Investor Relations

Nomination and Remuneration Committee - Terms of Reference

Nomination and Remuneration Committee - Terms of Reference

I. MANDATE

I. MANDATEThe Nomination and Remuneration Committee (“Committee”) is a Board level committee which provides oversights of the management of the Bank’s human resources including the appointment of directors (for both executive and non-executive), Senior Management and Management Committee Members. Its mandate is to establish the Bank’s overall human resources management framework to ensure that the Bank is in compliance with the applicable government regulations and follows the market best practice whenever possible.

The Committee assists the Board in establishing the Bank’s culture and behavioral standards that promote prudent risk-taking and fair treatment of customers. It advises and assists the Board in discharging its responsibilities for the Bank’s culture-related matters.

The Committee is responsible to ensure that directors, Senior Management and Management Committee Members appointed possess the necessary and appropriate qualifications to perform and discharge their duties.

The Committee is authorized by the Board to obtain independent professional advice and, if necessary, to select and appoint remuneration consultants at the Bank’s expense to provide such advice. The Committee may consult the Chairman of the Board of Directors, the Vice Chairman of the Board of directors and the Chief Executive regarding its proposals relating to the remuneration of Senior Management (as defined under the Remuneration Policy of the Bank).

II. FUNCTIONS

II. FUNCTIONS

1.	The Committee shall review and approve the remuneration of Directors, in particular the Independent Non-Executive Directors (“INEDs”) and members of Board-level committees on a regular basis to ensure that it is adjusted broadly in line with inflation and as required to maintain competitiveness within the banking sector and against other sectors.
2.	The Committee shall review and approve (i) remuneration packages (i.e. for both fixed and variable pay, including benefits in kind, pension rights, compensation payments, etc.) for Senior Management and Key Personnel (as defined under the Remuneration Policy of the Bank) and (ii) other matters as contemplated under the Remuneration Policy of the Bank.
3.	The Committee shall ensure that remuneration is appropriate and consistent with the Bank’s culture, long-term business and risk appetite, performance and control environment as well as with any legal or regulatory requirements. It shall work closely with the Risk Committee and the Audit Committee of the Board, and consult with the Bank’s risk control functions in evaluating incentives created by the remuneration system.
4.	The Committee shall review and approve the compensation payable to members of the Senior Management and Key Personnel (as defined under the Remuneration Policy of the Bank) in connection with any appointment to, or loss or termination of, their office and ensure that such compensations are in accordance with relevant contractual terms and is fair and not excessive.
5.	The Committee shall review and approve compensation arrangements relating to dismissal or removal of Directors for misconduct and ensure that such arrangements are in accordance with relevant contractual terms and that any compensation so paid is appropriate.
6.	The Committee shall ensure that an annual review of the Bank’s remuneration system and its implementation, includes an assessment of consistency with the Supervisory Policy Manual module CG-5 ‘Guideline on a Sound Remuneration System’ issued by the HKMA, is conducted independent of senior management involvement, and that the result is submitted to the HKMA.
7.	The Committee shall review and approve amendments to the Remuneration Policy of the Bank.
8.	The Committee shall work closely with other relevant Board committees and if deemed necessary, may consult the Bank’s Compliance and Anti-Money Laundering Division on matters of compliance regarding the remuneration system.
9.	The Committee shall identify individuals suitably qualified to become Board members and select or make recommendations to the Board on the selection of individuals nominated for directorships and senior management positions (based on the role and its responsibilities and the knowledge, experience and competence which the role requires).
10.	The Committee shall make recommendations to the Board on appointment or re-appointment of Directors and succession planning for Directors, in particular the Chairman, the Chief Executive and the INEDs. For the recommendation of an INED, the factors in assessing the independence of a Director as stated in the Directors Handbook shall be considered. The Committee shall ensure that endorsement from the Board and/or Remuneration & Nomination Committee of the holding company shall be obtained before making recommendations to the Board.
11.	The Committee shall regularly review whether each existing Director continues to remain qualified for his post, including the suitability and appropriateness of the INEDs.
12.	The Committee shall review the structure, size and composition (after giving due consideration to skills, knowledge and experience) of the Board at least annually and make recommendations on any proposed change to the Board.
13.	The Committee shall also undertake Board performance evaluation to assist the Board in reviewing the efficiency and effectiveness of the functioning of the Board.
14.	The Committee shall ensure objectivity and independence in the selection process for Board members and senior management. The Committee shall also strive to ensure that the Board is not dominated by one individual or small group of individuals in a manner that is detrimental to the interests of the Bank as a whole.
15.	The Committee shall regularly review and confirm the effectiveness of the overall culture enhancement initiatives pursued by the Bank. At the discretion of the Committee, seek assistance internally from the Internal Audit Division or Compliance and Anti-Money Laundering Division or engage outside professional auditors to perform such review.
16.	The Committee shall approve, review and assess, at least annually, the adequacy of the Bank Culture Statement which sets out the Bank’s culture and behavioural standards, and seek to ensure that the statement is translated into policies and procedures (including the Bank Culture Policy and Bank Culture Guideline) that are relevant to the day-to-day work of different levels of staff.
17.	The Committee shall review the results of the Bank’s assessment and feedback mechanisms in respect to the Bank’s culture and behavioral standards at least annually and when warranted.
18.	The Committee shall review and approve the Bank Culture Policy of the Bank.

III. MEETING FREQUENCY AND MINUTES

III. MEETING FREQUENCY AND MINUTESMeetings will be held annually and more frequently when deemed necessary.

The Head of Human Resources will serve as the secretary of the Committee and shall be responsible to produce and distribution such papers for, and minutes of, the Committee’s meetings as appropriate.

IV. MEMBERSHIP AND QUORUM

IV. MEMBERSHIP AND QUORUMThe Board shall appoint designated members of the Board as members of the Committee. A majority of the Members of the Committee should be INEDs. The Committee should have a minimum of two INEDs.

The Committee should be chaired by an INED.

The members of the Committee appointed by the Board should possess sufficient expertise and experience to form an independent judgment on human resources related matters.

Each appointed Committee Member shall hold office until the earlier of (i) such time as the Board determines to terminate his/her appointment, or (ii) the Committee Member ceases to be a member of the Board of Directors of the Bank.

Committee meetings must have a quorum of not less than three Committee Members, of which one must be either the Chairman or Vice Chairman of the Bank.

The Committee may invite any director or employee of the Bank to attend any of its meetings as it considers appropriate to assist in the discharging of its duties.

V. GOVERNANCE

V. GOVERNANCE A. Approval of Resolutions
Resolutions shall be determined by a majority of votes of the members present at a meeting. In the case of equal votes, the Chairman of the meeting shall have an additional or casting vote (Article 106 of the Articles of Association).

A resolution in writing signed by a majority of the members of the Nomination and Remuneration Committee shall be valid and have the same effect as a resolution passed at a meeting of the Committee (Article 114 of the Articles of Association).

B. Conflict of Interest
The Committee shall ensure that no Executive Director is involved in deciding his own remuneration.

Committee members shall disclose or declare any conflict of interest that relates to parties whose remuneration is being considered. The Committee members so affected shall abstain from voting where such a conflict exists and shall not be present when matters relating to the conflict of interest are discussed at Committee meetings.

C. Frequency of Review
The Committee shall review at least annually, its Terms of Reference and recommend to the Board any necessary changes.

VI. REPORTING

VI. REPORTINGThe Committee shall report to the full Board on important matters discussed. The report shall include important matters discussed and/or approved, events which require the attention of the full Board and matters endorsed for full Board’s approval, and any other matters deemed appropriate by the Committee’s Chairman.

12 December 2023