Pushing the Pace in
a Resurgent Sri Lanka
a Resurgent Sri Lanka
The Board appointed Human Resources and Remuneration Committee comprised of seven (7) Board members as set out below and the CEO has been present at meetings by invitation of the Committee except when matters relating to the CEO were discussed.
| Chairman | Mr Sunil G Wijesinha |
| Members | Mr Ashok Pathirage, Mr Sujeewa Rajapakse, Mrs Kimarli Fernando, Mr Anura Siriwardena, Mr Trevine Jayasekera and Mrs Indrani Sugathadasa |
Brief profiles of each member are given on Board of Directors section.
The Committee carries out the following duties and responsibilities:
The Overall focus of the Committee:
|
Name of Board Committee Member |
Directorship Status |
Membership Status |
Number of Meetings Attended |
| Sunil G Wijesinha | Non-Executive Independent | C | 06/06 |
| Ashok Pathirage | Non-Executive Non-Independent | M | 05/06 |
| Trevine Jayasekera | Non-Executive Independent | M | 04/06 |
| Kimarli Fernando | Non-Executive Independent | M | 05/06 |
| Anura Siriwardena | Non-Executive Independent | M | 03/06 |
| Sujeewa Rajapakse | Non-Executive Non-Independent | M | 05/06 |
| Indrani Sugathadasa | Non-Executive Independent | M | 05/06 |
C - Chairman M - Member I - On invitation
The proceedings of the Committee meetings have been regularly reported to the Board of Directors.
The Committee recognised rewards as one of the key drivers influencing employee behaviour, thereby impacting business results. Therefore, the reward programmes are designed to attract, retain and to motivate employees to deliver results by linking performance to demonstrable performance based criteria. In this regard, the Committee evaluates the performance of the CEO and KMPs against the pre-agreed targets and goals that balance short and long-term financial and strategic objectives.
The Bank’s variable (bonus) pay plan is determined according to the overall achievements of the Bank and pre-agreed individual targets, which are based on various performance parameters. The level of variable pay is set to ensure that individual rewards reflect the overall performance of the Bank, the particular business unit and individual performance. The Committee makes appropriate adjustments to the bonus pool in the event of over or under achievement against pre-determined targets. In this regard, the Committee can seek external independent professional advice on matters falling within its purview.
The Committee has as a practice ensured that the Bank organizes and takes part in compensation surveys every two years and has utilized such feedback to ascertain that compensation practices are benchmarked to the ‘best practices’ and are relevant and current as far as possible. Moreover, the Committee also ascertains the engagement levels of staff through Staff Engagement Surveys.
For the Committee broadening the leadership base in the Bank is a strategic priority. Development areas were focused, having followed up from the ‘360-degree Evaluation’ done previously for the leadership team of the Bank. This intervention was to ensure the Bank’s leadership is adequately developed to face current and future challenges and to build a broader leadership capacity and a deeper pipeline of leaders. The Bank is also focusing on a competency-based approach to leadership to make better-informed decisions in hiring, developing and promoting leaders.
Further, the Committee reviewed the succession plans and the talent management process in respect of the senior management of the Bank. Succession planning within the Bank also incorporates diagnostic tools and methods for assessing the developmental readiness of employees for particular experiences and roles. The Committee also advised the management to identify a set of customer service competencies and train the front line staff, based on those competencies.
During the preceding year, the Committee carried out the following:
Sunil G Wijesinha
Chairman - Board Human Resources and Remuneration Committee
Colombo
13 February 2015
| Chairperson | Mrs Kimarli Fernando |
| Members | Mr Sunil G Wijesinha, Ms G D Chandra Ekanayake, Mr Anura Siriwardena, Mrs Indrani Sugathadasa, Mr Rajendra Theagarajah |
The Board of Directors of National Development Bank PLC(the Bank) has adopted the Charter for the Corporate Governance and Legal Affairs Committee which describes the Committee's composition, responsibilities and operations, as well as the manner in which the Committee would be carrying out its role.
The Corporate Governance and Legal Affairs Committee which was formed in the year 2007 is mandated with the task of assisting the Board in ensuring compliance with the Companies Act No. 07 of 2007, the Banking Act Directions on Corporate Governance, the Bank’s internal Corporate Governance Code, the Colombo Stock Exchange Listing Rules and all rules, regulations and guidelines issued by regulatory authorities relating to corporate governance for licensed commercial banks. The Committee on a continuous basis reviews the overall corporate governance of the Bank including its Constitution, the CGLA Charter and the Corporate Governance Code and recommends improvementsas appropriate.
The principal purposes of the Committee are to assist the Board of Directors of the Bank in defining the Governance Role, improving Board processes and ensuring effective Governance.
The Committee held three meetings during the year under review.
|
Name of Board Committee Member |
Directorship Status |
Membership Status |
Number of Meetings Attended |
| Kimarli Fernando | Non-Executive Independent | C | 3/3 |
| Sunil G Wijesinha | Non-Executive Independent | M | 3/3 |
| Anura Siriwardena | Non-Executive Independent | M | 3/3 |
| G D Chandra Ekanayake | Non-Executive Non-Independent | M | 3/3 |
| Indrani Sugathadasa | Non-Executive Independent | I | 1/3 |
| Rajendra Theagarajah | Executive Director | M | 3/3 |
C - Chairman M - Member I - On invitation
The proceedings of the Committee meetings have been regularly reported to the Board of Directors.
The Committee meets on a regularly scheduled basis at least twice a year, or more frequently as circumstances dictate in order to ensure effective governance.
The Committee has carried out the following key activities in the year 2014:
Whilst endeavouring to ensure a solid corporate governance culture within the Bank, the Committee made significant improvements in several areas connected to corporate governance. During the year, the Committee reviewed the format of the Annual Declaration form to be submitted by the Directors and also made several recommendations to improve the Board processes as well as the processes followed by the Board Sub-Committees at sub-committee meetings. The procedure for selection and appointment of Directors to the subsidiary companies were also reviewed by the Committee. In addition, the Committee reviewed the Communications Policy of the Bank and the Related Party Policy. The Committee also gave suggestions on the procedure to be followed for the exercising of the ELCP options by employees. The Committee recommended improvements to the monitoring of the related party transactions effected by all Directors and Key Management Personnel. The Corporate Governance and Legal Affairs Committee Charter was reviewed and necessary amendments were suggested to the Board.
Kimarli Fernando
Chairperson
Corporate Governance and Legal Affairs Committee
13 February 2015
The Board appointed Nomination Committee comprised of five (5) Board members and the Chairman of the Committee is an Independent Director as set out below and the Chief Executive Officer (CEO) has been present at meetings only if invited by the Committee.
| Chairman | Mr Sunil G Wijesinha |
| Members | Mr Ashok Pathirage, Mr Sujeewa Rajapakse, Mr Anura Siriwardena, Mr Trevine Jayasekera |
Brief profiles of each member are given under Board of Directors section.
The Committee carries out the following duties and responsibilities:
The Nomination Committee is tasked with inter alia, identifying individuals qualified to become members of the Boards of the Bank and its Group Companies. The identification aforementioned is carried out by the Committee by determining the fit and proper nature of the Directors to be so appointed via the assessment of the experience, skills and expertise and competencies of such individuals being considered to be nominated against the needs of the Board/s and the relevant regulatory requirements and applicable statutes, if and when a vacancy exists and at such times the Committee considers appropriate.
The Committee held 4 meetings during the year under review.
|
Name of Board Committee Member |
Directorship Status |
Membership Status |
Number of Meetings Attended |
| Sunil G Wijesinha | Non-Executive Independent | C | 04/04 |
| Ashok Pathirage | Non-Executive Non-Independent | M | 03/04 |
| Trevine Jayasekera | Non-Executive Independent | M | 03/04 |
| Anura Siriwardena | Non-Executive Independent | M | 04/04 |
| Sujeewa Rajapakse | Non-Executive Non-Independent | M | 03/04 |
C - Chairman M - Member I - On invitation
The proceedings of the Committee meetings have been regularly reported to the Board of Directors.
The Committee meets as and when necessary in order to, inter alia, assess the suitability of individuals for appointment as Directors and KMPs of the Bank and its subsidiaries in the manner aforementioned as well as to conduct such other affairs which the Charter of the Committee mandates the Committee to carry out.
During the year the Committee recommended to the Board the re-election of Directors retiring by rotation and offering themselves for re-election at the Annual General Meeting. Additionally, the Committee further reviewed the appointment of one KMP to a subsidiary of the Bank and further recommended to the Board, suitable persons to be appointed as Directors to the subsidiary companies of the Bank.
Sunil G Wijesinha
Chairman - Board Nomination Committee
Colombo
13 February 2015
The Board appointed Strategic Issues Committee comprised of Seven (7) Board members and the Chairman of the Committee is an Independent Director as set out below. Other Board Members and Management of National Development Bank PLC (the Bank) may be present at the meetings by invitation.
| Chairman | Mr Sunil G Wijesinha |
| Members | Mr Ashok Pathirage, Mr Trevine Jayasekera, Mrs Kimarli Fernando, Mr Sarath Wikramanayake, Mr Sujeewa Rajapakse, Mr Anura Siriwardena |
Brief profiles of each member are given under Board of Directors section.
The Committee is responsible for determining the following decisions:
The Committee additionally carries out the following duties and responsibilities:
The primary purposes of the Committee are the examination and evaluation of strategic issues of a regular as well as of an ad hoc nature whilst also recommending any action required to be taken by the Board of Directors of the Bank. The Committee serves as a catalyst as well as a monitor of the development and implementation of the Bank’s business strategies and further assists the Board in maintaining an interactive strategic planning process with the management which includes the review and assessment of business strategy plans developed by the management and approved by the Board.
The Committee held one meeting during the year under review.
|
Name of Board Committee Member |
Directorship Status |
Membership Status |
Number of Meetings Attended |
| Sunil G Wijesinha | Non-Executive Independent | C | 01/01 |
| Ashok Pathirage | Non-Executive Non-Independent | M | 01/01 |
| Trevine Jayasekera | Non-Executive Independent | M | 01/01 |
| Sarath Wikramanayake | Non-Executive Non-Independent | M | 01/01 |
| Kimarli Fernando | Non-Executive Independent | M | 01/01 |
| Anura Siriwardena | Non-Executive Independent | M | 01/01 |
| Sujeewa Rajapakse | Non-Executive Non-Independent | M | 01/01 |
C - Chairman M - Member I - On invitation
The proceedings of the Committee meetings have been regularly reported to the Board of Directors.
The Committee meets as and when necessary in order to, inter alia, deliberate in detail on matters of strategic importance to the Bank and the NDB Group so as to advise the Board in a timely manner. The Committee meets to examine and evaluate any strategic issues that may arise and further to evaluate any changes to strategic plans/decisions already in place, as and when needed as well as to conduct such other affairs which the Charter of the Committee mandates the Committee to carry out.
At the Committee meeting held during the preceding year the Committee reviewed in detail and recommended to the Board of Directors of the Bank, the Budget of the Bank for year the 2015 and several strategic initiatives for the year 2015.
Sunil G Wijesinha
Chairman - Board Strategic Issues Committee
Colombo
13 February 2015
The Committee consists of three Non-Executive Directors, the Chief Executive Officer, Head Group Risk, Head of Operational Risk, Head of Market Risk and Head of Strategic Risk (CFO). As at year end Committee comprised of the following:
| Chairman | Mr Sarath Wikramanayake |
| Members | Mr Sunil G Wijesinha, Ms G D Chandra Ekanayake, Mr Rajendra Theagarajah, Mr Faizan Ozman (Group Chief Financial Officer), Ms Nirmala Rayen (Head - Group Risk Management), Ms Chamila Chandrapala (Head- Market Risk), Mr Priyantha Gamage (Head - Operational Risk) |
The Integrated Risk Management Committee was formed in June 2008 replacing the Risk & Credit Committee of the Board, in compliance with the Section 3 (6) of Direction No. 11 of 2007, on the subject “Corporate Governance for Licensed Commercial Banks in Sri Lanka”, issued by the Monetary Board of the Central Bank of Sri Lanka under the powers vested in the Monetary Board, in terms of the Banking Act No. 30 of 1988. The composition and the scope of work of the Committee are in conformity with the provisions of the said Direction.
The Charter of the IRMC was approved by the Board of Directors and is reviewed annually. As part of the annual review process, Committee reviewed the charter in May 2014 and there were no material changes made. As per the Charter, the scope of work include the following:
The Committee held four meetings, during the year under review to discuss the normal scope of work and one additional meeting to discuss the ICAAP Framework of the Bank. The attendance of Committee Members at meetings is given below:
The Committee reviews all key risks of the Bank such as Credit, Market, Liquidity, Operational Risks and the Key Risk Indicators of the Group Companies on a monthly basis through the monthly KRI statements. Group Companies covered are NDB Investment Bank, NDB Capital Holdings PLC, NDB Wealth Management Ltd., NDB Securities (Pvt.) Ltd., and NDB Capital Bangladesh.
The discussions and conclusions reached at the meetings are recorded in minutes and circulated to the Board of Directors for their information and necessary action.
Key members of the staff participate at the meetings as appropriate.
|
Name of Board Committee Member |
Directorship Status |
Membership Status |
Number of Meetings Attended |
| Sarath Wikramanayake | Non-Executive Director | C | 05/05 |
| Sunil G Wijesinha | Non-Executive Director | M | 03/05 |
| G D Chandra Ekanayake | Non-Executive Director | M | 03/05 |
| Rajendra Theagarajah | Executive Director | M | 05/05 |
C - Chairman M - Member I - On invitation
Reviewed and approved policies and operating guidelines related to impairment policy and Bank's Risk Management Policy on Exposure to Stock Market Activities.
Reviewed portfolio quality covering
Reviewed work carried out by the Executive Credit Committees (ECC), Credit and Market Risk Policy Committee by reviewing the decisions taken by each committee.
Reviewed and approve, policies and operating guidelines related to Operational Risk Policy, Risk & Control Self Assessment & Key Operational Risk Controls, Key Risk Indicators Methodology Paper, Operational Risk Data Collection, Business Continuity Management.
Reviewed operational risk issues, including but not limited to:
Review work carried out by the Operational Risk Policy Committee by reviewing the decisions taken by committee.
Reviewed and approved policies and operating guidelines related to Liquidity Risk Management Liquidity Contingency Funding Plan, Asset Liability Management, Investment Policy, Interest Rate Risk Management Policy, Treasury Dealing Room Limits, Individual Dealer & Authorisation Limits.
Reviewed information and monitored the effectiveness of the management of asset and liabilities, including local and foreign currency maturity mis-matches, price sensitivity, FX Risk Report, Country Risk Report, Debt/ equity/commodity exposure, Securities portfolio, MRM/ALM Limit Compliance Report.
Reviewed work carried out by the Asset Liability Committee (ALCO) by reviewing the decisions taken by Committee.
Assessed the Bank’s compliance with laws, regulations and regulatory guidelines, internal policies in all areas of business operations.
Reviewed and approved the annual work plan of Compliance function and assess work carried out.
Review Risk Dashboards of the Group Companies through the monthly KRI statements and quarterly Risk Assessment Report.
Review and approve Annual Review of Internal Capital Adequacy Assessment Process (ICAAP) Document for 2014.
Review performance against Risk Appetite.
Review progress on Integrated Risk Management Framework Implementation and new guidelines issued on Stress Testing and Baseline Security Standard for Information Security Management.
Quarterly updates on the Regulatory Examination Report.
Sarath Wikramanayake
Chairman - Integrated Risk Management Committee
Colombo
13 February 2015
The Audit Committee comprised of six Non-Executive Directors as at the end of the year 2014 and is in line with the composition requirements specified in the Direction. The Chairman of the Audit Committee Mr Trevine Jayasekera is an Independent Non-Executive Director and a Fellow Member of the Institute of Chartered Accountants of Sri Lanka, while the other members of the Committee are also from a specialist financial/auditing background.
The structure and composition of the Board Audit Committee for the year 2014 and the attendance of each Director is set out in the table below:
| Name of the Director |
Independent/Non-Independent under CBSL Directions |
Independent/Non-Independent under ICASL/SEC Directions |
No. of Meetings Attended/ Scheduled |
| Mr Trevine Jayasekera | Independent | Independent | 9/9 |
| Mr Sarath Wikramanayake | Non-Independent | Non-Independent | 8/9 |
| Mr Sujeewa Rajapakse | Non-Independent | Non-Independent | 6/9 |
| Ms G D Chandra Ekanayake | Non-Independent | Independent | 8/9 |
| Mrs Kimarli Fernando | Independent | Independent | 9/9 |
| Mrs Indrani Sugathadasa | Independent | Independent | 8/9 |
Brief profiles of the members are given under Board of Directors section.
This report focuses on the activities of the Audit Committee for the year under review. A more general description of the Committee’s functions is given under Corporate Governance section.
The Audit Committee assists the Board of Directors in its general oversight of financial reporting, internal controls and functions relating to internal and external audit. The Committee is responsible to the Board of Directors and reports on its activities regularly.
The roles and functions of the Committee, are set out in the Banking Act Direction No. 11 of 2007 on ‘Corporate Governance for Licensed Commercial Banks in Sri Lanka’ and its subsequent amendments (hereinafter referred to as the Direction), ‘Rules on Corporate Governance under Listing Rules of the Colombo Stock Exchange’ and ‘Code of Best Practice on Corporate Governance’ issued jointly by The Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka.
The Audit Committee Charter clearly defines the Terms of Reference of the Committee and is periodically reviewed and revised with the concurrence of the Board of Directors. This process ensures that new developments and concerns are adequately addressed. The Audit Committee Charter was last reviewed and approved by the Board of Directors in the last quarter of 2014.
The Audit Committee met nine times during the year of which four meetings were to approve the Bank’s quarterly and annual financial statements. Attendance of the Committee members for each of these meetings is given in the table under ‘Audit Committee Composition’ in this Report.
The Chief Executive Officer, the Head of Internal Audit, the Group Chief Financial Officer, Head of Group Risk and the Chief Operating Officer are permanent invitees. Other officials were invited to attend the meetings on a need basis. On the invitation of the Committee, the Bank’s External Auditors, Messrs Ernst & Young attended all meetings during the year. The Audit Committee met the External Auditors twice during the year, without the presence of CEO and the Corporate Management, to ensure that the Auditors had the independence to discuss and express their opinions on any matter and also for the committee to have the assurance that the management has fully provided all information and explanations requested by the Auditors.
The Committee assists the Board to discharge their responsibility in the preparation of Financial Statements that evidence a true and fair view on the financial position and performance in accordance with the Bank’s accounting records and as per the stipulated requirements of the Sri Lanka Accounting Standards. The Committee reviews:
During the year, the Committee reviewed the effectiveness of the Bank’s Internal Control System and the CEO’s quarterly confirmation on the internal control environment. Additionally, the Committee also assessed the effectiveness of the Bank’s internal controls over financial reporting as of 31 December 2014, as required by the Banking Act Direction No. 11 of 2007, Corporate Governance for Licensed Commercial Banks in Sri Lanka, Subsection 3(8)(ii) (b), based on the “Guidance for Directors of Banks on the Directors’ Statement on Internal Control” issued by The Institute of Chartered Accountants of Sri Lanka. The result of the assessment is given in the “Directors’ Statement on Internal Control” in the Annual Report. The External Auditors have also issued an Assurance Report on Directors’ Statement on Internal Controls. The Report is given under Independent Assurance Report page of the Annual Report.
During the year, the Audit Committee reviewed the independence, objectivity & performance of the internal audit function and the adequacy of its resources. The Internal Audit Plan for the Bank/Group was reviewed and approved by the Committee and the findings of the internal audits completed and their evaluation of the Bank’s internal control systems were reviewed. The Committee also reviewed updates on audit activities and the adequacy of coverage of the approved audit plan, the results of any unsatisfactory audits, the action plan to address these areas and the implementation status. Audit findings presented in the reports are prioritized based on the level of risk.
With the concurrence of Board of Directors, the annual internal audit of Treasury and related areas for the year 2014 was outsourced to an audit firm from the list of firms approved by Central Bank of Sri Lanka. These outsourcing assignments were awarded in compliance with the Central Bank of Sri Lanka Outsourcing Direction No. 02 of 2012.
The adoption of the revised Sri Lanka Accounting Standards (SLFRS/LKAS) and the impact of the same on the Bank’s Financial Statements have been independently validated by the External Auditors during their year-end audit and the process was continuously reviewed by the Committee.
The Internal Audit performs verifications covering applicable regulatory requirements during their process audits ensuring that systems and procedures are in place to ensure compliance with such requirements.
The internal audit function is governed by the Internal Audit Charter which defines the scope, functions, authority, responsibility, reporting, external relationship management and ethics that assist and direct/guide the Internal Audit Department to discharge its function independently.
The Audit Committee undertook the annual evaluation of the independence and objectivity of the External Auditor and the effectiveness of the audit process.
During the audit, the External Auditor presented to the Committee their audit approach and procedures, including matters relating to the scope of the audit and Auditor’s independence.
The Committee reviewed the audited Financial Statements with the External Auditor who is responsible for expressing an opinion on its conformity with the Sri Lanka Accounting Standards.
The Committee reviewed the Management Letter issued by the External Auditor and the management responses thereto.
The Audit Committee was of the view that the Non-Audit Services provided by the External Auditor were not within the category of services identified as prohibited under:
In carrying out the overseeing responsibilities, the Committee adopted the overview principles of the External Audits of Banks, as recommended by the Basel Committee on Banking Supervision, issued in March 2014.
The Audit Committee performed an evaluation of the External Auditor based on certain defined criteria and recommends the reappointment of Messrs Ernst & Young, Chartered Accountants as their External Auditor to the Board of Directors for the financial year ending 31 December 2015, subject to the approval of the shareholders at the next Annual General Meeting.
The Bank’s Whistle Blowing Policy is intended to serve as a channel of corporate fraud risk management. The policy will encourage any team member who has a legitimate concern on an existing or potential ‘wrong doing’, done by any person within the Bank, to come forward voluntarily, and bring such concern to the notice of an independent designated authority. Concerns raised are investigated and the identity of the person raising the concern is kept confidential.
The Audit Committee carried out a formal self-evaluation/appraisal on the effectiveness of the Committee and reported the results of same to the other members of the Board. The Board concurred that the Committee had carried out its responsibilities in an effective and satisfactory manner.
Trevine Jayasekara
Chairman of the Audit Committee
13 February 2015