CORPORATE GOVERNANCE COMMITTEE CHARTER
The Corporate Governance Committee is in charge of assisting the board of directors in fulfilling its
corporate governance responsibilities.
A.
B.
Membership
1.
The Corporate Governance Committee shall be composed of at least three (3) members
of the Board of Directors, two (2) of whom shall be independent directors, including the
chairperson.
2.
The Board of Directors shall have the power to remove and replace the members of, and
fill vacancies in, the Corporate Governance Committee.
Duties and Responsibilities
1.
The Committee shall review and evaluate the qualifications of all persons nominated to
the Board as well as those nominated to other positions requiring appointment by the
Board of Directors.
2.
It shall be responsible for ensuring the Board’s effectiveness and due observance of
Corporate Governance principles and guidelines.
3.
It shall observe the periodic evaluation of the board and its committees and executive
management. It shall also conduct an annual self-evaluation of the Board’s performance.
The Committee may coordinate with external facilitators in carrying out board
assessment, within the frequency approved by the entire board. 1
C.
4.
It shall decide whether or not a Director is able to and has been adequately carrying out
his/her duties as Director based on its own assessment or the assessment of external
facilitators, bearing in mind the Director’s contribution and performance (e.g.
competence, candor, attendance, preparedness and participation). Internal guidelines
shall be adopted that address the competing time commitments that are faced when
Directors serve on multiple boards.
5.
It shall make recommendations to the Board regarding the continuing education of
Directors, assignment to Board Committees, succession plan for the Board members and
Senior Officers, and their remuneration commensurate with corporate and individual
performance.
6.
It shall decide the manner by which the Board’s performance may be evaluated and
propose an objective performance criteria approved by the Board. Such performance
indicators shall address how the Board has enhanced long term shareholders’ value.
Meeting and Access
1.
1
The Committee shall meet every third Wednesday of the month at 2:00 p.m. at the
Bank’s Board Room, Head Office or such other date and time as may be agreed upon by
the members.
As added by BSP Circular No. 749
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D.
Quorum and Voting
A majority of the members of the Committee shall constitute a quorum and every decision of at
least a majority of the Committee members present at a meeting at which there is a quorum shall
be valid, unless a specific number of votes is required by existing laws and regulations.
E.
Charter Review
The Board shall review and assess the adequacy of this charter annually or as the need arises.
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authorization of China Banking Corporation.
RISK MANAGEMENT COMMITTEE CHARTER
I.
Background
The Board of Directors, as one of their specific duties and responsibilities, must constitute several
committees, one of which is a Risk Management Committee. The Board must also draw up a
written charter that defines the duties and responsibilities of its committee members.
II.
Organization
The Risk Management Committee will be composed of not less than three (3) members of the
Board of Directors, and may have one or more advisors as the Committee may deem proper.
Each member and advisor/s shall possess a range of expertise as well as adequate knowledge of
the institution’s risk exposures.
The Risk Management Unit shall primarily be responsible in assisting the Committee with its
responsibilities.
III.
Review
The Board of Directors shall review and assess the adequacy of this charter at least once every
year.
IV.
Authority
The Committee shall have the authority to investigate any matter within its duties and
responsibilities under the law, rules, circulars, memorandum and/or this charter, full access to and
cooperation from management and other units of the Bank, with full discretion to invite any officer
or employee to its meetings.
The Committee shall have adequate resources to enable it to effectively discharge its functions.
V.
Duties and Responsibilities
1.
2.
Meetings and reports
1.1.
Meet at least once every month at the Bank’s Head Office.
1.2.
Meet periodically with risk management personnel, internal auditors, compliance
personnel, and bank staff, together or separately as the Risk Management Committee
may see fit.
1.3.
Keep the Board of Directors informed as needed, at least once every year.
Responsibilities of the Risk Management Committee
2.1.
Responsible for the oversight and development of all the Bank’s risk management
functions, including but not limited to market risk, credit risk, and operational risk.
2.2.
Estimate the loss for each risk event, and estimate the probability of each risk event
occurring. Then calculate the expected loss for each risk event.
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2.3.
Develop a written risk management plan appropriate for managing the major
categories of risk events and minimizing the magnitude of expected losses, giving
priority to the risk events with the largest expected losses.
2.4.
Communicate the risk management plan to affected parties. Conduct regular
discussions regarding the Bank’s current risk exposure using regular management
reports. Ensure the concerned units are directed on how to manage these risks.
2.5.
Evaluate the risk management plan to ensure its continued relevancy,
comprehensiveness, and effectiveness. Review and revise the plan as needed.
2.6.
Oversee the system that manages discretionary authority limits delegated to
Management by the Board of Directors; ensure that this system continues to be
effective, that the authority limits are observed and that immediate corrective actions
are taken whenever breaches occur.
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NOMINATIONS COMMITTEE CHARTER
I.
Introduction
The Nominations Committee is a Board Committee created in compliance with the Revised Code
of Corporate Governance (SEC Memo No. 6 Series of 2009).
II.
Composition
The Nominations Committee shall be composed of at least three (3) members of the Board of
2
Directors , all of whom shall be independent directors.
III.
Duties and Functions 3
1.
Its primary task is to review and evaluate the qualifications of all persons nominated to
the Board and other appointments that require Board approval including promotions
favorably endorsed by the Promotions Review Committee.
That with regard to the nominees to the Board, the Committee is also tasked to identify
the quality of the directors nominated aligned with the Bank’s strategic directions.
2.
It shall promulgate the guidelines or criteria to govern the conduct of the nomination, and
the same shall be properly disclosed in the company’s information or proxy statement or
such other reports required to be submitted to the SEC.
3.
The nomination of director, more particularly of independent director, shall be conducted
by the Committee prior to a stockholders’ meeting. All nominations or recommendation
shall be signed by the nominating stockholders together with the acceptance and
conformity of the nominees.
4.
The Committee shall pre-screen the qualifications and prepare a final list of all candidates
and put in place screening policies and parameters that meet at least the minimum
requirement of SEC Memo No. 16 and BSP Circular No. 296 Series of 2001 to facilitate
its task to effectively review the qualifications of the nominees for directors, more
specifically for independent director/s.
5.
After the nomination, the Committee shall prepare a Final List of Candidates which shall
contain all the information about all the nominees for directors, more particularly for
independent directors, as required under Part IV (A) and (C) of Annex “C” of SRC Rule
12, which list shall be made available to the SEC and to all stockholders through the filing
and distribution of the Information Statement or Proxy Statement, in accordance with the
SRC Rule 17.1 (b) or the SRC or SRC Rule 20, respectively, or in such other reports the
company is required to submit to the SEC. The name of the person or group of persons
who recommended the nomination of the independent director/s shall be identified in
such report including any relationship with the nominee.
6.
Only nominees whose names appear on the Final List of Candidates shall be eligible for
election as directors, more specifically for Independent Directors. No other nomination
shall be entertained after the Final List of Candidates shall have been prepared. No
2
Article VI.C, Amended By-laws
3
Article VI.C.2, Amended By-Laws
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further nomination shall be entertained or allowed on the floor during the actual annual
stockholders’ meeting, except in the unlikely event that a particular nominee/s make/s a
last minute withdrawal of his/their acceptance and conformity, become/s incapacitated or
otherwise no longer available for any reason whatsoever.
7.
IV.
Assess the effectiveness of the Board’s processes and procedures in the election or
4
replacement of directors.
Meetings
The committee shall meet at least once a year or as necessary at the Bank’s head office.
V.
Charter Review
This Committee shall review this charter at least annually or as necessary.
4
(Article 3.K.ii, a, Revised Code of Corporate Governance)
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authorization of China Banking Corporation.
AUDIT COMMITTEE CHARTER
I.
Purpose and Objective
The Audit Committee primarily oversees all matters pertaining to audit – the Bank’s internal audit
function and performance, the integrity of the Bank’s financial statements, and the Bank’s
accounting processes in general, among other things. The Committee likewise provides oversight
on the senior management’s activities, as well as the Bank’s internal and external auditors and
monitors and evaluates the adequacy and effectiveness of the Bank’s internal control system.
The Committee also plays an important role in empowering and elevating the status of the
internal audit activity throughout the organization as provider of quality and significant assurance
and consulting services that adds value to the Bank’s governance, risk management, and internal
control processes.
II.
III.
Membership
A.
The Audit Committee shall be composed of at least three (3) members of the Board of
Directors, wherein two (2) of whom shall be independent directors, including the
Chairman, preferably with accounting, auditing, or related financial management
expertise or experience commensurate with the size, complexity of operations and risk
profile of the Bank.5
B.
To the greatest extent possible, the audit committee shall be composed of a sufficient
number of independent and non-executive board members. 6
C.
The Chief Executive Officer, Chief Financial Officer and/or Treasurer of the Bank, or
officers holding equivalent positions, shall not be appointed as members of the Audit
Committee.7
D.
No member of the Audit Committee shall be concurrently designated as a member of the
Trust Committee. 8
E.
The Board has the power to re-organize committee membership, thus, in case of vacancy
the Board of Directors may appoint the replacement in accordance with the Bank’s ByLaws.
Voting and Quorum Requirements
Majority of the members of the Committee shall constitute a quorum; each member is allowed to
vote for matters brought to the attention of the committee for action. Every decision of at least a
majority of the Committee members present at a meeting at which there is a quorum shall be
valid, unless a specific number of votes is required by existing laws and regulations.
IV.
Authority
The audit committee shall have explicit authority to investigate any matter within its terms of
reference, full access to and cooperation by management and full discretion to invite any director
or executive officer to attend its meetings, and adequate resources to enable it to effectively
discharge its functions. The audit committee shall ensure that a review of the effectiveness of the
5
BSP Circular No. 749
ibid
7
ibid
8
Manual of Regulations for Banks (MORB), Sec X406.2
6
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institution’s internal controls, including financial, operational and compliance controls, and risk
management, is conducted at least annually.
V.
Duties and Responsibilities
The Committee shall have the following duties and responsibilities:
A.
Provides oversight of the Bank’s financial reporting and control and internal and external
audit functions.
B.
Establishes the internal audit function (including in-house and outsource audit services)
and appoint qualified Chief Audit Executive as well as the independent external auditor
who shall both report directly to the Audit Committee. In cases of appointment or
dismissal of external auditors, it is encouraged that the decision be made only by
9
independent and non-executive audit committee members. It shall monitor and evaluate
the adequacy and effectiveness of the internal control system.
C.
Ensure that the Chief Audit Executive and internal audit function are free from
interference by outside parties.
D.
Ensure that there is an annual review of the effectiveness of the Internal Audit function
including compliance with the Institute of Internal Auditors’ International Standards for the
Professional Practice of Internal Auditing (IIA-ISPPIA) and Code of Ethics.10
E.
Reviews annually the Chief Audit Executive’s performance and concurs with the annual
compensation and salary adjustment.
F.
Establish and maintain mechanism by which officers and staff may, in confidence, raise
concerns about possible improprieties or malpractices in matters of financial reporting,
internal control, auditing, code of conduct or other issues to persons or entities that have
the power to take corrective action. It shall ensure that arrangements are in place for the
independent investigation, appropriate follow-up action, and subsequent resolution of
complaints.11
G.
Evaluate the effectiveness of the system for monitoring compliance with laws and
regulations and the results of management's investigation and follow-up (including
disciplinary action) of any instances of non-compliance. Obtains regular updates from
management and company legal counsel regarding compliance matters.8 Issue
certifications on critical compliance matters/issues.
H.
Evaluate the committee's and individual members' performance on a regular basis.
I.
Seek professional guidance from independent counsel, accountants, or others to advise
and assist the Committee in the effective performance of their duties. 8
J.
Keep the members informed and educated of the emerging trends and successful
practices in internal auditing.
8
9
Added by Circular No. 749
MORB, Subsection X186.4 (2008 - X164.4)
11
MORB, Section X141.3.c.9.a
8
IIA’s Model Audit Committee Charter
10
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otherwise, or stored in any information storage or retrieval system of any nature nor should the materials be disclosed to third parties without prior express written
authorization of China Banking Corporation.
K.
Oversight of Financial Reporting and Policies - Review and discuss with management,
internal and external auditors the annual audited financial statements before submission to
the Board, focusing particularly on:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
L.
8
any change/s in accounting policies and practices, standards and interpretations and its
related impact;
major judgmental areas including reasonableness of estimates and assumptions used
in the performance of financial statements;
significant adjustments resulting from the audit, error or fraud in financial reporting;
going concern assumption;
compliance with accounting and auditing standards;
compliance with tax, legal and stock exchange requirements;
management’s responsibility over the financial statements;
material errors and fraud and sufficiency of risk controls;
unusual or complex transactions including all related party transactions;
assessment of annual and interim financial reports as to completeness, clarity,
consistency and accuracy of disclosures of material information including on
subsequent events and related party transactions;
litigation, claims, contingencies or other significant legal issues that have impact on
financial statements;
fair and balance review of financial reports;
assessment of correspondence between the company and regulators regarding
financial statement filings and disclosures;
resolution of any disagreements between management and the external auditor
regarding financial reporting; 8
management’s competence regarding financial reporting responsibilities including
aggressiveness and reasonableness of decisions; and
completeness and timeliness of communication with external auditor as the critical
policies, alternative treatments, observations on internal controls, audit adjustments,
independence, limitations on the audit work set by the management, and other material
issues that affect the audit and financial reporting.
Oversight of Internal Control - Review and discuss with management, the external auditors
and internal audit, as appropriate.
1.
management’s assessment of the adequacy of internal controls, including the Report
on Internal Control that is filed with the Bank’s Annual Report, which shall state the
responsibilities of management for establishing and maintaining an adequate internal
control system and contain an assessment of the effectiveness of such system;
2.
internal control reports (management letters) submitted by the external auditors in
connection with their audit of the financial statements;
3.
internal control issues noted during internal audits, together with management’s
responses and determine the appropriate actions have been taken to address
significant deficiencies and weaknesses;
4.
monitor and evaluate the effectiveness of the information technology security and
12
control; and
5.
understand the scope of internal and external auditors’ review of internal control over
8
financial reporting.
IIA’s Model Audit Committee Charter
Article 3.K.(i).g of the Revised Code of Corporate Governance
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VI.
VII.
M.
Oversight of External Auditors - Select and appoint the external auditors, subject to
stockholder ratification. In cases of appointment or dismissal of external auditors, it is
encouraged that the decision be made only by independent, non-executive audit
committee members. 13 The external auditors are to report directly to the Committee.
Approve audit fees and fees for non-audit services, if any. Review and discuss the scope
and plan of the annual audit, including coordination of audit effort with internal audit and
rotation process of auditor/firm. Review and discuss the annual audited financial
statements, management letter, regulatory and accounting issues and developments and
their effect on the financial statements. Evaluate the qualifications, performance,
competence and independence of the external auditors.
N.
Oversight of Internal Audit - Review and concur in the appointment and replacement of
the Chief Audit Executive (CAE) who shall report directly to the Committee. Review and
approve the annual audit plan, extent and scope of work, charter, activities,
organizational structure/staffing and budget, including all major changes thereafter and
review periodic reports on the status and completion of the plan. Review and discuss the
reporting process and internal audit reports, management’s responses and corrective
actions on significant audit findings.
O.
Oversight of Risk Management Function - Provide oversight over Management’s
activities in managing credit, market, liquidity, operational, legal and other risks of the
Bank. This function shall include regular receipts from Management of information on risk
exposures and risk management activities.
Meetings and Access
A.
Date and Time of Meeting: The Committee shall meet every third Wednesday of the
month at 2:00 p.m. at the Bank’s Board Room, Head Office or such other date & time as
may be agreed upon by the members.
B.
Meet periodically with management, internal audit and external auditors, together or
separately as the Committee may see fit, and
C.
Report on the Committee’s activities regularly to the Board.
Self-Assessment
In accordance with the Bank’s Corporate Governance Manual and SEC Memo No.4 (series of
2012), the Committee shall conduct an annual assessment of its performance effectiveness
through a self-assessment.
VIII.
Charter Review
The Board shall review and assess the adequacy of this charter annually or as needed,
requesting board approval for proposed changes, and ensure appropriate disclosure as may be
required by law or regulation.8
8
IIA’s Model Audit Committee Charter
9
Subsection X141.3 (7) (d) (i) of the MORB, as amended
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COMPENSATION OR REMUNERATION
COMMITTEE CHARTER
A.
Introduction
The Compensation or Remuneration Committee provides oversight over the remuneration of
Senior Management and other key personnel, ensuring that compensation is consistent with the
Bank’s culture, strategy and control environment14.
B.
Composition
The Compensation or Remuneration Committee shall be composed of at least three (3) members
of the board, one of whom shall be an independent director.
C.
D.
Duties and Responsibilities
1.
Establish a formal and transparent procedure for developing a policy on executive
remuneration and for fixing the remuneration packages of all Bank personnel and provide
oversight over remuneration of all personnel, ensuring that compensation is consistent
with the interest of all stakeholders and the Bank’s culture, strategy and control
environment; 15
2.
Review and approve amount of remuneration, which shall be in a sufficient level to attract
and retain directors and all personnel who are needed to manage the Bank successfully;
3.
Develop a form on Full Business Interest Disclosure as part of the pre-employment
requirements for all incoming officers, which among others compel all officers to declare
under the penalty of perjury all their existing business interests or shareholdings that may
directly or indirectly conflict in their performance of duties once hired;
4.
Disallow any director to decide his or her own remuneration;
5.
Provide in the Bank's annual reports, information and proxy statements a clear, concise
and understandable disclosure of compensation of its executive officers for the previous
fiscal year and the ensuing year;
6.
Review (if any) of the existing Human Resources Development or Personnel Handbook,
to strengthen provisions on conflict of interest, salaries and benefits policies, promotion
and career advancement directives and compliance of personnel concerned with all
statutory requirements that must be periodically met in their respective posts;
7.
Or in the absence of such Personnel Handbook, cause the development of such,
covering the same parameters of governance stated above.
Meetings
The committee shall meet at least once a year at the Bank’s head office.
14
Control environment - The control environment includes the integrity, ethical values, policies, actions, management style and competence of
the entity's people, which set the tone of firm’s day-to-day activities; control environment is the foundation for all other components of internal
control.
15
BSP Circular No. 283
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RELATED PARTY TRANSACTION
COMMITTEE CHARTER
The Related Party Transaction Committee (“RPT Committee”) shall be responsible in reviewing all related
party transactions as defined in the existing policies of the Bank, laws, rules and regulations and in
ensuring that they are conducted at arm’s length, fair market terms or upon terms not less favorable to
the Bank than those offered to others.
I.
II.
Membership
1.
The RPT Committee shall be composed of at least three (3) Independent, Non-Executive
Directors. The Board of Directors shall appoint/designate the Chairman and the members
of this Committee.
2.
The members of the RPT Committee shall all be independent, non-executive directors
with a range of expertise as well as adequate knowledge of the institution’s risk relating to
related party transactions.
3.
The Board of Directors shall have the power to remove and replace the members of, and
fill vacancies in, the RPT Committee.
Quorum and Voting
A majority of the members of the Committee shall constitute a quorum and every decision of at
least a majority of the Committee members present at a meeting at which there is a quorum shall
be valid, unless a specific number of votes is required by existing laws and regulations.
III.
IV.
Access and Authority
1.
The Committee shall have the authority to investigate any matter within its duties and
responsibilities under the law, rules, circulars, memoranda and/or this charter, full access
to and cooperation from management and other units of the Bank, with full discretion to
invite any officer or employee to its meetings.
2.
The Committee shall have adequate resources to enable it to effectively discharge its
functions.
3.
Whenever appropriate, the Committee shall have access to external expert advice, like in
relation to proposed strategic transaction, such as mergers and acquisitions.
Duties and Responsibilities
1.
2.
Meetings and reports
1.1
The RPT Committee shall meet whenever necessary to discuss related party
transaction on the 3rd Wednesday of the month at the Bank’s Head Office.
1.2
Keep the Board of Directors informed as needed, at least once every year.
General Responsibilities of the RPT Committee
2.1
Policy
2.1.1
Shall be responsible in ensuring that a policy on RPT is in place and that
the said policy is reviewed annually or whenever necessary. Any
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changes therein shall be approved by the Board of Directors through the
RPT Committee.
2.1.2
The Committee shall determine the Material Interests or the amount of
significant transactions that could pose material risk to the Bank. For this
purpose, the amount to be considered as ‘Significant’ and to be included
in the Bangko Sentral ng Pilipinas (BSP) report must be Philippine Peso
(PHP) 50 Million (or its foreign currency equivalent) and above.
The amount may be changed based on the discretion of the Board of
Directors.
2.2
Review of Related Party Transaction
2.2.1
The Committee shall also be responsible in reviewing all related party
transactions as defined in the existing policies of the Bank.
2.2.2
The Committee shall evaluate the terms and conditions of the facility or
the transaction, to determine whether or not it is fair, conducted at arm’s
length, or upon terms not less favorable to the Bank than those offered to
others.
In determining that a transaction is at arm’s length, it shall consider the
pricing, timing of transactions, economic benefit, etc.
2.2.3
V.
Any director who has an interest in the transaction shall not participate in
the deliberation and shall abstain from the approval of the transaction.
Review
The Board of Directors shall review and assess the adequacy of this charter at least once every
year and/or as deemed necessary.
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