Each of these Committees has specific written terms of reference, which set out in detail their respective authorities and responsibilities. Each Committee reviews its terms of reference and effectiveness annually. The terms of reference of all the Non-executive Board Committees have been made available on the Bank’s website (www.hangseng.com). All Committees, except the Executive Committee and Nomination Committee, comprise solely of Independent Non-executive Directors (“INEDs”). Majority of the Nomination Committee members are INEDs while the Executive Committee comprises the Bank’s Executive Directors (“EDs”) and senior executives.
All Committees adopt the same governance processes as the Board as far as possible and report back to the Board on their decisions and recommendations on a regular basis.
Brief information and composition of all these Committees are set out in the section “Board Committees” on the Bank’s website.
The Executive Committee meets approximately ten times a year and operates as a general management committee under the direct authority of the Board. It exercises the powers, authorities and discretions as delegated by the Board in so far as they concern the management and day-to-day running of the Bank in accordance with its terms of reference and such other policies and directives as the Board may determine from time to time. The Executive Committee also sub-delegates credit, investment and capital expenditure authorities to its members and senior executives.
To further enhance the Bank’s risk management framework and in line with best practices, the Bank has set up a Risk Management Meeting, a risk meeting of the Executive Committee, to provide recommendations and advice to the Bank’s Chief Risk Officer on enterprise-wide management of all risks, policies and guidelines for the management of risk within the HASE Group. Risk Management Meetings are held not less than ten times each year. Minutes of Risk Management Meetings are provided to the Executive Committee and the Risk Committee for review and oversight purpose.
The Audit Committee meets at least four times a year with the Bank’s executives including the Chief Executive, Chief Financial Officer, Chief Risk Officer, Head of Audit, and representatives from the Bank’s external auditor. The Committee reviews, among other things, the Bank’s financial reporting, the nature and scope of audit reviews, and the effectiveness of the systems of internal control and compliance relating to financial reporting. The Audit Committee is also responsible for making recommendations to the Board on the appointment, re-appointment, removal and remuneration of the Bank’s external auditor. In addition, the Audit Committee has established a “Policy for the Reporting of Improprieties” to provide a secured and confidential channel through which all staff members may report incidents of improprieties on a strictly confidential basis so that the same can be timely and thoroughly investigated and appropriate actions can be taken promptly.
The Audit Committee reports to the Board following each Audit Committee meeting, drawing the Board’s attention to significant issues or matters of which the Board should be aware, identifying any matters in respect of which it considers that action or improvement is needed, and making relevant recommendations.
During 2018, the Audit Committee held five meetings and the major work performed by the Committee was as follows:
 |
reviewed the financial statements for the year ended 31 December 2017 and the related documents, and internal control recommendations and audit issues noted by the Bank’s external auditor |
|
|
reviewed the interim financial statements for the six months ended 30 June 2018 and the related documents, and the issues noted by the Bank’s external auditor |
|
|
reviewed and approved the quarterly banking disclosure statements for reporting periods ended 31 December 2017, 31 March 2018, 30 June 2018 and 30 September 2018 |
|
|
reviewed the annual operating plan and capital plan for year 2018 |
|
|
reviewed the balance sheet management position |
|
|
reviewed the revised accounting standards and prospective changes to accounting standards, in particular, the update on IFRS9 implementation and the impact on the Bank’s financial reporting |
|
|
reviewed the significant policies and plans including, but not limited to, the Bank’s Recovery Plan. |
|
|
reviewed the internal audit reports and discussed the same with the Management and Head of Audit |
|
|
reviewed and adopted the revised Internal Audit Charter and Audit Instruction Manual |
|
|
reviewed the update on internal audit plan for 2018 and approved the internal audit plan for 2019 |
|
|
reviewed the update on Sarbanes-Oxley Act (SOX) implementation and internal control system assessment as at 31 December 2017 and 30 June 2018 |
|
|
reviewed the adequacies of resources, qualifications and experience of staff of the Accounting and Financial Reporting function and Internal Audit function, and their training programmes and budgets |
|
|
reviewed the re-appointment, remuneration and engagement letter of the Bank’s external auditor, its independence and objectivity, and the effectiveness of the audit process |
|
|
reviewed the incidents reported under the Policy for the Reporting of Improprieties during the year |
|
|
reviewed the Audit Committee’s independence and effectiveness in discharging its role and responsibilities, and its terms of reference |
|
|
endorsed the appointment of an audit committee member of the Bank, and audit committee chairman of the Bank’s insurance subsidiary |
The Audit Committee also meets annually with the representatives of the Bank’s Head of Audit and external auditor without the presence of the Management in accordance with its terms of reference.
The Risk Committee meets at least four times a year with the Bank’s executives including the Chief Executive, Chief Financial Officer, Chief Risk Officer, Head of Audit, Head of Regulatory Compliance, Head of Financial Crime Compliance, and representatives from the Bank’s external auditor. The Committee is responsible for, among other things, the Bank’s high level risk related matters, risk appetite and tolerance, risks associated with proposed strategic acquisitions or disposals, risk management reports from the Management, effectiveness of the enterprise risk management framework and systems of internal control and compliance (other than that regarding financial reporting), and appointment and removal of the Chief Risk Officer.
Pursuant to HKMA’s Circular on “Bank Culture Reform”, the Board has also delegated to the Risk Committee to encompass culture-related responsibilities. Such responsibilities include actions to approve, review and assess, at least annually, the adequacy of any relevant statement which sets out the Bank’s culture and behavioural standards.
The Risk Committee reports to the Board following each Risk Committee meeting, drawing the Board’s attention to significant issues or matters of which the Board should be aware, identifying any matters in respect of which it considers that action or improvement is needed, and making relevant recommendations.
During 2018, the Risk Committee held five meetings and the major work performed by the Committee was as follows:
|
|
reviewed the update on implementation of HKMA’s guidance on bank culture reform, and the progress update on the Bank’s culture action plan, and endorsed the adoption of the Culture Statement |
|
|
reviewed the routine risk reports submitted by the Management including, but not limited to, enterprise risk management framework, risk governance structure, internal control system assessment, global risk appetite framework addendum and risk appetite statement with mid year review and profile update, risk maps, top and emerging risks, annual plan and progress update relating to financial crime compliance, regulatory compliance and internal control, and summary of HKMA’s regulatory on-site examinations |
|
|
reviewed the enterprise wide risk assessment report, internal capital adequacy assessment process, and endorsed the individual liquidity adequacy assessment process, credit approval authority limits, risk data aggregation and risk reporting frameworks and other significant policies and plans including, but not limited to, the Bank’s Recovery Plan, Contingency Funding Plan, Liquidity Management Policy, Connected Lending Policy, Capital Management Policy and Large Credit Exposure Policy |
|
|
reviewed the report on the alignment of risk and remuneration, and outcome of incentivising compliance for the pay review of performance year 2017 |
|
|
reviewed the internal control recommendations and audit issues noted by the Bank’s external auditor in the annual audit |
|
|
reviewed the Internal Audit Plan for 2019 and resourcing requirements, the revised Internal Audit Charter, the Audit Instruction Manual, and internal audit reports and key themes insofar as the same give rise to any risk-related issues |
|
|
reviewed the adequacies of resources, qualifications and experience of staff of the Risk and Compliance function, and their training programmes and budgets |
|
|
reviewed the incidents reported under the Policy for the Reporting of Improprieties during the year |
|
|
reviewed the update of cyber security risk and the revised accounting standards and prospective changes to accounting standards, in particular, the update on IFRS9 implementation, and the impact on the Bank insofar as the same give rise to any risk-related issues |
|
|
reviewed HKMA supervisor-driven stress test for 2017, and endorsed the scenarios setting and approach of the Bank’s stress testing |
|
|
reviewed the Risk Committee’s independence and effectiveness in discharging its role and responsibilities, and its terms of reference |
|
|
endorsed the appointment of a risk committee member of the Bank, and risk committee member of the Bank’s insurance subsidiary |
The Risk Committee also meets annually with the Bank’s Chief Risk Officer and Head of Audit separately without the presence of the Management in accordance with its terms of reference.
The Remuneration Committee normally meets twice a year with the Bank’s Head of Human Resources. The Committee considers and provides advice to the Board on the remuneration policy and structure in order to attract, motivate and retain quality personnel. Pursuant to delegation by the Board, the Committee also determines and proposes for the Board’s approval the remuneration policy, and the specific remuneration packages of all EDs, senior management and key personnel. In addition, it reviews at least annually and independently of the Management, the adequacy and effectiveness of the Bank’s remuneration policy and its implementation, to ensure that the Bank’s remuneration policy is consistent with relevant regulatory requirements and promotes effective risk management.
In determining the bank-wide remuneration policy, the Remuneration Committee will take into account the Bank’s business objective, people strategy, short-term and long-term performance, business and economic conditions, market practices, conduct, compliance and risk control, in order to ensure that the remuneration aligns with business and individual performance, promotes effective risk management, facilitates retention of quality personnel and is competitive in the market. The Committee may invite any Director, executive, consultant or other relevant party to provide advice in this respect, if necessary. In 2018, the Committee has requested to seek advice from an external consultant relating to the independent review of the Bank’s remuneration policy and its implementation for year 2018.
The Remuneration Committee reports to the Board following each Committee meeting, drawing the Board’s attention to significant issues or matters of which the Board should be aware, identifying any matters in respect of which it considers that action or improvement is needed, and making relevant recommendations.
During 2018, the Remuneration Committee held three meetings and the major work performed by the Committee was as follows:
|
|
endorsed the fees payable to the Bank’s Chairman, and the Directors and Board Committee chairmen/members of the Bank and its subsidiaries |
|
|
endorsed the remuneration packages of Directors, senior management and key personnel of the Bank |
|
|
reviewed the new approach of pay review process for performance year 2017 |
|
|
endorsed the proposed variable pay for 2017 and pay review proposal for 2018 |
|
|
reviewed the report on the alignment of risk and remuneration, and outcome of incentivising compliance for the pay review of performance year 2017 |
|
|
reviewed the revised remuneration policy and the list of the Bank’s material risk takers to further strengthen the governance in response to tightened regulatory requirements |
|
|
approved the appointment of independent reviewer for the Bank’s remuneration policy and its implementation |
|
|
reviewed the outcome of the independent review by an external reviewer of the Bank’s remuneration policy and remuneration system, and the adequacy and effectiveness of its implementation |
|
|
reviewed the Remuneration Committee’s effectiveness in discharging its role and responsibilities, and its terms of reference |
The Nomination Committee meets at least twice a year. It leads the process for Board appointments and identifies and nominates candidates for appointment to the Board, for the Board’s approval. The Committee also considers, among other things, the structure, size and composition of the Board and Non-executive Board Committees, independence of INEDs, re-election of Directors, term of appointment of Non-executive Directors (“NEDs”), time commitment required from NEDs, appointment to Board Committees, and approves the appointment to the position of “manager” as defined under the Banking Ordinance.
The Nomination Committee reports to the Board following each Committee meeting, drawing the Board’s attention to significant issues or matters of which the Board should be aware, identifying any matters in respect of which it considers that action or improvement is needed, and making relevant recommendations.
During 2018, the Nomination Committee held three meetings and the major work performed by the Committee was as follows:
|
|
endorsed the appointment of Audit and Risk Committee members, an Executive Committee member and the Head of Audit |
|
|
approved the appointment of “managers” under the Banking Ordinance |
|
|
reviewed the structure, size and composition of the Board and Non-executive Board Committees |
|
|
reviewed the succession planning for the Board and senior management |
|
|
reviewed the independence of INEDs |
|
|
reviewed the time commitment required from NEDs |
|
|
endorsed the renewal of terms of appointment of NEDs |
|
|
endorsed the re-election of Directors |
|
|
approved the revised appointment letter for NEDs |
|
|
reviewed the Nomination Committee’s effectiveness in discharging its role and responsibilities, and its terms of reference |