Delegation by the Board
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 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 nine 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 the Bank’s 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 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 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, the effectiveness of the systems of internal control and compliance relating to financial reporting, and the operation and effectiveness of whistleblowing policies and procedures. 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 Bank has adopted HSBC Group’s HSBC Confidential whereby all staff members may report incidents of improprieties on a strictly confidential and secured 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 2020, the Audit Committee held four meetings and the major work performed by the Committee was as follows:
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reviewed the financial statements for the year ended 31 December 2019 and the related documents, and internal control recommendations and audit issues noted by the Bank’s external auditor |
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reviewed the interim financial statements for the six months ended 30 June 2020 and the related documents, and the issues noted by the Bank’s external auditor |
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reviewed and approved the quarterly banking disclosure statements for reporting periods ended 31 December 2019, 31 March 2020, 30 June 2020 and 30 September 2020 |
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reviewed the annual operating plan and capital plan for year 2020 and the revised internal capital targets for 2020 and onwards |
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reviewed the balance sheet management position |
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reviewed the financial reporting risk update, which included the effectiveness of the Bank’s internal control systems relating to financial reporting and the Bank’s financial and accounting policies and practices, as well as the revised accounting standards and prospective changes to accounting standards |
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reviewed the significant policies and plans including, but not limited to, the Bank’s Recovery Plan |
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reviewed the internal audit reports and discussed the same with the Management and Head of Audit |
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adopted the revised Internal Audit Plan and Internal Audit Charter for 2020, and reviewed the resources arrangements, audit statistics, internal audit reports and key themes, and the progress for the draft Annual Audit Planning for 2021 |
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reviewed the update on Sarbanes-Oxley Act (SOX) implementation, internal control system assessment and accounting reconciliations control certificates as of 31 December 2019 and 30 June 2020 |
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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 |
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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 |
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reviewed the report on whistleblowing cases in 2020 and the operation and effectiveness of the whistleblowing arrangements |
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reviewed the Audit Committee’s independence and effectiveness in discharging its role and responsibilities, and its terms of reference |
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approved the Audit Committee Certificate of the Bank and its subsidiaries |
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endorsed the appointment of Audit Committee members of the Bank and its subsidiary |
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reviewed the composition of the Audit Committees of the Bank and its subsidiaries |
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escalated significant issues to the Audit Committee of The Hongkong and Shanghai Banking Corporation Limited (“HSBC”) |
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 2020, the Risk Committee held four meetings and the major work performed by the Committee was as follows:
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reviewed the Bank’s Culture Statement and culture dashboards |
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reviewed the first line of defence reports of all lines of businesses |
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reviewed the regular risk reports submitted by the Management including, but not limited to, risk management framework, risk governance structure, internal control system assessment, risk appetite statement and framework and profile update, risk profile papers (including risk maps and top and emerging risks) , regulatory compliance reports, annual plan and progress update relating to financial crime compliance and regulatory compliance, and summary of HKMA’s regulatory on-site examinations |
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reviewed the enterprise wide risk assessment report, internal capital adequacy assessment process, and endorsed the individual liquidity adequacy assessment process, credit approval authority limits, and other significant policies and plans including, but not limited to, the Bank’s Recovery Plan, Corporate Lending Policy, Contingency Funding Plan, Liquidity Management Policy, Connected Lending Policy, Capital Management Policy, Large Credit Exposure Policy, Retail Credit Risk Policy, New Product Approval Policy, Strategic Risk Management Policy, Third Party Risk Policy, 2020 and 2021 Traded Risk Limits, Traded Risk Limit Amendment Policy, Reputational Risk Management Policy, Model Risk Management Policy, HSBC Operational Risk Management Framework, and Outsourcing Management Framework |
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approved the annual plan of the Risk function for 2020 including risk priorities for 2020 |
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reviewed the report on the alignment of risk and remuneration, and outcome of incentivising compliance for the pay review of performance year 2019 |
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reviewed the revised Internal Audit Plan and the Internal Audit Charter for 2020, and the resources arrangements, audit statistics, internal audit reports and key themes, and the progress for the draft Annual Audit Planning for 2021 |
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reviewed the adequacy of resources, qualifications and experience of staff of the Risk and Compliance function, and their training programmes and budgets |
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reviewed the report on whistle-blowing cases in 2020 and the operation and effectiveness of the whistleblowing arrangements |
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reviewed the update of cyber security risk and cyber resilience assessment framework, including the target cyber resilience maturity |
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reviewed the operational resilience programme, implementation status of BCBS 239 compliance, development of data strategy, proactive country analytics investigations, and model risk management |
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reviewed the Risk Committee’s independence and effectiveness in discharging its role and responsibilities, and its terms of reference |
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approved the Risk Committee Certificate of the Bank and its subsidiaries |
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endorsed the appointment of Risk Committee member of the Bank’s subsidiary |
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review of composition of the Risk Committees of the Bank and its subsidiaries |
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reviewed the information cascaded from and escalated significant issues to the Risk Committee of HSBC |
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 meets at least twice a year to consider and provide advice to the Board on the remuneration policy and structure in order to underpin the Bank’s people strategy. Pursuant to delegation by the Board, the Committee also considers and proposes for the Board’s approval the remuneration packages of all EDs, senior management, key personnel and head of control functions. 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 practices are 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 2020, 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 2020.
The Remuneration Committee reports to the Board following each Committee meeting, and draws to the Board’s attention any significant issues, identify any action or improvement required, and makes relevant recommendations.
During 2020, the Remuneration Committee held two meetings and the major work performed by the Committee was as follows :
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endorsed the remuneration packages of Executive Directors, senior management, key personnel and Heads of Control Functions of the Bank |
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endorsed the proposed variable pay for 2019 and pay review proposal for 2020, and the update on 2020 performance and pay review process and changes to performance management |
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endorsed the fees payable to Non-executive Directors and Committee Chairmen/Members of the Bank and its subsidiaries |
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reviewed the report on the alignment of risk and remuneration, and outcome of incentivising compliance for performance year 2019 variable pay |
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reviewed and endorsed the revised remuneration policy for the Board’s approval |
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approved the appointment of independent reviewer for the annual review of the Bank’s remuneration policy and its implementation |
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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 |
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reviewed the Remuneration Committee’s effectiveness in discharging its role and responsibilities, and endorsed its revised terms of reference for the Board’s approval |
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approved the Remuneration Committee Certificate of the Bank and its subsidiaries |
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endorsed the remuneration packages for senior management and recommended to the Board for approval |
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endorsed the consequence management actions proposed by the Management |
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reviewed the composition of the Remuneration Committees of the Bank and its subsidiary |
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reviewed the information cascaded from and escalated significant issues to the Remuneration Committee of HSBC |
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 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. Since 2019, the Bank has adopted its Nomination Policy to ensure that proper selection and nomination processes are in place for Board appointments. The Nomination Committee shall consider the candidates based on merit having regard to the experience, skills, expertise as well as the overall Board diversity and shall undertake adequate due diligence in respect of the candidates and make recommendations for the Board’s consideration and, if thought fit, approval. The Nomination Policy is also available on the website of the Bank (www.hangseng.com). The Bank will from time to time review the Nomination Policy and monitor its implementation to ensure its compliance with regulatory requirements and good corporate governance practices.
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 2020, the Nomination Committee held three meetings and the major work performed by the Committee was as follows:
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endorsed the appointment of INED and Board Committee member |
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approved the appointment of Executive Committee member and senior executives |
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approved the appointment of “managers” under the Banking Ordinance |
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reviewed the structure, size and composition of the Board and Non-executive Board Committees |
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approved the role profile of the Chairman of the Board, and endorsed and recommended for the Board’s approval the proposed new Chairman of the Board and changes to Board Committee composition |
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reviewed the succession planning for the Board and senior management |
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reviewed the independence of INEDs |
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reviewed the time commitment required from NEDs |
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endorsed the renewal of terms of appointment of NEDs |
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endorsed the re-election and election of Directors |
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reviewed the revised appointment letter for NEDs |
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reviewed the Nomination Committee’s effectiveness in discharging its role and responsibilities, and its terms of reference |