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 INEDs. Majority of the Nomination Committee members are INEDs while the Executive Committee comprises the Bank’s 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.
Executive Committee
The Executive Committee usually meets once a month 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 usually held monthly. Minutes of Risk Management Meetings are provided to the Executive Committee and the Risk Committee for review and oversight purpose.
Audit Committee
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 2017, 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 2016 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 2017 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 March, 30 June and 30 September 2017
reviewed the annual operating plan and capital plan for year 2017
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 and revised Disclosure Policy.
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 enhanced Global Internal Audit Standards Manual
reviewed the update on internal audit plan for 2017 and approved the internal audit plan for 2018
reviewed the update on Sarbanes-Oxley Act (SOX) implementation and internal control system assessment as at 31 December 2016 and 30 June 2017
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
reviewed and adopted the revised approach for the governance and interaction with the audit committees of the Bank’s subsidiaries, and exercised oversight over such committees
endorsed the appointment of an audit committee chairman of the Bank’s subsidiary in Mainland China
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.
Risk Committee
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.
Following the issuance of HKMA’s Circular on “Bank Culture Reform” in March 2017, 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 standard.
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 2017, the Risk Committee held five meetings and the major work performed by the Committee was as follows:
reviewed the routine risk reports submitted by the Management including, but not limited to, enterprise risk management framework, 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 internal capital adequacy assessment process, individual liquidity adequacy assessment, 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 2016
reviewed the internal control recommendations and audit issues noted by the Bank’s external auditor in the annual audit
reviewed the revised Internal Audit Charter, the enhanced Global Internal Audit Standards Manual, and internal audit reports 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 the Risk Committee’s independence and effectiveness in discharging its role and responsibilities, and its terms of reference
reviewed and adopted the revised approach for the governance and interaction with the risk committees of the Bank’s subsidiaries, and exercised oversight over such committees
endorsed the appointment of a risk committee member of the Bank’s subsidiary in Mainland China
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.
Remuneration Committee
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 2017, the Committee has requested to seek advice from external consultant on matters relating to remuneration.
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 2017, the Remuneration Committee held four meetings and the major work performed by the Committee was as follows:
reviewed the fees payable to the Bank’s Chairman, and the Directors and Board Committee chairmen/members of the Bank and its subsidiaries, and made its recommendation to the Board
determined the remuneration packages of EDs, senior management and key personnel of the Bank
reviewed the proposed variable pay for 2016 and pay review proposal for 2017, and recommended the same to the Board for approval
reviewed the report on the alignment of risk and remuneration, and outcome of incentivising compliance for the pay review of performance year 2016
reviewed and updated the remuneration policy and the list of the Bank’s material risk takers to further strengthen the governance in response to tightened regulatory requirements
reviewed the outcome of the independent review by the Internal Audit function 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
Nomination Committee
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 NEDs, time commitment required from NEDs, and appointment to Board Committees.
The Nomination Committee reports to the Board following each Committee meeting, drawing the Board’s attention to significant issue 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 2017, the Nomination Committee held three meetings and the major work performed by the Committee was as follows:
reviewed and recommended the proposed appointment of Vice-Chairman and Executive Directors to the Board for approval
reviewed the structure, size and composition of the Board and Non-executive Board Committees
reviewed the succession planning for the Board
reviewed the independence of INEDs
reviewed the time commitment required from NEDs
recommended the renewal of terms of appointment of NEDs to the Board for approval
recommended the re-election of Directors to the Board for endorsement
reviewed the Nomination Committee’s effectiveness in discharging its role and responsibilities, and its terms of reference
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