"Corporate Governance is concerned with ensuring the Firm is run in the interests of Shareholders" (Franklin Allen, 2005). Hence, a good Corporate Governance Code needs to address the needs of both the Company (the Bank) and its Shareholders. In this regard, it is pertinent to mention that the "Code of Best Practice on Corporate Governance" issued jointly by The Institute of Chartered Accountants of Sri Lanka (ICASL) and the Securities and Exchange Commission of Sri Lanka (SEC) focuses adequately on fulfilling the aspirations of both parties mentioned above.
We have categorised extent of adherence by the Bank to the requirements of the six fundamental principles laid down in the aforesaid Code, into two sections, purely for the convenience of our stakeholders. Hence, Section 1 and Section 2 and the governance structures in place are tabulated below:
Section 1 of the Code deals with the Company (the Bank) and it mainly covers the governance aspects in regard to Company Directors, their remuneration, relations with Shareholders and accountability and audit.
Section 2 of the Code deals with the Shareholders and discusses how a good corporate citizen discharges its responsibilities towards both Institutional Investors and other Investors.
Corporate Governance Principle | Reference to Code | Compliance | Details of Compliance |
A DirectorsA.1 The Board The Bank is headed by an effective Board of Directors with local and international experience (professionals/ business leaders) drawn from different backgrounds inter alia banking, accounting, management, marketing, human resources and law. Their leadership skills, direction provided and controls put in place ensure the achievement of the objectives of the Bank set out in the Corporate Plan and the Budget, which aims to satisfy the expectations of all stakeholders. Profiles of Directors are given on 'Bord of Directors' section on this Stewardship report. |
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Board Meetings
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A.1.1
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Complied with
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Board Meetings are held monthly mainly to review the performance of the Bank and its subsidiaries and other routine matters referred to the Board by the Heads of respective divisions, while Special Board Meetings are convened whenever necessary. These meetings ensure that prompt action is taken to align the business processes to achieve the expectations of all stakeholders. See 'Number of Meetings Held and Attendance' on this Stewardship section. |
Responsibilities of the Board
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A.1.2
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Complied with
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The Board is responsible for providing strategic direction, ensuring execution of strategies, monitoring performance and providing oversight for the Bank. The Board is assisted in this task by the Corporate Management headed by the Managing Director. The Board Nomination Committee assists the Board in setting the criteria and key attributes required for the posts of Managing Director and the Key Management Personnel. It also ensures the succession arrangements for retiring Directors and Key Management Personnel. The Board takes necessary steps to fulfil the duties entrusted to it by securing the integrity of the information, managing risks and implementing an effective internal control system. In this process, compliance with all applicable laws and regulations and also adherence to the Bank's ethical standards and corporate values are of utmost importance in order to ensure that the interests of all stakeholders are taken into consideration in the corporate decision making proces ensuring that the Company's values and standards are set with an emphasis on adopting appropriate accounting policies and fostering compliance with financial regulations are also the responsibility of the Board. Responsibilities of the Board are clearly indicated in the Board Charter of the Bank. See 'Directors' Statement on Internal Control' that appears on Financial Reports for details on compliance on above aspects. |
Seeking Independent Professional Advice
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A.1.3
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Complied with
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The Directors are permitted to seek independent professional advice as and when required. The Company Secretary takes required initiatives in this connection. In addition, the Board is assisted by several Board Sub-Committees on various matters under their purview. |
Advice and Services of the Company Secretary
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A.1.4
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Complied with
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All legal matters for which clarification is needed by the Board are referred to the Company Secretary who is an Attorney-at-Law and a Chartered Secretary. She provides all required information after obtaining necessary professional advice, whenever required to do so. All Board members have full access to the assistance of the Company Secretary to ensure that proper Board procedures are followed and all applicable rules and regulations are complied with. The removal of the Company Secretary is a matter to be considered by the Board as a whole. |
Independent Judgment of Directors | A.1.5 | Complied with | All Directors exercise independent judgement in decisions made by the Board on issues of strategy, performance, resource allocation and the conduct of business. |
Dedicating Adequate Time and Effort by the Directors |
A.1.6 | Complied with | All Directors of the Bank dedicate adequate time and effort to fulfill their duties as Directors of the Bank (both before and after the Board Meetings), to ensure that the duties and responsibilities owed to the Bank are satisfactorily discharged.
In addition, Directors will function as members of one or more Sub-Committees of the Board and ensure that they allocate adequate time for the fulfilment of their duties as members of such Board Sub-Committees. See 'Number of Meetings Held and Attendance' on this Stewardship report. |
Training for New and Existing Directors |
A.1.7 | Complied with | Both new and existing Directors of the Bank are provided guidelines on general aspects of directorships and industry specific matters. In this regard, the Directors have recognised the need for continuous training, expansion of knowledge and to take part in such professional development as and when they consider necessary which would assist them to carry out their duties as Directors. |
A.2 Chairman and Chief Executive Officer (CEO) There is a clear division of responsibilities between conducting the business of the Board and day-to-day operations of the Bank, in order to ensure a balance of power and authority. The Chairman is responsible for leading the Board and for its effectiveness. The CEO's role is primarily to conduct the business operations of the Bank with the help of the Corporate Management. Hence, the roles of the Chairman and CEO are clearly distinct from one another. The Chairman is also the ultimate point of contact for shareholders, particularly on matters related to Corporate Governance. |
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Separation of the Roles of Chairman and MD/CEO
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A.2.1
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Complied with
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The positions and functions of the Chairman and the CEO are separated, thereby preventing unfettered powers for decision making being vested with a single autonomous entity.
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A.3 Chairman's Role Chairman is responsible for providing leadership and effectively managing the Board while preserving the order and facilitating effective discharge of Board functions. The Chairman also takes timely action to preserve good Corporate Governance by the Board. |
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Role of the Chairman
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A.3.1
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Complied with
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The Chairman ensures proper conduct of Board proceedings to optimise the contribution from Board members through:
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A.4 Financial Acumen The Code requires that the Board comprises of members with sufficient financial acumen and knowledge to offer guidance on matters of finance. The Board of the Bank has met the above requirement as some of the Board members are Qualified Accountants having professional qualifications and are equipped with sufficient financial acumen and knowledge to offer guidance on matters of finance. |
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Financial Acumen and Knowledge
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A.4
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Complied with
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The Board comprises of members with academic and professional qualifications in Accounting, Business Finance, Management and Law. The Chairman of the Board is an Associate of the Chartered Institute of Management Accountants, United Kingdom and has a Master of Business Administration (MBA) from the University of Leicester, England. He also has over 10 years experience as a Bank Director. The MD/CEO holds a Degree in Law and is a Fellow of the Chartered Institute of Bankers (London), and a Hubert H. Humphrey Fellow. He also has 38 years experience in Banking, out of which 18 years has been in the Corporate Management. In addition, the Chairman of the Board Audit Committee is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka, a member of the Institute of Chartered Management Accountants of Sri Lanka and a Member of the Institute of Certified Management Accountants of Australia.
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A.5 Board Balance The Code requires that balance is maintained between the Executive and Non-Executive Directors (NEDs) so that no individual or a small group of individual Directors are able to dominate the Board's decision making. |
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Presence of a Strong Team of NEDs
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A.5.1
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Complied with
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Six out of eight Directors on the Board are NEDs which is well above the minimum prescribed by this Code, which is two NEDs or NEDs equivalent to one-third of the total number of Directors, whichever is higher. This ensures that the views of Non-Executive Directors carry a significant weight in the decisions made by the Board.
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Independence of NEDs
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A.5.2 & A.5.3
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Complied with
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Four out of the six NEDs are Independent and this is well above the minimum prescribed by this Code, which is two NEDs or NEDs equivalent to one third of the total number of NEDs, whichever is higher. All four Independent Directors are independent of management and free of any business or other relationship that could impair their Independence.
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Annual Declaration of NEDs
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A.5.4
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Complied with
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Every NED of the Bank has made written submissions as to their independence against the specified criteria set out by the Bank, which is in line with the requirements of Schedule H of this Code.
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Annual Declaration by the Board on the independence of Directors
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A.5.5
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Complied with
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The Board has determined the independence of Directors based on the declarations submitted by the NEDs, as to their independence, as a fair representation and will continue to evaluate their independence on this basis annually. No circumstances have arisen for the determination of independence by the Board, beyond the criteria set out in the Code. Independent Non-Executive Directors are:
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Requirement to appoint a 'Senior Non-Executive Director' and making himself available for confidential discussions
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A.5.6 & A.5.7
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Not applicable
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There is no requirement to appoint a 'Senior Non-Executive Director' as the positions of the Chairman and the CEO are separated and the Chairman is an Independent Director.
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Conducting Meetings with NEDs only |
A.5.8 | Complied with | Chairman meets with the NEDs without the presence of Executive Directors, whenever necessary.
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Recording of Concerns which cannot be Unanimously resolved in Board Minutes
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A.5.9
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Complied with
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Concerns of the Directors which can not be unanimously resolved by the Directors if any, and all other important issues raised by the Directions at every Board Meeting during the year, are recorded in the minutes of Board Meetings with adequate details by the Company Secretary. This would be approved by the Chairman and the other members of the Board.
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A.6 Supply of Information The Code requires the Bank's management to submit timely information to the Board with sufficient information for making decisions, which would enable them to discharge their duties. |
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Obligation of the Management to provide appropriate and timely information to the Board
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A.6.1
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Complied with
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The Bank ensures that the Directors receive adequate information in a timely manner. On urgent matters, every effort is made to provide the information as early as possible. The Board Papers are prepared by the Heads of the respective Banking Departments and other divisions to provide adequate information to the Board enabling it to deliberate on all key issues concerning the Bank. Further, Directors are free to raise inquiries for additional information, whenever necessary. In addition, members of the Corporate Management make presentations on issues of importance. The Chairman ensures that all Directors are briefed adequately on issues arising at Board Meetings.
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Adequate Time for Board Meetings
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A.6.2 | Complied with
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According to the Articles of Association of the Bank, all Board Members are given a notice of at least 7 days prior to the confirmed dates of meetings and all Minutes of previous meetings, Agenda and Board Papers are normally dispatched within the aforesaid deadlines. Further, adequate notice is given to all Directors prior to emergency/special Board Meetings. This ensures that the Board members have adequate time to study the related papers and prepare for a meaningful discussion at their Meetings.
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A.7 Appointment to the Board The Code requires having a formal and transparent procedure in place for the appointment of new Directors to the Board. |
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Presence of a Nomination Committee and annual assessment of composition of the Board
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A.7.1 & A.7.2
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Complied with
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New appointments and re-elections of Directors to the Board are considered and recommended by the Nomination Committee and based on such recommendations, final decisions are made by the Board in a formal and transparent manner. Further, this Committee annually assesses the composition of the Board to ensure that the combined knowledge and experience of the Board matches the strategic demands faced by the Bank. See 'Board Nomination Committee Report' for the Terms of Reference and the composition of members of this Committee. |
Disclosure of required details to Shareholders on new appointments to the Board
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A.7.3
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Complied with
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When new Directors are appointed, a brief resumé of each such Director, including the nature of his or her expertise, the names of companies in which the Director holds directorships, memberships in Board Sub-Committees etc., are informed to the Central Bank of Sri Lanka (CBSL) and the Colombo Stock Exchange (CSE) in addition to disclosing this information in the Annual Report. Further, the required information is published in a few selected newspapers for the information of interested parties. Any changes in the details provided by the Directors are disseminated to the CSE without delay.
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A.8 Re-election The Code requires all Directors to submit themselves for re-election, on regular intervals and at least once in every three years. |
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Re-election of Non-Executive Directors including Chairman and Directors
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A.8.1 & A.8.2
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Complied with
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Directors to retire at the Annual General Meeting (AGM)
Please find a brief resume of the aforementioned Directors on 'Board of Directors' section on this Stewardship report. |
A.9 Appraisal of Board Performance The Code requires the Board to appraise its own performance periodically to ensure that its responsibilities are satisfactorily discharged. |
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Annual appraisal of the Board's performance and the performance of its Sub-Committees
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A.9.1 & A.9.2
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Complied with
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The performance of the Board is evaluated by the Nomination Committee and Board. A self-assessment was carried out by the Directors at the end of the year and the appraisal forms were first submitted to the Nomination Committee and then the Board, in order to ensure that the Sub-Committees and the Board function effectively and efficiently and also to facilitate continuous improvement. |
Disclosure of Criteria used for the Performance Evaluation
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A.9.3
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Complied with
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See 'report of the Board Human Resource & Remuneration Committee' on this Stewardship report for details of the criteria considered for performance evaluation of the Board.
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A.10 Disclosure of Information in Respect of Directors The Code requires that details of the Directors be disclosed in the Annual Report for information of the Shareholders. |
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Disclosures on Directors
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A.10.1
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Complied with
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The following details pertaining to each Director are disclosed as follows:
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A.11 Appraisal of Chief Executive Officer (CEO) The Code requires the Board to assess the performance of the CEO at least annually to ascertain degree to which the CEO meets the pre-set Financial and Non-Financial targets. |
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Setting Annual Targets and
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A.11.1 & A.11.2
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Complied with
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The Bank has a formal process for annual performance evaluation for the CEO. At the beginning of each financial year, the Board, supported by the Board Human Resources and Remuneration Committee discusses with the CEO and establish criteria to evaluate and assess the performance of the CEO. Assessment of performance of the CEO is carried out by the Board at the end of each year to ensure that pre-agreed targets have been achieved or if not whether there are acceptable reasons for not achieving them. The performance
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B Directors' RemunerationB.1 Remuneration Procedure This principle ensures that the Bank has a well established, formal and transparent procedure in place for developing an effective remuneration policy for both Executive and Non-Executive Directors where no Director is involved in deciding his/her own remuneration to avoid potential conflict of interest. |
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Establishment of a Remuneration Committee
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B.1.1
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Complied with
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The Bank has a Board Human Resources and Remuneration Committee which has 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. See 'Board Human Resources and Remuneration Committee Report' for the Terms of Reference on this Stewardship report. |
Composition of the Remuneration Committee
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B.1.2
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Complied with
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As prescribed in this Code, all members of the Board Human Resources and Remuneration Committee are Non-Executive Directors. Chairman of the Committee is appointed by the Board. The CEO attends meetings by invitation.
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Chairman and the Members of the Committee | B.1.3 | Complied with | See the 'Board Human Resources and Remuneration Committee Report' for details of the Chairman and the Members of the Board Human Resources and Remuneration Committee.
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Determination of the Remuneration of Non-Executive Directors
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B.1.4
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Complied with
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The Board as a whole decides the remuneration of the Non-Executive Directors. The Non-Executive Directors will receive a fee for being a Director of the Board and an additional fee for either chairing or being a member of a Committee, working on Special Committees and/or serving on subsidiary Boards. They do not receive any performance/incentive payments. |
Ability to consult the Chairman and/or CEO and to seek professional advice by the Committee
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B.1.5
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Complied with
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Each Committee has the authority to seek internal and external independent professional advice on remuneration of other Executive Directors and also on matters falling within its purview at the Bank's expense. Views of Chairmen of each Committee are obtained, in addition to the views of the CEO.
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B.2 Level and Make-Up of Remuneration The Bank ensures that the remuneration of Executive and Non-Executive Directors is at a satisfactory level to attract and retain the services of Directors. The proportion of remuneration of Executive Directors is linked to corporate and individual performance. |
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Remuneration packages of Executive Directors
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B.2.1
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Complied with
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The Board Human Resources and Remuneration Committee and the Board ensures that two Executive Directors namely, the Managing Director and the Chief Operating Officer who are on the Board are provided with a suitable remuneration package.
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Competitiveness of levels of Remuneration
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B.2.2
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Complied with
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The Board Human Resources and Remuneration Committee reviews information relating to executive pay from time to time to ensure same is on par with the market/industry rates as well as is aligned to the strategic objectives of the Bank.
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Comparison of Remuneration with other Companies in the Group
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B.2.3
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Complied with
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The Bank looks at market rates for the key positions in the Bank.
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Designing the Performance based Remuneration of Executive Directors
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B.2.4
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Complied with
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Objectives for two Executive Directors are set at the beginning of the year to align their interest with those of the Bank and the remuneration including the performance bonus is decided based upon the degree of achievement of such pre-set targets.
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Executive Share Options
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B.2.5
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Complied with
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Share options were offered to Executive Directors, the details of which are given in Notes 43 of the Financial Statements.
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Designing the Performance- Related Remuneration of Executive Directors
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B.2.6
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Complied with
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For details see 'Board Human Resources and Remuneration Committee Report' on this Stewardship report.
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Early Termination of Executive Directors
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B.2.7 & B.2.8
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Not applicable
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Terminations of Executive Directors, (MD/CEO and Chief Operating Officer) are governed by their contracts of service/employment.
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Levels of Remuneration of
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B.2.9
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Complied with
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Non-Executive Directors of the Bank are paid a fee commensurate with their time and role in the Bank. They are not entitled to receive shares under the existing Employee Share Option Schemes of the Bank.
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B.3 Disclosure of Remuneration The Code requires the Bank to disclose in its Annual Report the details of the remuneration paid and the Remuneration Policy. |
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Disclosure of Remuneration | B.3.1 | Complied with | See 'Board Human Resources and Remuneration Committee Report' on this Stewardship report for disclosures on the names of the Remuneration Committee members and the Remuneration Policy of the Bank. Also see Note 14 to the Financial Statements for the aggregate remuneration paid to Executive and Non-Executive Directors. |
C Relations with ShareholdersC.1 Constructive use of Annual General Meeting (AGM) and Conduct of General MeetingsThe Code requires the Board to use the AGM which is a major event in the Bank's calendar to communicate with shareholders and encourage their active participation. In this regard, all shareholders of the Bank receive the Notice of Meeting within the statutory due dates. |
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Use of Proxy Votes
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C.1.1
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Complied with
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The Bank has in place an effective mechanism to count all proxy votes to indicate to the Chairman the level of proxies lodged on each resolution and the number of votes for and against such resolution.
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Separate Resolutions for substantially separate issues and adoption of Annual Report and Accounts
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C.1.2
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Complied with
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Separate resolutions are proposed for all substantially separate issues to provide shareholders with the opportunity to deal with each significant matter separately. This mechanism promotes better stewardship while assuring the transparency in all activities of the Bank. Further, adoption of the Annual Report of the Board of Directors on the affairs of the Company, Statement of Compliance and the Financial Statements together with the Report of the Auditors thereon are considered as a separate resolution. |
Availability of Chairmen of Board Committees
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C.1.3
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Complied with
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The Chairman of the Bank ensures that Chairmen of all Board appointed Sub-Committees namely, Audit, Human Resources and Remuneration, Nomination, Integrated Risk Management, Credit and Technology are present at the AGM to answer the questions under their purview.
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Adequate Notice of AGM to Shareholders together with the summary of the procedure
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C.1.4 & C.1.5
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Complied with
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A Form of Proxy and a copy of the Annual Report are dispatched to each shareholder of the Bank together with the Notice of Meeting detailing the summary of procedure as per legal requirements giving adequate notice to shareholders together with a summary of the procedures governing voting at General Meetings. This provides opportunity to all shareholders to attend the AGM irrespective of their voting status and obtain clarifications for the matters of interest to them.
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C.2 Major Transactions The Code requires the Directors to disclose to shareholders all proposed material transactions which would materially alter the net asset position of the Bank, if entered into. |
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Disclosures on proposed Major Transactions
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C.2.1
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Not applicable
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There were no major transactions involving acquisition or disposal of greater than half of the net value of the Bank or its subsidiaries entered into by the Bank during the year. Transactions which materially affect the net assets base of the Bank are/will be disclosed in the Quarterly/Annual Financial Statements, if any.
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D Accountability and AuditD.1 Financial Reporting This principle requires the Board of Directors to present a balanced and understandable assessment of the Bank's financial position, performance and prospects.
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Board's responsibility for Statutory and Regulatory Reporting
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D.1.1
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Complied with
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The Board is well aware of its responsibility to present regulatory and statutory reporting in a balanced and understandable manner and a statement to this effect is given on Financial Reports confirming this position. The Bank has strictly complied with the requirements of the Companies Act No. 07 of 2007, the Banking Act No. 30 of 1988 and amendments thereto, in the preparation of Interim and Annual Financial Statements, which are prepared and presented in conformity with Sri Lanka Accounting Standards. In addition, the Bank has also complied with the reporting requirements prescribed by the regulatory authorities such as the Central Bank of Sri Lanka (CBSL) and the Colombo Stock Exchange (CSE). |
Declarations by Directors in the Directors' Report
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D.1.2
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Complied with
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The Directors have made all required declarations in the 'Annual Report of the Board of Directors'. See the 'Annual Report of the Board of Directors' appear on this Stewardship report for the required declarations. |
Statements by Directors and Auditors on Responsibility for Financial Reporting
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D.1.3
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Complied with
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The 'Statement of Directors' Responsibility' is given on Financial Reports. See 'Auditors' Report' on Financial Reports for the reporting responsibility of Auditors. |
Management Discussion
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D.1.4
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Complied with
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See 'Management Discussion and Analysis'
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Declaration by Board on
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D.1.5
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Complied with
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See item 18 of the 'Annual Report of the Board of Directors' on on this Stewardship report and the 'Statement of Directors' Responsibility' on Financial Reports for the required declarations.
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Requirement to summon an Extraordinary General Meeting (EGM) to notify serious loss in Net Assets (capital)
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D.1.6
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Not applicable
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Likelihood of such occurrence is remote. However, should the situation arise, an EGM will be called for and shareholders will be notified.
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D.2 Internal Control The Code requires the Bank's Board to ensure that an effective system of internal controls, which safeguards the Bank's assets to protect the interest of shareholders is in place. |
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Directors to conduct an
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D.2.1
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Complied with
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The Bank obtained the External Auditors' certification on the effectiveness of the internal control mechanism on financial reporting.
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Need for an Internal Audit function for Companies with no such function
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D.2.2
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Not applicable
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This is not applicable as the Bank already has its own in-house Internal Audit Department, which is responsible for internal audit function.
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D.3 Audit Committee The Code requires the Board to have formal and transparent arrangements in selecting and applying the accounting policies, financial reporting and internal control principles and maintaining an appropriate relationship with the Bank's External Auditor. |
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Composition of the
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D.3.1
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Complied with
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All members of the Board Audit Committee, including the Chairman are Non-Executive Directors and two of the members are Independent Directors. Details of the members, invitees and the Secretary of the Committee are found on the 'Board Audit Committee Report' under the heading 'Composition of the Committee'. |
Duties of the Audit Committee
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D.3.2
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Complied with
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As stated in the Report of the Board Audit Committee of the Bank, Board Audit Committee regularly reviews scope, results and effectiveness of the audit. It also ensures the balance among objectivity, independence and value for money of the services provided by the Bank's Auditors, with special attention to provision of non-audit services by the Auditors.
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Terms of reference of the
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D.3.3
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Complied with
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Terms of Reference of the Board Audit Committee is clearly defined in the Charter of the Audit Committee approved by the Board of Directors, which was last revised in 2012. This clearly explains the purpose of the Committee, its duties and responsibilities together with the scope and functions of the Committee. The Committee mainly deals with the matters pertaining to statutory and regulatory compliance in financial reporting, matters with regard to the External Auditors, Internal Audit and Risk Management procedures of the Bank.
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Disclosure of Names of the Members of the Audit Committee
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D.3.4
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Complied with
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Names of the members of the Audit Committee are given on this Stewardship report under the heading on 'The Composition of the Committee' and disclosure on the independence of the Auditors is found under the Section on 'External Audit' in the 'Board Audit Committee Report' on this Stewardship report.
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D.4 Code of Business Conduct and Ethics The Code requires the Bank to adopt an Internal Code of Conduct and Ethics to be adhered to by all Directors and members of the Senior Management of the Bank. |
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Disclosures on presence of Code of Business Conduct and Ethics
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D.4.1
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Complied with, for Members of Senior Management
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The Bank has an internally developed Code of Conduct for its employees including the Corporate and Senior Management. This Codes addresses conflict of interest, corporate opportunities, confidentiality of information, fair dealing, protecting and proper use of the Company's assets, compliance with laws and regulations and encouraging the reporting of any illegal or unethical behaviour, etc. Details of the Bank's Code of Ethics, including Governing Principles are found on 'Corporate Governance' section.
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Affirmative Statement
|
D.4.2
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Complied with
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See the 'Letter from the Chairman' for required details.
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D.5 Corporate Governance Disclosures Directors of the Bank disclose annually the Bank's adherence to the 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 and the Banking Act Direction No. 11 of 2007 of the Central Bank of Sri Lanka on Corporate Governance for Licensed Commercial Banks in Sri Lanka and subsequent amendments thereto, in the 'Corporate Governance Report'. |
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Annual Corporate Governance Report in the Annual Report
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D.5.1
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Complied with
|
This Report serves this requirement.
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Section 2: ShareholdersE Institutional InvestorsE.1 Shareholder Voting The Code requires the institutional shareholders to make considered use of their votes and encourage to ensure that their voting intentions are translated into practice. |
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Communication with Shareholders
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E.1.1
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Complied with
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In order to avoid conflicts of interest by nurturing the mutual understanding, the Board carries out dialogues with its shareholders at general meetings. In this regard, the AGM of the Bank plays a critical role. Voting of the shareholders is crucial in carrying a resolution at the AGM. The Chairman, who plays the role of the agent, communicates the views and queries of the shareholders to the Board and the senior management, in order to ensure that the views are properly communicated to the Bank.
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E.2 Evaluation of Governance Disclosures The Code requires the Bank to encourage institutional investors to give due weight to all relevant factors drawn to their attention. |
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Due weight by Institutional Investors
|
E.2.1
|
Complied with
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The Institutional Investors are at liberty to give due weight on matters relating to the Board structure and composition, when they consider resolutions relating to Board structure and composition.
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F Other InvestorsF.1 Investing/Divesting Decisions |
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Seek Independent Advice
|
F.1.1
|
Complied with
|
Individual shareholders are at liberty to carry out adequate analysis or seek independent advice before making investing or divesting decisions.
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F.2 Shareholder Voting | |||
Encourage Voting by Individual Investors
|
F.2.1
|
Complied with
|
Individual shareholders are encouraged to participate in general meetings of the Bank and exercise their voting rights. The Bank adequately communicates with all shareholders by ensuring that they are informed of this position by dispatching necessary Notices in time.
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Annual Corporate Governance Report of Commercial Bank of Ceylon Plc for the year ended December 31, 2012 is given below:
In terms of Section 46(1) of the Banking Act No. 30 of 1988, subsequently
amended, the Monetary Board has been empowered to issue Directions
to Licensed Commercial Banks, regarding the manner in which any aspect
of the business of such banks is to be conducted, in order to ensure
the soundness of the banking system. In the exercise of the powers conferred by the above section, the Monetary Board has issued Banking
Act Direction No. 11 of 2007 on 'Corporate Governance for Licensed
Commercial Banks in Sri Lanka'.
The aforesaid Direction consists of two distinct parts viz Direction 2
and Direction 3. Direction 2 consists of eight principles, for explanatory
purposes and/or clarification purposes only. Strict compliance is
necessary for the rules that are set out in Direction 3. Commercial Bank of
Ceylon PLC made every endeavour to comply with the Rules of Corporate
Governance as indicated in Direction 3 of the Corporate Governance
Direction. Details of such compliance for the year 2012 are fully disclosed
below against each requirement of Direction 3.
Relevant Section | Rule | Degree of Compliance | |||||||||||||||
3 (1) - Responsibilities of the Board | |||||||||||||||||
3 (1) (i) | The Board shall strengthen safety and soundness of the Bank by ensuring the implementation of the following: | ||||||||||||||||
(a) Approve and oversee the Bank's strategic objectives and corporate values and ensure that these are communicated throughout the Bank; | Complied with.
Approving, overseeing, and monitoring the execution of the strategic objectives, corporate values, overall business strategy and policies are handled directly by the Board. Board's views relating to the above are communicated throughout the Bank. |
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(b) Approve the overall business strategy of the Bank, including the overall risk policy and risk management procedures and mechanisms with measurable goals, for at least the next three years; | Complied with.
The Strategic Plan for next 5 years was approved by the Board after discussing related issues in detail with the Corporate Management. |
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(c) Identify the principal risks and ensure implementation of appropriate systems to manage the risks prudently; | Complied with. Identifying principal risks, approving overall risk policy and risk management procedures are done mainly through the Board Integrated Risk Management Committee. | ||||||||||||||||
(d) Approve implementation of a policy of communication with all stakeholders, including depositors, creditors, shareholders and borrowers; | Complied with.
A Board approved Communication Policy is available. Annual General Meeting is used to have an effective dialogue with the shareholders on matters which are relevant and concern to the general membership. |
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(e) Review the adequacy and the integrity of the Bank's internal control systems and management information systems; | Complied with.
Adequacy and the integrity of the Bank's internal control systems and management information systems is reviewed by the Board Audit Committee. |
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(f) Identify and designate Key Management Personnel, as defined in the International Accounting Standards, who are in a position to: (i) significantly influence policy; (ii) direct activities; and (iii) exercise control over business activities, operations and risk management; | Complied with.
Board of Directors and selected Members of the Corporate Management who fall into the defined criteria are designated as Key Management Personnel. |
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(g) Define the areas of authority and key responsibilities for the Board Directors themselves and for the Key Management Personnel; | Complied with.
Bank has a Board approved Formal Schedule of matters specifically reserved for Board, defining the areas of authority and key responsibilities of the Board Directors. Areas of authority and key responsibilities for members of the Corporate Management are stated in the Job Descriptions of each member. |
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(h) Ensure that there is appropriate oversight of the affairs of the Bank by Key Management Personnel, that is consistent with Board policy; | Complied with.
Affairs of the Bank are regularly discussed and monitored by the Directors at the Board level and by the Members of Corporate Management at Management Level. |
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(i) Periodically assess the effectiveness of the Board Directors' own governance practices, including: (i) the selection, nomination and election of Directors and Key Management Personnel; (ii) the management of conflicts of interests; and (iii) the determination of weaknesses and implementation of changes where necessary; | Complied with.
An Evaluation Form specifically designed to cover the related areas was sent to the Directors for the purpose of evaluating the effectiveness for 2012. Responses of Directors were discussed for necessary action at a subsequent Board Meeting. |
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(j) Ensure that the Bank has an appropriate succession plan for Key Management Personnel; | Complied with.
Succession Plan is reviewed at regular intervals to ensure that the Bank has named successors for the key management positions in the Bank and has development plans to ensure their readiness. |
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(k) Meet regularly, on a need basis, with the Key Management Personnel to review policies, establish communication lines and monitor progress towards corporate objectives; | Complied with.
The Members of the Corporate Management regularly make presentations and take part in discussions on their areas of responsibility at Board Meetings. |
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(l) Understand the regulatory environment and ensure that the Bank maintains an effective relationship with regulators; | Complied with. | ||||||||||||||||
(m) Exercise due diligence in the hiring and oversight of External Auditors. | Complied with.
The Board has adopted a Policy of Rotation of Auditors, once in every 5 years, in keeping with the principles of good Corporate Governance. At the end of the 5-year period, quotations are called from suitable Audit Firms, prior to the recommendation of new Auditors as per the Rotation Policy. |
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3 (1) (ii) | The Board shall appoint the Chairman and the Chief Executive Officer and define and approve the functions and responsibilities of the Chairman and the Chief Executive Officer in line with Direction 3 (5) of these Directions. | Complied with.
Positions of the Chairman and the Managing Director (MD)/Chief Executive Officer (CEO) are separated. Further, functions and responsibilities of the Chairman and the CEO are properly defined and approved in line with Direction 3 (5) of these Directions. See Direction 3 (5) on this Report for details. |
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3 (1) (iii) | The Board shall meet regularly and Board meetings shall be held at least twelve times a year at approximately monthly intervals. Such regular Board meetings shall normally involve active participation in person of a majority of Directors entitled to be present. Obtaining the Board's consent through the circulation of written resolutions/papers shall be avoided as far as possible. | Complied with.
The Board meets regularly at least on monthly intervals. During 2012, the Board met 14 times. See 'Item A. 1.1' of the ICASL and SEC Code table on this section for further details. |
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3 (1) (iv) | The Board shall ensure that arrangements are in place to enable all Directors to include matters and proposals in the agenda for regular Board meetings where such matters and proposals relate to the promotion of business and the management of risks of the Bank. | Complied with.
All Board members are given an equal opportunity in this regard, where such proposals relate to the promotion of business and the management of risks of the Bank. |
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3 (1) (v) | The Board procedures shall ensure that notice of at least 7 days is given of a regular Board meeting to provide all Directors an opportunity to attend. For all other Board meetings, reasonable notice may be given. | Complied with.
Directors are given notice of at least 7 days for regular Board meetings. In addition, adequate notice is given for Special Board meetings. |
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3 (1) (vi) | The Board procedures shall ensure that a Director who has not attended at least two-thirds of the meetings in the period of 12 months immediately preceding or has not attended the immediately preceding three consecutive meetings held, shall cease to be a Director. Participation at the Directors' meetings through an alternate Director shall, however, be acceptable as attendance. | Complied with.
All Directors have attended at least two-thirds of the meetings held during 2012. Further, no Director has been absent from three consecutive regular Board meetings during the year. |
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3 (1) (vii) | The Board shall appoint a Company Secretary who satisfies the provisions of Section 43 of the Banking Act No. 30 of 1988, whose primary responsibilities shall be to handle the secretariat services to the Board and shareholder meetings and to carry out other functions specified in the statutes and other regulations. | Complied with.
An Attorney-at-Law / Chartered Secretary with adequate experience functions as the Secretary of the Board and she has taken steps to duly comply with the requirements under the Banking Act No. 30 of 1988. She has also ensured that proper Board procedures are followed and that applicable rules and regulations are adhered to. |
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3 (1) (viii) | All Directors shall have access to advice and services of the Company Secretary with a view to ensuring that Board procedures and all applicable rules and regulations are followed. | Complied with.
See 'Item A.1.4' of the ICASL and SEC Code table on this section for further details. |
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3 (1) (ix) | The Company Secretary shall maintain the minutes of Board meetings and such minutes shall be open for inspection at any reasonable time, on reasonable notice by any Director. | Complied with.
The Company Secretary maintains the minutes of Board meetings with sufficient details and the Minutes are open for inspection by any Director. |
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3 (1) (x) | Minutes of Board meetings shall be recorded in sufficient detail so that it is possible to gather from the minutes, as to whether the Board acted with due care and prudence in performing its duties. The minutes shall also serve as a reference for regulatory and supervisory authorities to assess the depth of deliberations at the Board meetings. Therefore, the minutes of a Board meeting shall clearly contain or refer to the following: (a) a summary of data and information used by the Board in its deliberations; (b) the matters considered by the Board; (c) the fact-finding discussions and the issues of contention or dissent which may illustrate whether the Board was carrying out its duties with due care and prudence; (d) the testimonies and confirmations of relevant executives which indicate compliance with the Board's strategies and policies and adherence to relevant laws and regulations; (e) the Board's knowledge and understanding of the risks to which the Bank is exposed and an overview of the risk management measures adopted; and (f) the decisions and Board resolutions. |
Complied with.
The Company Secretary records the minutes of Board meetings with sufficient details. Minutes are approved by the Chairman and the other members of the Board, after making required amendments, if necessary. |
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3 (1) (xi) | There shall be a procedure agreed by the Board to enable Directors, upon reasonable request, to seek independent professional advice in appropriate circumstances, at the Bank's expense. The Board shall resolve to provide separate independent professional advice to Directors to assist the relevant Director or Directors to discharge his/her/their duties to the Bank. | Complied with.
The Directors are permitted to seek independent professional advice at the Bank's expense. A procedure adopted by the Board is in place in this connection. |
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3 (1) (xii) | Directors shall avoid conflicts of interests, or the appearance of conflicts of interest, in their activities with, and commitments to, other organisations or related parties. If a Director has a conflict of interest in a matter to be considered by the Board, which the Board has determined to be material, the matter should be dealt with at a Board meeting, where Independent Non-Executive Directors [Refer to Direction 3 (2) (iv) of these Directions] who have no material interest in the transaction, are present. Further, a Director shall abstain from voting on any Board resolution in relation to which he/she or any of his/her close relation or a concern, in which a Director has substantial interest, is interested and he/she shall not be counted in the quorum for the relevant agenda item at the Board meeting. |
Complied with.
Directors do not participate in making decisions on matters, in which they have an interest and avoid conflicts of interests with the activities of the Bank. Such Directors' presence is disregarded in counting the quorum for agenda involving such issues. |
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3 (1) (xiii) | The Board shall have a formal schedule of matters specifically reserved to it for decision to ensure that the direction and control of the Bank is firmly under its authority. | Complied with.
The Board has put in place systems and controls to facilitate the effective discharge of Board functions. Pre-set agenda of meeting ensures the direction and control of the Bank is firmly under Board's control and authority. |
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3 (1) (xiv) | The Board shall, if it considers that the Bank is, or is likely to be, unable to meet its obligations or is about to become insolvent or is about to suspend payments due to depositors and other creditors, forthwith inform the Director of Bank Supervision of the situation of the Bank prior to taking any decision or action. | No such situations have arisen. Bank has a Board approval procedure to take action in the event of such a possibility. | |||||||||||||||
3 (1) (xv) | The Board shall ensure that the Bank is capitalised at levels as required by the Monetary Board in terms of the Capital Adequacy ratio and other prudential grounds. | Complied with.
The Bank has duly complied with Capital Adequacy requirements and requirements under other prudential grounds. |
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3 (1) (xvi) | The Board shall publish in the Bank's Annual Report, an Annual Corporate Governance Report setting out the compliance with Direction 3 of these Directions. | Complied with.
This Report serves the said requirement. |
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3 (1) (xvii) | The Board shall adopt a scheme of self-assessment to be undertaken by each Director annually, and maintain records of such assessments. | Complied with.
The Bank has adopted a system of self-assessment, to be undertaken by each Director, annually. |
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3 (2) - The Board's Composition | |||||||||||||||||
3 (2) (i) | The number of Directors on the Board shall not be less than 7 and not more than 13. |
Complied with. Currently there are 8 Directors on the Board. |
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3 (2) (ii) | (A) The total period of service of a Director other than a Director who holds the position of Chief Executive Officer, shall not exceed nine years and such period in office shall be inclusive of the total period of service served by such Director up to January 1, 2008. (B) In this context, the following transitional provisions shall apply: A Director who has completed 9 years as at January 1, 2008, or who completes such term at any time prior to December 31, 2008, may continue for a further maximum period of 3 years commencing January 1, 2009. |
Complied with. All the Non-Executive Directors are within 9 years. |
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3 (2) (iii) | An employee of a bank may be appointed, elected or nominated as a Director of the Bank (hereinafter referred to as an 'Executive Director') provided that the number of Executive Directors shall not exceed one-third of the number of Directors of the Board. In such an event, one of the Executive Directors shall be the Chief Executive Officer of the Bank. | Complied with.
There are two Executive Directors namely MD/CEO and the Chief Operating Officer on the Board. Accordingly, the number of Executive Directors does not exceed one-third of the total number of Directors of the Board. |
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3 (2) (iv) | The Board shall have at least three Independent Non-Executive Directors or one-third of the total number of Directors, whichever is higher. This sub-direction shall be applicable from January 1, 2010 onwards. A Non-Executive Director shall not be considered independent if he/she: |
Complied with. Following are the Non-Executive Independent Directors: Mr. D.S. Weerakkody Mr. K.G.D.D. Dheerasinghe Mr. L. Hulugalle Mr. S. Swarnajothi |
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(a) has direct and indirect shareholdings of more than 1% of the Bank; | |||||||||||||||||
(b) currently has or had during the period of two years immediately preceding his/her appointment as Director, any business transactions with the Bank as described in Direction 3 (7) hereof, exceeding 10% of the regulatory capital of the Bank; | |||||||||||||||||
(c) has been employed by the Bank during the two-year period immediately preceding the appointment as Director; | |||||||||||||||||
(d) has a close relation who is a Director or Chief Executive Officer or a member of Key Management Personnel or a material shareholder of the Bank or another Bank. For this purpose, a 'close relation' shall mean the spouse or a financially dependent child; |
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(e) represents a specific stakeholder of the Bank; | |||||||||||||||||
(f) is an employee or a Director or a material shareholder in a company or business organisation: | |||||||||||||||||
(i) which currently has a transaction with the Bank as defined in Direction 3 (7) of these Directions, exceeding 10% of the regulatory capital of the Bank, or | |||||||||||||||||
(ii) in which any of the other Directors of the Bank are employed or are Directors or are material shareholders; or | |||||||||||||||||
(iii) in which any of the other Directors of the Bank have a transaction as defined in Direction 3 (7) of these Directions, exceeding 10% of regulatory capital in the Bank. | |||||||||||||||||
3 (2) (v) | In the event an alternate Director is appointed to represent an Independent Director, the person so appointed shall also meet the criteria that apply to the Independent Director. | No such situation has arisen. | |||||||||||||||
3 (2) (vi) | Non-Executive Directors shall be persons with credible track records and/or have necessary skills and experience to bring an independent judgment to bear on issues of strategy, performance and resources. | Complied with.
Their profiles are found on 'Board of Directors'section. |
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3 (2) (vii) | A meeting of the Board shall not be duly constituted, although the number of Directors required to constitute the quorum at such meeting is present, unless more than one-half of the number of Directors present at such meeting are Non-Executive Directors. This sub-direction shall be applicable from January 1, 2010 onwards. | Complied with.
All Board meetings held during 2012 were duly constituted with the presence of more than one-half of the Non-Executive Directors. See 'Number of Meetings Held and Attendance' on this section. |
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3 (2) (viii) | The Independent Non-Executive Directors shall be expressly identified as such in all corporate communications that disclose the names of Directors of the Bank. The Bank shall disclose the composition of the Board, by category of Directors, including the names of the Chairman, Executive Directors, Non-Executive Directors and Independent Non-Executive Directors in the Annual Corporate Governance Report. | Complied with.
See Note 1 that appears on 'Notes to the Financial Statements'. Profiles of the Non-Executive Directors are given on 'Board of Directors' section. |
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3 (2) (ix) | There shall be a formal, considered and transparent procedure for the appointment of new Directors to the Board. There shall also be procedures in place for the orderly succession of appointments to the Board. | Complied with.
New appointments and re-elections of Directors to the Board are based on the recommendations of the Board Nomination Committee. There is a procedure in place for the orderly succession of appointments to the Board. See the 'Board Nomination Committee Report'. |
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3 (2) (x) | All Directors appointed to fill a casual vacancy shall be subject to election by shareholders at the first general meeting after their appointment. | Complied with.
All Directors appointed to the Board are subject to re-election by shareholders at the first Annual General Meeting after their appointment. |
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3 (2) (xi) | If a Director resigns or is removed from office, the Board shall: (a) announce the Director's resignation or removal and the reasons for such removal or resignation including but not limited to information relating to the relevant Director's disagreement with the Bank, if any; and (b) issue a statement confirming whether or not there are any matters that need to be brought to the attention of shareholders. | Complied with.
Mr. A.L. Gooneratne, former Managing Director/Chief Executive Officer of the Bank retired from the services of the Bank on April 27, 2012 on reaching the age of retirement and resigned from his position as a Director of the Board with effect from the said date. An announcement was made as required. |
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3 (2) (xii) | A Director or an employee of a Bank shall not be appointed, elected or nominated as a Director of another Bank except where such Bank is a Subsidiary Company or an Associate Company of the first mentioned Bank. | Complied with.
None of the present Directors of the Bank acts as a Director of another Bank. See the Profiles of Directors on 'Board of Directors' section. |
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3 (3) - Criteria to Assess the Fitness and Propriety of Directors | |||||||||||||||||
In addition to provisions of Section 42 of the Banking Act No. 30 of 1988, the criteria set out below shall apply to determine the fitness and propriety of a person who serves or wishes to serve as a Director of a Bank. Non-compliance with any one of the criteria as set out herein shall disqualify a person to be appointed, elected or nominated as a Director or to continue as a Director. |
Complied with.
Declarations are submitted by each Director declaring their suitability (fit and proper test) annually. These affidavits and declarations are considered and discussed initially at a Nomination Committee meeting and thereafter at a Board meeting by the Board for necessary action. |
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3 (3) (i) | The age of a person who serves as Director shall not exceed 70 years.
(A) In this connection, the following general exemption shall apply:
A Director who has reached the age of 70 years as at January 1, 2008 or who would reach the age of 70 years prior to December 31, 2008 may continue in office for a further maximum period of 3 years commencing January 1, 2009. |
Complied with.
All Directors are below 70 years. |
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3 (3) (ii) | A person shall not hold office as a Director of more than 20 companies/entities/institutions inclusive of Subsidiaries or Associate Companies of the Bank. Of such 20 companies/entities/institutions, not more than 10 companies shall be those classified as Specified Business Entities in terms of the Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995. (A) In this context, the following general exemption shall apply: If any person holds posts in excess of the limitations as above, such person shall within a maximum period of three years from January 1, 2009 comply with the above mentioned limitation and notify the Monetary Board accordingly. |
Complied with.
No Director holds directorships of more than 20 companies / 10 companies classified as "Specified Business Entities." |
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3 (4) - Management Functions Delegated by the Board | |||||||||||||||||
3 (4) (i) | The Directors shall carefully study and clearly understand the delegation arrangements in place. | Complied with. | |||||||||||||||
3 (4) (ii) | The Board shall not delegate any matters to a Board Committee, Chief Executive Officer, Executive Directors or Key Management Personnel, to an extent that such delegation would significantly hinder or reduce the ability of the Board as a whole to discharge its functions. | The Board is empowered by the Articles of Association to delegate to the MD/CEO any of the powers vested with the Board, upon such terms and conditions and with such restrictions as the Board may think fit. | |||||||||||||||
3 (4) (iii) | The Board shall review the delegation processes in place on a periodic basis to ensure that they remain relevant to the needs of the Bank. | Complied with.
The delegated powers are reviewed periodically to ensure that they remain relevant to the needs of the Bank. |
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3 (5) - The Chairman and Chief Executive Officer | |||||||||||||||||
3 (5) (i) | The roles of Chairman and Chief Executive Officer shall be separate and shall not be performed by the same individual. | Complied with.
There is a clear separation of duties between the roles of the Chairman and the CEO, thereby preventing unfettered powers for decision making being vested with one person. |
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3 (5) (ii) | The Chairman shall be a Non-Executive Director and preferably an Independent Director as well. In the case where the Chairman is not an Independent Director, the Board shall designate an Independent Director as the Senior Director, with suitably documented terms of reference to ensure a greater independent element. The designation of the Senior Director shall be disclosed in the Bank's Annual Report. | Complied with.
Chairman is an Independent Non-Executive Director. |
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3 (5) (iii) | The Board shall disclose in its Corporate Governance Report, which shall be an integral part of its Annual Report, the identity of the Chairman and the Chief Executive Officer and the nature of any relationship [including financial, business, family or other material/relevant relationship(s)], if any, between the Chairman and the Chief Executive Officer and the relationships among members of the Board. | Complied with.
The Board is aware that there are no relationships whatsoever, including financial, business, family, any other material/relevant relationship between the Chairman and the CEO. Similarly, no relationships prevail among the other members of the Board, other than for two Directors being common Directors of a company. See Note 2 appearing on this section for further details. |
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3 (5) (iv) | The Chairman shall:
(a) provide leadership to the Board; (b) ensure that the Board works effectively and discharges its responsibilities; and (c) ensure that all key and appropriate issues are discussed by the Board in a timely manner. |
Complied with.
Board approved List of Functions and Responsibilities of Chairman include, 'Providing Leadership to the Board' as a responsibility of the Chairman. The Bank expanded the 'scope for Appraisal' in the Board 2012 annual assessment by including an area to measure the "Effectiveness of the Chairman in facilitating the effective discharge of Board functions." All key and appropriate issues are discussed by the Board on a timely basis. |
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3 (5) (v) | The Chairman shall be primarily responsible for drawing up and approving the agenda for each Board meeting, taking into account where appropriate, any matters proposed by the other Directors for inclusion in the agenda. The Chairman may delegate the drawing up of the agenda to the Company Secretary. | Complied with.
The Chairman ensures, that all Directors are properly briefed on issues arising at Board Meetings. |
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3 (5) (vi) | The Chairman shall ensure that all Directors are properly briefed on issues arising at Board meetings and also ensure that Directors receive adequate information in a timely manner. | Complied with. | |||||||||||||||
3 (5) (vii) | The Chairman shall encourage all Directors to make a full and active contribution to the Board's affairs and take the lead to ensure that the Board acts in the best interests of the Bank. | Complied with. | |||||||||||||||
3 (5) (viii) | The Chairman shall facilitate the effective contribution of Non-Executive Directors in particular and ensure constructive relations between Executive and Non-Executive Directors. | Complied with. | |||||||||||||||
3 (5) (ix) | The Chairman, shall not engage in activities involving direct supervision of Key Management Personnel or any other executive duties whatsoever. | Complied with.
The Chairman does not directly get involved in the supervision of Key Management Personnel or any other executive duties. |
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3 (5) (x) | The Chairman shall ensure that appropriate steps are taken to maintain effective communication with shareholders and that the views of shareholders are communicated to the Board. | Complied with. At general meetings, shareholders are given the opportunity to take up matters for which clarification is needed. Further, matters are adequately clarified by the Chairman and/or CEO and/or any other officer. | |||||||||||||||
3 (5) (xi) | The Chief Executive Officer shall function as the apex executive-in-charge of the day-to-day-management of the Bank's operations and business. | Complied with. The CEO is supported by the members of the Corporate Management to manage the day-to-day-management of the Bank's operations and business. | |||||||||||||||
3 (6) - Board Appointed Committees | |||||||||||||||||
3 (6) (i) | Each bank shall have at least four Board Committees as set out in Directions 3 (6) (ii), 3 (6) (iii), 3 (6) (iv) and 3 (6) (v) of these Directions. Each Committee shall report directly to the Board. All Committees shall appoint a Secretary to arrange the meetings and maintain minutes, records, etc., under the supervision of the Chairman of the Committee. The Board shall present a report of the performance on each Committee, on their duties and roles at the Annual General Meeting. | Complied with.
The following mandatory Board Sub-Committees have been appointed by the Board requires each such committee to report to the Board: 1. Board Human Resources and Remuneration Committee 2. Board Integrated Risk Management Committee 3. Board Nomination Committee 4. Board Audit Committee See this Stewardship section for the Reports of the Board Committees. |
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3 (6) (ii) | The following rules shall apply in relation to the Audit Committee: | See Sections of Composition, Charter, Meetings and the Methodology of the Board Audit Committee Report on this Stewardship section. | |||||||||||||||
(a) The Chairman of the Committee shall be an Independent Non-Executive Director who possesses qualifications and experience in accountancy and/or audit. | Complied with.
Chairman of the Committee is an Independent Non-Executive Director and possesses qualifications and related experience. |
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(b) All members of the Committee shall be Non-Executive Directors. | Complied with.
All members of the Committee are Non-Executive Directors |
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(c) The Committee shall make recommendations on matters in connection with:
(i) The appointment of the External Auditor for audit services to be provided in compliance with the relevant statutes;
(ii) the implementation of the Central Bank guidelines issued to Auditors from time to time; (iii) the application of the relevant accounting standards; and (iv) the service period, audit fee and any resignation or dismissal of the Auditor; provided that the engagement of the Audit Partner shall not exceed five years, and that the particular Audit Partner is not re-engaged for the audit before the expiry of three years from the date of the completion of the previous term. |
Complied with.
The evaluation is carried out by the Board Audit Committee in consultation with the Chief Financial Officer. |
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(d) The Committee shall review and monitor the External Auditor's independence and objectivity and the effectiveness of the audit processes in accordance with applicable standards and best practices. | Complied with.
The Board has adopted a policy of rotation of Auditors, once in every 5 years, in keeping with the principles of Good Corporate Governance. |
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(e) The Committee shall develop and implement a policy on the engagement of an External Auditor to provide non-audit services that are permitted under the relevant statutes, regulations, requirements and guidelines. In doing so, the Committee shall ensure that the provision by an External Auditor of non-audit services does not impair the External Auditor's independence or objectivity. When assessing the External Auditor's independence or objectivity in relation to the provision of non-audit services, the Committee shall consider:
(i) whether the skills and experience of the audit firm make it a suitable provider of the non-audit services; (ii) whether there are safeguards in place to ensure that there is no threat to the objectivity and/or independence in the conduct of the audit resulting from the provision of such services by the External Auditor; and (iii) whether the nature of the non-audit services, the related fee levels and the fee levels individually and in aggregate relative to the audit firm, pose any threat to the objectivity and/or independence of the External Auditor. |
Complied with.
Following action is taken prior to the assignment of non-audit services to External Auditors by the Bank: (a) If the Management is of the view that the independence is likely to be impaired with the assignment of any non-audit service to External Auditors, no assignment will be made to obtain such services. (b) Further, relevant information is obtained from External Auditors to ensure that their independence is not impaired, as a result of providing any non-audit services. (c) Assigning such non-audit services to External Auditors is discussed at Audit Committee Meeting and required approval is obtained to that effect. |
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(f) The Committee shall, before the audit commences, discuss and finalise with the External Auditors the nature and scope of the audit, including: (i) an assessment of the Bank's compliance with the relevant Directions in relation to corporate governance and the management's internal controls over financial reporting; (ii) the preparation of Financial Statements for external purposes in accordance with relevant accounting principles and reporting obligations; and (iii) the co-ordination between firms where more than one audit firm is involved. |
Complied with.
The Auditors make a presentation at the Board Audit Committee Meeting with details of the proposed Audit Plan and the Scope. Members of the Board Audit Committee obtain clarifications in respect of the contents of the presentation, if deemed necessary. |
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(g) The Committee shall review the financial information of the Bank, in order to monitor the integrity of the Financial Statements of the Bank, its Annual Report, accounts and quarterly reports prepared for disclosure, and the significant financial reporting judgments contained therein. In reviewing the Bank's Annual Report and accounts and quarterly reports before submission to the Board, the Committee shall focus particularly on: (i) major judgmental areas; (ii) any changes in accounting policies and practices; (iii) significant adjustments arising from the audit; (iv) the going concern assumption; and (v) the compliance with relevant accounting standards and other legal requirements. |
Complied with.
Quarterly Financial Statements as well as year end Financial Statements are circulated to all members of the Board Audit Committee. A detailed discussion takes place at the Board Audit Committee meeting regarding such Financial Statements. Once the members of the Board Audit Committee have obtained required clarifications in respect of all aspects included in the Financial Statements. Such Financial Statements are recommended for approval by the Board of Directors. |
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(h) The Committee shall discuss issues, problems and reservations arising from the interim and final audits, and any matters the Auditor may wish to discuss including those matters that may need to be discussed in the absence of Key Management Personnel, if necessary. | Complied with.
The Committee met the External Auditors twice without the presence of the Executive Directors and Corporate Management. |
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(i) The Committee shall review the External Auditor's Management Letter and the management's response thereto. | Complied with.
Upon receipt of the year end Management Letters, Auditors are invited to make a presentation at a Board Audit Committee meeting to discuss significant findings which have arisen during the audit. Thereafter, the Board Audit Committee decides on remedial action to be taken in respect of such findings, if any, and relevant Heads of Departments are instructed to take such action. |
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(j) The Committee shall take the following steps with regard to the internal audit function of the Bank: (i) Review the adequacy of the scope, functions and resources of the Internal Audit Department, and satisfy itself that the department has the necessary authority to carry out its work; (ii) Review the internal audit programme and results of the internal audit process and, where necessary, ensure that appropriate actions are taken on the recommendations of the Internal Audit Department; |
Complied with. The Annual Audit Plan prepared by the Internal Audit Department is submitted to the Board Audit Committee for approval. This plan covers the scope and resource requirement relating to the Audit Plan. |
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(iii) Review any appraisal or assessment of the performance of the head and senior staff members of the Internal Audit Department; | Complied with. This review is carried out by immediate Supervising Officer and thereafter referred to the Chairman of the Board Audit Committee, for a further review and ratification. |
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(iv) Recommend any appointment or termination of the head, senior staff members and outsourced service providers to the internal audit function; | Complied with.
The services of five audit firms have been obtained to assist the Inspection Department to carry out the audit function. Prior approval of the Board Audit Committee has been obtained in this regard. |
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(v) Ensure that the Committee is appraised of resignations of senior staff members of the Internal Audit Department including the Chief Internal Auditor and any outsourced service providers, and to provide an opportunity to the resigning senior staff members and outsourced service providers to submit reasons for resigning; | Complied with. | ||||||||||||||||
(vi) Ensure that the internal audit function is independent of the activities it audits and that it is performed with impartiality, proficiency and due professional care. | Complied with.
Internal Audit Department reports direct to DGM Inspection who will be reporting directly to the Board Audit Committee. Hence, it is independent and the audits are performed with due care. |
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(k) The Committee shall consider the major findings of internal investigations and management's responses thereto. | Complied with.
Significant findings of investigations carried out by the Inspection Department along with the responses of the Management are tabled and discussed at Board Audit Committee meetings. |
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(l) The Chief Finance Officer, the Chief Internal Auditor and a representative of the External Auditors may normally attend meetings. Other Board Members and the Chief Executive Officer may also attend meetings upon the invitation of the Committee. However, at least twice a year, the Committee shall meet with the External Auditors without the Executive Directors being present. | Complied with.
The immediate requirement of two meetings between the Board Audit Committee and External Auditors has been met. In addition, on two occasions, the Non-Executive Directors have been provided with an opportunity of discussing matters relating to audit on a private basis. |
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(m) The Committee shall have: (i) explicit authority to investigate into any matter within its terms of reference; (ii) the resources which it needs to do so; (iii) full access to information; and (iv) authority to obtain external professional advice and to invite outsiders with relevant experience to attend, if necessary. | Complied with.
Please refer 'Board Audit Committee Report' on this Stewardship section. |
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(n) The Committee shall meet regularly, with due notice of issues to be discussed and shall record its conclusions in discharging its duties and responsibilities. | Complied with.
Please refer 'Board Audit Committee Report' on this Stewardship section. |
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(o) The Board shall disclose in an informative way; (i) details of the activities of the Audit Committee; (ii) the number of Audit Committee meetings held in the year; and (iii) details of attendance of each individual Director at such meetings. | Complied with.
Please refer 'Board Audit Committee Report' on this Stewardship section. |
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(p) The Secretary of the Committee (who may be the Company Secretary or the Head of the Internal Audit function) shall record and keep detailed minutes of the committee meetings. | Complied with.
The secretary of the Committee records and maintains all minutes of the meetings. |
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(q) The Committee shall review arrangements by which employees of the Bank may, in confidence, raise concerns about possible improprieties in financial reporting, internal control or other matters. Accordingly, the Committee shall ensure that proper arrangements are in place for the fair and independent investigation of such matters and for appropriate follow-up action and to act as the key representative body for overseeing the Bank's relations with the External Auditor. | Complied with.
The Bank has a Whistle-Blowing Policy which has been reviewed and approved by the Board Audit Committee and the Board of Directors. |
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3 (6) (iii) | The following rules shall apply in relation to the Human Resources and Remuneration Committee: | Please refer Sections of Composition, Charter, Meetings and the Methodology of the 'Board Human Resources and Remuneration Committee Report' on this Stewardship section. | |||||||||||||||
(a) The Committee shall determine the remuneration policy (salaries, allowances and other financial payments) relating to Directors, Chief Executive Officer (CEO) and Key Management Personnel of the Bank | Complied with.
The Bank has a formal process for annual performance evaluation for the CEO and Key Management Personnel. The performance evaluations for a particular year are formally approved before April in the subsequent year. Please refer 'Board Human Resources and Remuneration Committee Report' on this Stewardship section. |
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(b) The Committee shall set goals and targets for the Directors, CEO and the Key Management Personnel. | |||||||||||||||||
(c) The Committee shall evaluate the performance of the CEO and Key Management Personnel against the set targets and goals periodically and determine the basis for revising remuneration, benefits and other payments of performance based incentives. | |||||||||||||||||
(d) The CEO shall be present at all meetings of the Committee, except when matters relating to the CEO are being discussed. |
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3 (6) (iv) | The following rules shall apply in relation to the Board Nomination Committee: | ||||||||||||||||
(a) The Committee shall implement a procedure to select/appoint new Directors, CEO and Key Management Personnel. | Complied with.
Please refer Sections of Composition, Charter, Meetings and the Methodology of the 'Board Nomination Committee Report' on this Stewardship section. |
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(b) The Committee shall consider and recommend (or not recommend) the re-election of current Directors, taking into account the performance and contribution made by the Director concerned towards the overall discharge of the Board's responsibilities. |
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(c) The Committee shall set the criteria such as qualifications, experience and key attributes required for eligibility to be considered for appointment or promotion to the post of CEO and the key management positions. | |||||||||||||||||
(d) The Committee shall ensure that Directors, CEO and Key Management Personnel are fit and proper persons to hold office as specified in the criteria given in Direction 3 (3) and as set out in the Statutes. | Complied with.
Committee ensures that all Directors are fit and proper persons to hold office as specified in the Direction. Board Human Resources and Remuneration Sub-Committee ensures that Key Management Personnel are fit and proper persons to hold office as specified in the Direction. |
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(e) The Committee shall consider and recommend from time to time, the requirements of additional/new expertise and the succession arrangements for retiring Directors and Key Management Personnel. | For Directors - Complied with. For Key Management Personnel - This activity is handled by the Board Human Resources and Remuneration Committee. | ||||||||||||||||
(f) The Committee shall be chaired by an Independent Director and preferably be constituted with a majority of Independent Directors. The CEO may be present at meetings by invitation. | Committee was chaired by an Independent Director. CEO was present at meetings by invitation. | ||||||||||||||||
3 (6) (v) | The following rules shall apply in relation to the Integrated Risk Management Committee: | Please refer Sections of Composition, Charter, Meetings and the Methodology of the 'Board Integrated Risk Management Committee Report' on this Stewardship section. | |||||||||||||||
(a) The Committee shall consist of at least three Non-Executive Directors, Chief Executive Officer and Key Management Personnel supervising broad risk categories - i.e., credit, market, liquidity, operational and strategic risks. The Committee shall work with Key Management Personnel very closely and make decisions on behalf of the Board within the framework of the authority and responsibility assigned to the Committee. | Complied with. Members of the Committee are given below: Mr. D.S. Weerakkody Mr. K.G.D.D. Dheerasinghe Prof. U.P. Liyanage Mr. W.M.R.S. Dias (By invitation) |
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(b) The Committee shall assess all risks - i.e., credit, market, liquidity, operational and strategic risks to the Bank on a monthly basis through appropriate risk indicators and management information. In the case of Subsidiary Companies and Associate Companies, risk management shall be done, both on a Bank basis and Group basis. | Complied with.
The Committee will take action to comply with the requirements for all Subsidiaries and Associate Companies, on a monthly basis, during the year 2013. |
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(c) The Committee shall review the adequacy and effectiveness of all management level committees such as the Credit Committee and the Asset-Liability Committee to address specific risks and to manage those risks within quantitative and qualitative risk limits as specified by the Committee. | Complied with. The Committee minutes evidence that all risk indicators such as key operational risk indicators , non-financial operating risk indicators, analysis of NPA ratio, and default ratios, high risk lending sector advances/NPA segmentation by industry and product risk grading, cross border, counterparty and bank risk exposure have been reviewed on a monthly basis. |
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(d) The Committee shall take prompt corrective action to mitigate the effects of specific risks in the case such risks are at levels beyond the prudent levels decided by the Committee on the basis of the Bank's policies and regulatory and supervisory requirements. | Complied with.
Quarterly reports of the Committee are evidence that all risk indicators which have gone beyond the limits have been discussed at a length and recommendations/suggestions are made to reduce the same with nominating relevant persons responsible and further the progress is being monitored. |
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(e) The Committee shall meet at least quarterly to assess all aspects of risk management including updated business continuity plans. | Complied with. | ||||||||||||||||
(f) The Committee shall take appropriate actions against the officers responsible for failure to identify specific risks and take prompt corrective actions as recommended by the Committee, and/or as directed by the Director of Bank Supervision. | Committee refers such matters, if any, to the HR Department for necessary action. The applicable procedure which is in practice will be strengthened as specified in this Direction. | ||||||||||||||||
(g) The Committee shall submit a risk assessment report within a week of each meeting to the Board seeking the Board's views, concurrence and/or specific Directions. | Complied with. | ||||||||||||||||
(h) The Committee shall establish a compliance function to assess the Bank's compliance with laws, regulations, regulatory guidelines, internal controls and approved policies on all areas of business operations. A dedicated compliance officer selected from Key Management Personnel shall carry out the compliance function and report to the Committee periodically. | Complied with. Compliance function is in place to assess the Bank's compliance. The Compliance Officer submits a quarterly compliance report to the Board Audit Committee, Board Integrated Risk Management Committee and the non-compliance issues are reported to the main Board. |
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3 (7) - Related Party Transactions | |||||||||||||||||
3 (7) (i) | The Board shall take the necessary steps to avoid any conflicts of interest that may arise from any transaction of the Bank with any person, and particularly with the following categories of persons who shall be considered as "related parties" for the purposes of this Direction: (a) Any of the Bank's subsidiary companies; (b) Any of the Bank's associate companies; (c) Any of the Directors of the Bank; (d) Any of the Bank's Key Management Personnel; (e) A close relation of any of the Bank's Directors or Key Management Personnel; (f) A shareholder owning a material interest in the Bank; (g) A concern in which any of the Bank's Directors or a close relation of any of the Bank's Directors or any of its material shareholders has a substantial interest. | A Board approved process is in place to ensure that the Bank does not engage in transactions with related parties, as defined in the Direction.
The Bank is in the process of strengthening the monitoring mechanism in this regard, during the year 2013. Transactions carried out with Related Parties in the normal course of business are disclosed in Note 53 to the Financial Statements on 'Related Party Disclosures' in Note 53 on 'Notes to the Financial Statements'. |
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3 (7) (ii) | The type of transactions with related parties that shall be covered by this Direction shall include the following: (a) The grant of any type of accommodation, as defined in the Monetary Board's Directions on maximum amount of accommodation, (b) The creation of any liabilities of the Bank in the form of deposits, borrowings and investments, (c) The provision of any services of a financial or non-financial nature provided to the Bank or received from the Bank, (d) The creation or maintenance of reporting lines and information flows between the Bank and any related parties which may lead to the sharing of potentially proprietary, confidential or otherwise sensitive information that may give benefits to such related parties. | A Board approved process is in place to ensure compliance. The Bank is in the process of strengthening the monitoring mechanism in this regard during the year 2013. | |||||||||||||||
3 (7) (iii) | The Board shall ensure that the Bank does not engage in transactions with related parties as defined in Direction 3 (7) (i) above, in a manner that would grant such parties "more favourable treatment" than that accorded to other constituents of the Bank carrying on the same business. In this context, "more favourable treatment" shall mean and include treatment, including the:
(a) Granting of "total net accommodation" to related parties, exceeding a prudent percentage of the Bank's regulatory capital, as determined by the Board. For purposes of this sub-direction: I. "Accommodation" shall mean accommodation as defined in the Banking Act Direction No. 07 of 2007 on Maximum Amount of Accommodation. II. The "total net accommodation" shall be computed by deducting from the total accommodation, the cash collateral and investments made by such related parties in the Bank's share capital and debt instruments with a maturity of 5 years or more. |
A Board approved process is in place to ensure compliance. The Bank is in the process of strengthening the monitoring mechanism in this regard during the year 2013. | |||||||||||||||
(b) Charging of a lower rate of interest than the Bank's best lending rate or paying more than the Bank's deposit rate for a comparable transaction with an unrelated comparable counterparty. | |||||||||||||||||
(c) Providing of preferential treatment, such as favourable terms, covering trade losses and/or waiving fees/commissions, that extend beyond the terms granted in the normal course of business undertaken with unrelated parties. | |||||||||||||||||
(d) Providing services to or receiving services from a related party without an evaluation procedure. |
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(e) Maintaining reporting lines and information flows that may lead to sharing potentially proprietary, confidential or otherwise sensitive information with related parties, except as required for the performance of legitimate duties and functions. | |||||||||||||||||
3 (7) (iv) | A Bank shall not grant any accommodation to any of its Directors or to a close relation of such Director, unless such accommodation is sanctioned at a meeting of its Board of Directors, with not less than two-thirds of the number of Directors other than the Director concerned, voting in favour of such accommodation. This accommodation shall be secured by such security as may from time to time be determined by the Monetary Board as well. |
All accommodations to Directors and/or their close relatives are approved either at a Board meeting or through circulation of Board Papers. | |||||||||||||||
3 (7) (v) | (a) Where any accommodation has been granted by a Bank to a person
or a close relation of a person or to any concern in which the person has a substantial interest, and such person is subsequently appointed as a Director of the Bank, steps shall be taken by the Bank to obtain the necessary security as may be approved for that purpose by the Monetary Board, within one year from the date of appointment of the person as a Director. |
No such situation has arisen during the year. | |||||||||||||||
(b) Where such security is not provided by the period as provided in Direction 3 (7) (v) (a) above, the Bank shall take steps to recover any amount due on account of any accommodation, together with interest, if any, within the period specified at the time of the grant of accommodation or at the expiry of a period of eighteen months from the date of appointment of such Director, whichever is earlier. |
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(c) Any Director who fails to comply with the above sub-directions shall be deemed to have vacated the office of Director and the Bank shall disclose such fact to the public. | |||||||||||||||||
(d) This sub-direction, however, shall not apply to a Director who at the time of the grant of the accommodation was an employee of the Bank and the accommodation was granted under a scheme applicable to all employees of such Bank. |
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3 (7) (vi) | A Bank shall not grant any accommodation or "more favourable treatment" relating to the waiver of fees and/or commissions to any employee or a close relation of such employee or to any concern in which the employee or close relation has a substantial interest other than on the basis of a scheme applicable to the employees of such Bank or when secured by security as may be approved by the Monetary Board in respect of accommodation granted as per Direction 3 (7) (v) above. | Accommodation specified in this Direction was granted to employees only under 'Staff Benefit Scheme' of the Bank. The monitoring mechanism will be further strengthened during the year 2013. | |||||||||||||||
3 (7) (vii) | No accommodation granted by a Bank under Direction 3 (7) (v) and 3 (7) (vi) above, nor any part of such accommodation, nor any interest due thereon shall be remitted without the prior approval of the Monetary Board and any remission without such approval shall be void and of no effect. | Not applicable due to the reasons mentioned above in 3 (7) (v) & 3 (7) (vi) | |||||||||||||||
3 (8) - Disclosures | |||||||||||||||||
3 (8) (i) | The Board shall ensure that: (a) Annual Audited Financial Statements and Quarterly Financial Statements are prepared and published in accordance with the formats prescribed by the supervisory and regulatory authorities and applicable accounting standards, and that (b) such statements are published in the newspapers in an abridged form, in Sinhala, Tamil and English. | Complied with. Annual Audited Financial Statements and Interim Financial Statements of the Bank were prepared and published in the newspapers (in Sinhala, Tamil and English) in accordance with the formats prescribed by the Supervisory and Regulatory Authorities and applicable accounting standards. In addition, a copy of the Annual Report is sent to each shareholder either in the hard copy form or in a CD. Further Interim Financial Statements are sent to the Colombo Stock Exchange in addition to hosting them in the official website of the Bank for the information of interested stakeholders. | |||||||||||||||
3 (8) (ii) | The Board shall ensure that the following minimum disclosures are made in the Annual Report: | ||||||||||||||||
(a) A statement to the effect that the Annual Audited Financial Statements have been prepared in line with applicable accounting standards and regulatory requirements, inclusive of specific disclosures. | Complied with. Disclosures on the compliance with the applicable accounting standards and regulatory requirements in preparation of the Annual Audited Financial Statements have been made in the 'Statement of Directors' Responsibility', 'Managing Director's and Chief Financial Officer's Responsibility Statement'. | ||||||||||||||||
(b) A report by the Board on the Bank's internal control mechanism that confirms that the financial reporting system has been designed to provide reasonable assurance regarding the reliability of financial reporting, and that the preparation of Financial Statements for external purposes has been done in accordance with relevant accounting principles and regulatory requirements. | Complied with. Report by the Board on the effectiveness of the Bank's internal control mechanism to ensure that the financial reporting system has been designed to provide reasonable assurance regarding the reliability of financial reporting, is given on 'Directors Statement of Internal Control' and that the preparation of Financial Statements for external purposes has been done in accordance with relevant accounting principles and regulatory requirements is given on 'Statement of Directors' Responsibility'. In addition, all Directors have signed the 'Annual Report of Board of Directors' found on this Stewardship section, wherein all Directors have collectively taken the responsibility for the above requirement. | ||||||||||||||||
(c) The External Auditor's certification on the effectiveness of the internal control mechanism referred to in Direction 3 (8) (ii) (b) above, in respect of any statements prepared or published after December 31, 2008. | Complied with. The Bank obtained an assurance report from the External Auditors on the effectiveness of the internal control mechanism referred to in Direction 3 (8) (ii) (b) above. | ||||||||||||||||
(d) Details of Directors, including names, fitness and propriety, transactions with the Bank and the total of fees/remuneration paid by the Bank. | Complied with.
Profiles of Directors are given on 'Board of Directors' section, transactions of the Directors with the Bank are given in the 'Directors Interest in Contracts with the Company' and the total of fees/remuneration paid to the Directors by the Bank is given in Note 14 to the Financial Statements on Financial Reports section. |
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(e) Total net accommodation as defined in 3 (7) (iii) granted to each category of related parties. The net accommodation granted to each category of related parties shall also be disclosed as a percentage of the Bank's regulatory capital. | Complied with.
Total net accommodations granted to each category of related parties are given in Note 53 to the Financial Statements on the Financial Reports section.
The net accommodations granted to each category of related parties as a percentage of the Bank's regulatory capital are given below:
Direct and indirect accommodation to related parties:
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(f) The aggregate values of remuneration paid by the Bank to its Key Management Personnel and the aggregate values of the transactions of the Bank with its Key Management Personnel, set out by broad categories such as remuneration paid, accommodation granted and deposits or investments made in the Bank. | Complied with.
The aggregate values of remuneration paid by the Bank to its Key Management Personnel are given in Note 53.2.1.1, 53.2.1.2 and 53.2.1.3 to the Financial Statements and the aggregate values of the transactions of the Bank with its Key Management Personnel are set out in Note 53.2.2 to the Financial Statements . |
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(g) The External Auditor's Certification of the compliance with these Directions in the Annual Corporate Governance Reports published after January 1, 2010. | Complied with.
The factual findings report has been issued by the External Auditors on the level of compliance with the requirements of these Directions. The findings presented in their report addressed to the Board did not identify any inconsistencies to those reported above. |
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(h) A report setting out details of the compliance with prudential requirements, regulations, laws and internal controls and measures taken to rectify any material non-compliances. | Complied with.
See 'Statement of Directors' Responsibility' for details of the compliance with prudential requirements, regulations, laws and internal controls. |
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(i) A statement of the regulatory and supervisory concerns on lapses in the Bank's risk management, or non-compliance with these Directions that have been pointed out by the Director of Bank Supervision, if so directed by the Monetary Board to be disclosed to the public, together with the measures taken by the Bank to address such concerns. | Not Applicable.
There were no significant supervisory concerns on lapses in the Bank's risk management or non-compliance with this Direction that have been pointed out by the Director of Bank Supervision of Central Bank of Sri Lanka and requested by the Monetary Board to be disclosed to the public. |
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3 (9) - Transitional and Other General Provisions | |||||||||||||||||
3 (9) (i) | Compliance with this Direction shall commence from January 1, 2008 onwards and all Licensed Commercial Banks shall fully-comply with the provisions of this Direction by or before January 1, 2009, except where extended compliance dates have been specifically provided for in this Direction. | Position reported in 2008, 2009, 2010 & 2011 Annual Reports. Position applicable to the year 2012 is reported in this Annual Report. | |||||||||||||||
3 (9) (ii) | In respect of the Banks that have been incorporated by specific statutes in Sri Lanka, the Boards as specified in such statutes shall continue to function in terms of the provisions of the respective statutes, provided they take steps to comply with all provisions of this Direction that are not inconsistent with the provisions of the respective statutes. | Not Applicable. | |||||||||||||||
3 (9) (iii) | This Direction shall apply to the branches of the foreign Banks operating in Sri Lanka to the extent that it is not inconsistent with the regulations and laws applicable in such Bank's country of incorporation. The branch of a foreign Bank shall also publish its parent Bank's Annual Corporate Governance Report together with its Annual Report and accounts of the branch operations in Sri Lanka. | Not Applicable. | |||||||||||||||
3 (9) (iv) | In the event of a conflict between any of the provisions of this Direction and the Articles of Association (or Internal Rules) pertaining to any Bank, the provisions of this Direction shall prevail. However, if the Articles of Association of an individual Bank set a more stringent standard than that specified in this Direction, such provisions in the Articles of Association may be followed. | Not Applicable. | |||||||||||||||
3 (9) (v) | If for any reason such as ill health or any incapacity as provided for in the Banking Act, the Monetary Board considers that exemptions referred to in Directions 3 (2) (ii) B, 3 (3) (i) A and 3 (3) (ii) A should not be availed of, such ground may be notified to the person by the Monetary Board, and after a hearing, the Monetary Board may limit the period of exemption. | Not Applicable. |
The following table lists out the composition of the Board, by category of Directors for the year ended December 31, 2012.
Name of the Director | Independence / Non-Independence Status |
||
Chairman Mr. D.S. Weerakkody (Non-Executive Director) | Independent | ||
Executive Directors: Mr. W.M.R.S. Dias (Director up to April 26, 2012 and Managing Director from April 27, 2012) Mr. J. Durairatnam (with effect from April 28, 2012) Mr. A.L. Gooneratne (Managing Director up to April 27, 2012) |
Executive & Non-Independent |
||
Other Non-Executive Directors: | |||
Mr. K.G.D.D. Dheerasinghe (Deputy Chairman) | Independent | ||
Prof. U.P. Liyanage | Non-Independent | ||
Mr. L. Hulugalle | Independent | ||
Mr. M.P. Jayawardena | Non-Independent | ||
Mr. S. Swarnajothi | Independent |
Disclosure under Section 3 (5) (iii) of the Direction No. 11 of 2007 by the Board of Directors of Commercial Bank of Ceylon PLC
1. | Name of Chairman | Mr. D. S. Weerakkody |
2. | Name of Chief Executive Officer | Mr. W. M. R. S. Dias |
3. | Any relationship including financial/business, family or other material/relevant relationship between the Chairman and the Chief Executive Officer | Nil |
4. | Any relationship including financial/business, family or other material/relevant relationship between members of the Board, including Chairman and Chief Executive Officer (Subject to following Note*) | Nil |
Note*
Mr. M. P. Jayawardena was the Managing Director/Chief Executive Officer of Chemanex PLC and Prof. U.P. Liyanage, a Director of the Bank was also a Director of Chemanex PLC as at December 31, 2012.
|
Main Board | Board Human Resources & Remuneration Committee | Board Integrated Risk Management Committee | Board Nomination Committee | Board Audit Committee | Board Credit Committee | Board Technology Committee | ||||
Mr. D. S. Weerakkody | C | C | C | C* | |||||||
Mr. K.G.D.D. Dheerasinghe | M | M | C | M | C | ||||||
Prof. U.P. Liyanage | M | M | M | M | M | C | |||||
Mr. W.M.R.S. Dias | M | Ω | M | Ω | Ω | M | M | ||||
Mr. L. Hulugalle | M | M | M | ||||||||
Mr. M.P. Jayawardena | M | M | M | M | |||||||
Mr. J. Durairatnam (Appointed with effect from April 4, 2012) |
M | M | Ω | M | |||||||
Mr. S. Swarnajothi (Appointed with effect from August 20, 2012) |
M | M | C | ||||||||
Mr. A. L. Gooneratne (Resigned upon retirement with effect from April 27, 2012) |
M | Δ | M | Δ | M | M | |||||
C - Chairman M - Member Ω - By invitation Δ - By invitation until retirement | |||||||||||
* Chairman until August 20, 2012 |
Reports of the Board Human Resources & Remuneration, Board Integrated Risk Management, Board Nomination, Board Audit, Board Credit and
Board Technology Committees appear on this Stewardship section.
Name of Committee | Main Board | Board Human Resources & Remuneration Committee | Board
Integrated
Risk Management Committee |
Board Nomination Committee | Board Audit Committee | Board Credit Committee | Board Technology Committee | |||||||
Name of Director | Eligible to Attend | Attended | Eligible to Attend | Attended | Eligible to Attend | Attended | Eligible to Attend | Attended | Eligible to Attend | Attended | Eligible to Attend | Attended | Eligible to Attend | Attended |
Mr. D.S. Weerakkody | 14 | 14 | 7 | 7 | N/A | N/A | 3 | 3 | 5 | 5 | N/A | N/A | N/A | N/A |
Mr. K.G.D.D. Dheerasinghe | 14 | 13 | 7 | 7 | 4 | 4 | 3 | 3 | N/A | N/A | 12 | 10 | N/A | N/A |
Prof. U.P. Liyanage | 14 | 13 | 7 | 3 | 4 | 4 | 3 | 2 | 7 | 4 | N/A | N/A | 5 | 5 |
Mr. W.M.R.S. Dias | 14 | 14 | 7* | 7* | 4 | 4 | 3* | 3* | N/A | N/A | 12 | 12 | 5 | 4 |
Mr. L. Hulugalle | 14 | 12 | N/A | N/A | 4 | 0 | N/A | N/A | 7 | 7 | N/A | N/A | N/A | N/A |
Mr. M.P. Jayawardena | 14 | 13 | N/A | N/A | 4 | 2 | N/A | N/A | 7 | 6 | 12 | 9 | N/A | N/A |
Mr. J. Durairatnam (Appointed with effect from April 4, 2012) |
9 | 9 | N/A | N/A | 2 | 1 | N/A | N/A | N/A | N/A | N/A | N/A | 5 | 4 |
Mr. S. Swarnajothi (Appointed with effect from August 20, 2012) |
6 | 6 | N/A | N/A | 2 | 2 | N/A | N/A | 2 | 2 | N/A | N/A | N/A | N/A |
Mr. A.L. Gooneratne (Resigned upon retirement with effect from April 27, 2012) |
5 | 5 | 1** | 1** | 1 | 0 | 1** | 1** | N/A | N/A | 4 | 3 | 1 | 1 |
* Mr. W.M.R.S. Dias, Managing Director/CEO attends Committee meetings by invitation ** Mr. A.L. Gooneratne former Managing Director/CEO attended Committee meetings by invitation until his retirement. |