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.
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:
The Overall focus of the Committee:
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.
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,
D.S. Weerakkody
Chairman - Board Human Resources and Remuneration Committee
Colombo
February 27, 2013
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.
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.
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.
In order to discharge the above duties and responsibilities, the Committee undertakes to carryout the following:
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
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 Committee are given below:
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'.
The mandate of the Committee includes inter alia the following:
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.
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
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.
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.
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.
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:
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.
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:
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.
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.
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.
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.
In regard to the external audit function of the Bank, the role played by the Committee is as follows:
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.
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.
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.
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.
The Audit Committee Charter was last reviewed and revised in January 2012 with the concurrence of the Board of Directors.
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.
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
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.
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:
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.
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
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.
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:
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.
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