STATEMENT OF CORPORATE GOVERNANCE Reports... · YBhg. Dato’ Zulkiflee 1. Invitation to Launch of BNM, FIDE 28 June 2010 Abbas bin Abdul Hamid Performance Pays - the Report on Non-Executive

STATEMENT OF CORPORATE GOVERNANCE

Annual Report 2010 26

The Board of Directors of AFFINBANK (“Board”) and Management appreciate the importance of adopting high standards of CorporateGovernance in all areas of its business towards enhancing business prosperity and corporate accountability with the ultimate objectiveof safeguarding the interest of shareholder’s value. The Board and Management are fully committed and constantly strive to ensurethat the principles of the Malaysian Code on Corporate Governance (“Code”) and Bank Negara Malaysia (BNM) Guidelines on CorporateGovernance for Licensed Institutions (Revised BNM/GP1) are adopted and practised throughout the group. This is important so as toensure that AFFINBANK is managed safely and soundly where risks and business prudence are appropriately balanced so as tomaximize shareholder’s return and protect the interests of all stakeholders. It also enable the shareholder of AFFINBANK and the publicto access and determine the standards of Corporate Governance. Throughout 2010 and to date, AFFINBANK continues to conductits 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 ofEthics (“COE”), which aims at instilling the five values namely discipline, integrity, humility, caring and creativity in AFFINBANK and itsemployees. The Board and Management set high ethical business standards and practices for business conduct and the code ofbehaviour for employees to adhere to. In addition to the COE, all Directors are also required to observe the Directors’ COE. Responsibilityfor implementation of these policies and guidelines rests primarily with Management, with oversight by the Audit & ExaminationCommittee. 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 extentof 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 thatthe Board has to its best efforts and knowledge, complied with the principles and best practices of the Code throughout thefinancial year under review.

`The Board of AFFINBANK has a balance composition with a strong independent element. It consists of representatives from theprivate 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 anddiversity in expertise and perspective they have to lead AFFINBANK as well as allow for an independent and objective analysis ofmajor issues.

Board’s Responsibilities

The Board acknowledges their roles and responsibilities for the overall performance of AFFINBANK. These will ensure theBoard functions objectively, independently and effectively.

The Board’s responsibilities remain within the framework of BNM Guidelines. The Board also exercises great care to ensure thathigh ethical standards are upheld, and that the interests of stakeholders are not compromised. These include responsibility fordetermining AFFINBANK’s general policies and strategies for the short, medium and long term, approving business plans, includingtargets and budgets, and approving major strategic decisions. The terms of reference of the Board Committees disclosed on page37 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 underapproved terms of reference, to assist the Board in discharging their duties. The Chairmen of the various Committees report onthe outcome of their Committee meetings to the Board and any further deliberation is made at Board level, if required. Thesereports and deliberations are incorporated into the Minutes of the Board meetings. The various Committee are listed below

Board Remuneration 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 competitiveand consistent with AFFINBANK’s culture, objectives and strategy. The Committee obtains advice from experts incompensation and benefits, both internally and externally.


AFFIN BANK BERHAD(25046-T)

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Board Nominating Committee (“BNC”)

* The BNC is responsible for providing a formal and transparent procedure for the appointment of Directors and ManagingDirector/Chief Executive Officer, assessing the effectiveness of individual Director, the Board as a whole and the performanceof 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 andother 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 dueprocess 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 andoversees 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) alternateDirectors 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 BNMguidelines.

Board meetings are presided by a Non-Independent Non-Executive Chairman whose role is clearly separated from the role of theManaging Director/Chief Executive Officer. The Chairman is responsible for ensuring the effectiveness and smooth functioning ofthe 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 anddischarging of responsibilities by the Board.

The Managing Director/Chief Executive Officer is responsible for the overall day-to-day business affairs of AFFINBANK whileproviding 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 theDirectors 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 andevaluated, having considered the long term interests of AFFINBANK’s objectives. No individual or small group of individualsdominate 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. Whereissues 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 theCompany’s Memorandum and Articles of Association, one-third (1/3) of the Directors, or, if their number is not three (3) or amultiple of three (3), the number nearest to one-third (1/3), shall retire from office at each Annual General Meeting and they mayoffer themselves for re-election.

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Directors’ Training

In accordance with the Code, all newly appointed Non-Executive Directors are furnished by AFFINBANK with copies of the BNMGuidelines, the Banking and Financial Institutions Act 1989, the Green Book and other relevant legislation governing the bankingindustry to facilitate their understanding of banking business requirements. All Directors have attended various training programmesorganised internally as well as externally by the relevant authorities such as BNM, Securities Commission (“SC”) and CompaniesCommission 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 andtraining programmes organised within the Group and by other external organizers. The development and training programmesattended 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 2010Seri Ismail bin Haji Omar Forum - Gearing for Forum Foundation(Bersara) Economic Resurgence

2. Invitation to Launch of BNM, FIDE 28 June 2010Performance Pays- the Report on Non-Executive DirectorsRemuneration

3. Islamic Banking Affin Holdings Berhad 1 July 2010Training

4. 2nd Annual Corporate Asian World Summit 6 & 7 July 2010Governance Summit & Federation of2010 - Truth, Lies and Public Listed CompanyCorporate Governance & Malaysian Institute of

Corporate Governance

5. Briefing on Financial Affin Holdings Berhad 8 July 2010Reporting Standards (FRS)Goods and Service Tax (GST)

6. Briefing by PwC on Affin Holdings Berhad 20 August 2010Performance Pays: A study of financialinstitutions Directors’Remuneration

7. The Financial Industry BNM 3 November 2010Conference 2010

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YBhg. Dato’ Zulkiflee 1. Invitation to Launch of BNM, FIDE 28 June 2010Abbas bin Abdul Hamid Performance Pays - the

Report on Non-ExecutiveDirectors Remuneration,

2. Islamic Banking Training Affin Holdings Berhad 1 July 2010

3. 2nd Annual Corporate Asian World Summit 6 & 7 July 2010Governance Summit 2010 & Federation of- Truth, Lies and Public Listed CompanyCorporate Governance & Malaysian Institute of


4. FIDE Programme for The Financial 19 & 20 July 2010Directors (Group 17) Institutions Directors’ 2 & 3 August 2010

Education (FIDE) 20 & 21 September 201018 & 19 October 2010


6. The Financial Industry BNM 3 Nov. 2010Conference 2010

YM. Dr. Raja Abdul Malek 1. FIDE Directors’ BNM, FIDE 8 Feb. 2010bin Raja Jallaludin Compensation Study:

Focus Group workshop

2. Strategic Islamic Finance PNB Investment Institute 16 June 2010Sdn Bhd

3. Invitation to Launch of BNM, FIDE 28 June 2010Performance Pays - theReport on Non-ExecutiveDirectors Remuneration,

4. 2nd Annual Corporate Asian World Summit 6 & 7 July 2010Governance Summit 2010 & Federation of - Truth, Lies and Corporate Public Listed Company Governance & Malaysian Institute of



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Dr. Raja Abdul Malek 6. Briefing by PwC on Affin Holdings Berhad 20 August 2010bin Raja Jallaludin Performance Pays:

A study of financialinstitutions Directors’Remuneration

7. Regulatory Framework And Malaysian Institute of 24 November 2010Directors Duties 2010 Corporate Governance

(MICG)

YBhg. Laksamana Madya 1. Hi-Tea Talk by YBhg Dr. AIBIM 8 June 2010Tan Sri Dato’ Seri Ahmad Abbas MirakhorRamli bin Mohd Nor(Bersara) 2. Invitation to Launch of BNM, FIDE 28 June 2010

Performance Pays -the Report on Non-ExecutiveDirectors Remuneration


4. 2nd Annual Corporate Asian World Summit 6 & 7 July 2010Governance Summit 2010 & Federation of - Truth, Lies and Corporate Public Listed Company Governance & Malaysian Institute of


5. Briefing on Financial Affin Holdings Berhad 8 July 2010Reporting Standards (FRS)Goods and Service Tax(GST)

YBhg. Dato’ Sri Abdul 1. Managing Risks in BNM-Cagamas 13 January 2010Aziz Abdul Rahman Mortgage Financing

2. Hi-Tea Talk by Ybhg Dr. AIBIM 8 June 2010Abbas Mirakhor

3. Board Risk Management BNM, FIDE 21 & 22 June 2010Committee Programme

4. Invitation to Launch of BNM, FIDE 28 June 2010Performance Pays -the Report on Non-ExecutiveDirectors Remuneration



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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 2010Aubrey 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 2009Mr. Stephen Charles Li) 15 & 16 April 2010

2. Invitation to Launch of BNM, FIDE 28 June 2010Performance Pays -the Report onNon-Executive DirectorsRemuneration,


En. Mohd Suffian bin 1. Managing Risks in BNM-Cagamas 13 Jan 2010Haji Haron Mortgage Financing

2. Building Audit Committee BNM, FIDE 17 & 18 May 2010for Tomorrow

3. Board Risk Management BNM, FIDE 21 & 22 June 2010Committee Programme

4. Invitation to Launch of BNM, FIDE 28 June 2010Performance Pays -the Report on Non-ExecutiveDirectors Remuneration


6. The Financial Industry BNM 3 November 2010Conference 2010

7. Regulatory Framework And Malaysian Institute of 24 November 2010Directors Duties 2010 Corporate Governance

(MICG)

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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 Directorsto 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 toreview progress reports on AFFINBANK’s financial performance, approve strategies, business plans and significant policies as wellas 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 RajaChulan, 50200 Kuala Lumpur.

Board meetings are conducted in accordance to a structured agenda. Board Members are provided with the structured agendatogether with the relevant proposals documents and information in a form and of a quality appropriate in advance of each Boardmeeting. This is to facilitate the Directors to peruse the Board papers and seek clarifications that may require from the Managementor the Company Secretary well ahead of the meeting date. Urgent papers may be presented for tabling at the Board meetingsunder supplemental agenda.

The Board monitors AFFINBANK’s performance by reviewing the monthly Management Report, which provides a comprehensivereview and analysis of AFFINBANK’s operation and financial issues. In addition, the Minutes of the various Board Committees andManagement 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 providesthe Board with assistance and their full access to necessary materials and relevant information and the advice and services of theCompany Secretary in order to fulfill their duties and specific responsibilities.

2. Directors’ Remuneration

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 theperformance 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 theapproval of the shareholder, an allowance for attendance of meetings and a Committee fee. A revision of Director’s fee waseffected in 2010. The Directors’ fees and allowances are those recommended by the Board and in line with Affin Holdings Groupof companies.

Directors’ emoluments are disclosed in the relevant note to the financial statements as an aggregate sum, in conformance to theAffin 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 2010.Likewise the Annual Report and financial statements for year ended December 2010 was tabled at the 35th AGM on 15 March2011.

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3. Accountability and Audit

Financial Reporting

AFFINBANK continues to subscribe to the philosophy of transparent, fair, reliable and easily understandable reporting toshareholder. The Board upholds its responsibility by regularly providing updates on AFFINBANK’s performance through quarterlyannouncements, ad hoc press conferences, and briefings to the media throughout 2010.

The Board acknowledges and accepts full responsibility for the financial information contained in this Annual Report and by whichit means to provide a balanced, clear and meaningful assessment of its financial position and prospects as presented here in thisAnnual 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 ofaffairs, the results and cash flow of AFFINBANK and the Group for the financial year. The Board also strives to ensure that financialreporting presents a true and fair assessment of AFFINBANK’s position and prospects. There is reasonable assurance thatAFFINBANK has maintained proper accounting records used and consistently applied appropriate accounting policies supportedby reasonable and prudent judgments and estimates, and prepared the financial statements in accordance to the provision of theCompanies Act 1965, approved accounting standards in Malaysia and BNM Guidelines.

All published information on AFFINBANK is available at www.affinbank.com.my.

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Documents

STATEMENT OF CORPORATE GOVERNANCE Reports... · YBhg. Dato’ Zulkiflee 1. Invitation to Launch of BNM, FIDE 28 June 2010 Abbas bin Abdul Hamid Performance Pays - the Report on Non-Executive