STATEMENT OF CORPORATE GOVERNANCE

Transcription

1 Annual Report The Board of Directors of AFFINBANK ( Board ) and Management appreciate the importance of adopting high standards of Corporate Governance in all areas of its business towards enhancing business prosperity and corporate accountability with the ultimate objective of safeguarding the interest of shareholder s value. The Board and Management are fully committed and constantly strive to ensure that the principles of the Malaysian Code on Corporate Governance ( Code ) and Bank Negara Malaysia (BNM) Guidelines on Corporate Governance for Licensed Institutions (Revised BNM/GP1) are adopted and practised throughout the group. This is important so as to ensure that AFFINBANK is managed safely and soundly where risks and business prudence are appropriately balanced so as to maximize shareholder s return and protect the interests of all stakeholders. It also enable the shareholder of AFFINBANK and the public to access and determine the standards of Corporate Governance. Throughout 2010 and to date, AFFINBANK continues to conduct its business with integrity and exercise a high level of transparency and objectivity. The Board and Management are fully committed in ensuring employees adhere closely to BNM s Guidelines (BNM/GP7) on Code of Ethics ( COE ), which aims at instilling the five values namely discipline, integrity, humility, caring and creativity in AFFINBANK and its employees. The Board and Management set high ethical business standards and practices for business conduct and the code of behaviour for employees to adhere to. In addition to the COE, all Directors are also required to observe the Directors COE. Responsibility for implementation of these policies and guidelines rests primarily with Management, with oversight by the Audit & Examination Committee. Good Corporate Governance is the foundation of the culture and business practices of AFFINBANK. The following statements set out the commitment of AFFINBANK in applying good Corporate Governance principles and the extent of compliance with the recommended best practices. 1. Board of Directors The Board is committed in establishing and enhancing shareholder s value in the long term. The Board is pleased to report that the Board has to its best efforts and knowledge, complied with the principles and best practices of the Code throughout the financial year under review. `The Board of AFFINBANK has a balance composition with a strong independent element. It consists of representatives from the private sectors with suitable qualifications fulfilling the fit and proper criteria as required by BNM/GP1, a mixture of different skills, competencies, experience and personalities. Directors profiles which appear on pages 9 to 12 reflect clearly the depth and diversity in expertise and perspective they have to lead AFFINBANK as well as allow for an independent and objective analysis of major issues. Board s Responsibilities The Board acknowledges their roles and responsibilities for the overall performance of AFFINBANK. These will ensure the Board functions objectively, independently and effectively. The Board s responsibilities remain within the framework of BNM Guidelines. The Board also exercises great care to ensure that high ethical standards are upheld, and that the interests of stakeholders are not compromised. These include responsibility for determining AFFINBANK s general policies and strategies for the short, medium and long term, approving business plans, including targets and budgets, and approving major strategic decisions. The terms of reference of the Board Committees disclosed on page 37 of this Annual Report provide an outline of its role and functions. In carrying out its functions, the Board has delegated specific responsibilities to other Board Committees, which operated under approved terms of reference, to assist the Board in discharging their duties. The Chairmen of the various Committees report on the outcome of their Committee meetings to the Board and any further deliberation is made at Board level, if required. These reports and deliberations are incorporated into the Minutes of the Board meetings. The various Committee are listed below Board Committee ( BRC ) * The BRC is responsible for providing a formal and transparent procedure for developing the remuneration policy for Directors, Managing Director/Chief Executive Officer and key senior management officers and ensuring that compensation is competitive and consistent with AFFINBANK s culture, objectives and strategy. The Committee obtains advice from experts in compensation and benefits, both internally and externally.

2 27 AFFIN BANK BERHAD (25046-T) Board Nominating Committee ( BNC ) * The BNC is responsible for providing a formal and transparent procedure for the appointment of Directors and Managing Director/Chief Executive Officer, assessing the effectiveness of individual Director, the Board as a whole and the performance of the Managing Director/Chief Executive Officer and key senior management personnel. Board Risk Management Committee ( BRMC ) * The BRMC is responsible for overseeing management s activities in managing credit, market, liquidity, operational, legal and other risks and to ensure that the risk management process is in place and functioning. Board Loan Review and Recovery Committee ( BLRRC ) * The BLRRC is responsible in providing critical review of loans and other credit facilities with higher risk implications, after due process of checking, analysis, review and recommendation by the Credit Risk Management function, and if found necessary, exercise the power to veto loan applications that have been approved by the Group Management Loan Committee. Audit & Examination Committee ( AEC ) * The AEC is responsible for providing oversight on reviewing the adequacy and integrity of the internal control systems and oversees the work of the internal and external auditors. Board Composition and Balance The Board composition is in compliance with the Revised BNM/GP1. The Board consist of nine (9) Directors and two (2) alternate Directors comprising one (1) Executive Director and eight (8) Non-Executive Directors, of whom three (3) are Independent Non- Executive Directors and five (5) are Non-Independent Non-Executive Directors. All Directors have met the criteria set by the BNM guidelines. Board meetings are presided by a Non-Independent Non-Executive Chairman whose role is clearly separated from the role of the Managing Director/Chief Executive Officer. The Chairman is responsible for ensuring the effectiveness and smooth functioning of the Board, the governance structure, independence and inculcate a positive culture in the Board. The Board comprises Directors who, as a group, provides a mixture of core competencies such as finance, accounting, business, management, marketing, information technology and investment management, which are essential for the effective functioning and discharging of responsibilities by the Board. The Managing Director/Chief Executive Officer is responsible for the overall day-to-day business affairs of AFFINBANK while providing strong leadership in the implementation of Board decisions. The composition of the Board is further balanced by the presence of Independent Non-Executive Directors. Although all the Directors have an equal responsibility for the Group s business directions and operations, the role of these Independent Non- Executive Directors are particularly important in ensuring that the strategies proposed by the management are fully discussed and evaluated, having considered the long term interests of AFFINBANK s objectives. No individual or small group of individuals dominate the Board s decision making process. Independence and Conflict of Interest It is the Directors responsibility to declare whether they have a potential or actual interest in any transaction of AFFINBANK. Where issues involve conflict of interest, the interested Directors abstain from discussing or voting on the matter. Appointments and Re-election to the Board In 2010, BNM approved the reappointment of one (1) of Non-Independent Non-Executive Director. In accordance with the Company s Memorandum and Articles of Association, one-third (1/3) of the Directors, or, if their number is not three (3) or a multiple of three (3), the number nearest to one-third (1/3), shall retire from office at each Annual General Meeting and they may offer themselves for re-election.

3 Annual Report Directors Training In accordance with the Code, all newly appointed Non-Executive Directors are furnished by AFFINBANK with copies of the BNM Guidelines, the Banking and Financial Institutions Act 1989, the Green Book and other relevant legislation governing the banking industry to facilitate their understanding of banking business requirements. All Directors have attended various training programmes organised internally as well as externally by the relevant authorities such as BNM, Securities Commission ( SC ) and Companies Commission of Malaysia ( CCM ). In addition, the members of the Board keep abreast with the relevant developments in business, banking and finance industry as well as new regulatory requirements on a continuous basis via various conferences, seminars and training programmes organised within the Group and by other external organizers. The development and training programmes attended by the Directors during the year ended 31 December 2010 are set out below. Director Course Title Trainer/Organiser Date YBhg. Jen Tan Sri Dato 1. World Islamic Economic World Islamic Economic 19 May 2010 Seri Ismail bin Haji Omar Forum - Gearing for Forum Foundation (Bersara) Economic Resurgence 2. Invitation to Launch of BNM, FIDE 28 June 2010 Performance Pays - the Report on Non -Executive Directors 3. Islamic Banking Affin Holdings Berhad 1 July 2010 Training 4. 2nd Annual Corporate Asian World Summit 6 & 7 July 2010 Governance Summit & Federation of Truth, Lies and Public Listed Company Corporate Governance & Malaysian Institute of Corporate Governance 5. Briefing on Financial Affin Holdings Berhad 8 July 2010 Reporting Standards (FRS) Goods and Service Tax (GST) 6. Briefing by PwC on Affin Holdings Berhad 20 August 2010 Performance Pays: A study of financial institutions Directors 7. The Financial Industry BNM 3 November 2010 Conference 2010

4 29 AFFIN BANK BERHAD (25046-T) Director Course Title Trainer/Organiser Date YBhg. Dato Zulkiflee 1. Invitation to Launch of BNM, FIDE 28 June 2010 Abbas bin Abdul Hamid Performance Pays - the Report on Non-Executive Directors, 2. Islamic Banking Training Affin Holdings Berhad 1 July nd Annual Corporate Asian World Summit 6 & 7 July 2010 Governance Summit 2010 & Federation of - Truth, Lies and Public Listed Company Corporate Governance & Malaysian Institute of Corporate Governance 4. FIDE Programme for The Financial 19 & 20 July 2010 Directors (Group 17) Institutions Directors 2 & 3 August 2010 Education (FIDE) 20 & 21 September & 19 October Briefing by PwC on Affin Holdings Berhad 20 August 2010 Performance Pays: A study of financial institutions Directors 6. The Financial Industry BNM 3 Nov Conference 2010 YM. Dr. Raja Abdul Malek 1. FIDE Directors BNM, FIDE 8 Feb bin Raja Jallaludin Compensation Study: Focus Group workshop 2. Strategic Islamic Finance PNB Investment Institute 16 June 2010 Sdn Bhd 3. Invitation to Launch of BNM, FIDE 28 June 2010 Performance Pays - the Report on Non-Executive Directors, 4. 2nd Annual Corporate Asian World Summit 6 & 7 July 2010 Governance Summit 2010 & Federation of - Truth, Lies and Corporate Public Listed Company Governance & Malaysian Institute of Corporate Governance 5. Briefing on Financial Affin Holdings Berhad 8 July 2010 Reporting Standards (FRS) Goods and Service Tax (GST)

5 Annual Report Director Course Title Trainer/Organiser Date Dr. Raja Abdul Malek 6. Briefing by PwC on Affin Holdings Berhad 20 August 2010 bin Raja Jallaludin Performance Pays: A study of financial institutions Directors 7. Regulatory Framework And Malaysian Institute of 24 November 2010 Directors Duties 2010 Corporate Governance (MICG) YBhg. Laksamana Madya 1. Hi-Tea Talk by YBhg Dr. AIBIM 8 June 2010 Tan Sri Dato Seri Ahmad Abbas Mirakhor Ramli bin Mohd Nor (Bersara) 2. Invitation to Launch of BNM, FIDE 28 June 2010 Performance Pays - the Report on Non-Executive Directors 3. Islamic Banking Training Affin Holdings Berhad 1 July nd Annual Corporate Asian World Summit 6 & 7 July 2010 Governance Summit 2010 & Federation of - Truth, Lies and Corporate Public Listed Company Governance & Malaysian Institute of Corporate Governance 5. Briefing on Financial Affin Holdings Berhad 8 July 2010 Reporting Standards (FRS) Goods and Service Tax (GST) YBhg. Dato Sri Abdul 1. Managing Risks in BNM-Cagamas 13 January 2010 Aziz Abdul Rahman Mortgage Financing 2. Hi-Tea Talk by Ybhg Dr. AIBIM 8 June 2010 Abbas Mirakhor 3. Board Risk Management BNM, FIDE 21 & 22 June 2010 Committee Programme 4. Invitation to Launch of BNM, FIDE 28 June 2010 Performance Pays - the Report on Non-Executive Directors 5. Islamic Banking Training Affin Holdings Berhad 1 July Briefing by PwC on Affin Holdings Berhad 20 August 2010 Performance Pays: A study of financial institutions Directors

6 31 AFFIN BANK BERHAD (25046-T) Director Course Title Trainer/Organiser Date Mr. Aubrey Li Kwok-Sing 1. FIDE Programme for The Financial Institutions 12 & 13 April 2010 & Mr. Brian Li Man-Bun Directors (Group 15) Directors Education (FIDE) 10 &11 May 2010 (Alternate director to Mr. 17 & 18 Jun 2010 Aubrey Li) 15 & 16 April 2010 Mr. Stephen Charles Li 1. FIDE Programme for The Financial Institutions 12 & 13 Apr 2010 & Mr. Eric Koh Tong Hau Directors (Group 15) Directors Education (FIDE) 10 &11 May 2010 (Alternate Director To 7 & 8 December 2009 Mr. Stephen Charles Li) 15 & 16 April Invitation to Launch of BNM, FIDE 28 June 2010 Performance Pays - the Report on Non-Executive Directors, 3. Islamic Banking Training Affin Holdings Berhad 1 July 2010 En. Mohd Suffian bin 1. Managing Risks in BNM-Cagamas 13 Jan 2010 Haji Haron Mortgage Financing 2. Building Audit Committee BNM, FIDE 17 & 18 May 2010 for Tomorrow 3. Board Risk Management BNM, FIDE 21 & 22 June 2010 Committee Programme 4. Invitation to Launch of BNM, FIDE 28 June 2010 Performance Pays - the Report on Non-Executive Directors 5. Briefing on Financial Affin Holdings Berhad 8 July 2010 Reporting Standards (FRS) Goods and Service Tax (GST) 6. The Financial Industry BNM 3 November 2010 Conference Regulatory Framework And Malaysian Institute of 24 November 2010 Directors Duties 2010 Corporate Governance (MICG)

7 Annual Report Meeting and Supply of Information to the Board Board meetings for each financial year are scheduled in advance before the end of each financial year so as to enable the Directors to plan accordingly and fit the year s Board meetings into their respective schedules. The Board meets on a scheduled basis at least twelve (12) times a year. Additional meetings are convened when necessary to review progress reports on AFFINBANK s financial performance, approve strategies, business plans and significant policies as well as to consider business and other proposals which require the Boards approval. For Financial year ended 31 December 2010, 18 Board meetings were held. Meetings are usually held at the Bank s Board Room at 19th Floor, Menara Affin, 80 Jalan Raja Chulan, Kuala Lumpur. Board meetings are conducted in accordance to a structured agenda. Board Members are provided with the structured agenda together with the relevant proposals documents and information in a form and of a quality appropriate in advance of each Board meeting. This is to facilitate the Directors to peruse the Board papers and seek clarifications that may require from the Management or the Company Secretary well ahead of the meeting date. Urgent papers may be presented for tabling at the Board meetings under supplemental agenda. The Board monitors AFFINBANK s performance by reviewing the monthly Management Report, which provides a comprehensive review and analysis of AFFINBANK s operation and financial issues. In addition, the Minutes of the various Board Committees and Management Committee meetings and other issues are also tabled and considered by the Board. Procedures are in place for Directors to seek independent professional advice at AFFINBANK s expense. AFFINBANK also provides the Board with assistance and their full access to necessary materials and relevant information and the advice and services of the Company Secretary in order to fulfill their duties and specific responsibilities. 2. Directors Composition AFFINBANK acknowledges the importance of attracting and retaining the right calibre of Directors with the necessary skills, qualifications and experience for effective Board oversight of AFFINBANK s business activities and affairs. The make-up of the Managing Director/Chief Executive Officer s remuneration remained unchanged consisting of salary, allowances, bonus and other customary benefits as appropriate. Any salary review, takes into account market rates and the performance of the individual and of AFFINBANK. Non-executive Directors emoluments consist of three components - an annual fee as a Board member which is subject to the approval of the shareholder, an allowance for attendance of meetings and a Committee fee. A revision of Director s fee was effected in The Directors fees and allowances are those recommended by the Board and in line with Affin Holdings Group of companies. Directors emoluments are disclosed in the relevant note to the financial statements as an aggregate sum, in conformance to the Affin Holdings relevant legislation. Shareholder AFFINBANK is a wholly owned subsidiary of Affin Holdings Berhad, a company listed on Bursa Malaysia. Annual General Meeting ( AGM ) The Annual Report and financial statements for year ended December 2009 were tabled at the 34th AGM on 24 March Likewise the Annual Report and financial statements for year ended December 2010 was tabled at the 35th AGM on 15 March 2011.

8 33 AFFIN BANK BERHAD (25046-T) 3. Accountability and Audit Financial Reporting AFFINBANK continues to subscribe to the philosophy of transparent, fair, reliable and easily understandable reporting to shareholder. The Board upholds its responsibility by regularly providing updates on AFFINBANK s performance through quarterly announcements, ad hoc press conferences, and briefings to the media throughout The Board acknowledges and accepts full responsibility for the financial information contained in this Annual Report and by which it means to provide a balanced, clear and meaningful assessment of its financial position and prospects as presented here in this Annual Report and all other reports to the stakeholders, regulatory authorities and public. Statement of Directors Responsibility for Preparing the Financial Statement The Board is confident that the financial statements for the financial year ended 2010 give a true and fair view of the state of affairs, the results and cash flow of AFFINBANK and the Group for the financial year. The Board also strives to ensure that financial reporting presents a true and fair assessment of AFFINBANK s position and prospects. There is reasonable assurance that AFFINBANK has maintained proper accounting records used and consistently applied appropriate accounting policies supported by reasonable and prudent judgments and estimates, and prepared the financial statements in accordance to the provision of the Companies Act 1965, approved accounting standards in Malaysia and BNM Guidelines. All published information on AFFINBANK is available at