Delegation by the Board

Board Committees
Each of these Committees has specific written terms of reference, which set out in detail their respective authorities and responsibilities. Each Committee reviews its terms of reference and effectiveness annually. All Committees, except the Executive Committee and Nomination Committee, comprise solely INEDs. Majority of the Nomination Committee members are INEDs while the Executive Committee comprises the Bank’s senior management members. All Committees report back to the Board on their decisions or recommendations on a regular basis. Brief information and composition of all these Committees are set out in the section “Board Committees” on the Bank's website.
Executive Committee

The Executive Committee usually meets once each month and operates as a general management committee under the direct authority of the Board. It exercises the powers, authorities and discretions as delegated by the Board in so far as they concern the management and day-to-day running of the Bank in accordance with its terms of reference and such other policies and directives as the Board may determine from time to time. The Executive Committee also sub-delegates credit, investment and capital expenditure authorities to its members and senior executives.

To further enhance the Bank’s risk management framework and in line with best practices, the Bank has set up a Risk Management Committee (“RMC”), chaired by the Bank’s Chief Risk Officer, to centralise the risk management oversight function of the Bank and its subsidiaries. The RMC reports directly to the Executive Committee. Its main functions are to review, analyse, evaluate, recognise and manage various risks of the Bank, including all the eight types of risks stipulated in HKMA’s SPMs, namely, credit risk, market risk, liquidity risk, interest rate risk, operational risk, legal and compliance risk, reputation risk and strategic risk. In addition, the RMC also covers business (including insurance) risk, pension risk, security and fraud risk, and sustainability risk, and is responsible for approval of all risk management related policies. RMC meetings are usually held monthly. Minutes of RMC meetings are provided to the Executive Committee and the Risk Committee for review.

Audit Committee

The Audit Committee meets at least four times a year, with the Bank’s executives including, but not limited to, the Chief Executive, Chief Financial Officer, Chief Risk Officer and Head of Audit, and representatives from the Bank’s external auditor. The Committee reviews, among other things, the Bank’s financial reporting, the nature and scope of audit reviews, and the effectiveness of the systems of internal control and compliance relating to financial reporting. The Audit Committee is also responsible for making recommendations to the Board on the appointment, re-appointment, removal and remuneration of the Bank’s external auditor. In addition, the Audit Committee has established a “Policy for the Reporting of Improprieties” to provide a secured and confidential channel through which all staff members may report incidents of improprieties in a secured and confidential manner so that the same will be timely and thoroughly investigated and appropriate actions can be taken promptly.

The Audit Committee reports to the Board following each Audit Committee meeting, drawing the Board’s attention to salient points that the Board should be aware of, identifying any matters in respect of which it considers that action or improvement is needed and making relevant recommendations.

During 2013, the Audit Committee held six meetings and the major work performed by the Committee was as follows:

  • reviewed the Bank’s financial statements for the year ended 31 December 2012 and the related documents, and the management letters and audit issues noted by the Bank’s external auditor;
  • reviewed the Bank’s interim financial statements for the six months ended 30 June 2013 and the related documents, and the issues noted by the Bank’s external auditor;
  • reviewed essential matters or reports relating to financial control and reporting, and discussed the same with the Management;
  • reviewed balance sheet management position;
  • reviewed the Bank’s 2013 annual operating plan and capital plan;
  • reviewed the revised accounting standards and prospective changes to accounting standards, and the impact on the Bank’s financial reporting;
  • reviewed the internal audit reports, and discussed the same with the Management and Head of Audit;
  • reviewed the internal audit plan for 2014;
  • reviewed the remuneration and engagement letters of the Bank’s external auditor, and its independence and objectivity, and the effectiveness of the audit process;
  • reviewed the adequacies of resources, qualifications and experience of staff of the Bank’s Accounting and Financial Reporting function and Internal Audit function, and their training programmes and budgets;
  • reviewed the effectiveness of the Policy for the Reporting of Improprieties and the incidents reported through such channel during the year;
  • reviewed the Audit Committee’s effectiveness in discharging its role and responsibilities and its terms of reference and made recommendation to the Board for any changes; and
  • exercised oversight over the audit committees of the Bank’s principal subsidiaries.

The Audit Committee meets with the representatives of the Bank’s external auditor and Head of Audit without the presence of the Management at least once a year. In addition, the Committee also meets with the representatives of HKMA to maintain a regular dialogue with the regulator and to share HKMA’s general views on their supervisory focus.

Risk Committee

The Risk Committee meets at least four times a year, with the Bank’s executives including, but not limited to, the Chief Financial Officer, Chief Risk Officer, Chief Compliance Officer, Head of Audit, and representatives from the Bank’s external auditor. The Committee is responsible for, among other things, the Bank’s high level risk related matters, risk appetite and tolerance, risks associated with proposed strategic acquisitions or disposals, risk management reports from the Management, effectiveness of the Bank’s risk management framework and systems of internal control and compliance (other than internal control over financial reporting), and appointment and removal of the Bank’s Chief Risk Officer.

The Risk Committee reports to the Board following each Risk Committee meeting, drawing the Board’s attention to salient points that the Board should be aware of, identifying any matters in respect of which it considers that action or improvement is needed and making relevant recommendations.

During 2013, the Risk Committee held four meetings and the major work performed by the Committee was as follows:

  • reviewed routine risk reports submitted by the Management including, but not limited to, the Bank’s risk management framework, risk appetite statement and profile, enterprise stress testing analysis, risk dashboards, risk maps, top and emerging risks, and reports relating to compliance and internal control;
  • reviewed the Bank’s capital management and internal capital adequacy assessment process;
  • reviewed the Bank’s progress in implementing Basel III;
  • reviewed the management letters and audit issues noted by the Bank’s external auditor insofar as the same related to risk issues/matters;
  • reviewed the internal audit reports insofar as the same give rise to any risk-related issues;
  • reviewed the adequacies of resources, qualifications and experience of staff of the Bank’s Risk Management function, and their training programmes and budgets;
  • reviewed regulatory review reports and discussed the same with the Management;
  • reviewed the incidents reported under the Policy for the Reporting of Improprieties insofar as the same give rise to any risk-related issues;
  • reviewed the Risk Committee’s effectiveness in discharging its role and responsibilities and its terms of reference, and made recommendation to the Board for any changes; and
  • exercised oversight over the risk committees of the Bank’s principal subsidiaries.

The Risk Committee meets with the Bank’s Head of Audit and Chief Risk Officer separately without the presence of the Management at least once a year.

Remuneration Committee

The Remuneration Committee meets at least twice a year, with the Bank’s Head of Human Resources. The Committee considers and makes recommendations to the Board on the remuneration policy and structure in order to attract, motivate and retain quality personnel. Pursuant to delegation by the Board, the Committee also determines the remuneration policy, and the specific remuneration packages of all Executive Directors, senior management and key personnel. In addition, it also reviews at least annually and independently of the Management, the adequacy and effectiveness of the Bank’s remuneration policy and its implementation to ensure that the Bank’s remuneration policy is consistent with relevant regulatory requirements and promotes effective risk management.

In determining the bank-wide remuneration policy, the Remuneration Committee will take into account the Bank’s business objective, people strategy, short-term and long-term performance, business and economic conditions, market practices and risk management needs, in order to ensure the remuneration aligns with business and individual performances, promotes effective risk management, facilitates retention of quality personnel and is competitive in the market. The Committee may invite any Director, executive, consultant or other relevant party to provide advice in this respect. In 2013, the Committee has not requested to seek advice from external consultant on matters relating to remuneration.

The Remuneration Committee reports to the Board following each Committee meeting, drawing the Board’s attention to salient points that the Board should be aware of, identifying any matters in respect of which it considers that action or improvement is needed and making relevant recommendations.

During 2013, the Remuneration Committee held two meetings and the major work performed by the Committee was as follows:

  • reviewed and updated the Bank’s remuneration policy to further strengthen the Bank’s governance in response to the tightened regulatory requirements;
  • reviewed the outcome of the review by the internal audit function of the Bank’s remuneration policy and remuneration system, and the adequacy and effectiveness of its implementation;
  • reviewed the fees payable to the Bank’s Chairman, and the Directors and Board Committee Chairmen/members of the Bank and its subsidiaries, and recommended the same to the Board for approval;
  • determined the remuneration packages of the Executive Directors, senior management and key personnel of the Bank, and the Vice-Chairman and Chief Executive of Hang Seng Bank (China) Limited;
  • reviewed the report on the alignment of risk and remuneration;
  • reviewed the proposed variable pay for 2012 and recommended the same to the Board for approval;
  • reviewed the pay review proposal for 2013 and recommended the same to the Board for approval; and
  • reviewed the Remuneration Committee’s effectiveness in discharging its role and responsibilities and its terms of reference and made recommendation to the Board for any changes.
Nomination Committee

The Nomination Committee meets at least twice a year. It leads the process for Board appointments and identifies and nominates for the Board’s approval, candidates for appointment to the Board. The Nomination Committee also considers, among other things, the structure, size and composition of the Board, independence of INEDs, term of appointment of and time required from NEDs, and appointment to Board Committees.

The Nomination Committee reports to the Board following each Committee meeting, drawing the Board’s attention to salient points that the Board should be aware of, identifying any matters in respect of which it considers that action or improvement is needed and making relevant recommendations.

During 2013, the Nomination Committee held two meetings and the major work performed by the Committee was as follows:

  • reviewed the structure, size and composition of the Board;
  • reviewed the succession planning for the Board;
  • reviewed independence of INEDs;
  • reviewed time commitment required from NEDs;
  • recommended to the Board for approval the renewal of terms of appointment of NEDs;
  • recommended to the Board for endorsement the re-election of the retiring Directors;
  • reviewed and approved the revised appointment letter of NEDs;
  • recommended to the Board for approval appointments of Directors;
  • recommended to the Board for approval the Board Diversity Policy;
  • recommended to the Board for approval the succession policy for senior management;
  • recommended to the Board for approval the changes to the composition of Executive Committee, Remuneration Committee and Nomination Committee; and
  • reviewed the Nomination Committee’s effectiveness in discharging its role and responsibilities and its terms of reference and made recommendation to the Board for any changes.


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