely voluntary basis. is in line with the vision of the Company, were part of the "Or Camp" program the framework of the program, company The connection between the parties takes focusing on the realization of dreams operating during vacation times. Several employees volunteered for work at boarding into account the needs of the social and needs. times annually, Discount Capital organizes houses of the Fair Chance for Children organization and the qualifications of activities in which all its employees Association, with the aim of realizing the the volunteering manager, with a view Company employees initiate for the participate jointly with the children staying dreams and providing response to the needs of bringing to the associations and the community - The company is open to at the camp, the whole event on that day of children living in boarding houses with no different organizations their professional any employee wishing to offer ideas and being financed by the company (for example: family support. Dreams have been realized and administrative skills. leading social initiatives. The company the "Farmer House" activity - the Ayalon over the years for thousands of children assists in providing ideas and financial Valley Farm, experience yielding tours of and youth at risk from all over the country. I BELONG ISRAEL (Masa Israeli) - ICC support and by following the actual work. the Holon Children Museum, inflatables works in aid of IDF wounded as part of Of the various activities led by employees activity at the camp, etc). "ICC is to wish and dream", the flagship a joint program with the IDF Disabled may be mentioned the distribution of gift Organization and the "Masa Israeli" parcels during the Holidays to children "Open Heart" Association – Several times program of ICC, which emphasizes the organization. ICC employees and a group in hospitals and boarding houses, annually, Discount Capital funds Holiday realization of drems and needs at any of IDF wounded who are associated with participation in Chanukah parties at senior food parcels for needy families. the fighters' centers embark on a social citizens homes, and more. time and place, has marked the sixth values journey to empower Israelis and year of operation. deepen their sense of belonging. Granting sponsorships and purchasing tickets for fundraising events – ICC "ICC for a Fair Chance" - a social enterprise "Round-Up" - ICC participates in the supports associations and social which intertwine ICC credit card holders activities of the "Round-Up" Association organizations by providing sponsorships together with various trading houses and engaged in improving the Israeli society, and the purchase of tickets for fundraising the "Fair Chance for Children" Association. and offering to ICC customers credit card events, to which company employees Within the framework of the enterprise, holders the option of rounding-up to the active in community work are invited from a discount is granted to the credit card nearest shekel the amount of a credit card time to time. 162 SOCIAL REPORT 2018 GREEN DISCOUNT 163 08 Green Discount

Policy 164

"Green Credit" 165

Promoting green building 166

Responsible consumption of resources 168

Carbon footprint 172

Goals 179

Approx. NIS NIS

4.5% 5.2% 35.6% 7.6% 10.3 million 822 million Energy Electricity Paper consumption Carbon footprint (in carbon investment in energetic credit exposure to projects consumption (GJ) consumption (kW-h) (tons) dioxide equivalent tons) efficiency projects involving solar energy All data relate to the rate of change compared to 2017 164 SOCIAL REPORT 2018 GREEN DISCOUNT 165

The Bank allocates manpower and identification of the risks, evaluation thereof Policy financial resources to examine and and reporting it to the decision makers, as mitigate as much as possible its direct well as conducting a continuous monitoring Green Discount Bank attributes importance and indirect environmental impact; of borrowers having a high environmental and relevance to the subject of the The Bank integrates environmental risk risk potential. environment, from the social and economic management within its business activity; aspects. The Bank endeavors to create a The Bank is committed to identifying The aim of this policy is to identify positive impact through environmental risk the environmental impacts in the borrowers having a high risk potential, and management in its business activities and construction and properties field. The making specific decisions with respect to Discount through savings and efficiencies in its Bank's Management appointed a senior cases where the risk is viewed as material operational routine. The Bank adopted a officer, the manager of the construction (having a high probability of materialization The Bank endeavors to create policy of maintaining the proper balance and properties group, who reports directly and upon the potential materialization the a positive impact through between business activity and to the Head of the Human Resources and credit loss, may be material). environmental protection and it is Properties Division; environmental risk management in committed to present an ongoing The Bank strives to involve its employees In this framework, the Bank has defined its business activities and through improvement in its environmental and the community in its activities on an evaluation process with respect to the performances, without compromise behalf of the environment. level of environmental risk and of the quality savings and efficiencies in its regarding the quality of services provided of risk management regarding business to its customers. customers upon the granting of credit and operational routine upon performing the periodic evaluation of As a corporation that provides financial "Green Credit" customer quality, with special reference services, the Bank’s direct environmental to customers having a high environmental effects result from its consumption of office Policy regarding risk potential. The monitoring of the credit materials, primarily electricity and paper. Environmental Risks risk exposed to significant environmental Accordingly, the Bank focuses its efforts In recent years, there has been a risks is performed on an ongoing basis on managing, measuring and monitoring significant increase in the global during the year. and on making savings and increasing awareness of ecological and social damage efficiency in these areas. caused as a bi-product of the development For further details regarding the risk of projects, mainly in the industrial, real management at the Discount Group, see Ultimate Objectives estate and infrastructure sectors. As a result the 2018 Annual Report (pp. 54-91) and  The Bank is committed to the principle thereof, the widening legislation on the in the document "Disclosure according of sustainable development; subject and the claims by those who had to the third pillar of Basel and additional The Bank is committed to preventing suffered damage which were admitted by information regarding risks" for 2018. environmental damage and ongoing courts around the world, corporations improvement in contribution to the engaged in these areas began taking into Extending "green credit" environment; account environmental criteria in As part of the overall process of The Bank supports an entrepreneurial considering the feasibility of projects. environmental risk management, and proactive approach to reducing the Legislation in this field has widened also the Bank offers credit to "green" businesses, harmful effects on the environment in in Israel, though it is not yet wide-ranging everything subject to adherence to the credit the area of assets; compared to Europe and the U.S. granting rules in effect at the Bank, including The Bank continuously examines energy- the examination of the repayment ability saving alternatives, in the operation of Banking corporations may be exposed to of the borrower. electrical equipment and air conditioning. environmental risks in the various aspects of their operation, and such risks may be "Green credit" - credit extended for: Environmental activity included with other risks, such as: credit  Financing the operations of a company principles risk, market risk, operational risk, legal producing green products that contribute The Bank strives to comply with all risk and liquidity risk. to the protection of the quality of the environmental laws, regulations and environment; governance and received no complaints in The Bank's policy as regards environmental  Credit to a company that has a green 2018 regarding its environmental conduct; risks relating to credit is focused on the production process protecting the quality 166 SOCIAL REPORT 2018 GREEN DISCOUNT 167

of the environment; At the beginning of 2019, after being  Credit extended for the establishment of Promoting Granting of successful in the tender, MDB began the a green operation, including the purchase marketing of the loans. of green equipment (machinery);  Upgrading of production systems of those green building green credit by ICC protecting the quality of the environment. Establishment of the Discount ICC is setting up a collaboration Campus the principal with Enerpoint Ltd., one of the oldest Financing in the solar energy In 2016, the Discount Group, through and largest solar energy companies in Israel, field Discount Leasing, began to promote subsidiaries for the financing of domestic solar energy A relevant field, which has become the Discount Campus project in Rishon systems. ICC and Enerpoint signed in May relatively significant to the Bank's Le'Tzion, in the framework of which, the The principal subsidiaries are also engaged 2017, an agreement in principle for activity, is credit extended for the installation Group acquired a piece of land of 21 in promoting the granting of “green credit”. cooperation in providing loans for the of solar systems. dunnums in that city. The campus is intended installation of home solar energy systems. to house in the future the Head Offices of MDB Within this framework, ICC will provide loans The sub-sector engaged in photovoltaic Discount Bank, MDB and ICC, including MDB provides from time to time, to private customers installing the Enerpoint installations (PV) is a part of the renewable computer installations. This project credit for the financing of solar solar energy systems on their home rooftops. energy field. This field is based on constitutes the principal non-banking systems, mainly to corporations specializing The project is being conducted at a low regulations under power of the Electricity investment of the Group for the coming in joint ventures with Kibbutz settlements intensity. Market Act, designed to regularize the years. (where control is in the hands of the Kibbutz). establishment of electricity production The volume of credit to this type of activity installations using solar and wind energies. The Discount Campus is planned in amounted in 2018, to NIS 35 million, These systems have many advantages when accordance with strict environmental compared with NIS 23 million at December it comes to promoting environmental quality standards, while being based on green 31, 2017, a relatively insignificant amount and clean electricity generation through construction principles and qualified in in relation to the operations of this bank. the use of renewable energy. In addition, accordance with the LEED V4 rating of the the Bank extends credit for projects in the U.S. Green Building Council. Loans secured by State guarantees for the CSP (thermo solar) field. purpose of increasing energetic efficiency By means of integrative planning work by In October 2018, MDB participated in The Bank has a specific policy for the all consultants engaged on the project, the tender for the operation of a Fund granting of credit to the solar energy opportunities have been identified for for increasing energetic efficiency systems field, both to business and private the creation of healthy, convenient and secured by a State guarantee, and soon consumers. Among other matters, the resources saving work environment. afterwards began preparations for its processes for granting credit, controls Employees would enjoy improved air execution. This Fund, the first of its and specific collateral for this field are quality and daylight conditions, and have kind in Israel, is intended to support the established within the framework of the an outside view. effort for achievement of the national policy. goal of increasing energetic efficiency In the Campus buildings would be and reducing the consumption of The Bank's credit exposure in respect of integrated a set of advanced building fronts electricity. An inter-ministerial committee financing solar energy projects amounted that include the planning of structured would examine the feasibility of loan as of December 31, 2018, to NIS 822 shadings developed with the assistance of applications prior to their submission million, compared with NIS 884 million energetic analysis, efficient electrical and to the bank, which would carry out the as of December 31, 2017. This, in excess air conditioning systems, and the planning underwriting of the credit. Within the of the financing extended by the Bank to of an economical lighting system, which framework of the Fund, the bank will corporations engaged in this field. would lead to a significant energy saving grant loans secured by State guarantees, and reduce the carbon-dioxide emission at a rate of 75% of the amount of the of the Campus. loan, for a period of up to seven years. With respect to projects that mostly Planned in the middle of the Campus involve the integration of innovative are different garden areas providing the Israeli technologies, the rate of the State employees with resting and leisure areas. guarantee would be increased to 85%.

Continued on page 168 168 SOCIAL REPORT 2018 GREEN DISCOUNT 169

Continued from page 166 In addition to the above, the project environmental effects, the Bank strives to Breakdown of the consumption of energy from various sources - Discount Bank includes a unique planning process based reduce the environmental effects stemming in GJ1, in the years 2015-2018 on the Integrated Design Process, which from its operations. In this respect the Bank 133,568 20,758 includes identification of opportunities and has adopted measures for increasing the 2018 154,326 synergies for the creation of a qualitative awareness regarding sensible environment in the project and the consumption, including the saving of 140,940 20,692 determination of measurable designing electricity. Inter alia, the Bank issues a 2017 161,632 goals. monthly electricity consumption report. 163,625 20,137 This report includes a comparative 2016 183,762 Study of environmental effects analysis and is distributed to all the branch in existing buildings and unit managers. With the aid of the 192,266 20,377 The Bank studies the environmental report, electricity consumption data is 2015 212,643 effects also as regards existing brought to the attention of the managers, 0 50,000 100,000 150,000 200,000 250,000 buildings, as a basis for taking decisions encouraging energy saving. In addition, in the field of construction and properties: a summary report is issued half-yearly Total electricity consumption Total fuel consumption (diesel and gasoline)  The process of choosing and planning and yearly to all the Bank’s unit managers. Notes: 1 GJ - Energy measurement unit (Gigajoules). the head office and branch buildings 2 The total energy consumption of Discount Bank is the summation of the total consumption of electricity and total consumption of fuel by the Bank. integrates green criteria, both in In 2018, additional measures were taken to engineering and in the choice of materials; reduce electricity consumption, including:  Environmental control is conducted,  Replacement of air conditioning Discount Bank’s electricity consumption which includes the measurement and systems with advanced VRF systems kW-h, in the years 2015-2018 monitoring of radiation in the Bank at 14 locations of the Bank; buildings;  Energetic efficiency of lighting in 2018 37,102,203  The Bank, has a building which complies 22 locations of the Bank through the with Standard 5281 of the Standards installation of LED lamps; 2017 39,150,000 Institute for green construction, at 17,  Allotment of approx. NIS 10.3 million Yehuda Halevi Street in Tel Aviv. for energetic efficiency measures at 2016 45,451,496 branches and head office premises. In 2018, Discount Bank’s fuel consumption 2015 53,407,111 Responsible rose slightly, at a rate of approx. 0.3%. 0 10,000,000 20,000,000 30,000,000 40,000,000 50,000,000 60,000,000 Energy consumption consumption In 2018, the Bank’s total energy Discount Bank’s energetic intensity consumption1 amounted to total kW-h/sq.m. in the years 2015-2018 of resources 154,326 GJ, and the Bank managed to achieve a 4.5% saving in energetic 335 350 consumption compared to the previous 288 265 Energetic efficiency year. 300 255 As stated, Discount Bank’s direct environmental effects are extremely Reducing electricity consumption - in 250 limited, resulting mainly from office 2018, Discount Bank managed to reduce 200 operations: the consumption of energy, total electricity consumption by approx. water, paper, etc. Despite the nature of its 5.2% compared to the previous year. 250

200 In 2018, Discount Bank was successful Following is a summary of the data regarding Discount Bank’s consumption 150 in reaching savings of 4.5% in the of energy from various sources in the consumption of energy compared to the years 2015-2018: 100 0 previous year 2015 2016 2017 2018 170 SOCIAL REPORT 2018 GREEN DISCOUNT 171

Discount Bank’s fuel consumption Paperless Activity mailbox on the Bank's website. This process in liters for employee trips and generators The Bank promotes measures for makes it possible to reduce the distribution the reduction in paper consumption, of notices and letters to the customer's 599,200 14,350 10,096 as part of several projects, and with the aid home by mail. Furthermore, the service 2018 623,646 thereof, the Bank managed to reduce its allows the safekeeping of mail messages 599,500 14,980 7,400 consumption of paper by 35.6% in 2018. and management of a personal archive, 2017 621,880 where mail may be retrieved during a period 598,700 14,498 350 Digitalization of the archives of up to seven years. Concurrently, the Bank 2016 613,548 During 2018, the Bank continued to convert has conducted the mapping of prevalent 599,300 15,100 6,000 and transform its branch documents into notices sent to customers, examining their 2015 620,400 electronic source documents. In addition, regulatory requirement, and reduced the the Bank took out all the material from its number and frequency of such notices; 580,000 590,000 600,000 610,000 620,000 630,000 central archives, scanned it and it is now Gasoline for transport Diesel for transport Diesel for generators presented in the customer’s digital file. This Envelope savings move enabled savings in work and storage Replacement of inter-office envelopes space, and reduced the quantity of paper with multi-use envelopes. In addition, Fuel consumption - employee encourage employees to use this means reports produced, as well as a transition documents sent for scanning are delivered shuttle service of transportation on their way to work. to producing digital reports; in expendable nylon envelops as an The Bank provides to its employees alternative to paper envelops; a shuttle service available during Computerized forms system the whole day (at specified hours), operating Savings in Discount Bank's Banking work uses a large number of Use of the "Fax to Mail" software with respect to two central locations of array of shuttle services forms. Until now, the forms were printed in Cancellation of the need to print fax notices, operation: from the 160 Herzl Street location advance, requiring extensive storage space. and the keeping of documents sent to the to the Discount Bank building in the center The inventory of forms was destroyed Bank as computer files. of Tel Aviv, and another shuttle service from whenever they were updated. The Bank Jerusalem to the Discount College in Rishon switched to a computerized forms system, LeTzion. In addition, the Bank has installed which enables each employee to print in one of the buildings in Yehuda Halevi , the updated form when needed, while it Street, shower cabins for employees working 30 2500 contains the particulars of the specific in the Discount Tower building, who cycle tons liters customer, thereby avoiding recording errors. of CO of fuel per month Discount Bank’s paper to work, and also provided parking 2 This process also saves space for storage consumption installations for bicycles, in order to of the blank forms, and enables customers to receive faster and more efficient service; Tons Data regarding the estimated savings resulting from the provision of a shuttle 565 service for employees in Discount System for managing and distributing 600 539 Frequency Average Average Estimated procedures and circulars Length of Leaves number of number of savings in 500 Destination Days journey 408 from Circuits passengers passengers travel time The Bank has an internal communications per week (in minutes) per circuit per month (in hours) network, the “intra-net”, which is used in 400 Discount distributing circulars and procedures to Central College the employees, thereby enabling the Bank’s 4 2 6 192 60 192 263 Jerusalem Rishon procedures to be readily accessed and 300 LeTzion retained for long periods, while making Discount Within Tel savings in the cost of printing and Tower, 160 5 9 10 1,800 20 600 200 Aviv distributing circulars to employees; Herzel St.

Total monthly savings 792 Discount mail service in the Internet 100 Total annual savings 9,504 The Bank contacts its customers and enables them to receive updates about 0 Notes: For the purpose of the calculation, an estimate has been made of the distance travelled, the cost of fuel and the refueling their account activity by means of a secured 2015 2016 2017 2018 coefficient taken from the data of the Central Bureau of Statistics. 172 SOCIAL REPORT 2018 GREEN DISCOUNT 173

Recycling and use of recycled Discount Bank’s carbon footprint according to scopes materials Carbon footprint Carbon dioxide equivalent tons The Bank promotes the recycling On its own initiative, the Bank has 4,272 20,015 605 of materials by its employees. In committed to a reduced greenhouse 2018, some 391 tons of paper were sent gas emissions target and is working 2018 24,892 for recycling, comprising 100% of the Bank’s accordingly to gradually reduce its carbon 4,028 22,267 652 paper waste. In addition to paper, the Bank footprint, through energetic efficiencies at 2017 26,947 sends used light bulbs, bottles, batteries its branches and head office. In each year, and electronic waste for recycling. In 2018, the Human Resources and Properties Division 3,709 27,392 556 some 6,800 light bulbs, 121,700 drink bottles, monitors the progress in this area by collecting 2016 31,657 10,200 batteries and 43.7 tons of electronic performance data in the various areas and 8,619 37,160 195 waste were sent for recycling. formation of a comprehensive report. In 2015 addition, in each year the Bank voluntarily 45,974 reports emissions created by it to the 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 reporting and recording center of the Israel Ministry of Environmental Protection. Scope 1 Scope 2 Scope 3

Notes: 1 The computation of the greenhouse gases emission in scope 1 and 2 are based on emission coefficients published by The carbon footprint of Discount Bank and its the Israel Ministry of Environmental Protection for the years 2015-2018. principal subsidiaries in Israel, whose data 2 The computation of emission in scope 3 is based on the emission coefficients of DEFRA and GHG Protocol. 3 As from the year 2016, the calculation of Scope 3 includes also water consumption, paper consumption by the Bank 6,800 are presented below, comprise three scopes: and paper sent for recycling.  Scope 1 - Total direct emissions, originating light bulbs in the consumption of fuel and refrigerant gases; The intensity of Discount's Increasing the awareness of  Scope 2 - Total indirect emissions deriving greenhouse gas emissions employees from electricity consumption; The Bank uses the Intranet system Carbon dioxide/sq. m. equivalent tons  Scope 3 - Total indirect emissions affected for operating an organizational by the operations, but not resulting there 0.29 environmental portal, where all information from. Business flights, paper consumption and activity in this respect is being 0.3 121,700 and water consumption are included in published. The portal also serves as an drink bottles this scope. address for employee questions and 0.25 0.20 approaches in the matter. In 2018, Discount Bank managed to achieve 0.18 0.17 a reduction of approx. 7.6% in its overall 0.2 Additionally, in the offices and conference carbon footprint, compared to 2017. The rooms, stickers are affixed to the switches, reduction results mainly from approx. 5.2% 0.15 reminding to shut off the lights at the end of decrease in electricity consumption and from the work day and, all of the cafeterias have 10,200 the reduction in indirect emissions in Scope 0.1 hung banners calling for saving resources 2 accordingly. and encouraging employees to make use batteries 0.05 of the recycling bins placed in them. Emission of additional materials Discount Bank makes use of 0 refrigerant gases for the air 2015 2016 2017 2018 conditioning of its branch and head office buildings. In 2018, the Bank consumed approx. 0.8 tons of R-22 type refrigerant gas and 43.7 approx. 0.28 tons of R-410 type refrigerant tons of electronic waste gas. The Bank is acting for the replacement of a major part of its old air conditioning systems with the more economical VRF systems. 174 SOCIAL REPORT 2018 GREEN DISCOUNT 175

26 encouraging customers to transact MDB’s consumption of energy from various sources Responsible business online, e.g. using applications; in GJ units, in the years 2015-2018 installation of two monitors in each work consumption position enabling the parallel use of two 32,333 10,131 systems, thus obviating monitor printings 2018 42,464 (installation at all work stations of the 33,340 10,268 of resources at bank has not yet been completed); use 2017 43,608 of software for managing internal tasks 37,292 11,353 the principal in the organization (AB), thus obviating 2016 48,645 internal printed forms (e.g. real time credits 39,510 12,809 subsidiaries in and transfers, joining "business+", etc.); 2015 52,319 reducing archiving time for documents, 0 10,000 20,000 30,000 40,000 50,000 60,000 thus reducing the archives. The process of Israel digital signature upon monitors is expected Total electricity consumption Total fuel consumption (diesel and gasoline) to be introduced at the branches at the Notes: 1 GJ - Energy measurement unit (Gigajoules). Mercantile Discount Bank beginning of 2020, thus avoiding a large 2 The fuel consumption data for 2017 were improved. quantity of paper printing. Similarly to Discount Bank, MDB has also adopted many and varied Presentation of proper disclosure in MDB’s consumption of electricity energetic efficiency measures, inter alia: information desks In kW-h in the years 2015-2018 MDB is required to publish daily proper Cutting down fuel consumption disclosure at each of its branches. Motor vehicles were put at the disposal As an alternative to a physical notice 2018 8,981,352 of employees for joint travel for work board, screens have been developed in 2017 9,261,162 purposes. Preference was given to vehicles the information desks designed for the on lease having a low pollution level. Also presentation of proper disclosure. 2016 10,358,950 the bank started to hold meetings by way of video conferences, while increasing 2015 10,975,114 during 2018 the number of conference rooms enabling such meetings. 0 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000 Notes: The electricity consumption at the rental properties of MDB is assessed on the basis of the average kw/h price. "Paperless project" A designated project for the savings in 27 paper was introduced since the beginning MDB’s fuel consumption of 2017, inter alia, with the aim of turning in liters, for employee transport and for generators MDB into an environment friendly green 303,773 1,685 bank. Processes using large quantities of 2018 305,458 paper and processes in which the use of 307,856 1,710 paper is superfluous are being identified 2017 309,566 within the framework of the project, and 343,691 2,772 following the mapping and examination 2016 346,463 of such processes, a digital process is 387,644 3,321 introduced and/or printing is obviated, to the 2015 390,965 extent possible within the framework of the regulatory requirements and procedures. 0 250,000 300,000 350,000 400,000 Gasoline for transport Diesel for transport Following are a number of examples of Notes: MDB does not consume diesel oil for generators. paper reducing: reducing the number of

notices sent to customers via ordinary 26 102-48 mail, adding them to the "green mail"; 27  102-48 176 SOCIAL REPORT 2018 GREEN DISCOUNT 177

MDB’s paper consumption MDB’s energetic intensity ICC’s consumption of energy from various sources Tons, in the years 2015-2018 total kW-h/sq.m. in GJ, in the years 2015-2018 219 268 220 201 300 243 23,399 16,574 2018 210 226 221 39,973 196 250 200 21,722 17,510 186 200 2017 39,232 190 150 180 24,064 18,386 2016 100 42,450 170 23,983 19,699 160 50 2015 43,682 0 0 2015 2016 2017 2018 2015 2016 2017 2018 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000

Total electricity consumption Total fuel consumption (diesel and gasoline)

Notes: GJ - Energy measurement unit (Gigajoules). ICC The validity of a part of credit cards has ICC is also promoting the responsible been extended for five years. This move consumption of resources and the shall contribute to the reduction in the ICC’s consumption of electricity reduction in its carbon footprint. For this company's consumption of plastics in the kW-h, in the years 2015-2018 purpose, the roofs of buildings owned by long-run. it are coated once a year with a white insulation material that contributes to the The company's vehicle fleet 2018 6,499,760 reduction in the warming up of buildings in The fleet which numbers approx. 230 motor the summer months, thus saving energy vehicles, has been replaced during the recent 2017 6,034,000 consumption required for air-conditioning. years and includes at present vehicles having Furthermore, to the extent possible, ICC smaller engines, which consume less petrol 2016 6,684,440 utilizes natural light for the lighting of its and emit lesser pollution. Replacement offices, and in planning new premises and of the company's vehicle fleet led to a 5% 2015 6,662,000 operational locations, use is made of saving in the company's fuel consumption. materials that are not harmful to the Furthermore, the company operates a 0 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 environment, while adhering, to the extent transportation sevice for employees living in possible, to green building principles. Ashdod and Rehovot, with a view of reducing the use of private vehicles by employees. CALMAIL Besides the transportation service, the In 2015, ICC began a move for the reduction company operates a nightly taxi cab service, in the consumption of paper in its operations, numbering on an average approx. four proposing to its customers to receive taxi cabs per night, for transportation of their monthly statement of transactions authorized personnel. by electronic mail instead of by regular mail. In this framework, since 2015, the Environmental control number of customers joining this service ICC conducts environmental control activity, has grown considerably, and the matter is which includes measurement and monitoring under an organizational focus. As of the end of radiation in company premises. Current of 2018, 44% of the company's customers monitoring of the work environment is have joined the service and are receiving conducted, including attendance and their statements by CALMAIL instead of radiation surveys, performed by outside by regular mail. independent companies. 178 SOCIAL REPORT 2018 GREEN DISCOUNT 179

ICC’s fuel consumption ICC’s energetic intensity in liters, for employee transport and for total kW-h/sq.m. goals generators 467 438 700,000 601,803 500 Goals presented in the previous report 561,561 391 383 600,000 528,235 400 Done 500,000 A decrease of 5.2 in Energy - reducing electricity consumption - 4% annually. kW-h consumption. 500,000 300 An increase of 0.3%. Reducing gasoline consumption - 1% annually. 200,000 200 Discount Reducing the carbon footprint in Scope 1 and Scope Bank Done A reduction of 7.6%. 2 by 1% per year. 100,000 100 It is the intention of the Bank to examine different 0 0 means for exposure of employees and increasing 2015 2016 2017 2018 2015 2016 2017 2018 their awareness to environmental issues relevant to the Bank's operations. Notes: Use of emergency power generators by ICC is negligible (a few tens of liters per year). future goals IDB Bank floor (in a warehouse / pantry and other Reducing the carbon footprint in Scopes 1 and 2 by 1% per year. Recycling project public areas): one of the waste bins with Energy - reducing electricity consumption - 2% annually. a black plastic bag is labeled for general Discount All businesses in the city of New garbage. The other bin (blue) with a clear Planning of the "paperless staff" project and the "paperless branch" project Bank and bringing them to the approval of the bank's Management. York are required by law to recycle plastic bag is labeled for all recyclable certain materials and do their utmost to materials (MGP and paper). Preparation for the implementation at the branches of digital signature on verify that recyclable material is properly documents to be carried out during 2020. treated by their suppliers of waste removal In addition, Management of the building Preparation for the implementation at the branches of digital signature on MDB services. has posted (at eye level, as required by documents to be carried out during 2020. law) guiding posters detailing the type of IDB Bank has engaged a private authorized waste to be placed in the recycle bin and waste removal supplier IESI (Waste the waste intended to the general waste bin. Connection) and has developed a waste removal plan. Management of the IDB Bank building has also placed posters intended for the The Municipal Authority of New York has cleaning staff at the waste collection area issued to IDB Bank Business Integrity and at the loading ramp at the back of the Commission (BIC) stickers, which identify building. The recyclable waste and the the authorized private waste removal other waste is collected and transported service supplier of the bank. The sticker separately during the night by the waste is attached to a front window and is clearly removal service supplier of IDB Bank. visible from the sidewalk edge at the entrance to the building.

IDB Bank is authorized to collect recyclable waste with no prior sorting. Recycling with no prior sorting means that all recyclable material (metal, glass, plastic [MGP] and paper) may be placed in the same waste bin. IDB Bank's building Management has provided at least two waste bins on each 180 SOCIAL REPORT 2018 CORPORATE GOVERNANCE 181 09 Corporate Governance

Corporate Governance Code for the Discount Group 182

The General Meeting of Shareholders 183

The Board of Directors 184

The Bank's Management 194

Remuneration of Senior Officers 195

Principal Control Functions 197

Prevention of Corruption 199

Compliance with Regulation 202

Goals 207 182 SOCIAL REPORT 2018 CORPORATE GOVERNANCE 183

Guidelines from time to time, but at least Corporate annually. The Guidelines were first approved The General Corporate Governance in 2008 and most recently in 2018. Meeting of The Corporate Governance Code of MDB was approved by the Board of Directors Code for the of MDB in January 2013 and was updated Shareholders most recently in June 2018. The Agenda for the general meeting Discount Group of shareholders is determined by Governance The Corporate Governance Code of ICC the Board of Directors, however, according The Corporate Governance Code, was approved by the Board of Directors to the Companies Law, a shareholder who Within the Bank’s corporate governance approved by the Bank's Board of of ICC in November 2014 and was most holds at least one percent of the voting Directors in October 2009, reflects the recently validated in March 2018. The Code rights in a general meeting of shareholders, code, it has been determined that the implementation of a "best practice" policy is available for review on the company's may request the Board of Directors to include Board of Directors is responsible for in the corporate governance field. The Code website. an item on the agenda of a general meeting is based on the provisions of the law and to be convened in the future, on condition prescribing high standards of conduct, various regulations applying to the Bank in Corporate governance that this item merits a discussion at the the corporate governance field. In December questionnaire general meeting of shareholders. designed to enhance professional 2017, the Board of Directors approved The Bank's corporate governance conduct and integrity and for updates to the document. The updated questionnaire for 2018 is available In accordance with the provisions of document is available for review on the for review on the MAGNA website of the the law, the Bank has to publish a notice their assimilation throughout the Bank's website. Israel Securities Authority and on the MAYA at least twenty-one days prior to the organization. The Bank acts and will act website of the Tel-Aviv Stock Exchange Ltd. notice convening a general meeting of This document is designed to present the together with the Bank's 2018 Annual Report. shareholders, when a proposal for the in accordance with an ethical code that corporate governance rules that guide the is intended to reflect the values of the activity of the Discount Group. These rules are intended to govern the conduct of the Discount Bank's Organizational Structure Chart Bank and to determine proper standards Discount Group, inter alia, with the aim of ensuring that the Group will manage its risks Board of of behavior and fair and transparent in a proper and useful manner, will increase Directors conduct with respect to the customers its earnings in favor of its shareholders and will act to maintain the interests of its customers. The corporate governance rules detailed in the document reflect the PRESIDENT perception of the Discount Group regarding & CEO everything relating to the values of the Group, to the decision-making processes, risk management and proper and adequate Internal Corporate control and supervision procedures. Auditor Secretary

Within the framework of the implementation of the corporate governance plan, the Board Legal Advisory & Accounting Risk Technologies Subsidiaries of Directors approved a work procedure vis- Regulation Division Division Management & Operations Division à-vis the subsidiary companies. Moreover, Division Division the Bank's Board of Directors approved a Planning, Strategy Banking Corporate Financial Human Resources & procedure for the approval of transactions & Finance Division Division Division Markets Division Properties Division with interested parties in the Bank.

IDB Bank’s Board of Directors reviews and approves the Corporate Governance Note: Discount Bank's organizational structure chart in 2018 184 SOCIAL REPORT 2018 CORPORATE GOVERNANCE 185

appointment of directors or the termination accordance with these provisions, voting of Directors of Mercantile Discount Bank, Procedure of appointment of their office appears on the agenda of the on the appointment of directors shall take see the 2018 Annual Report of this bank of directors at the principal meeting. The preliminary notice includes place only at the annual general meeting (pp. 261-263 of the Hebrew report). For subsidiaries details of the subjects on the agenda or at a meeting convened under Section additional details regarding members MDB and ICC are private companies. of the coming general meeting. In the 35A of the Banking Law (Licensing), of the Board of Directors of ICC, see the The appointment of directors at notice convening a general meeting of 1981 (hereinafter: "the Banking Law"); 2018 annual report of this company (pp. MDB and at ICC is made in accordance with shareholders, the Bank provides details of the period of service of a director who 175-177 of the Hebrew report). their qualifications and in accordance with the agenda of the meeting being convened, is not an external director is limited to Proper Conduct of Banking Business the proposed resolutions and the majority three years, and the cumulative period Directive No. 301. Appointment of members required for the different resolutions. of his service is limited to nine years; of the Board of Directors in ICC is made in the number of directors who are to be accordance with the ratio of holdings The above stated, excluding the replaced in each year shall not exceed between Discount Bank and FIBI and in determination of the agenda by the Board one half of the number of the serving accordance with guidelines set in the of Directors, does not apply to MDB and to directors. shareholders agreement and the company's ICC, both being private companies. articles. The Bank's Board of Directors Within the context of an amendment of approves the decision regarding the Proper Conduct of Banking Business appointment of directors of MDB and of Directive No. 301, the maximum number of ICC. The Board of directors in a banking corporation is to be reduced from 15 to 10 from July 1, 2020. The appointment of a director at MDB and Directors For further details, see the 2018 Annual at ICC requires the approval of the Bank Report (p. 376). The Supervisor of Banks of Israel, following a full "fit and proper" Procedure of appointment of has directed that the Bank is to gradually (F&P) process, with this also applying to directors reduce the number of directors and that external directors according to Directive the Board of Directors is to comprise 10 No. 301. The appointment and the renewal The appointment of members of directors following the Bank's general of the approval is done every three years. the Bank’s Board of Directors is meeting for 2020. made by the general meeting of shareholders, and everything according According to the Banking Law, a statutory to the provisions of the law applying to committee was established for the the Bank as a public company and as a appointment of directors in a banking banking corporation having no core corporation not having a core controlling controlling interest and in accordance interest, the duty of which is to propose with the Bank`s articles. The provisions to the general meeting candidates to determine special qualifying conditions serve as directors. Concurrently with regarding the qualifications and the committee, in the case of a banking experience required from whoever serves corporation having no core controlling as director of a banking corporation. interest, a shareholder and/or a group According to the Banking Ordinance the of shareholders that hold more than two Supervisor of Banks has to be informed and a half percent of a certain class of in advance of the intention to appoint a means of control in the corporation, are director, and the Supervisor has the entitled to propose to the general meeting authority to oppose such an appointment. candidates for election as directors.

The Bank is a banking corporation For additional details regarding the Bank's without a core controlling interest, Board members, see the 2018 Annual subject to special provisions regarding Report (p. 296) and the Periodic Report the appointment of directors, their for 2018 (Regulation 26) . For additional service and termination of service. In details regarding members of the Board 186 SOCIAL REPORT 2018 CORPORATE GOVERNANCE 187

1 Composition of the Board of Directors Segregation of the Chairman of consistency with the policy of the board the Board’s duties of directors; The Discount Mercantile ICC IDB Dr. Yossi Bachar served as the The board of directors will ensure the Corporation Bank Discount New York Bank Chairman of the Board of Directors establishment of clearly defined spheres through December 3, 2018 and, since that of responsibility and accountability within Number of directors 13 11 9 10 date, Mr. Shaul Kobrinsky has served as the banking corporation; Directors qualified as external directors 13 4 3 6- the Chairman of the Board of Directors. The board of directors will outline the Neither Dr. Bachar nor Mr. Kobrinsky held organizational culture of the banking External directors2 4 5- 5- 6- any other office at the Bank. In 2018 the corporation, which requires the External directors in terms of Chairman of the Board of Directors of MDB implementation of high standards of 5 4 3 6- Directive no. 3013 was Mr. Yair Avidan, a Senior Executive professional conduct and honestly; Directors with professional Vice-President of Discount Bank, who does The board of directors will ensure that 13 9 8 7- qualifications4 not hold any other office at MDB. The the banking corporation operates in Directors with accounting and Chairman of the Board of Directors of ICC compliance with the law and regulations. 12 5 8 7- financial expertise through April 10, 2018 was Mr. Yuval Gavish, Women 3 1 2 3 a Senior Executive Vice-President of In accordance with the Directives, the Discount Bank, and, since that date, Mr. Board of Directors appoints the President Men 10 10 7 7 Ran Oz has served as the Chairman of ICC’s & CEO and approves the appointment of the Board of Directors. Neither Mr. Gavish nor members of management by the President Age: Up to 50 1 1 1 2 Mr. Oz held any other office at ICC. & CEO. The Bank’s Board of Directors also 51-60 1 1 5 3 approves the appointment of directors at the Bank's principal subsidiaries. 61-70 9 8 3 3 Activity of the Board of Over 70 2 1 - 2 Directors It should be noted that the corporate In accordance with the Companies governance code of the Discount Group, Law, the Board of Directors will has determined, among other things, outline the policy of the corporation and principles regarding the responsibilities

Notes: 1 The data is updated through the date of publication of the 2018 Annual Report. will supervise the activities and duties of of the Board of Directors, the independence 2 In terms of the Companies Law, 1999. the CEO. According to the Law, the Board and qualification of the Board, the conduct 3 External directors in terms of Directive No. 301 of the Proper Conduct of Banking Business Directives, and as such also of Directors may not delegate its authority of the Board and its meetings, committees qualify as external directors in terms of the Companies Law. 4 Within the meaning of the term in the Companies Regulations (Conditions and Tests for Directors Having Accounting and to a committee of the Board with respect of the Board, separation of powers between Financial Expertise and a Director Having Professional Qualifications), 2005. to a number of issues, including the the Board and management, duties of 5 The duty to appoint external directors in accordance with the Companies Law does not apply to MDB and to ICC, both formation of a general policy. the Board, of the President & CEO and of being private companies. 6 The provisions of the Companies Law and of Proper Conduct of Banking Business Directive No. 301 do not apply to management. IDB Bank. This notwithstanding, IDB Bank’s corporate governance guidelines require that a minimum of one-third of the The Proper Conduct of Banking Business directors be independent and define the criteria for that independence. 7 The provisions of the Companies Law and of Proper Conduct of Banking Business Directive No. 301 do not apply to Directives prescribe that the Board of Determination of the agenda of the Board IDB Bank. This notwithstanding, the three members of IDB Bank’s Audit Committee all have general financial literacy, as Directors bears responsibility for the of Directors required by the Audit Committee’s deed of authority. Two of them have expertise in banking or in financial management business of the banking corporation and for The agenda for the meetings of the matters. All directors, pursuant to IDB Bank’s corporate governance guidelines, must have experience or expertise in one or more of the following fields: banking, finance, economics or business, law, management or accounting. its financial strength. Within this framework, Bank's Board of Directors is determined the Directives provide, inter alia, that: by the Chairman of the Board, taking into consideration the different regulatory The board of directors will outline the requirements, including corporate strategy of the banking corporation, legislation, the Proper Conduct of Banking including the risk strategy and risk Business Directives, etc. appetite, and will approve the banking corporation’s policy that will guide the Issues concerning risk management, banking corporation in its ongoing corporate governance and social activities; responsibility are discussed by the Board The board of directors will supervise where required and/or in accordance with the activities of management and their regulatory duties and the Bank's policy. 188 SOCIAL REPORT 2018 CORPORATE GOVERNANCE 189

Work procedure of the Board of Directors Committees of the Board of The Committee is authorized to discuss The Committee approves the annual and its committees Directors and approve credit applications that work plan of the Compliance Officer and The Board of Directors and its The Bank’s Board of Directors acts, deviate from the credit policy, as well as conducts semi-annual monitoring of its committees operate in accordance inter alia, through subcommittees. applications under conditions and amounts implementation. The Committee discusses with a procedure determined for their As a general rule, all committees are exceeding the minimum determined by the annual work plan of the Anti-Money work, within the framework of which permanent committees, some of which are the Board of Directors from time to time. Laundering Officer and conducts semi- are prescribed, among other things, the in accordance with statutory requirements. annual monitoring of its implementation. duties and powers of the Board itself and Ad-hoc committees are formed from time Audit Committee of the various Board committees, their to time to deal with certain matters. The The Committee discusses the annual and The Committee approves the policy manner of operation, the reports that composition of the Board of Directors and multiyear internal audit work plan, makes document regarding the handling of public have to be submitted to them and their its committees and their duties are recommendations regarding such plan to complaints and the service charter and frequency, and issues and transactions determined in accordance with the relevant the Board of Directors and monitors the discusses the periodic report of the Public that require their approval. The Board of legislation and the Proper Conduct of plans’ implementation. Complaints Commissioner. Directors updates the procedure from Banking Business Directives. The duties time to time, as required. of the Board of Directors and of its The Committee discusses material audit The Committee discusses the independent committees are also defined in internal reports of the internal audit, the quarterly internal audit review with regard to ICAAP (a Assessment of the effectiveness of the procedures, and the work procedures of and semi-annual reports submitted by the document summarizing the internal capital work of the Board of Directors the Board of Directives and of its internal auditor, which, inter alia, include a adequacy assessment process). In accordance with Proper Conduct of committees. The following are the main summary of the audit reports prepared by Banking Business Directive No. 301, duties of the subcommittees: the Internal Auditor and the annual report The Committee holds discussions with the Board of Directors performs, once regarding the operations of the internal the audit and control functions on their every two years, for internal purposes, Credit Committee audit. The Committee discusses the audit own, in the presence of the Committee a process of self-assessment. This is The Committee is authorized to deal with reports of the Supervisor of Banks, of members and the relevant officer alone. intended to test the efficiency of the various matters concerning the credit authorities and of the Bank’s independent Board of Directors' work, to identify operations of the Bank and the Group. auditors, and the proposed response of The Committee discusses transactions weaknesses in its work and make the Inter alia, the role of the Committee is to management to the issues raised in such with “related persons”, as required under necessary changes where required. support the Board of Directors in outlining reports. Directive no. 312 of the Proper Conduct the credit management strategy, as well as of Banking Business Directives, and The self-assessment process is to discuss and make recommendations to The Committee makes recommendations actions and transactions as required by conducted by means of questionnaires the Board of Directors with regard to the to the Board regarding the appointment the provisions of the Companies Law. relating to aspects of the work of the Bank's credit policy document. of an internal auditor or his removal from Board of Directors and its committees, office and also makes recommendations The Audit Committee is responsible including: the commitment and The Committee discusses, inter alia, to the Remuneration Committee regarding for supervising the work of the Bank's independence of the Board of Directors, the following matters: the Bank's credit the salary and remuneration of the internal independent auditors, including making outlining the strategy of the Bank policy; the Group and the Bank’s (on a auditor and his promotion. In addition, the recommendations to the Board of and of the Group and monitoring its standalone basis) credit risks document; Committee makes recommendations to Directors regarding the remuneration implementation, the activities of the compliance with the credit policy document; the Board of Directors regarding the letter of the independent auditors, as well as subcommittees and the coordination effectiveness of the credit policy; retail appointing the Internal Auditor/internal examining the scope of their work and between them, supervision and control credit portfolios of the Bank, and of the audit function and approves the plan for their remuneration and presenting its over the performance of the Bank and subsidiaries ICC and MDB; debt collection assuring the quality of the internal audit recommendations to the Board of Directors. management, and so forth. The process procedures policy and the periodic report function. It is also responsible for bringing its position at Discount Bank is conducted with the of the head of the function that handles before the general meeting whenever the assistance of an external party, which, debt collection; drawing conclusions with The Committee receives on an ongoing agenda of a general meeting includes the among other things, assists in the regard to default cases; and so forth. The basis reports regarding disciplinary termination of office of the independent formation of the questionnaire and in Committee discusses the yearly and events and regarding the manner in which auditor or the non-renewal of its office. the gathering and analysis of the findings multiyear credit control work plan and the management has dealt with such cases. Once every three years, the Audit Committee stemming therefrom. The process was annual report of the credit controller. The holds a discussion regarding the possibility last performed in October 2018 (at MDB Committee also holds a discussion with The Committee examines deficiencies in of replacing the existing independent – in November 2017, at ICC – in April the credit controller on his own. the business management of the Bank and auditors of the Bank. 2018). proposes ways of rectifying them. 190 SOCIAL REPORT 2018 CORPORATE GOVERNANCE 191

The Committee discusses the Bank’s draft of The Committee discusses and makes Chief Risk Officer (CRO) and with the other make recommendations to the Board of the annual report and the quarterly reports to recommendations to the Board of Directors audit and control functions so as to update Directors with regard to the internal capital the public ("the Financial Statements") and in matters regarding the existence of the latest risk profile, the risk appetite, the adequacy assessment process (ICAAP), submits recommendations to the Board with permanent conflict of interests of a limits and the exceptions thereto, material with regard to insurance of the Bank and the respect thereto. As part of the discussions director of the Bank. The Committee also default events and the risk mitigation plans, Group, including the renewal of the banking on the Financial Statements, the Committee discusses the issue of negligible relations as well as to establish a work interface with insurance policy (BBB) and the insurance of discusses the matter of customers where regarding a director/candidate for office the Audit Committee of the Board of Directors officers (D&O) and with regard to business the allowance recommended to be made of director of the Bank, in accordance with on material matters relevant to its sphere continuity. Furthermore, the Committee is with respect thereto in the relevant quarter the provisions of the Banking Ordinance of responsibility. authorized to approve, or recommend that the is in an amount greater than that prescribed and the Companies Law. Board of Directors approves, new products by the Board. Furthermore, the Committee The CRO submits immediate reports to and activities, unless it is recommended that discusses the matter of disclosures The Audit Committee has to approve the Committee, and if required also to the a new product/activity is to be discussed at regarding the accounting policy on critical whether and to what extent a candidate, who Board of Directors, on any matter, finding another committee that has special expertise topics and regarding critical accounting meets the qualification terms of an external or deficiency found in the area within the on the relevant topic. estimates. Moreover, the Committee director, also meets the qualification duty and authority of the Committee, which discusses and makes recommendations to terms of an independent director under might have a material effect on the risk The Committee holds a quarterly the Board of Directors regarding the formal the Companies Law. management at the Bank and the Group and/ discussion, sitting as a sub-committee disclosure policy of the Bank. or on their business as well as other topics, for the management of operation risks in Risk Management Committee at its discretion before the Committee for the United States. inter alia in accordance Prior to the issue of a prospectus, the The Committee is authorized to discuss and discussion (the aforesaid is also applicable with proper Conduct of banking Business Committee discusses the draft prospectus to make recommendations to the Board of in relation to MDB and ICC). Directive in the matter of overseas before its submission for approval of the Directors in any matter relating to the overall extensions. Board and makes recommendations to the risk strategy, including the risk management The Committee discusses periodic reports Board regarding the draft. and risk exposure policy, in the Bank and on the issues from the risk management field Resources Committee in the Group. Within this framework, the in the Bank and in the Group, in accordance The Committee discusses matters relating Furthermore, the Committee makes Committee’s role is to exercise control with Proper Conduct of Banking Business to human resources, labor relations and recommendations to the Board in all matters and supervision over the manner in which Directives and according to need. Inter alia, labor agreements. The Committee monitors relating to internal control over the financial Management implements the overall risk annual discussions regarding the risk appetite the process of updating the code of ethics reporting, in everything relating to the strategy, including the risk appetite, as declaration, the adequacy of the strategy, and formulating the vision, values and rules supervision over the current management outlined by the Board of Directors, and also the Bank of Israel’s uniform stress testing, of conduct of the Bank. It discusses the of financial reporting risks, in accordance to discuss the scope of the exposure to the and the results of the holistic stress testing policy for social responsibility management, with Section 404 of the Sarbanes Oxley various risks and limitations on exposure; and the effects thereof on the capital, within including reviewing the Bank’s social Act. The Committee approves the financial organizational preparations and corporate the framework of the ICAAP, and the SREP commitment activity, and also the Corporate reporting risk management policy and the governance for the implementation of the letter and the Group’s preparations for its Social Responsibility Report. annual work plan for financial reporting risk risk strategy for exposure management and implementation. Moreover, the Committee management (SOX 404), and also monitors control; and also updating of the Board of receives annual reviews regarding the The Committee discusses the mobility the progress of the plan’s implementation. Directors’ procedures in the risk management stress testing of market risks and the main policy for the Bank’s officeholders and field. assumptions used in managing the interest monitors the policy’s implementation. The Committee receives an annual review exposure, fraud and embezzlement, material from the independent auditors regarding Furthermore, it is up to the Committee to operational risks and changes to the catalog The Committee will also discuss the Bank’s the audit of the Financial Statements and ensure that new or developing risks are of models. properties (real estate) management policy. regarding new developments in standards managed as required, and that the Bank’s and regulation in Israel and the world over, as Management allocates appropriate resources The Committee holds discussions on Remuneration Committee well as a quarterly review (the independent to these. Moreover, it is the Committee’s task the Group policy documents and on This Committee has been given the duties auditors’ communications with the functions to exercise control and supervision over the the core documents un the field of risk and powers required pursuant to Amendment responsible for overall control). risks involved in the activities of the Bank’s management, at the frequencies prescribed No. 20 of the Companies Law and under investee companies from the perspective for such discussions, and approves Proper Conduct of Banking Business The Committee also discusses the of risk-based materiality. them/makes recommendations to the Directives of the Supervisor of Banks. corporate governance questionnaire prior Board of Directors for their approval. The to its discussion in the plenum. The Committee is in regular contact with the Committee is authorized to discuss and The Committee discusses and makes 192 SOCIAL REPORT 2018 CORPORATE GOVERNANCE 193

recommendations to the Board of Directors The Committee also approves projects in an existing or proposed transaction, Committees of the Board of regarding the remuneration policy for the and procurement agreements in the to the extent required, for the purpose Directors at the Principal Bank’s employees and its senior officers. computer field, where the total amount of determining a process of approval of Subsidiaries of the investment therein exceeds NIS 35 a transaction, as stated, by the various Where required, and prior to approval by the million. organs (audit committee and/or the board Mercantile Discount Bank Board of Directors and the general meeting, of directors and/or a general meeting), as Operating at MDB are the following the Committee approves the terms of Mechanisms for the Prevention the case may be. committees of the Board of Directors: engagement of the Bank with its senior of Conflict of Interests among Audit & Remuneration, Risk Management, officers as regards their remuneration. Directors Inter alia, it has been prescribed that a Administration, Credit. The Administration In accordance with Proper Conduct director who has declared that he has such Committee deals, among other things, also The Committee discusses the assessment of Banking Business Directive No. a personal interest regarding a specific with the following matters: manpower, of effectiveness of the remuneration policy 301, it is not permitted to appoint a director matter, will not receive information from computerization, branches, organizational and mechanisms. The Committee approves whose current business interests create a the banking corporation with regard to that structure and efficiency. The Administration the annual bonus to the officers. permanent conflict of interest between matter, will not be present at a discussion Committee receives reports from the himself and the banking corporation or pertaining to the matter in which he has President & CEO or from the VP Human Technologies & Innovation Committee where fear of such conflict exists. According a personal interest, and will not vote on Resources and Administration or from other The Committee is authorized to to legislation, a director has a fiduciary such matter. The Directives also prescribe parties in accordance with the subject discuss and approve and/or to make commitment toward the corporation in that a director who has an affiliation to matter. The Committee also receives recommendations to the Board of which he serves, including a commitment a corporation in a secondary sector (a reports regarding activity in aid of the Directors on the following issues: the IT to avoid any conflicting activity between holding of at least 5% in one or more of community, and the Committee was also strategy and policy and its management, his duties as director and any other office the means of control over the corporation presented with the new code of ethics, including data security and cyber, the he may hold or between his personal in the secondary sector, or serving as an and it monitors the plan for implementing Bank’s technological infrastructures, interests and/or of any action constituting officer of the corporation in the secondary measures for assimilating the code. management and usage of databases, competition with the business of the sector), will not be present at discussions of technological innovation in support of the company and avoiding the utilization of any the board of directors or of its committees ICC business innovation and their alignment business opportunity of the company with that relate to a customer of the banking Operating at ICC are the following with the Bank’s overall strategy and policy; a view to obtaining benefits for himself or corporation, which is also a corporation committees of the Board of Directors: how the Bank prepares for banking in for another person. The Bank's Board of in the same secondary sector, and will Strategy & Business Committee, the future and coping with the business Directors has approved guidelines and not receive information and reports with Remuneration Committee, Computer challenges arising from technological quantitative criteria for the prevention, on regard to that customer from the banking System Committee, Risk Management innovation in general and disruptive a permanent basis, of conflict of interest, corporation. Committee and the Audit Committee. The innovation in particular; a framework based on the scope of the business relations Remuneration Committee discusses also for managing technological risks, of the director, which raise suspicion of The corporate governance code of the issues of manpower. The ICC’s code of including data security and cyber risks conflict of interest and the materiality of Discount Group, determines, among ethics was approved in July 2014 by the and innovation risks; annual work goals the business relations with the Bank. The other things, that the Board of Directors Board of Directors of the company. Reports and plans; and, allocation of appropriate Bank's Board of Directors has also approved shall determine a policy and principles for regarding the social responsibility areas resources to achieve the planned activity guidelines for cases where a Director has dealing with conflicts of interest, which are are submitted on a current basis to the of the banking corporation in the IT area, a personal conflict of interests. intended to protect the Bank from improper Board of Directors of ICC. data and innovation management and the or illegal actions or from the influence of operational sphere. In addition, within the frameworks of the those who do not act in accordance with The duties of the said committees and their Companies Law and the Proper Conduct of the best interests of the Bank. authority, in ICC and MDB, are similar to The Committee discusses the Banking Business Directives, procedures those of the parallel committees of Discount following policy documents and makes and mechanisms have been prescribed It has also been determined that the Bank, as described above. recommendations to the Board of Directors for dealing with cases where a conflict Board will determine rules for dealing regarding their approval: IT management of interest exists, or may exist, between with transactions in which a controlling policy, IT risk management policy, strategy the corporation and an interested party shareholder and/or an officer is involved, and policy for cyber protection and data therein. In this framework, the Law has or in which they have a personal interest, security management, the policy for using determined the duties of disclosure, subject to the provisions of the law applying cloud computing technology and the policy according to which a director is bound to to the Bank. Such rules shall apply also for managing E-Banking risks. declare any personal interest that he has to a transaction between a controlling 194 SOCIAL REPORT 2018 CORPORATE GOVERNANCE 195

shareholder and/or an officer of the Bank, with related persons and transactions in Details regarding members of management1 as the parent company, and subsidiaries which an officer of the Bank has a personal of the Bank. interest (whether transactions of the Bank The Discount Mercantile ICC IDB with the officer himself or transactions Corporation Bank Discount Bank New York Accordingly, the Bank's Board of Directors of the Bank with others), in accordance Number of members 12 10 8 13 has determined a procedure for the approval with Proper Conduct of Banking Business of management of transactions with interested parties of Directive No. 312 and in accordance with the Bank, which is intended to regulate the the Companies Law. Women 4 2 2 4 process of identification, approval and reporting of transactions between the It should be noted that according to Men 8 8 6 9 Bank and subsidiaries under its control, Proper Conduct of Banking Business and interested parties in the Bank, which Directive No. 301, directors of the Bank are Age: up to 50 6 4 7 7 require approvals and special reporting. prohibited from serving also as directors of corporations controlled by the Bank, 51-60 5 5 1 2 Under the powers conferred upon it as well as from serving as directors of a pursuant to the Companies Law, the financial body, the volume of whose assets Audit Committee of the Board of Directors exceeds NIS 2 billion. 61 and over 1 1 - 4 has established yardsticks concerning transactions between the Bank and The aforesaid applies also to the board of Notes: 1 The data is updated through to the date of publication of the 2018 Annual Report. interested parties of the Bank, according directors of ICC. Furthermore, it should to which decision would be made as to what be noted that, due to the membership mix subject to the approval of the Board of Chairman of the Board, is to be determined in transactions need to be brought before of ICC’s board of directors, which, inter Directors. an identical manner and in accordance with the Audit Committee for approval, whose alia, is composed also of directors who the manner of determining the remuneration duty it is to decide whether it is an irregular act as officers of the owner banks of ICC, For additional details regarding the Bank's of an external director, in accordance with the transaction that requires special approvals, discussions by the board which might members of management, see the 2018 Regulations. In addition, the Amendment to in accordance with the Companies Law. expose commercial and business secrets, Annual Report (p. 297) and the Bank's Directive 301A, from August 2015, prescribes as well as a potential for the violation of the periodic report for 2018 (Regulation 26A). that the remuneration of all members of the Furthermore, the Bank acts in conformance antitrust laws, are not held in the presence For additional details regarding members of board of directors, including the chairman, with the provisions of Proper Conduct of of the directors who act also as officers of management of Mercantile Discount Bank, will be fixed remuneration alone. Banking Business Directive No. 312, in the owner banks and – due to the complexity see the 2018 annual report of this bank (pp. the matter of related persons, which sets of the subject – these are actually brought 265-266 of the Hebrew report). For additional Directors' remuneration, excluding the requirements regarding obtaining approval before ad-hoc committees, composed of details regarding members of management chairman of the board, is determined in of the Audit Committee for transactions external directors and an independent of Israel Credit Cards, see the 2018 annual accordance with the Companies Regulations between the Bank and persons related to director, for an in-depth review of the matter. report of this company (pp. 178-179 of the (Rules Applying to Remuneration and the Bank, including transactions between Hebrew report). Reimbursement of Expenses of External the Bank and Officers of the Bank. In Directors), 2000 (in this section: "the accordance with this Directive, the Audit Regulations"). Committee is required to confirm that the The Bank's Remuneration transaction is not under terms that are more The amounts of the remuneration for external beneficial than the customary terms of Management of Senior directors and for other directors, serving similar transactions that the Bank enters The President & CEO with the Bank and defined in the Regulations into with other parties. The Bank's Board of Directors has Officers as “expert” directors, are in accordance the authority to appoint the President with the maximum amount determined Accordingly, the Board of Directors has & CEO and is responsible for supervising and Remuneration of Directors in the Regulations for an expert external approved a procedure for approving evaluating the performance of the President (Excluding the Chairman of the director. A director who is not defined as an transactions with related persons and & CEO. Board) “expert” director is entitled to remuneration transactions in which an officer of the In accordance with Proper Conduct of in accordance with the remuneration to which Bank has a personal interest. the aim of Members of Management Banking Business Directive No. 301A an external director who is not defined as the procedure is to describe the manner Members of management are ("Directive 301A"), the remuneration for an “expert” is entitled. The remuneration is of treatment required for transactions appointed by the President & CEO, all directors of the Bank, excluding the composed of a fixed annual amount with the 196 SOCIAL REPORT 2018 CORPORATE GOVERNANCE 197

addition of remuneration for participation in who are not the controlling shareholders Risk management has been defined by each meeting of the Board or of one of the of the company or who do not have a Principal committees of the Board. The remuneration personal interest in the approval of the the Bank as a function having Group does not include any component that is remuneration policy. Control responsibility. Accordingly, emphasis is connected to the performance of the Bank. For further details regarding the being put on tightening the interfaces Directors' remuneration at MDB is determined remuneration plan for officers of the Bank, Functions with the subsidiaries in Israel and in accordance with the Regulations, based see Note 23 to the financial statements on the capital grading relevant to MDB. The as of December 31, 2018 (pp. 182-186). The Internal Audit abroad and on the guidance provided annual remuneration of directors, who The Bank's Internal Auditor is Mr. to them regarding the adoption of serve as officers of Discount Bank, is paid Mechanism for the reimbursement of Nir Abel, CPA (Isr.), who assumed to Discount Bank. variable remuneration (Clawback) office in May 2011. The Chairman of the processes and tools according to Directive 301A states that variable Board of Directors is the organizational methodologies determined by the parent Directors' remuneration at ICC is determined remuneration paid to a key employee entity in charge of the Internal Auditor. in accordance with the Regulations and will be subject to the obligation company, mutatis mutandis is payable to directors who do not serve of reimbursement in exceptional The internal audit operates according to an who has served in this position since May as officers of the owner banks. The circumstances where the employee was annual and multiyear work plan, focused on 2011. For details regarding the internal remuneration is based on the capital grading involved in activity causing exceptional risks, which was designed on the basis of audit at ICC, see the 2018 annual report of relevant to ICC. damage to the corporation, including: an overall risk survey, conducted according ICC (p. 182 of the Hebrew report). unlawful activity, violation of fiduciary to new and accepted methodologies, and duty, deliberate violation or disregard was influenced by local and international The Internal Auditor of IDB Bank is Mr. Mario The Terms of Service and of gross negligence of the policy of guidelines (including Basel, SOX, COSO Lemos, who has served in this position Employment of the Chairman the banking corporation, its rules and and Proper Conduct of Banking Business since November 2017. of the Board and the procedures, or in the event of fraud or Directive No. 307 regarding the internal President & CEO deliberate inappropriate conduct, which audit function). Risk Management Division For details regarding the terms caused the restatement of data in the The Chief Risk Officer is Mr. Avi of service and employment of financial statements. The internal audit is a function having Levi who took office on July 21, 2016 the Chairman of the Board of Directors Group responsibility and, therefore, and heads the Risk Management Division. and of the President & CEO of the Bank, For further disclosure regarding emphasis is placed upon the existence of The Chief Risk Officer is a member of see Note 35 to the financial statements "remuneration", see the document interfaces with the subsidiary companies management and reports to the President as of December 31, 2018 (pp. 282-286). "Disclosure according to the third pillar that have their own internal audit units in & CEO independently from the business of Basel and additional information the fields of methodology, approval of lines that create the risk. The Chief Risk Remuneration Plan for regarding risks", available for perusal work plans, etc. Officer assists the Board of Directors in Officers on the Internet. fulfilling its duties regarding risk Remuneration policy for officers of the The internal audit is carried out according management, and he has full access to the Bank (2017-2019) For details regarding remuneration at to the provisions of the Internal Audit Law, Board of Directors and to the Board's Risk The annual general meeting held MDB, see "Additional disclosure according 1992, and of Proper Conduct of Banking Management Committee. The Chief Risk on November 8, 2016, approved the to the third pillar of Basel - as of December Business Directive No. 307, "The Internal Officer is responsible for the management remuneration policy for officers of the 31, 2018" (pp. 100-107 of the Hebrew Audit Function". For further details of all risks at the Bank and the Group, within Bank, in accordance with Section 267A of report). The said report is available on regarding the internal audit at the Discount the framework of the second line of defense. the Companies Law. This policy replaced the website of MDB. For details regarding Group, see the 2018 Annual Report (p. 298). the previous remuneration policy. the remuneration plan for the CEO of ICC, Risk management has been defined its managers and employees, see the The Internal Auditor of MDB is Ms. Tsiona by the Bank as a function having Group It should be noted, that the Companies annual report of the company for 2018 Cohen, who has served in this position responsibility. Accordingly, emphasis is Law (Section 267A) states, among other (pp. 137-138 of the Hebrew report) and since August 2012. For details regarding being placed on tightening the interfaces things, that the majority of votes at the the "Additional disclosure according to the internal audit at MDB, see the 2018 with the subsidiaries in Israel and abroad and general meeting, which approves the the third pillar of Basel" - 2018 annual annual report of this bank (p. 422 of the on the guidance provided to them regarding remuneration policy for officers, will report (pp. 59-66 of the Hebrew report). Hebrew report). the adoption of processes and tools comprise the majority of all the votes of The said reports are available for perusal according to methodologies determined shareholders participating in the meeting, on the website of the company. The Internal Auditor of ICC is Mr. Nir Abel, by the parent company, mutatis mutandis. 198 SOCIAL REPORT 2018 CORPORATE GOVERNANCE 199

Risk Management Division is involved independent functions that support the The Chief Risk Officer of MDB is Mr. Gilad risk is achieved by three lines of defense: risk management, comprising the units Alyagon, who has served in this position in material processes, such as: managing credit risks, market risks, liquidity since May 1, 2012. For details regarding First line of defense supporting the strategic planning and and investment in securities, operational risk management at MDB, see the 2018 The business units. The Bank and the risk, including business continuity risks and annual report of this bank (pp. 80-146 of Group conduct operating risk surveys on accompanying strategic and business fraud and embezzlement risks, IT risks and the Hebrew report) as well as the document a current and dynamic basis and maintain, processes cyber risks, as well as compliance risks, regarding "Disclosure according to the third as a routine matter, the operational risk prohibition of money laundering and finance pillar of Basel and additional information maps by means of a designated operational Among the main tasks of the Division: of terror risks and cross-border risks. regarding risks" of this bank (in Hebrew). risk management system. Each risk center Recommendations regarding the risk manager is responsible for the evaluation appetite and risk management policy, The managers of the risk management The Chief Risk Officer of ICC is Mr. Alex of the risks inherent in the operations of his identification and correct evaluation of units operate as the second line of defense Beltush, who has served in this position unit. The risk maps contain, among other the risks and exposures; and conduct a variety of processes for the since July 2013. For details regarding risk things, also embezzlement and fraud risks. Monitoring and current reporting to identification, measurement, evaluation management at ICC, see the 2018 annual management and the board of directors, as well as control and risk mitigation. report of ICC (pp. 39-62 of the Hebrew The risk survey conducted at the Bank as a risk-based management and control Furthermore, the Chief Risk Officer is report), as well as the document regarding and at companies in the Group, within the tool; responsible for control functions, including "Disclosure according to the third pillar of framework of which are examined, inter Verification of capital adequacy, ensuring the credit controller, a second opinion Basel and additional information regarding alia, fraud and embezzlement risks, covers the long-term stability of the group; unit for credit applications, as well as a risks" of ICC (in Hebrew). a period of three years and is repeated Involvement in material processes, such supervision and evaluation function, which every three years. A new survey began in as: supporting the strategic planning and performs comprehensive assessment 2017, to be performed over three years. accompanying strategic and business processes of the risk profile of the Bank The survey applies to all of the units, in processes, integration of new work and of the Group, including management Prevention of the Bank and in the Discount Group. In procedures derived from regulation; of the annual Internal Capital Adequacy addition, each manager of a risk center Leading the credit policy and the Assessment Process (ICAAP), and also Corruption has the duty of updating the risk map on an integration of risk-based pricing, performs supervision and control processes ongoing basis, whenever there have been providing a second opinion on credit over the subsidiaries in Israel and abroad The corporate governance code of material changes and/or changes in work applications and on investments that from risk management aspects and is the Discount Group states as follows: processes, systems or in the effectiveness involve a material credit exposure and responsible for an IT unit, providing support "The Board of Directors is responsible of the controls. approval of ratings, classifications and for the promotion and management of risk for setting high standards of conduct, allowances, challenging of the capital management systems, and hence also the designed to promote professional An independent control function operates planning, strengthening of risk-based work desk system for the Chief Risk Officer. conduct and honesty, and for the at each division, which serves as a first remuneration aspects, improving tools, integration thereof throughout the line of defense and partly activates control models and systems supporting risk The above stated applies in essence also organization". systems for identifying suspicious activity. management, identification of developing in relation to IDB Bank, MDB and ICC. risks, etc. This, with the aim of verifying Fraud and Embezzlement the integration of risk management For further details regarding the risk Risks As part of the battle against bribery, aspects as an integral part of the business management at the Discount Group, see As a financial corporation, the fraud and embezzlement, the Bank processes and testing their anticipated the 2018 Annual Report (p. 55) and in the Bank holds funds and financial impact on the risk profile; document "Disclosure according to the third assets of its customers. In operations has integrated different procedures, Active involvement in managing the pillar of Basel and additional information of this nature, the most basic condition including procedures prohibiting processes regarding prohibition of regarding risks", which is available for for conducting business is the trust which money laundering and the financing of perusal on the MAGNA website of the customers feel toward the Bank. Hence employees from being in a situation of terror at the bank, as well as management Israeli Securities Authority, on the MAYA the importance of management of fraud conflict of interests, in general, and of the risk and conducting current website of the Tel-Aviv Stock Exchange and embezzlement risks. controls regarding compliance matters, Ltd. and on the Bank's website. from accepting gifts from parties with administrative enforcement and cross- The management of fraud and whom they maintain relations in the border risks. The Chief Risk Officer of IDB Bank is Mr. embezzlement risks is conducted by the Paul Caulfield, who has served in this Discount Group as part of the operational course of their work, in particular The Risk Management Division incorporates position since July 2017. risk management. Management of the 200 SOCIAL REPORT 2018 CORPORATE GOVERNANCE 201

Second line of defense drawing of conclusions in lectures in instances were concluded with either an internal committee (the Donations Risk Management Division. In its role the field units, executive conferences a reprimand in writing or with an oral Committee), and with respect to each as the second line of defense, the Risk and various forums, and distributes reprimand, transfer from the unit, selective donation, an examination is performed Management Division determines the several times a year learning pages of restriction of advancement and such like. regarding the substance of the receiving operational risk management policy, which extraordinary events to all Bank employees. association, its objects and as to includes a designated chapter regarding The internal audit function at MDB applies The instances examined in 2017-2018 whether it has all the required approvals. the management of embezzlement and similar procedures. included two cases of theft of money. The For additional details, see below in fraud risks. The policy defines the manner remaining cases referred to conflict of "Compliance with the provisions of the of management, monitoring, mitigating It should be noted that, in addition to the interests, personal privacy, transactions in law and regulations". and reporting of such risks. Furthermore, examinations made following reports accounts of related persons, prohibition on the Risk Management Division challenges being received, the second and third lines money laundering, investment consulting, Mechanism for exposing corruption – the risk assessment that the first line of of defense entities carry out initiated accepting loans from customers, etc. "Whistle-blower" defense performs in accordance with examinations in order to monitor irregular A "hot-line" was installed at the Internal the determined methodology, where transactions. The internal audit function The internal audit function at the Bank, at Audit Division for reports to be made each risk is awarded a rating according examines on an ongoing basis the accounts ICC and at MDB, performs audits of the anonymously, and a circular was issued to parameters evaluated by the risk of employees within the framework of manner in which embezzlement and fraud in this respect to all employees. The center manager. The operational risk audit work performed during the year or events are handled, and of the drawing of circular stated that the internal audit management department has established of specific audits. Some dozens of such conclusions and their assimilation. function would ensure that the identity a designated unit – the embezzlement and accounts are examined yearly. Specific of the complainant would not be exposed fraud risk management unit. Among the examinations of employee accounts are In 2018, the Bank and MDB participated in without his permission, unless so required unit’s duties are: increasing awareness of also conducted as a result of approaches a uniform and comprehensive survey on by the Court. The circular also clarified that this issue, current monitoring of irregular made by customers, employees, public the topic of fraud and embezzlement in the Bank's management shall not permit transactions, reporting them, where complaints or the intensification of current the banking system that was conducted by employment of any measures against required, to the internal audit function, audit following audit findings. the Banking Supervision Department. No employees whose complaint had been etc. An advanced system for monitoring material gaps were revealed in the course submitted bona fide. embezzlement by employees was deployed In cases where irregular activities are of conducting the survey at the Bank and in 2018. found or where there is suspicion of actions at MDB. The "hot-line" is intended for reports contrary to employee work procedures, regarding the following matters: suspicion Third line of defense treatment of the case is conducted by Additional Means for the of fraud and embezzlement; concern The Internal Audit function. As the third the Disciplinary Committee, which may Prevention of Bribery, Fraud regarding improper accounting operations; line of defense, the internal audit function decide on termination of employment, and Embezzlement suspicion of violation of the law; material examines the risk surveys and the manner reprimand, removal from office, transfer As part of the battle against bribery, deviation from the Bank’s procedures. of challenging them, and also examines the from the unit, etc. fraud and embezzlement, the Bank The manner of reporting and treatment effectiveness of controls. Clear procedures has integrated a conflict of interests policy of complaints concerning financial and guidelines have been established as The special examinations and the and different procedures, including irregularities has been established in the regards the manner of reporting of events resulting findings are reported to the Audit procedures prohibiting situations of internal audit procedures. suspected of being embezzlement. In Committee, within the framework of current conflict of interests applying to employees this context, among others ways, a "hot reporting and within the framework of the in general, and acceptance of gifts from In the aforementioned information line" to the internal audit function has periodic reporting (quarterly and annual) parties with whom they maintain relations sheets that it distributes several times been installed for the Bank’s employees with respect to the activity of the Internal in the course of their work, in particular. a year, the internal audit function notes to be able to report suspicious/irregular Audit Division. In accordance with the said procedures, the existence of the "hot-line" and its events. As part of this process, the internal the receipt or payment of "facilitation number. In addition, as part of "FaceBank", audit function performs an extensive 45 special examinations were conducted in payments", inter alia, are prohibited. the central tool for intra-organizational examination, which includes the issue 2018. In 18 instances, no irregular activity Moreover, there is a wide assimilation of communication, details are provided of an audit report, and where required, was revealed. Six employees terminated the code of ethics concerning, among regarding the "hot-line" and its aims, submitting the case to the Disciplinary their employment with the Bank. 45 special other things, these issues. within the framework of "complaints and Committee. examinations were conducted in 2017. In reporting centers". A report concerning 19 instances, no irregular activity was The payment procedures at the Bank complaints received through the "hot-line" The internal audit function taking revealed. Five employees terminated involve strict approval and control is submitted to the Audit Committee of explanatory procedures and an extensive their employment with the Bank. All other procedures. Donations are approved by the Board of Directors. 202 SOCIAL REPORT 2018 CORPORATE GOVERNANCE 203

The Discount "hot-line" serves ICC too. of business management – of integrity, provisions having bank-customer relations Prevention of The mechanism for reporting by means of decency, fairness and honesty – all while aspects. the "hot-line" has been communicated to safeguarding the customer’s privacy. Corruption at the employees, including by means of a link In accordance with instructions of the Banking on the employee portal for reporting via The duty of the Board of Directors and Supervision Department, the Bank has the "hot-line" of the internal audit function. management was established to protect appointed a Chief Compliance Officer, who Principal Subsidiaries MDB also operates a "hot-line", which employees who report illegal actions, assists senior Management and the Board operates in a similar fashion. unethical actions or such that might impair of Directors in the effective management Mercantile Discount Bank integrity, against disciplinary actions or of the statutory and regulatory provisions In the course of 2017-2018, several special reviews Prohibition on Political other negative implications toward them. applying to the Bank, including with respect to were performed regarding the bank accounts of Activity anti-money laundering and terror financing, employees, where in a number of cases irregular The Bank supports a social and The Bank has stated in its policy documents and since 2016, also with respect to internal activity has been revealed. As a result, four employees environmental agenda in Israel, and procedures the extent of tolerance enforcement fields in the securities laws, terminated their employment with the bank. As regards though it rigidly adheres to not acting with respect to deviation from compliance and the supervision over financial services additional employees, measures were taken such as politically. The Bank does not support provisions and risk appetite therefor. The (pension consulting) regulations, and cross- reprimand, either in writing or orally, transfer from the political bodies nor does it make any Bank has established detailed processes border risks. This, at the Bank and at the unit, restriction of advancement and awards. Of the contributions to political bodies, political and procedures for the implementation of relevant subsidiaries in the Discount Group. instances examined only one case of money pilfering parties or politicians. requirements of regulatory instructions Among his other duties, the Chief Compliance had been found. The other cases mainly involved applying to the Bank and the enforcement Officer examines and verifies the Bank's transgression of procedures and transactions in The rules of the Bank prohibit the use by thereof. Due to the fact that the provisions readiness for any new operation, in order to accounts of related persons. employees of the premises of Bank or of its of the law and regulation are changed verify the compliance and implementation resources for political purposes. Whenever frequently, the Bank has established of the provisions of the law and regulation ICC general elections are declared in Israel, a process by which procedures and within the area of his responsibility. The Chief In 2018, a number of exceptional events took place, the said rules are refreshed by the Bank. systems are updated from time to Compliance Officer also conducts, through which related primarily to improper activity of employees, time, in accordance with requirements the compliance functions, a follow-up of sales promotion representatives, the collapse of trading resulting from such changes. The Bank the rectification of deficiencies concerning houses, and an air conditioning problem. All the events Compliance also conducts processes regarding the compliance, in order to avoid their repetition were examined and dealt with by the company (by the drawing of conclusions from failure in the future, monitors audit reports and fraud risk management, the ERM unit and the business with Regulation events, customer complaints and control customer complaints brought to his attention, functions), investigations were conducted regarding and audit reports. At the same time, and and initiates action for the detection of cross- the events, and lessons were learned. The company Discount Bank strictly manages its where required, the Bank updates forms, organizational failures. has acted to terminate the employment of employees business in a legal and proper control processes, systems, procedures, in the situations where this is required and has taken manner, diligently complying with the etc. that support relevant products and disciplinary action appropriate to the severity of the provisions of the law and regulation in its services. Furthermore, employee training The Bank complies with statutory and findings (in instances relating to employees’ activities). activities. and absorption activities are conducted. The code of ethics adopted by the Bank regulatory provisions and also acts in Additional Means for the Prevention of Within the Bank's corporate governance code includes a declaration regarding the conformance with the code of ethics in Bribery, Fraud and Embezzlement at the it has been determined, that the Board of commitment to comply in letter and spirit which the Bank’s values are anchored Bank's Principal Subsidiaries Directors is responsible for prescribing high with the provisions of all laws, regulatory IDB Bank standards of conduct, designed to enhance guidelines and the Bank’s procedures. and which prescribes appropriate professional conduct and integrity and to IDB Bank adheres to all federal, state, and local laws, standards for fair and transparent including but not limited to the federal Bank Bribery integrate them throughout the organization. In accordance with Proper Conduct of Act, and the Foreign Corrupt Practices Federal Act. The Bank acts and will act in accordance with Banking Business Directive No. 308, conduct and behavior vis-à-vis the IDB Bank has a Code of Conduct which all employees a code of ethics intended to reflect the values "Compliance and the Compliance Function customers are required to sign and abide by, and which includes of the Bank, to determine proper standards at a Banking Corporation", compliance risk the Bank’s rules regarding compliance with internal of behavior and fair and transparent conduct management is performed in an overall The Legal Counsel Division at the Bank assists controls, conflicts of interest and receipt of gifts. IDB with respect to the customers. This is manner covering all compliance provisions in the implementation of the duties applying Bank also manages risk through a similar approach achieved, inter alia, through creating an applying to the Bank, which are relevant to the Bank, by interpretation of the law and by using three lines of defense: the business unit, risk environment and organizational culture to its operations and which impose on it legal counseling in the course of the current management and compliance, and internal audit. that places emphasis on high standards operative compliance duties, and not only business activity. The provisions of the law 204 SOCIAL REPORT 2018 CORPORATE GOVERNANCE 205

and procedures are also being enforced on the functioning of the parties at the Bank function employees visited also in 2018 requirements for monitoring, supervision an ongoing basis by the various control and entrusted with supervising compliance many of the Bank's branches and held and follow up. Work procedures are being supervisory systems, which are intended to with the provisions of the law. A similar discussions with branch management updated on a regular basis. Concurrently, ensure compliance with the provisions of the activity is conducted at ICC too. teams and other employees with respect within the framework of integrating this law and regulations applying to the Bank. to different issues and the challenges subject into the compliance culture of the Several times a year, the internal audit which they face in their daily activities. Bank, the Bank holds training and learning It should be noted that, in order to function distributes information sheets sessions for employees by means of frontal increase effectiveness of compliance to all the Bank’s employees regarding Prohibition of Money studies, computerized courseware made at the Bank's branches and different exceptional events. In addition, staff of Laundering and the Finance of available to the branches and Head Office units, employees of the first line of the internal audit function give lectures Terror units, knowledge tests and case studies. defense have been appointed to serve as at the various units of the Bank regarding, The Bank acts to implement the Employees are also exposed to updated compliance officers/trustees. Moreover, inter alia, exceptional events and material requirements pursuant to the Anti- information via the Bank's Intra-net site. employees have been appointed to serve deficiencies revealed in the compliance Money Laundering Law and the Fight as compliance risk managers at the field. Against Terror Law, and the regulations In addition, the Bank uses effective control different divisions. These employees enacted under these laws. The Bank further and supervisory tools in order to monitor assist in verifying the implementation The aforesaid also applies with respect acts to have the Bank’s employees irregular transactions and to fulfill the of the statutory and regulatory in the to MDB. assimilate the directives relating to the duties imposed upon the Bank according different matters of compliance and prohibition of money laundering and the to the law. prohibition of money laundering, which are Integration and Training financing of terror. To this end, the Bank under their responsibility, as determined As part of the training program invests resources for the updating and The aforesaid also applies with respect in the Bank's procedures. Such employees for familiarization with the Bank, development of systems supporting the to MDB and ICC. serve as information centers and assist each new employee undergoes training fulfillment of the provisions of the law. in the training and implementation of in matters of ethics, which, among other Fines compliance, fairness and decency values things deals with various aspects of Within the framework of integrating the No fines in material amounts and among the Bank’s employees. normative-ethical conduct. regulatory guidelines and international no non-monetary sanctions were standards in the anti-money laundering imposed, during 2018, on any of the As a structured part of the compliance field, the Bank had formulated a Group risk corporations that are covered by this report As part of the training program for culture at the Bank, all bank employees, management policy, which was approved with respect to non-compliance with laws familiarization with the Bank, each whether in senior or junior positions, by the Board of Directors at the beginning and regulations. However, it should be noted undergo training in various matters of of 2018, which included also reference that, on December 23, 2018, the Supervisor new employee undergoes training in compliance, while designated employee to the prevention of using accounts held of Banks informed the Bank on the imposition matters of ethics, which, among other populations undergo also training with with the Bank for offences of bribery and of a monetary sanction of NIS 750 thousand, respect to specific compliance matters. corruption. due to the Bank having included the text of things deals with various aspects of Within this framework, in 2017, the Bank a warning by way of a link rather than in the normative-ethical conduct held a group meeting on the subject of The subject of the prohibition of money Bank's advertisement itself – which compliance, in which different contents laundering and the financing of terror has constitutes a breach of Section 5(c) of the Moreover, use is made of the "hot-line" relevant to the operations of the Bank and become in recent years one of the most Banking (Service to Customers) Law, 1981. that is operated by the internal audit the Group were discussed, with special important enforcement and prevention function (see above) also for the purpose reference to urgent matters presently on subjects in international and domestic of reporting compliance issues. the agenda, and to expected trends and legislation, and regulation on this topic is developments both in Israel and globally. changing and developing, intensifying the Furthermore, the Bank's Internal Audit Another conference is planned to be Group performs audits at the Bank's held at the beginning of 2020. Among units and cross-organizational audits, the actions taken for assimilating the within the framework of which, among compliance culture at the Bank, significant other things, integrity, compliance with use has been made of auxiliary training the law and compliance with various and learning tools in order to reach regulatory provisions and with procedures every last one of the Bank’s employees. determined by the Bank, are examined. In executing these duties, the Chief The Internal Audit Group also examines Compliance Officer and compliance 206 SOCIAL REPORT 2018 CORPORATE GOVERNANCE 207

conflict of interest, create a perception Compliance of impropriety, or jeopardize the Bank’s with Regulation integrity or reputation. goals 4. Compliance with laws and regulations – The bank actively promotes and requires Goals presented in the previous report at the Principal compliance with the laws, rules and Training for different employee populations, including day seminars Done regulations that govern the bank’s and courses for control and risk management functions. business. Obeying both the letter and the Conducting in-depth examinations by the risk management division, Subsidiaries Done spirit of the law is one of the foundations at sensitive units constituting risk foci at the Bank. IDB Bank of the bank’s ethical standards. Integrating additional scenarios in the system that monitors Done The bank’s Code of Conduct (“the Code”) Discount employee embezzlement - according to a work plan. Bank guides everyone at IDB Bank – employees, This Code, which is distributed to and Done Guidance regarding the new system that was installed. officers, and directors – in meeting acknowledged by all employees, consultants, their responsibilities to the bank and its agents and temporary workers annually Acquisition and deployment of a system that complements the employee embezzlement monitoring system - a system that customers, and in making ethical business through the bank's online training system, is Done displays a managerial dashboard and enhances the level of the decisions. It is designated to provide very detailed and clearly lays out the bank’s system’s effectiveness. everyone at IDB Bank with guiding principles expectations from all those involved. on how to apply its own common sense and how to exercise good judgment and Furthermore, the bank ensures that conscience, for the purpose of assisting everyone at the bank receives the UDAAP them in their work for the bank. training course annually, which teaches future goals and strengthens employees' knowledge of The Code is intended to prevent violations the types of actions and practices that the Strengthening the assimilation of fairness and decency. of the law and corporate policy, and is based bank may deem unfair, deceptive, and/or Conducting protection of privacy training. on four main principles: abusive. There are also other fair lending Training for different employee populations including day seminars and training courses given to employees and courses for control and risk management functions. 1. Honesty and candor in conduct – Banking members of the Board of Directors which Discount Conducting in-depth examinations by the risk management division, at is a business based on mutual trust, and deals, among other things, with treating Bank sensitive units constituting risk foci at the Bank. the Bank demands absolute fairness in customers fairly from various regulatory all of its affairs. The bank's success perspectives. Integrating additional scenarios in the system that monitors employee embezzlement and adding enhanced monitoring over sensitive populations. in the marketplace depends to a large extent on the confidence and trust of its Prohibition of Money Involvement in setting activity thresholds in relation to activities that are customers. Every employee, officer and Laundering and the Financing susceptible to fraud risk – primarily online banking activities. director must conduct business in a way of Terror at the Bank's that fully justifies the continued goodwill Principal Subsidiaries of the bank and trust of its customers. IDB 2. Integrity in the bank's work with IDB Bank complies with federal, state and customers, with one another and with the relevant laws of other countries that the public – the bank strives to exemplify prohibit money laundering and seek to the highest standards of personal and prevent the financing of terrorist activity, professional ethics in all aspects of its such as the USA PATRIOT Act of 2001, Bank business. Secrecy Act and other laws. IDB Bank has a Financial Crimes Program and Code of 3. The avoidance of conflicts of interest Conduct which all employees are required or even the appearance of a conflict – to sign and comply with. These documents Each employee, officer and director must include the Bank’s framework for combating avoid engaging in any outside business terrorist financing, money laundering and or other activity that might create a other financial crimes. 208 SOCIAL REPORT 2018 EPILOGUE 209

Thank you's! And before Discount Bank's Eighth Corporate Responsibility Report gets going… the pleasure of thank you's! Thank you to the dozens of Discount Bank's employees and employees of the subsidiaries MDB, ICC and IDB Bank who worked so hard gathering and processing the material, who provided responses, ideas, comment, clarifications, proofreading, initiative and 10 encouragement. A special thanks to "The Storyteller" Studio for upgrading the design of the report. Thanks to Liad Ortar and The Corporate Social Responsibility Institute for controling of the report. Epilogue Thanks to Anat Even-Chen, Yarden Kletter, Achinoam Zigel and Nofar Wallach- from the Corporate Responsibility Group at BDO Consulting for their devoted work in escorting the preparation of the report and for their support in upgrading its contents. Thank you's and responses to the report 209 And last but not least - a huge thank you to all the Discount Bank's employees and employees of the subsidiaries MDB, ICC and IDB Bank who convert the corporate commitment, a GRI Content Index Combined with UNGC 210 daily activity, from a vision to a reality.

Principles of the Global Impact Initiative 219

Appendices - Customers 220 Responses to the Report The Bank's customers, its employees, shareholders from the public, other stakeholders or remaining readers of the Report - all are invited to respond and comment on the Report Appendices - Employees 223 and its contents: send ideas, comments or illuminations, or just talk about the Report and the social activism of Discount Bank. Appendices - Community 231 Responses may be sent:

Appendices - Green Discount 232 By telephone Or by email 076-8055673 [email protected] List of tables and charts 233

The Bank's employees By fax are also invited to react 03-6836141 through the intranet website.

By mail - to: Israel Discount Bank Ltd. - Human Resources and Assets Division, 41, Yehuda Halevi Street, Tel Aviv, c/o Ms. Anat Sigman, in charge of social responsibility 210 SOCIAL REPORT 2018 EPILOGUE 211

28 GRI Content Index Combined with UNGC Page number in the report GRI UNCG Disclosure Disclosures Discount Standard MDB ICC IDB NY - cop Bank GOVERNANCE Page number in the report GRI UNCG 102-18 Governance structure 188 193 193 - Disclosure Disclosures Discount Standard MDB ICC IDB NY - cop Bank 102-19 Delegating authority 191 N/R N/R N/R Executive-level responsibility GRI 101 Foundation 2016 : 102-20 for economic, environmental, 16 16 16 16 102-1 Name of the organization 24 29 31 33 and social topics Activities, brands, products, Consulting stakeholders on 102-2 24,59 29 31 33 16-17, and services 102-21 economic, environmental, and 193 193 - 191 102-3 Location of headquarters 24 30 31 34 social topics 102-4 Location of operations 24-25 30 31 34 Composition of the highest 102-5 Ownership and legal form 24 29-30 31 33-34 102-22 governance body and its 186 186 186 186 No Specific committees 102-6 Markets served 24-25 30 32 34 requirement Chair of the highest governance GRI 102 102-7 Scale of the organization 42 42 42 42 by the COP 102-23 187 187 187 - : GRI 102: body No Specific General Information on employees and General requirement Disclosures 102-8 223-224 223-224 223-224 - Disclosures Nominating and selecting the other workers 102-24 184-185 185 185 - by the COP 2016 2016 highest governance body 102-9 Supply chain 140-141 143 143-144 144 102-25 Conflicts of interest 192-194 192-194 192-194 - Significant changes to the 102-10 organization and its supply 27 31 32 34-35 Role of highest governance chain 102-26 body in setting purpose, values, 46 N/R N/R N/R and strategy Precautionary Principle or 102-11 165-166 165-166 165-166 165-166 7 Collective knowledge of highest approach 102-27 191 193 193 - governance body 102-12 External initiatives 35-36 35-36 35-36 35-36 1-10 Evaluating the highest 102-13 Membership of associations 35-36 35-36 35-36 35-36 1-10 102-28 governance body’s 188 188 188 - STRATEGY performance Statement from senior Identifying and managing GRI 102: 102-14 12-13 12-13 12-13 12-13 187-188, 187-188, 187-188, 187-188, decision-maker No Specific 102-29 economic, environmental, and General requirement 197-200 197-200 197-200 197-200 Disclosures Key impacts, risks, and 12-13, social impacts 102-15 30-31 32-33 34-35 by the COP 2016 opportunities 27-28 ETHICS AND INTEGRITY Values, principles, standards, 102-16 46 49 49 49 GRI 102: and norms of behavior 1-10 General No Specific Disclosures Mechanisms for advice and 102-17 51 53 53 53 requirement 2016 concerns about ethics by the COP

28  For the materiality Disclosure Service, GRI Services reviewed that the GRI content index is clearly presented and the references for Disclosures 102-40 to 102-49 align with the appropriate sections in the body of the report. The service was performed on the Hebrew version of Israel Discount Bank's report (English GRI content index). 212 SOCIAL REPORT 2018 EPILOGUE 213

Effectiveness of risk Page number in the report 102-30 190-191 190-191 190-191 - GRI UNCG management processes Disclosure Disclosures Discount Standard MDB ICC IDB NY - cop Review of economic, Bank 102-31 environmental, and social 191 193 193 - REPORTING PRACTICE topics Entities included in the Highest governance body’s role 102-32 16 N/R N/R N/R 102-45 consolidated financial 25 25 25 25 in sustainability reporting statements Communicating critical 102-33 191 193 193 - Defining report content and concerns 102-46 17-18 17-18 17-18 17-18 GRI 102: topic Boundaries Nature and total number of No Specific General 102-34 191 193 193 - requirement 102-47 List of material topics 19 19 19 19 Disclosures critical concerns by the COP 14, 98, 2016 102-35 Remuneration policies 195-196 196 196 - 107, 153, Process for determining 102-48 Restatements of information 14,116,175 14,116 14 102-36 195-196 196 196 - 223, 225, remuneration 227 GRI 102: No Specific Stakeholders’ involvement in 102-49 Changes in reporting 14 14 14 14 102-37 195-196 196 196 - General requirement remuneration Disclosures 102-50 Reporting period 12 12 12 12 by the COP Annual total compensation 2016 102-38 116 116 116 - 102-51 Date of most recent report 14 14 14 14 ratio 102-52 Reporting cycle 12 12 12 12 Percentage increase in annual 102-39 116 116 116 - Contact point for questions total compensation ratio 102-53 209 N/R N/R N/R regarding the report STAKEHOLDER ENGAGEMENT Claims of reporting in No Specific 102-54 accordance with the GRI 14 14-15 14-15 14-15 102-40 List of stakeholder groups 16-17 16-17 16-17 16-17 requirement Standards by the COP 102-55 GRI content index 210-218 210-218 210-218 210-218 Collective bargaining GRI 102 102-41 100 102 102-103 103 1, 2, 6 102-56 External assurance 20-21 20-21 20-21 20-21 : agreements General Disclosures Identifying and selecting 102-42 16-17 16-17 16-17 16-17 2016 stakeholders No Specific GRI 103: MANAGEMENT APPROACH 2016 Approach to stakeholder requirement Explanation of the material 102-43 16-17 16-17 16-17 16-17 103-1 41 41 41 41 engagement by the COP topic and its Boundary No Specific 102-44 Key topics and concerns raised 16-17 16-17 16-17 16-17 The management approach and 103-2 41 41 41 41 requirement its components by the COP Evaluation of the management 103-3 41 41 41 41 approach GRI 201: GRI 201: ECONOMIC PERFORMANCE 2016 Economic No Specific Direct economic value Performance 201-1 42 42 42 42 requirement generated and distributed 2016 by the COP Financial Implications and 201-2 other risks and opportunities 165 165 165 165 7 due to climate change Defined benefit plan obligations 201-3 112 118 118 - and other retirement plans No Specific requirement Financial assistance received 201-4 Not received during reported period by the COP from government 214 SOCIAL REPORT 2018 EPILOGUE 215

GRI 103: MANAGEMENT APPROACH 2016 Page number in the report GRI UNCG Explanation of the material topic Disclosure Disclosures Discount 103-1 42-43 42-43 42-43 42-43 Standard MDB ICC IDB NY - cop and its Boundary Bank No Specific The management approach and GRI 302: ENERGY 2016 103-2 42-43 42-43 42-43 42-43 requirement its components Energy consumption within the by the COP 302-1 169 175 177 - Evaluation of the management organization GRI 203: 103-3 42-43 42-43 42-43 42-43 approach Energy consumption outside of Indirect 302-2 Not material to the organization Economic GRI 203: INDIRECT ECONOMIC IMPACTS 2016 GRI 302: the organization Energy 2016 Impacts 302-3 Energy intensity 169 176 178 - 2016 Infrastructure investments and 302-4 Reduction of energy consumption 169 175 177 - 203-1 73,148 76,159 76,160 - services supported No Specific Reductions in energy requirements 302-5 165-166 167 167 - requirement of products and services by the COP GRI 103: MANAGEMENT APPROACH 2016 Significant indirect economic 203-2 42 42 42 42 Explanation of the material topic impacts 103-1 164 164 164 164 7, 8 and its Boundary GRI 103: MANAGEMENT APPROACH 2016 The management approach and Explanation of the material topic 103-2 164 164 164 164 7, 8 103-1 140 140 140 140 its components and its Boundary No Specific Evaluation of the management The management approach and 103-3 164 164 164 164 7, 8 103-2 140 140 140 140 requirement approach GRI 204: its components Procurement by the COP GRI 305: EMISSIONS 2016 Evaluation of the management Practices 103-3 140 140 140 140 305-1 Direct (Scope 1) GHG emissions 173 232 232 - 7, 8 2016 approach GRI 305: Energy indirect (Scope 2) GHG GRI 204: PROCUREMENT PRACTICES 2016 Emissions 305-2 173 232 232 - 7, 8 2016 emissions No Specific Proportion of spending on local Other indirect (Scope 3) GHG Not Not 204-1 140-141 143 143-144 144 requirement 305-3 173 - 7, 8 suppliers emissions measured measured by the COP 305-4 GHG emissions intensity 173 - - - 7, 8 GRI 103: MANAGEMENT APPROACH 2016 Explanation of the material topic 305-5 Reduction of GHG emissions 173 - - - 7, 8, 9 103-1 199-201 199-201 199-201 199-201 10 and its Boundary Emissions of ozone-depleting 305-6 172 - - - 7, 8 The management approach and substances (ODS) 103-2 199-201 199-201 199-201 199-201 its components Nitrogen oxides (NOX), sulfur Evaluation of the management 305-7 oxides (SOX), and other significant Not material to the organization 7, 8 103-3 199-201 199-201 199-201 199-201 GRI 205: approach air emissions Anti- GRI 103: MANAGEMENT APPROACH 2016 corruption GRI 205: ANTI-CORRUPTION 2016 2016 Operations assessed for risks Explanation of the material 205-1 199-201 202 202 202 103-1 96-97 96-97 96-97 96-97 1, 2, 6 related to corruption topic and its Boundary The management approach and Communication and training 103-2 96-97 96-97 96-97 96-97 205-2 about anti-corruption policies 199-200 202 202 - its components and procedures Evaluation of the management 103-3 96-97 96-97 96-97 96-97 Confirmed incidents of corruption GRI 401: approach 205-3 200-201 202 202 - and actions taken Employment GRI 401: EMPLOYMENT 2016 2016 New employee hires and GRI 103: MANAGEMENT APPROACH 2016 401-1 225-227 225-227 225-227 - 6 Explanation of the material topic employee turnover 103-1 164 164 164 164 7, 8, 9 and its Boundary Benefits provided to full-time No Specific GRI 302: employees that are not provided The management approach and 401-2 113-114 118-119 119 119 requirement Energy 2016 103-2 164 164 164 164 to temporary or part-time its components by the COP employees Evaluation of the management 103-3 164 164 164 164 approach 401-3 Parental leave 228 228 - - 1, 2, 6 216 SOCIAL REPORT 2018 EPILOGUE 217

GRI 103: MANAGEMENT APPROACH 2016 Page number in the report GRI UNCG Explanation of the material 96-97, 96-97, 96-97, 96-97, Disclosure Disclosures Discount 103-1 Standard MDB ICC IDB NY - cop topic and its Boundary 100-101 100-101 100-101 100-101 Bank No Specific The management approach and 96-97, 96-97, 96-97, 96-97, GRI 103: MANAGEMENT APPROACH 2016 GRI 402: 103-2 requirement Labor / its components 100-101 100-101 100-101 100-101 Explanation of the material by the COP 103-1 104 104 104 104 6 Management Evaluation of the management 96-97, 96-97, 96-97, 96-97, topic and its Boundary 103-3 Relations approach 100-101 100-101 100-101 100-101 The management approach and 2016 103-2 104 104 104 104 GRI 402: LABOR / MANAGEMENT RELATIONS 2016 GRI 405: its components Diversity No Specific Evaluation of the management Minimum notice periods and Equal 103-3 104 104 104 104 402-1 100 102 103 - requirement approach regarding operational changes Opportunity by the COP 2016 GRI 405: DIVERSITY AND EQUAL OPPORTUNITY 2016 GRI 103: MANAGEMENT APPROACH 2016 Diversity of governance bodies 405-1 230 230 230 - Explanation of the material and employees 103-1 96-97 96-97 96-97 96-97 topic and its Boundary Ratio of basic salary and No Specific 405-2 101 103 103 - The management approach and remuneration of women to men 103-2 96-97 96-97 96-97 96-97 requirement its components by the COP GRI 103: MANAGEMENT APPROACH 2016 Evaluation of the management Explanation of the material 103-3 96-97 96-97 96-97 96-97 103-1 99-100 99-100 99-100 99-100 1, 2, 6 approach topic and its Boundary GRI 403: OCCUPATIONAL HEALTH AND SAFETY 2016 The management approach and GRI 406: 103-2 99-100 99-100 99-100 99-100 Workers representation in Non- its components formal joint management- Discrimination Evaluation of the management GRI 403: 403-1 126-127 134-135 134-135 134-135 103-3 99-100 99-100 99-100 99-100 Occupational worker health and safety 2016 approach committees Health and GRI 406: NON-DISCRIMINATION 2016 Safety 2016 Types of injury and rates of Incidents of discrimination and injury, occupational diseases, 406-1 111 111 111 - corrective actions taken 403-2 lost days, and absenteeism, 228 228 228 - No Specific and number of work-related requirement GRI 103: MANAGEMENT APPROACH 2016 fatalities by the COP Explanation of the material 103-1 148 148 148 148 Workers with high incidence or topic and its Boundary No Specific 403-3 high risk of diseases related to 127 135 135 - The management approach and 103-2 148 148 148 148 requirement their occupation its components by the COP Health and safety topics Evaluation of the management 103-3 148 148 148 148 403-4 covered in formal agreements 126-127 134-135 134-135 135 approach with trade unions GRI 413: LOCAL COMMUNITIES 2016 GRI 103: MANAGEMENT APPROACH 2016 GRI 413: Operations with local Explanation of the material community engagement, impact 103-1 96-97 96-97 96-97 96-97 6 Local 413-1 148-149 159 160-161 - topic and its Boundary Communities assessments, and development The management approach and 2016 programs 103-2 96-97 96-97 96-97 96-97 its components Operations with significant actual Evaluation of the management 413-2 and potential negative impacts on 165-166 167 167 - No Specific 103-3 96-97 96-97 96-97 96-97 approach local communities requirement GRI 404: Access points in low-populated by the COP Training and GRI 404: TRAINING AND EDUCATION 2016 FS13 or economically disadvantaged 60 67-68 68 68 Education Average hours of training per 404-1 122 129 130 - areas by type 2016 year per employee Initiatives to improve access 59-60, Programs for upgrading No Specific 67-68, 68, 68, 72, FS14 financial services for 69, 404-2 employee skills and transition 120-121 128-129 129-130 130-131 requirement 71,76 71-72, 76 76 disadvantaged people 73-74,76 assistance programs by the COP Percentage of employees receiving regular performance 404-3 123 131 131 - and career development 6 reviews 218 SOCIAL REPORT 2018 EPILOGUE 219

GRI 103: MANAGEMENT APPROACH 2016 Explanation of the material topic Principles of the Global Compact initiative 103-1 84-86 84-86 84-86 84-86 and its Boundary Discount Bank expresses support of the ten principles of the Global Compact initiative No Specific The management approach and its of the United Nations, and acts for the advancement of these principles. 103-2 84-86 84-86 84-86 84-86 requirement components by the COP Evaluation of the management 103-3 84-86 84-86 84-86 84-86 Following is a list of the principles of the initiative: GRI 417: approach Marketing GRI 417: MARKETING AND LABELING 2016 and Labeling Requirements for product and 2016 84-86 86 86 86 417-1 service information and labeling Incidents of non-compliance Businesses should support and respect the protection of No Specific concerning product and service 86-87 86 86 - 1 internationally proclaimed human rights; 417-2 requirement information and labeling Human rights by the COP Businesses should make sure that they are not complicit in Incidents of non-compliance 2 human rights abuses; 417-3 concerning marketing 86-87 86 86 86 communications GRI 103: MANAGEMENT APPROACH 2016 Businesses should support the freedom of association and Explanation of the material topic 3 actively acknowledge the right for collective bargaining; 103-1 87-88 87-88 87-88 87-88 1 and its Boundary 4 The elimination of all forms of forced and compulsory labor; The management approach and its Standards of GRI 418: 103-2 87-88 87-88 87-88 87-88 components employment Customer Evaluation of the management The effective abolition of child labor; Privacy 103-3 87-88 87-88 87-88 87-88 5 2016 approach The elimination of discrimination in respect employment GRI 418: CUSTOMER PRIVACY 2016 6 and occupation; Substantiated complaints 418-1 concerning breaches of customer 88 88 88 88 privacy and losses of customer data Businesses should support a precautionary approach to GRI 103: MANAGEMENT APPROACH 2016 7 environmental challenges; Explanation of the material topic 103-1 203 203 203 203 Undertake initiatives to promote greater environmental and its Boundary The environment 8 responsibility; No Specific The management approach and its GRI 419: 103-2 203 203 203 203 requirement components Encourage the development and diffusion of environmentally Socio by the COP 9 friendly technologies; Economic Evaluation of the management 103-3 203 203 203 203 Compliance approach 2016 GRI 419: SOCIO ECONOMIC COMPLIANCE 2016 Businesses should work against corruption in all its forms, Anti-corruption Non-compliance with laws and No Specific 10 including extortion and bribery. 419-1 regulations in the social and 205 205 205 205 requirement economic area by the COP

1  Link to the official website of UNGC: http://www.unglobalcompact.org 220 SOCIAL REPORT 2018 EPILOGUE 221

Complaints regarding central indices only, which he examined Appendices customers disturbance to the vicinity in relation to the five major banks: No complaints were received in Complaints and enquiries data at Discount Bank 2018 by the Bank, by MDB or by 1. First Index ICC with respect to disturbance to the The ratio between the share of each 2018 2017 2016 2015 vicinity. bank in the number of complaints and Complaints and enquiries received 2,668 3,029 2,651 2,666 requests for clarification handled by Complaints and enquiries dealt with 2,769 3,047 2,577 2,713 Customers complaints to the the Supervisor of Banks to that bank's Completion of dealing with complaints 2,191 2,034 1,483 1,859 Bank of Israel share in the system as a whole. For details regarding complaints Completion of dealing with enquiries, 636 1,013 1,074 854 requests and clarifications submitted by Discount customers A low ratio denotes the satisfaction of to the Bank of Israel in 2017, see the 2017 customers with the bank with no need Percentage of justified complaints 15.1% 13.6% 17.9% 27.5% Social Responsibility Report (pp. 67, 69). for submission of a complaint. The ratio between the share of Discount Bank in Rate of justified complaints Distribution of the subjects of main complaints at The Supervisor of Banks published on the number of complaints and requests September 23, a review of approaches handled by the Supervisor of Banks Discount Bank Discount Bank made by the public to the Supervisor. (namely, not only justified complaints or 27.5% The review was prepared in a completely complaints in general, but also requests) 30% 27.4% 20% 15.4% 15.8% 9.4% 12% different form than the reviews published and the share of the Bank in the system in prior years. In contrast to past practice, as a whole amounts to 1.23 and the Bank 2018 25% no data was published regarding the is placed fifth in this Index. 17.9% 24.5% 24.4% 17.4% 12.3% 8.1% 8.1% 5.2% quantity/number of justified complaints 20% % submitted against each bank separately This data did not appear in the review by 15.1 2017 13.6% or their ratio. Also, a change took place in the Supervisor for 2017, which included 15% the other indices examined and published reference to Bank's share in the number Means of Payment Credit 100% by the Supervisor. of justified complaints. 10% The quality of service - Additional operations - attentiveness and service, inheritance, foreclosure, call center and the opening debt collection and It is noted, that the data indicates 2. Second Index 5% and closure of branches execution of Orders an increase of 19% in the number of Willingness of a bank to act in favor of complaints received by the Public the customer even if his complaint was 0% Current accounts - the opening an Other 2015 2016 2017 2018 closing of accounts, transactions not Complaints Officers at the banks found unjustified ("ex gratia credit") in accordance with signature rights or Securities, deposits and compared to 2017, and an increase of with no authorization saving depositis approx. 20% in the number of complaints A high ratio reflects the willingness of a and requests for clarification received by bank to act in favor of a customer even the Supervisor of Banks, while approx. where his complaint was unjustified. Distribution of main complaints at ICC Rate of justified complaints 8% of the concluded complaints were The Supervisor of Banks sees it as MDB found justified. demonstrating a high level of fairness towards customers. 28% According to the data produced by the 30% Bank, the rate of justified complaints, The ratio of Discount Bank was reduced 66.5% 16.4% 2.5% 2.2% 25% 20% classified by the Supervisor of Banks in from 30% in 2017 to 16% in 2018. Discount 2018 16.3% 2018 as justified in relation to the Bank, Bank is placed fourth in this Index. 20% 8.4% 4% is significantly lower amounting to 5.6%, 12.7% compared to 17.5% in 2017. Nevertheless, It is noted that, in general, the average 15% 100% as stated, this data is not reflected in for the five major banks decreased from Payments Additional activity of the 10% the review for 2018, neither in relation 26.9% in 2017 to 21.9% in 2018, namely, on banking corporation Quality of Service to the Bank nor in relation to the banking the face of it, the willingness of the system Other 5% system as a whole. as a whole to act in an ex gratia manner Credit Activity of a clearing agent towards customers has decreased. 0% 2015 2016 2017 2018 The Supervisor of Banks referred to three 222 SOCIAL REPORT 2018 EPILOGUE 223

Continued from page 221

Customer complaints to the 3. Third Index Bank of Israel at the main The response time to handle complaints Appendices Employees subsidiaries in Israel The ratio of quick response reflects a General note: The data relating to Discount Bank includes tenured employees, employees engaged on personal MDB higher level of service provided by the contracts, members of Management, temporary employees and outsource workers (software houses and The total complaints submitted to the Bank Complaints Officer. The Bank responded TeleBank service center workers), but excludes employees on unpaid leave and on maternity leave. of Israel and passed for response to MDB to 94% of the complaints within thirty days amounted to 47 approaches, of which a from date of receipt of the complaint, the position has been formed regarding 25 average for the five major banks being Employees of Discount Bank and its principal subsidiaries complaints, and 3 complaints have been response to 89.4% of the complaints For the year ended on December 31 found justified. Regarding one complaint within 30 days from date of receipt of 2018 2017 2016 that had been concluded by mediation, the complaint. Discount Bank is placed Discount Bank 5,343 5,502 5,529 MDB acted in favor of the customer with third in this Index. MDB 1,388 1,431 1,431 no monetary repayment. 1 Also this data did not appear in the review ICC 1,568 1,481 1,427 ICC for 2017, which included reference to the IDB Bank 517 483 478 For details regarding ICC customer Index for the quality of handling responses Note: 1 The data do not include Outsourcing complaints submitted to the Bank of Israel to the Supervisor of Banks by complaints in 2017, see the Social Responsibility Report officers (composed of many parameters for 2017 (p.69). in addition to the response time) where the Bank received the maximum grade Ex gratia compensation to customers – (100%). Breakdown of employees by gender Seven cases of unjustified complaints were For the year ended on December 31 recorded in 2018 (out of 35 complaints Ex gratia compensation of customers 2018 2017 2016 received by the corporation and found In certain cases and for business Men Women Total Men Women Total Men Women Total unjustified, approx. 20%) regarding which, considerations, the Bank compensate Discount Bank 2,121 3,222 5,343 2,219 3,283 5,502 2,258 3,271 5,529 an ex gratia compensation was paid in a customers even if their complaint had total amount of NIS 3,600. been found unjustified, this, in general, MDB 605 783 1,388 631 800 1,431 639 792 1,431 due to the wish of the Bank to retain long- ICC1 454 1,114 1,568 418 1,063 1,481 407 1,020 1,427 standing and loyal customers. 23 cases IDB Bank 291 226 517 259 224 483 256 222 478 of unjustified complaints were recorded Note: 1 The data do not include Outsourcing in 2018 (out of a total of 147 unjustified claims, approx. 16%) in which an ex gratia compensation has been paid in a total Breakdown of employees by geographic distribution29 amount of NIS 36,000. For the year ended on December 31 A target of 18% justified complaints 2018 rate 2017 rate had been set for 2018 out of the total Jerusalem and the 608 11.4 522 9.5% complaints received by the Bank and South Region complaints received by the Bank of Israel. Central Region 568 10.6 600 10.9% The Bank reached this target in respect Discount lowlands Region 634 11.9 711 12.9% of the total complaints received, the ratio Bank Northern Region 573 10.7 628 11.4% of justified complaints being 15.1%. As Headquarters regards complaints received through 2,960 55.4 3,041 55.3% (Tel-Aviv) the Bank of Israel, the ratio of justified Total 5,343 100.0% 5,502 100.0% complaints was 5.6%.

Note: 1 Distribution according to geographic areas was improved in 2018. The comparative data was improved accordingly.

29  102-48 224 SOCIAL REPORT 2018 EPILOGUE 225

Breakdown of employees by type of engagement For the year ended on December 31 Average age and seniority 2018 2017 2016 For the year ended on December 31 Tenured employees, under personal 3,681 3,853 3,917 2018 2017 2016 contracts and members of Management Average Average Average Average age Average age Average age Temporary employees 1,215 1,285 1,304 seniority seniority seniority Discount Bank Manpower company employees - - - Discount Bank 45.0 16.1 45.1 16.5 44.8 16.4 Outsourcing1 447 364 308 MDB 44.3 16.9 43.9 16.5 43.3 16.1 Total 5,343 5,502 5,529 ICC 36.3 8.3 36.0 9.0 36.2 8.5 Tenured employees, under personal 1,209 1,232 1,225 contracts and members of Management Temporary employees 143 165 167 Employee turnover For the year ended on December 31 MDB Breakdown of new employees by gender30 Manpower company employees 73 75 93 2018 2017 2016 Software house 28 27 32 Men 151 174 206 Total 1,453 1,499 1,517 Discount Bank Women 336 448 456 Tenured employees, under personal 1,437 979 947 Total 487 622 662 contracts and members of Management Men 9 15 7 2 Temporary employees 26 505 508 ICC MDB Women 31 38 17 Outsourcing 330 177 135 Total 40 53 24 Total 1,793 1,661 1,590 Men 122 279 73 ICC Women 372 2215 253 Notes: 1 Includes employees of software houses and TeleBank service center workers. 2 2 Includes outsource workers and does not include employees on unpaid leave and female employees on maternity leave. Total 494 294 326

Notes: 1 The data include temporary employees and tenured employees. 2 The figure has been modified.

Breakdown of employees by age Breakdown of new employees by age30 For the year ended on December 31 For the year ended on December 31 2018 2017 2016 2018 2017 2016 Up to 30 668 657 689 Up to 30 334 403 433 31-50 2,823 2,827 2,795 31-50 143 203 219 Discount Bank Discount Bank Over 50 1,852 2,018 2,045 Over 50 10 16 10 Total 5,343 5,502 5,529 Total 487 622 662 Up to 30 127 118 121 Up to 30 30 35 12 31-50 849 929 987 31-50 10 18 11 MDB MDB Over 50 412 384 323 Over 50 - - 1 Total 1,388 1,431 1,431 Total 40 53 24 Up to 30 514 490 431 Up to 30 394 2204 245 31-50 783 815 827 31-50 97 87 80 ICC ICC Over 50 155 162 169 Over 50 3 23 1 Total 1,452 1,467 1,427 Total 494 2294 326

Notes: 1 Discount Bank and MDB's data include tenured employees and temporary employees. Notes: 1 The data include temporary employees and tenured employees. 2 ICC's data include permanent employees and non-permanent employees. 2 The figure has been modified. 2 The Discount Bank data includes two employees of Discount Leasing Company. 30  102-48 226 SOCIAL REPORT 2018 EPILOGUE 227

Breakdown of leaving employees by gender Breakdown of employees by reasons of leaving31 For the year ended on December 31 For the year ended on December 31 2018 2017 2016 2018 2017 2016 Men 274 250 345 Temporary Tenured Total Temporary Tenured Total Temporary Tenured Total Discount Bank Women 496 467 641 Encouraged - 157 157 - 15 15 - 312 312 Total 770 717 986 retirement Men 37 24 27 Natural 11 78 89 8 592 599 535 82 5117 MDB Women 50 30 60 retirement and leaving Total 87 54 87 > Of which: termination 11 - 11 7 - 7 34 1 35 Men 92 79 109 Discount of contract ICC Women 324 230 241 Bank Resignation 386 24 410 444 24 468 400 34 434 Total 416 309 350 Dismissal 108 43 112 119 34 123 110 33 113 Notes: 1 The data include temporary employees and tenured employees. (imposed by the 2 Discount Bank's data do not include employees leaving from maternity leave / unpaid leave. Bank) Other - 2 12 4 8 112 6 4 10

Total retirement 505 265 770 575 5142 5717 550 435 5986

Encouraged - 18 18 - 10 10 - 32 32 retirement Breakdown of leaving employees by age Natural 1 7 8 - 12 12 - 10 10 For the year ended on December 31 retirement 2018 2017 2016 and leaving Up to 30 303 363 260 Resignation 20 17 37 13 10 23 16 9 25 MDB 31-50 215 229 407 Dismissal 17 5 22 4 4 8 17 2 19 Discount Bank Over 50 252 125 319 (imposed by the Bank) Total 770 717 986 Other - 2 2 - 1 1 - 1 1 Up to 30 23 8 16 Total retirement 38 49 87 17 37 54 33 54 87 31-50 40 25 29 MDB Over 50 24 21 42 Natural 4 3 2 retirement Total 87 54 87 and leaving Up to 30 304 230 215 Resignation 283 199 230 31-50 103 75 128 ICC ICC Dismissal 143 107 108 Over 50 9 4 7 (imposed by the company) Total 416 309 350 Other - - 10

Total retirement 430 309 350

Notes: 1 Of which passed away: 2018 - 2; 2017 - 9. 2 ICC - not including employees retiring from unpaid leave / maternity leave or employees under trial period. Mobility of employees 3 The dismissals are of employees under trial period or for serious disciplinary reasons. For the year ended on December 31 4 MDB - tenured employees including employees engaged on personal contracts and members of Management. 5 The figure has been modified. 2018 2017 2016 Discount Bank 618 665 709 MDB 175 104 160 ICC 179 137 135 31  102-48 228 SOCIAL REPORT 2018 EPILOGUE 229

Maternity leave For the year ended on December 31 Events involving customers and employees, who resulted in the activation of insurance policy 2018 2017 2016 For the year ended on December 31 Men Women Men Women Men Women 2018 2017 2016 Eligible for maternity leave 129 281 140 282 160 302 Customers (third party) 16 24 12 Went on maternity leave 9 255 4 248 6 261 Discount Bank Employees (employers' liability) 9 8 4 Discount Returned from leave 9 254 4 219 6 237 Total 25 32 16 Bank Employees who were still 8 238 4 205 5 204 Customers (third party) 2 4 12 employed 12 months after MDB Employees (employers' liability) 1 - 4 returning to work Total 3 4 16 Eligible for maternity leave 41 65 44 66 52 65 Customers (third party) 5 2 2 Went on maternity leave - 65 - 66 - 65 ICC Employees (employers' liability) 14 19 3 Returned from leave - 34 - 53 - 38 MDB Total 19 21 5 Employees who were still - 65 - 66 - 65 employed 12 months after returning to work

Notes: 1 Eligible for maternity leave - Anyone who had a child born to him/her between the dates of January 1, to December 31, of that year, who did not necessarily exercise his entitlement at the Bank. 2 F or Discount Bank: a. Data for 2018 - Number of male/female employees who returned to work after a maternity leave and stayed to work - as of April 1, 2019. Employee training b. Data for 2017 - Number of male/female employees who returned to work after a maternity leave and stayed to work - as of April 27, 2018. Average training hours per employee c. Data for 2016 - Number of male/female employees who returned to work after a maternity leave and stayed to work - as of June 28, 2017. 2018 2017 2016 3 For MDB: a. Data for 2018 - Number of male/female employees who returned and stayed to work - as of December 31, 2018. Discount Bank 37 39 34 b. Data for 2017 - Number of male/female employees who returned and stayed to work - as of December 31, 2017. c. Data for 2016 - Number of male/female employees who returned and stayed to work - as of December 31, 2016. MDB 53 45 40

For the year ended on December 31 Employees absence Details of employee training data at Discount Bank 2018 2017 2016 2018 2017 2016 Men Women Men Women Men Women Total frontal instructions 26,052 29,536 26,335 Absence in respect 26,459 49,285 25,371 51,314 25,939 55,298 of paid sick days Interactions Computer-Mediated Learning 43,757 37,016 39,914 Discount Bank Absence rate 6.14% 5.99% 6.24% Average training hours per employee 37 39 34 Accidents 33 82 38 79 37 105 Average days per employee 13.07 12.95 12.68 Absence in respect 5,098 10,368 5,083 8,528 10,476 4,840 Cost of training – in NIS million 8.9 9.9 7 MDB of paid sick days Absence rate 4.6% 4.0% 4.10% Accidents 274 321 8 12 8 12 Absence in respect 4,168 14,557 3,949 17,357 3,902 14,304 of paid sick days ICC Absence rate 5.14% 5.09% 5.12% Accidents 22 28 17 57 8 18 Feedback interviews of employees Notes: 1 Paid sick days are counted according to the number of actual days. Percentage of employees who received feedback 2 The counting of days is of workdays missed by the employee and it refers to the total number of possible workdays in the year and not to the total number of days in the calendar year. 2018 2017 2016 3 The absence rate is calculated as the total actual number of absence days divided by the total number of possible workdays of the employee population at the end of the reporting year. It should be noted that the total number of absence Discount Bank 99% 99% 98% days includes all employees who in respect of which an event of “illness” was recorded, while the denominator comprises the employee population at the end of the year. As a result of this calculation format the absence rate has an upward bias. MDB 99% 98% 96% 4 Data on reported accidents are data reported to the National Insurance Institute, and include accidents on the way to and ICC 100% 99% 100% from the workplace. Therefore, these data do not constitute an indication of the number of "safety at work" events. 230 SOCIAL REPORT 2018 EPILOGUE 231

Diversity among employees Women in the different grades Appendices Community 2018 2017 2016 Scope of expenditure of the Discount Group in respect of activities for the community Women Rate of Women Rate of Women Rate of women women women 2018 2017 2016 Board of 3 23% 3 25% 4 29% In NIS thousands Directors Managers 509 50% 535 49% 533 48% Direct expense including the "Lema'an" project activities 8,925 7,726 7,667 Discount > Of which: Bank Branch Sponsorships1 535 279 186 managers 70 40% 63 39% 57 37% and above1 Direct current cost of operating the Hezelilienblum 4,401 5,420 5,501 Clerks 2,713 62.8% 2,748 62% 2,738 62% Museum2

Board of 1 10% 1 8% 2 17% Indirect expenses - payroll3 2,599 2,544 3,262 Directors MDB Managers 173 37% 162 36% 160 35% Miscellaneous expenses4 425 299 526

Clerks 610 66% 638 65% 632 65% Total 16,885 16,268 17,142 Board of 2 22.2% 2 22% 2 22% Directors Notes: 1 A small part of the expense regarding sponsorships has been taken into account – only sponsorships for social ICC Managers 164 55% 148 56% 135 54% associations. 2 Guidance team payroll and building maintenance. Clerks 947 75% 911 71% 881 69% 3 Staff of the social responsibility unit and certain other factors who were directly engaged in social responsibility matters as part of their regular working hours. 4 Mostly expenses relating to the preparation of various social and environmental responsibility reports, participation of Note: 1 Including members of Management. the Banks' Management in financing the travel to Poland and direct expenses in respect of a financial education project. 232 SOCIAL REPORT 2018 EPILOGUE 233

Appendices Green Discount List of tables and charts Name of the table/chart Page The material topics matrix 18 Greenhouse gas emissions in 2017-2018 Material Topics - reporting Boundaries 19 Discount Group Holdings Structre 25 Scope 1 Scope 2 Scope 3 Total emissions The economic value created by the Discount Group 42 2018 2017 Reporting and consultation channels 52 Discount Bank 4,272 20,015 605 24,892 26,947 Student loans in the years 2015-2018 66 MDB 715 4,845 Not measured 5,560 6,254 Lectures and Workshops 75 ICC 1,169 3,506 Not measured 4,675 5,098 Surveys conducted by the Bank 78

Notes: 1 The calculation of emissions in Scope 1 for "MDB" and "ICC" relates to consumption of fuel only; while that for Discount 2018 service quality index data 79 Bank includes also emission of air conditioning refrigerant gases. Breakdown of Discount Bank's employees by gender 98 Employees of Discount Bank and the principal subsidiaries 98 Breakdown of Discount Bank’s employees by employment categories 98 Average age and average seniority of the employees 1 99 Details regarding the investment of Discount Bank in the process of reducing Academic education 99 greenhouse gas emissions in 2018, and the annual savings deriving from them: Wage differences between female and male employees 101 Type of activity Description Investment in Annual Annual GHG Expected annual Employment of underrepresented populations in the labor market – Discount Bank 107 NIS thousands energy emissions financial savings2 savings reduction (estimate in NIS) Employment of underrepresented populations in the labor market – MDB 110 (in kwh) (CO2e tons) Employment of underrepresented populations in the labor market – ICC 110 Energy Energy 9,690 952,768 514 331,000 Data regarding the retirement of employees 112 efficiencies efficiencies in in buildings A/C systems The ratio between the average cost of remuneration of the senior officer group and the average cost and mean cost of remuneration of all employees 116 Energy Upgrading 640 231,442 125 83,000 efficiencies the lighting Data regarding average annual training hours per employee 122 in buildings systems Average annual training hours per employee 122 Buildings – - 890,587 480 318,000 Training days at Discount Bank 122 reduction of space Training days at MDB 128 Total year 2018 10,330 2,047,797 1,119 732,000 Data regarding employee and manager training inputs at ICC 130 Total year 2017 10,800 6,299,351 3,796 3,244,000 Discount Sprint for the Future - General data 151

Notes: 1 Savings in the consumption of electricity in relation to 2017. Estimated as a percentage of total savings in consumption. Ratio of volunteering employee 153 2 In accordance with actual savings data, estimated as a percentage of the total financial savings. Average hours per employee 153 Distribution of the investment of the Discount Group 154 Total investment of the Discount Group in the community 154 Breakdown of the consumption of energy from various sources - Discount Bank 169 Discount Bank’s electricity consumption 169 Discount Bank's energetic intensity 169 Discount Bank's fuel consumption 170 Savings in Discount Bank's array of shuttle services 170 Data regarding the estimated savings resulting from the provision of a shuttle service for employees in Discount 170 Discount Bank’s paper consumption 171 Discount Bank’s carbon footprint according to scopes 173 The intensity of Discount's greenhouse gas emissions 173 MDB’s consumption of energy from various sources 175 234 SOCIAL REPORT 2018

Name of the table/chart Page MDB’s consumption of electricity 175 MDB’s fuel consumption 175 MDB's energetic intensity 176 MDB’s paper consumption 176 ICC’s consumption of energy from various sources 177 ICC’s consumption of electricity 177 ICC’s energetic intensity 178 ICC’s fuel consumption 178 Discount Bank's Organizational Structure Chart 183 Composition of the Board of Directors 187 Details regarding members of management 195

GRI Content Index combined with UNGC 210- 218 Complaints and enquiries data at Discount Bank 220 Rate of justified complaints - Discount Bank 220 Distribution of the subjects of main complaints at Discount Bank 220 Rate of justified complaints - MDB 220 Distribution of main complaints at ICC 220 Employees of Discount Bank and its principal subsidiaries 223 Breakdown of employees by gender 223 Breakdown of employees by geographic distribution 223 Breakdown of employees by type of engagement 224 Breakdown of employees by age 224 Average age and seniority 225 Breakdown of new employees by gender 225 Breakdown of new employees by age 225 Breakdown of leaving employees by gender 226 Breakdown of leaving employees by age 226 Mobility of employees 226 Breakdown of employees by reasons of leaving 227 Maternity leave 228 Employees absence 228 Events involving customers and employees, who resulted in the activation of insurance policy 229 Average training hours per employee 229 Details of employee training data at Discount Bank 229 Percentage of employees who received feedback 229 Women in the different grades 230 Scope of expenditure of the Discount Group in respect of activities for the community 231 Greenhouse gas emissions in 2017-2018 232 Details regarding the investment of Discount Bank in the process of reducing greenhouse gas emissions in 2018, and the annual savings deriving from them 232