Stewardship

Board Human Resources and Remuneration Committee Report

Composition of the Board Human Resources and Remuneration Committee

The Board appointed Human Resources and Remuneration Committee comprised of three Non-Executive Directors and the Executive Director who is the Managing Director of the Bank, who is present by invitation.

Mr. D.S. Weerakkody - Chairman

Mr. K.G.D.D. Dheerasinghe - Deputy Chairman

Prof. U.P. Liyanage

Mr. W.M.R. Dias - Managing Director/CEO - By invitation

Brief profiles of each member are given on 'Board of Directors' section.

The Managing Director who is responsible for the overall management of the Bank provides information to the Committee and participates in all deliberations. The Managing Director took part in all deliberations except in relation to those matters where the outcome had an impact on him.

Charter of the Board Human Resources and Remuneration Committee

The Committee is vested with power to evaluate, assess, decide and recommend to the Board of Directors on any matter that may affect the Human Resources Management of the Bank and shall specifically include the following:

• Determine the compensation of the Chairman, Deputy Chairman, Managing Director and other members of the Board of Directors of the Bank, while ensuring that no Director is involved in setting his or her own remuneration.
• Determine the compensation and benefits of the Key Management Personnel and establish performance parameters in setting their individual goals and targets.
• Formulate guidelines, policies and parameters for the compensation structures for all Executive staff of the Bank and oversee the implementation thereof.
• Review information related to executive pay from time to time, in order to ensure same is in par with the market / industry rates or as per the strategy of the Bank.
• Evaluate the performance of the Managing Director and Key Management Personnel against the pre-agreed targets and goals.
• Make recommendations to the Board of Directors from time-to-time of the additional/new expertise required by the Bank.
• Assess and recommend to the Board of Directors of the promotions of the Key Management Personnel, address succession planning and issues connected to the organisational structure.
• Evaluate, assess and make recommendations and provide directions pertaining to the Board of Trustees and the management of the private Provident Fund of the Bank.
• Make recommendations/decisions/directions pertaining to the statutory payments made by the Bank on behalf of its employees (EPF, ETF, Terminal Benefits, etc.), ensuring the effective fulfilment of all commitments arising as a result of the employer-employee relationship.
• Recommend/decide/give directions on disciplinary matters resulting in a significant financial loss to the Bank caused by Key Management Personnel of the Bank.
• Formulate formal and transparent procedures for developing policy on remuneration for Executives and Directors.
• Approve annual increments, bonuses, changes in perquisites and incentives.

Board Human Resources and Remuneration Committee Guiding Principles

The Overall focus of the Committee:

• Setting guidelines and policies to formulate compensation packages, which are attractive, motivating and capable of retaining qualified and experienced employees in the Bank. In this regard, the Committee sets the criteria such as qualifications, experience, skills and competencies required which are to be considered for appointment or promotion to the post of Managing Director and to Key Management positions.
• Setting guidelines and policies to ensure that the Bank upholds and adhere to the provisions of the Laws of the Land, particularly those provisions of the Banking Act No. 30 of 1988, including the Directions issued by the Monetary Board / Director of Bank Supervision in accordance of the provisions of such Act.
• Providing guidance and policy direction for relevant matters connected to general areas of Human Resources Management of the Bank.
• Ensuring that the performance related element of remuneration is designed and tailored to align employee interests with those of the Bank and its main stakeholders which ensure sustainable growth.
• Structuring remuneration packages to ensure that a significant portion of the remuneration is linked to performance which builds a pay for performance culture.
• Promoting a culture of regular performance reviews to enable staff to obtain feedback from their superiors in furtherance of achieving their objectives and development goals.
• To develop a robust pipeline of rising talent capable and available to fill key positions in the Bank.

Board Human Resources and Remuneration Committee Meetings

The Committee held eight meetings during the year under review. The attendance of committee members at meetings is stated in the table on 'Corporate Governance' Section. The Chairman of the Committee can convene a special meeting in the event a requirement arises, provided all members are given sufficient notice of such special meeting. The quorum for a meeting is three (3) members.

Members of the Corporate Management are invited to participate at the sittings of the Committee meetings as and when required by the Chairman, considering the topics for deliberation at such meeting.

The proceedings of the Committee meetings were regularly reported to the Board of Directors.

Methodology used by the Board Human Resources and Remuneration Committee

The Committee recognised rewards as one of the key drivers influencing employee behaviour, thereby impacting business results. Therefore, the reward progammes are designed to attract, retain and to motivate employees to deliver results by linking performance to demonstrable performance based criteria. In this regard, the Committee evaluates the performance of the Managing Director and Key Management Personnel against the pre-agreed targets and goals that balance short and long term financial and strategic objectives.

The Bank's variable (bonus) pay plan is determined according to the overall achievements of the Bank and pre-agreed individual targets, which are based on various performance parameters. The level of variable pay is set to ensure that individual rewards reflect the overall performance of the Bank, the particular business unit and individual performance. The Committee makes appropriate adjustments to the bonus pool in the event of over or under achievement against pre-determined targets. In this regard, the Committee can seek external independent professional advice on matters falling within its purview.

Further, the Committee may seek external agencies at regular intervals to carry out salary surveys to determine the salaries paid to staff vis-à-vis the market position, enabling the Committee to make informed decisions regarding the salaries in the Bank. Moreover, the Committee also ascertains the engagement levels of staff through Staff Engagement Surveys.

For the Committee broadening the leadership base in the bank is a strategic priority. Development areas were focused, having followed up from the '360-degree Evaluation' done previously for the leadership team of the Bank. This intervention was to ensure the Bank's leadership is adequately developed to face current and future challenges and to build a broader leadership capacity and a deeper pipeline of leaders. The Bank is also focusing on a competency-based approach to leadership to make better-informed decisions in hiring, developing and promoting leaders.

Further, the Committee reviewed the succession plans and the talent management process in respect of the senior management of the Bank. Succession planning within the Bank also incorporates diagnostic tools and methods for assessing the developmental readiness of employees for particular experiences and roles.

The Committee also advised the management to identify a set of customer service competencies and train the front line staff, based on those competencies. Among the other activities of the Committee during this period,

1. reviewed the existing ESOP scheme
2. revised and approved the loan schemes applicable to all levels of staff which will be effective for a period of three years and
3. reviewed the HR Strategy to ensure the HR organisation is positioned to create value and deliver strategically relevant business capabilities.

 

D.S. Weerakkody
Chairman - Board Human Resources and Remuneration Committee

Colombo
February 27, 2013

 

Board Integrated Risk Management Committee Report

Composition of the Board Integrated Risk Management Committee

The Board appointed Integrated Risk Management Committee (BIRMC) as at the end of the year comprised of the following members:

Mr. K.G.D.D. Dheerasinghe* - Chairman

Prof. U.P. Liyanage

Mr. L. Hulugalle*

Mr. M.P. Jayawardena

Mr. S. Swarnajothi*

Mr. W.M.R.S. Dias - Managing Director/CEO

Mr. J. Durairatnam - Executive Director/Chief Operating Officer

Mr K.D.N. Buddhipala - Chief Financial Officer/Secretary of the BIRMC

Mr. S.C.U. Manatunge - Chief Risk Officer

* Independent Non-Executive Director

Please refer 'Board of Directors' section for the profiles of the Board members.

Charter of the Board Integrated Risk Management Committee

The BIRMC was established by the Board of Directors, in compliance with the Section 3 (6) of the Direction No. 11 of 2007, on 'Corporate Governance for Licensed Commercial Banks in Sri Lanka', issued by the Monetary Board of the Central Bank of Sri Lanka under powers vested in the Monetary Board, in terms of the Banking Act No. 30 of 1988. The composition and the scope of work of the Committee is in conformity with the provisions of the Section 3 (6) (v) of the aforesaid Direction.

The Charter of the BIRMC was reviewed by the Board of Directors in June 2012. The BIRMC Charter clearly sets out the membership, source of authority, duties and responsibilities of the BIRMC. Functions of the BIRMC in the Bank's overall risk management framework have been discussed in detail under 'Managing Risk at Commercial Bank' on this Stewardship report.

Board Integrated Risk Management Committee Meetings and the Methodology :

The Committee held four meetings on a quarterly basis, during the year under review. The attendance of Committee Members at meetings is stated in the table on 'Corporate Governance' section. The BIRMC assists Board of Directors in performing its oversight function in relation to different types of risks faced by the Bank in its business operations and ensures adequacy of effectiveness of the risk management framework of the Bank. The Committee submits a risk assessment report within a week of each meeting to the Board of Directors. Duties of the BIRMC include determining the adequacy and effectiveness of such measures, and to ensure that the actual overall risk profile of the Bank conforms to the desirable risk profile of the Bank, as defined by the Board of Directors.

The Committee assesses all key risks such as Credit, Operational, Market, Liquidity etc., on a monthly basis through a set of risk indicators.

The Committee continued to work very closely with the Key Management Personnel and the Board of Directors in fulfilling its statutory, fiduciary and regulatory responsibilities for risk management.

Activities of the Committee

In order to discharge the above duties and responsibilities, the Committee undertakes to carryout the following:

• Reviewing the terms of reference of all Management Committees dealing with specific risks or some aspect of risk, such as the Executive Integrated Risk Management Committee, The Executive Committee on Monitoring NPAs, the Credit Policy Committee and the Assets and Liabilities Committee.
• Monitoring the actions initiated by Senior Management to test the effectiveness of the measures taken by the respective Committees referred to above.
• Reviewing the annual work plan, related strategies, policies and framework of the above Committees, to ensure that the Committees have a good understanding of their mandate and adequate mechanism to identify, measure, avoid, mitigate, transfer or manage the risks within the qualitative and quantitative parameters set by the BIRMC.
• Maintaining a continuous dialogue with the Management Committees directly or indirectly dealing with specific risks, so that the BIRMC is immediately informed of any hindrance, obstacle, discouragement or constraint in the performance of their functions and/or the implementation of their decisions.
• Reviewing the risk indicators designed to monitor the level of specific risks at any given time, with a view of determining the adequacy of such indicators to serve the intended risk management objectives.
• Reviewing the actual results computed monthly against each risk indicator and take prompt corrective action(s) to mitigate the effects of specific risks, in case such risks are exceeding the prudent thresholds defined by the Board of Directors.
• Reviewing and approving the parameters and limits set by the management against various categories of risk and ascertain whether they are in accordance with the relevant laws and regulations as well as the desired policy levels stipulated by the Board of Directors.
• Taking appropriate actions against the failures of the officers responsible for risk management functionality to improve the overall effectiveness of risk management at the Bank.
• Monitoring the effectiveness and the independence of the risk management function within the Bank and ensure that adequate resources are deployed for this purpose.
• Reviewing the effectiveness of the compliance function, to assess the Bank's compliance with laws, regulations, regulatory guidelines, internal controls and approved policies in all areas of business operations.
• Reviewing the updated Business Continuity and Disaster Recovery Plan annually.

During the year 2012, the BIRMC supported execution of the overall business strategy within a set of prudent risk parameters that are reinforced by an effective risk management framework.

K.G.D.D. Dheerasinghe
Chairman - Board Integrated Risk Management Committee

Colombo
February 27, 2013

 

Board Nomination Committee Report

Composition of the Board Nomination Committee

The Board Nomination Committee as at the end of the year comprised of the following Independent Non-Executive Directors of the Bank:

Mr. D.S. Weerakkody - Chairman

Mr K.G.D.D. Dheerasinghe

Prof. U.P. Liyanage - Non-Independent Director

Mr. W.M.R.S. Dias, Managing Director attended all meetings of the Committee by invitation. Mrs. R.R. Dunuwille, the Company Secretary of the Bank, functioned as the Secretary of the Committee.

Brief profiles of the members of the Committee are given on 'Board of Directors' section.

Terms of Reference of the Board Nomination Committee

Terms of Reference of the Committee are given below:

(a) Purpose of Establishing the Committee

Nomination Committee was established by the Board in compliance with sub-direction 3 (6) of the Direction No. 11 of 2007 (subsequently amended) on Corporate Governance for Licensed Commercial Banks in Sri Lanka issued by the Monetary Board of the Central Bank under Section 46 (1) of the Banking Act No. 30 of 1988, as amended, to ensure Board's oversight and control over 'Selection of Directors, Chief Executive Officer and Key Management Personnel'.

(b) Composition of the Committee

• The Committee shall be chaired by an Independent Director who has adequate experience in the relevant subject and be constituted with a majority of Independent Directors of the Board to ensure that the responsibilities of the Committee are discharged effectively.
• Chief Executive Officer may be present at meetings by invitation.

(c) Authority of the Committee

• The Committee has the authority to discuss issues under its purview and report back to the Board of Directors with recommendations, enabling the Board to take a final decision on the matter.
• If a need arises, professionals from outside may be invited for advice on specific issues.
• Bank staff may be present at Committee meetings for advice or special assignments, on invitation.

(d) Meetings of the Committee

• There shall be a quorum of two thirds of the members of the Committee to hold a meeting.
• The Committee shall meet as and when a need arises.

Board Nomination Committee Charter

The mandate of the Committee includes inter alia the following:

• To implement a procedure to select/appoint new Directors, Chief Executive Officer and Key Management Personnel.
• To consider and recommend (or not recommend) the re-election of current Directors, taking into account the performance and contribution made by them towards the overall discharge of the Board's responsibilities.
• To set the criteria such as qualifications, experience and key attributes required for eligibility to be considered for appointment or promotion to the post of Chief Executive Officer and key management positions.
• To ensure that Directors, Chief Executive Officer and Key Management Personnel are fit and proper persons to hold office as per the criteria set out in the Direction issued by the Central Bank of Sri Lanka and relevant statutes.
• To consider and recommend, from time to time, the requirements of additional/ new expertise and the succession arrangements for retiring Directors and Key Management Personnel.
• To make recommendations on any other matter(s) referred to it by the Board of Directors.

Board Nomination Committee Meetings

Three Committee meetings were held during the year under review. Attendance of the Committee members at meetings is Proceedings of the Committee meetings are regularly reported to the Board of Directors.

Methodology Adopted by the Board Nomination Committee

The Committee continued to work closely with the Board of Directors on matters assigned to the Committee and reported back to the Board of Directors with its recommendations.

 

D.S. Weerakkody
Chairman – Board Nomination Committee

Colombo
February 27, 2013

 

Board Audit Committee Report

Composition of the Board Audit Committee

The Board appointed Audit Committee as at the end of the year comprises the following Non-Executive Directors of the Bank:

Mr. S. Swarnajothi - Chairman (Appointed w.e.f. August 20, 2012)

Mr. L. Hulugalle

Mr. M.P. Jayawardena

Prof. U.P. Liyanage

The Chairman of the Committee, Mr. S. Swarnajothi, is an Independent Non-Executive Director, who is a Fellow of The Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) and a Fellow of the Institute of Certified Management Accountants of Sri Lanka (FCMA). He is a former Auditor General of Sri Lanka and possesses considerable experience in the field of Auditing and Finance.

Mr. D.S. Weerakkody, the Chairman of the Board of Directors of the Bank, an Independent Non-Executive Director functioned as the Chairman of the Board Audit Committee till Mr. S. Swarnajothi was appointed as a Director of the Bank as well as the Chairman of the Board Audit Committee in August 2012. Mr. Weerakkody too is an Associate of the Chartered Institute of Management Accountants, U.K. (ACMA) and a Fellow of the Institute of Certified Management Accountants of Sri Lanka (FCMA) and possesses considerable experience in the field of Finance and Management.

Mr. L. Hulugalle, who serves in the Committee, is also an Independent Non-Executive Director.

The profiles of the members are given on 'Board of Directors' section.

Mr. Manil Jayesinghe, a senior practising Chartered Accountant with long years of experience in Audit, Accounting Standards and Financial Reporting serves the Committee in the capacity of a Consultant and is invited to attend its meetings.

The Bank's Deputy General Manager – Inspection/Management Audit functions as the Secretary of the Committee.

Terms of Reference

The Charter of the Audit Committee, which is subject to review and revision periodically by the Board of Directors, clearly defines the Terms of Reference of the Committee. The Committee is responsible to the Board of Directors and reports on its activities regularly. It also assists the Board of Directors in its general oversight of financial reporting, internal controls and functions relating to internal and external audit.

The composition requirements, roles and functions of the Committee are set out in the Banking Act Direction No. 11 of 2007 on 'Corporate Governance for Licensed Commercial Banks in Sri Lanka' (hereinafter referred to as the Direction), 'Rules on Corporate Governance under Listing Rules of the Colombo Stock Exchange' and 'Code of Best Practice on Corporate Governance' issued jointly by The Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka.

Meetings

During the financial year ended December 31, 2012, seven Committee meetings were held. Minutes of such meetings, which include adequate details of matters discussed, are reported regularly to the Board of Directors. A table showing the record of attendance at these meetings appears on Corporate Governance section. The engagement partner of the Bank's previous External Auditors, Messrs Ernst & Young, was invited to attend two such meetings during the year. In addition, Managing Director, Chief Operating Officer, Chief Financial Officer, Chief Risk Officer, Deputy General Manager - Systems Audit and Deputy General Manager - Inspection/Management Audit attended the Committee meetings by invitation. Members of the Senior Management of the Bank were also invited to participate in the meetings as and when the necessity arose.

Mandate and Role

The Audit Committee assists the Board of Directors in fulfilling effectively its oversight responsibilities for the Bank's accounting and financial reporting processes and audit of the Financial Statements of the Bank. The Committee has been mandated to:

• Examine all relevant issues relating to the financial and other connected affairs of the Bank.
• Monitor the financial reporting systems in place to ensure the integrity and the soundness of the information provided to the Board of Directors, Regulatory Authorities, Management and other Stakeholders.
• Review the quality and the appropriateness of accounting policies and their adherence to statutory and regulatory compliance and applicable accounting standards.
• Ensure that the Bank has adopted and adhere to policies which firmly commits the Bank to achieve the highest standards of good Corporate Governance practices so that its operations conform to the highest ethical standards, good industry practices and in the best interest of all stakeholders.
• Identify, analyse and monitor the risks faced by the Bank and examine the adequacy, efficiency and effectiveness of internal controls and procedures in place to avoid, mitigate or transfer such risks.
• Monitor all internal and external audit and Inspection programmes, review internal and external audit/inspection reports and follow-up on their findings and recommendations.
• Review the Interim Financial Statements and the Bank's Annual Financial Statements prepared for disclosure, prior to submission to the Board of Directors.

The Bank has complied with the requirements specified in the Section 3 (6) (ii) of the aforesaid Direction. More details as to how the Committee discharges its responsibilities in respect of the above tasks are given below.

Financial Reporting

The Committee assists the Board of Directors to discharge their responsibility in the preparation of Financial Statements that evidence a true and fair view on financial position and performance, based on the Bank's accounting records and in accordance with the stipulated requirements of the Sri Lanka Accounting Standards. In accordance with the mandate mentioned above, the Committee reviews the following:

• Adequacy and effectiveness of the Internal Controls, Systems and Procedures to provide reasonable assurance that all transactions are accurately and completely recorded in the books of account.
• Effectiveness of the Financial Reporting Systems in place to ensure reliability of the information provided to the stakeholders.
• Accounting policies to determine the most appropriate accounting policies after considering all choices available.
• Processes by which compliance with Sri Lanka Accounting Standards and other regulatory provisions relating to financial reporting and disclosures are ensured.
• Annual Report & Accounts and the Interim Financial Statements prepared for publication prior to submission to the Board.

The Committee has assessed the prevailing Internal Controls, Systems and Procedures, and expressed the view that adequate controls and procedures are in place to provide reasonable assurance that the Bank's assets are safeguarded and that the financial position of the Bank is well monitored and accurately reported.

Regulatory Compliance

The Committee closely scrutinises compliance with mandatory banking and other statutory requirements and the Systems and Procedures in place to ensure compliance with such requirements. The quarterly reports being submitted by the Corporate Management are being used by the Committee to monitor compliance with all such legal and statutory requirements. The Bank's inspection function has been mandated to conduct test checks covering all regulatory compliance requirements, as a further monitoring measure.

Risks and Controls

In view of the fact that the Bank has adopted a risk based audit approach, the effectiveness of the internal control procedures in place to identify and manage all significant risks are being reviewed by the Committee. A Risk Grading Matrix has been adopted for assessing and measuring the operational risks identified during inspections. The Committee seeks and obtains the required assurances from the Business Units on the remedial action in respect of the identified risks in order to maintain the effectiveness of internal control procedures in place.

Internal Audit and Inspection

The Bank's Inspection Department carries out branch inspections. With the concurrence of the Board of Directors, the Bank continues to engage the services of five firms of Chartered Accountants approved by the Central Bank of Sri Lanka in order to supplement Bank's Inspection Department in carrying out such inspections.

The Committee regularly reviews the programme of inspection formulated for the purpose and its implementation and closely monitors the internal audit and the inspection functions. Over 440 inspection reports on Branches and Head Office Departments received the attention of the Committee and the operational deficiencies, lapses highlighted and the recommendations were given due attention. Members of the committee visited some of the branches to get a better understanding of the branch operations. Major findings of internal investigations with recommendations of the Management were considered and appropriate instructions issued. The Committee also invited representatives from the Audit Firms assisting in branch inspections to make presentations on their observations and findings.

External Audit

In regard to the external audit function of the Bank, the role played by the Committee is as follows:

• Assisting the Board of Directors to implement the processes of engaging External Auditors for audit services in compliance with the provisions of the Direction and agree on their remuneration with the approval of the shareholders.
• Making all possible endeavours to ensure that the Auditors comply with the guidelines issued to them by the Central Bank of Sri Lanka and the application of the relevant accounting standards.
• Reviewing non-audit services provided by the Auditors with a view to ensuring that such functions do not fall within the restricted services and provision of such services will not impair the External Auditors' independence and objectivity.
• Meeting the External Auditors at the conclusion of the Interim Audit conducted as at June 30, 2012 to discuss their findings.
• Discussing with the Auditors their audit plan, scope and the methodology proposed to be adopted in conducting the audit prior to commencement of the Annual Audit.

The Auditors were also provided with the opportunities of meeting the Non-Executive Directors separately, without any Executive being present, to ensure that the Auditors had the independence to discuss and express their opinions on any matter and also for the Committee to have the assurance that the Management has fully-provided all information and explanations requested by the Auditors.

At the conclusion of the audit, the Committee also met the Auditors to review the Auditor's Management Letter before it is submitted to the Board of Directors and to the Central Bank of Sri Lanka.

Internal Controls

Sections 3 (8) (ii) (b) and (c) of the Direction stipulates the requirements to be complied with by the Bank to ensure reliability of the financial reporting system in place at the Bank. The Committee is assisted by the External Auditors to closely monitor the procedures designed to maintain an effective internal control mechanism to provide reasonable assurance that this requirement is being complied with.

All major decisions taken by the Assets and Liabilities Committee (ALCO), the Credit Policy Committee and the Integrated Risk Management Committee are regularly examined by the Committee. In addition, the Committee regularly monitors all exceptional items charged to the Income Statement, long outstanding items in the Bank's Chart of Accounts, Credit Quality, Risk Management Procedures and adherence to classification of non-performing loans and provisioning requirements specified by the Central Bank of Sri Lanka. The Committee also reviewed the credit monitoring and follow-up procedures and the internal control procedures in place to ensure that necessary control and mitigating measures are available in respect of newly identified risks.

Good Governance

A Code of Ethics and Whistle-Blowers Charter is in place for the purpose of educating and encouraging all members of staff to resort to whistle-blow if they suspect wrong doings or other improprieties. Highest standards of Corporate Governance and adherence to the Bank's Code of Ethics are ensured. All appropriate procedures are in place to conduct independent investigations into incidents reported through whistle-blowing or identified through other means. The Whistle-Blowers Charter guarantees the maintenance of strict confidentiality of the identity of the whistle-blowers.

Transition to New/Revised Sri Lanka Accounting Standards

With effect from January 01, 2012, it is mandatory for the Bank to comply with the requirements of new/revised Sri Lanka Accounting Standards (SLFRS/LKAS) which are based on the International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS). These standards require substantial changes to some of the accounting treatments adopted by the Bank. The Board Audit Committee evaluated the proposals made by a Working Committee set up by the Bank, with the guidance of Messrs Ernst & Young, the Consultants appointed for the purpose and obtained approval from the Board of Directors for such proposals.

The transition to the new/revised Accounting Standards and the impact of the same on Bank's Financial statements have been independently validated by the External Auditors during the year end audit.

The Board Audit Committee would continue to monitor the progress of implementation of new Accounting Standards and keep the Board of Directors informed at regular intervals.

Audit Committee Charter

The Audit Committee Charter was last reviewed and revised in January 2012 with the concurrence of the Board of Directors.

Evaluation of the Committee

An independent evaluation of the effectiveness of the Committee was carried out by the other members of the Board and the Committee has been found to be highly effective.

Appointment of the External Auditor

In keeping with the Bank's policy of rotating Auditors periodically, the previous Auditors, Messrs Ernst & Young who had provided their services since 2006, were replaced by Messrs KPMG, Chartered Accountants, as the Bank's new Auditors for the financial year ended December 31, 2012 with the approval of the shareholders at the Annual General Meeting held in March 2012.

 

S. Swarnajothi
Chairman – Board Audit Committee

Colombo
February 27, 2013

 

Board Credit Committee Report

Composition of the Board Credit Committee

The Board Credit Committee (BCC) consists of the following members:

Mr. K.G.D.D. Dheerasinghe - Chairman

Mr. M.P. Jayawardena

Mr. W.M.R.S. Dias - Managing Director/CEO

Mr A.L. Gooneratne who was a member of the Committee resigned from the Board of Directors of the Company with effect from April 27, 2012.

Mrs. R.R. Dunuwille, the Company Secretary of the Bank, functions as the Secretary of the Committee.

Brief profiles of each member of the Committee are given on 'Board of Directors' Section.

Mandate and Role of the Board Credit Committee

The Board Credit Committee assists the Board of Directors in effectively fulfilling its responsibilities relating to the Credit Direction, Credit Policy and Lending Guidelines of the Bank in order to inculcate healthy lending standards and practices and ensure relevant regulations are complied with.

The Committee is empowered to:

• Review and consider changes proposed from time to time to the Credit Policy document and the Lending Guidelines of the Bank.
• Analyse and review the credit risk control measures in the lending area, the pricing of lending proposals and also ensure that credit proposals are within the regulatory framework of the Central Bank of Sri Lanka.
• Evaluate, assess and make recommendations on credit propositions submitted to the Board of Directors.
• Evaluate and recommend sector exposures and cross boarder exposures.
• Monitor non-performing advances and recommend provision cover as required.
• Monitor and evaluate special reports called for by the Board of Directors.
• Set lending directions based on the current economic climate.

Board Credit Committee Meetings

Twelve BCC meetings were held during the year under review. Attendance of the Committee members at meetings of BCC is given on Corporate Governance section. Proceedings of the Committee meetings are regularly reported to the Board of Directors.

Methodology Used by the Board Credit Committee

The Committee will meet on a monthly basis and approve credit proposals above a predetermined limit.

Credit proposals and other papers intended for approval by the Board of Directors are scrutinised to verify the overall credit worthiness and recommended accordingly with or without redress, as required.

Credit proposals are evaluated in the perspective of the Bank's lending policies and appetite.

Closer monitoring is exercised on priority sectors and areas of higher interest.

The BCC operates in consultation with the scope of the Bank's credit risk management to ensure overall coherence between the Bank's credit policies and management.

 

K.G.D.D. Dheerasinghe
Chairman – Board Credit Committee

Colombo
Frebruary 27, 2013

 

Board Technology Committee Report

Composition of the Board Technology Committee

The Committee as at the end of the year comprises of the following members:

Prof. U.P. Liyanage - Chairman

Mr. W.M.R.S. Dias - Managing Director/CEO

Mr. J. Durairatnam - Executive Director/Chief Operating Officer

Mr. A. R.M. Muttiah - Chief Information Officer

Mr. L.H. Munasinghe - Deputy General Manager - Marketing

Mr. M.E.P. Perera - Assistant General Manager - Operations
(appointed w.e.f. September 26, 2012)

Mr. A.L. Gooneratne, the former Managing Director/CEO of the Bank who was a member of the Committee ceased to be a member upon his retirement as Managing Director on April 27, 2012.

Please refer 'Board of Directors' section for the profiles of the Board members.

Charter of the Board Technology Committee

The Committee was established by the Board of Directors in recognition of the degree of reliance of the Bank on technology, and the growing appreciation of the role of IT Governance.

The Committee has been empowered to:

• Set the overall technology strategy and track progress of the objectives to meet this strategy.
• Review significant technology procurements prior to them being sent to the Board of Directors for approval.
• Analyse emerging technology and its potential use.

Board Technology Committee Meetings

There were five committee meetings during the year with attendance of members listed on 'Corporate Governance' section.

Periodic updates are given to the Board on the progress of Board Technology Committee objectives.

Methodology Adopted by the Board Technology Committee

The Committee meets at least every quarter, and review progress of strategic objectives. The Committee also reviews significant items for procurement and recommend them for approval by the Board of Directors as appropriate.

 

Prof. U.P. Liyanage
Chairman - Board Technology Committee

Colombo
February 27, 2013