HL 2017

CORPORATE

Management Discussion & Analysis

Building our Talent brand
For FY2017, we continue to make sustainable investments in our workforce by creating an environment in which they can thrive
in. Our new training centre in Damansara City will feature a state of the art learning environment with resources and facilities that
are up to the latest technologies. Our office’s open concept fosters collaboration, promotes learning and nurture strong values. It
is where employees can gather to generate ideas as well as process information relevant to our Bank’s growth and innovation.
Furthermore HR has placed more focus to communicate a genuine and consistent talent branding message about the distinct
strengths, values and beliefs of Hong Leong Bank to our potential employees. Our talent brand serves to complement our ability
to hire the best candidates who possess the potential, attributes and leadership style that are pre-requisites to be successful in
the ever changing banking industry. Within that premise, our talent branding initiatives revolve around the awareness, attraction
and desirability components of the Bank’s overall recruitment strategy.
We invested in the Bank’s talent brand by actively participating in career fairs to ensure that we tap into the best recruitment
resources for top-notch talent. Represented by more than 30 dedicated employees from across our various functions, we
participated in the Graduan Aspire Career Fair to advocate for Hong Leong Bank as an Employer of Choice. We also participated in
the Malaysian Career & Education Fair (“UKEC”) in London in April 2017 where we successfully hired our first batch of graduates
from top-tier universities to participate in our Management Associate Programme that will commence in October 2017.
Our talent branding efforts continue through collaboration with major local universities, conducting targeted career talks and
participation in Campus Career Days and Job Fairs.
We have also strengthened our social media presence and leveraged on other recruitment platforms such as LinkedIn and Graduan
to increase talent brand awareness and intensify social engagement with a wider outreach. We achieved more than 300,000
impressions on LinkedIn content updates. We uploaded content designed specifically to create a greater level of awareness and
buzz around our recruitment activities on LinkedIn. These have been most effective; especially a video where our CEO, Domenic
Fuda, spent time giving his insight on what it took him to get to the top of his career.
Learning & Development
HLBB employees are encouraged to take ownership of their professional and personal development and the Bank supports this
development with various learning programmes. The Bank practices the 70:20:10 learning model, as it is flexible and an effective
way of learning, anytime, anywhere. This model also encourages ownership, initiative and accountability for the employee’s own
personal development.

10% • eLearning on MyLearning
Formal • Structured training programs
Training • Certification
• Literature from internal and external sources

20% • Feedback from managers, colleagues and customers / clients
Learning • Mentor for career advice
from Others • Mentor more junior / senior with specialist / leadership skills
• Networking

70% • Stretched assignment HONG LEONG BANK BERHAD
On-the-job • Double hatting in an additional role ANNUAL REPORT 2017
Learning • Job rotation
• Deputising
• Strategic project experience
• Intentional practice and reflection of a skill

The best development happens when learning from new experiences (70%) as it has three times more impact than formal 49
classroom training. This development happens when the appropriate level of manager support, development planning and
learning from others are in place.

CORPORATE

Management Discussion & Analysis

As an organisation that places strong emphasis on Sustainability, we focus on making Real jobs, real expectations, relevant
sure that the employee has the right managerial support and development planning experience, strong coaching and senior
to maintain professional growth. Managers are continually involved in the career management commitment are the
path development of employees, where they work with HR on developing a career imperatives of the programme structure.
frame-work for their respective departments and divisions. These frame-works are Rewards
utilised to identify the key competencies required for a particular role. It also helps The Bank’s rewards strategy is in
both the employee and manager to understand the training/coaching required by alignment with the Hong Leong
the employee to develop her/ his career. Group’s total compensation philosophy
Hong Leong Bank encourages employees to identify internal opportunities that are which supports and promotes a high
available across the various divisions of the Bank. With a robust internal transfer performance culture to deliver the Bank’s
programme, employees are able to avail themselves of opportunities to broaden vision. Our vision is to be a digitalised
their scope and unlock new career paths. and innovative ASEAN financial services
Besides banking industry knowledge and skills, Hong Leong Bank actively equips our provider. The rewards strategy focuses
talents with soft skill training that have proven to be pivotal to successful careers. on proving a competitive remuneration
In 2016, over one thousand employees attended various soft skill programmes such and benefits package as well as ample
as Effective Negotiation Skills, Email and Business Writing, Emotional Intelligence for career progression opportunities for
Managers, etc. These programmes are continually offered to employees because we employees.
subscribe to the fact that it takes more than technical skills to be effective leaders. HLB’s rewards frame-work focuses
As part of their on-going development to be future leaders, the Bank also has on a balanced and right pay mix to
robust leadership training programmes that target the different needs of various achieve desired long-term business
managerial groups. 699 emerging and aspiring leaders attended structured performance. The frame-work includes
leadership programmes that were organized in 2016. These programmes were aimed base pay, fixed cash allowances,
at readying a healthy pipeline of future managers to take on enhanced roles within performance-based variable pay, sales
the organisation. incentive, long-term incentives, benefits
Graduate Training Programme and other employee programmes.
With the focus on building a ready pool of well-rounded banking professionals The rewards frame-work ensures that
who are able to connect with and serve the community, Hong Leong Bank initiated employees are paid competitively when
graduate trainee programmes in the Personal Financial Services and Business and compared to the industry and talent
Corporate Banking divisions commenced in October 2016. market the Bank is operating in. This
Trainees are to undergo an 18-month structured training and job rotation within the is delivered via a combination of the
division, understanding and applying their skills on the front-line, in the middle and various items mentioned above.
back offices of the Bank. Throughout the programme, trainees will be mentored by The Bank also adopts a rigorous and
a senior manager and their respective line managers will provide essential coaching. robust key performance indicators
This will ensure that the trainees are adequately guided both on professional and setting process that incorporates risk
personal success. management (to fulfil risk control
objectives) as part of the score-cards for
Graduate Training Program Framework each division (in particular each Head
of Division). This is to avoid excessive
HONG LEONG BANK BERHAD Understand & Align Apply & Contribute Enable & Excel risk-taking behaviour and that business
ANNUAL REPORT 2017 growth is balanced with building
and maintaining sufficient control
mechanisms.

The major difference between the qualities of graduate programmes and how Key performance indicators (“KPIs”)/key
successful they emerge from these programmes depend on the quality of the results areas (“KRAs”) of employees are
managers who are responsible for the trainees under their care; the quality of the measured and monitored diligently to
project or the role that the trainee goes through as well as the support and focus of ensure strong alignment of employee
the senior management team. output to the overall business strategy
and direction of the Bank.
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CORPORATE

Management Discussion & Analysis

Deferred compensation and claw- invest time and effort in our people as o Take the right action – take the HONG LEONG BANK BERHAD
backs are introduced in some of the much as we do in our business. right interventions to organise ANNUAL REPORT 2017
compensation programmes - such as Key components to drive for results the right composition of talent
sales incentive schemes; to drive the include: (per division, department, 51
right behaviours in achieving business • A clear understanding of current project, location etc.).
goals and that there is no adverse risk
elements in the approved schemes. and future business strategies. It is • Rebuilding Employee/ Employer
Employee Engagement – My Thoughts, imperative that decisions we take Proposition
Our Future on the HR front are relevant to the o We must have a strong external
Hong Leong Bank launched its first business; reputation – a strong talent
employee engagement survey, branded • Right people in the right roles – brand with Hong Leong Bank
‘My Thoughts, Our Future’ (“MTOF”) on 15 accurate hiring and promotion as an Employer of Choice.
June 2017. This was necessary as we are decisions, the ability to identify o We must also know who we
committed to creating a conducive work key talent gaps and that talent are internally – strong talent
environment that genuinely takes into required to drive business success brand internally, conducive
account the needs of our employees. is identified and put in place; work environment with the
We achieved a participation rate of • Highly motivated and high right offerings in the space
89.4% on a base of 8,566 employees performance culture – employees of values, culture, reputation,
from the whole banking group, including need to have the agility to Learning and Development as
our international entities. The survey unlearn and re-learn to keep well as Rewards & Recognition.
was deployed by Willis Towers Watson pace with a VUCA (Volatility, It begins with who we have
to ensure absolute confidentiality Uncertainty, Complexity, Ambiguity) today.
of responses, as we strive to ensure environment. They must have the
real action and positive changes are ability to think and take ownership, • Focus on Employee Potential
carried out. Results will be published in as if this is their own business; and o We invest out training dollars
September 2017. • Readiness of the HR Team – value- on our own people, so that
The strategy for‘My Thoughts, Our Future’ add from the HR front can only we no longer have to rely on
action planning is to ensure consistent happen with the correct HR bench pinching from other companies.
execution. This will be for the long haul strength in place. The key focus We grow our own; invest in
and will require the commitment from in upgrading capabilities are as good talent - not just based on
everyone tasked to its execution. This follows: performance but potential as
is vital as it reflects the Leadership o Being technologically-savvy; well.
Team’s commitment to acknowledging o Understanding data and o Refocusing Learning &
and addressing - wherever possible, the Development to drive business
issues that are important to employees. insights; results – aim to set benchmarks
Ultimately, our goal is to create an o Developing an ‘outside-in’ in the financial space for
inspiring work environment for all. investment in talent, in best-in-
As the industry continues to undergo perspective, therefore being class accreditation and training
significant change, propelled by the able to interpret trends; and & development offerings.
evolving financial landscape and the o Learning agility
constant threat of disruption, insights The strategic actions include: • Leverage on Technology
from ‘My Thoughts, Our Future’ will be • Strategic Workforce Planning o We must be agile and adopt
key to ensure the Bank is ready to meet (“SWP”) new ways of working, with
the future. o Take stock of who we have real time access to data and
Future-proofing our Workforce – – analysis to build a ‘balance decision making – paperless
Driving the People Agenda sheet’ of people within the systems and processes –
A critical joint responsibility between all Bank based on competency, anytime, anywhere.
divisions and HR is to ensure that we capability, current resources o Create new ways of learning –
and SWP opportunities. real time access.
o Strengthen decision-making
with data and insights.

CORPORATE

Sustainability Statement

KEY HIGHLIGHTS

OUR APPROACH TO SUSTAINABILITY COMMUNITY INVESTMENT
Employees from Hong Leong Bank Berhad
Our approach to sustainability focuses participated in a group-wide employee engagement
on the three dimensions of value initiative involving Hong Leong Foundation and the
creation: economic, environmental, Group Operating Companies. A total of RM57,738 was
and social. It aims to set the direction raised and donated to 17 charitable organisations.
for a future-orientated business Total disbursement of scholarships for
strategy that balances economic diploma/undergraduate and masters
success with environmental and studies, ROAR and GDVT programs:
social responsibility, all in line with
the expectations of stakeholders. We Approx.
seek to promote sustainable business,
increase transparency and, ensure RM37 MILLION
that our risk management processes (Since inception)
help to avoid negative environmental
and social impacts arising from our TOTAL TAXES PAID OPERATING
core businesses. In addition, we try FOR FY2017 EXPENSES
to manage our business operations
sustainably and embrace our RM391 RM2,008
responsibilities as a corporate citizen. MILLION MILLION

HONG LEONG BANK BERHAD52 QUANTITY of recycled
ANNUAL REPORT 2017 paper used:

46,502kg

CORPORATE

Sustainability Statement

FEMALE REPRESENTATION HOW SUSTAINABILITY IS GOVERNED
IN EXECUTIVE MANAGEMENT: Sustainability at Hong Leong Bank is driven by the highest
level within the organisation: our Board. Our Directors, and
FY2017 especially those in the Board Risk Management Committee,
oversee our sustainability and climate change-related actions
Percentage of women Percentage of women and policies, ensuring these are in line with our corporate
in senior management in top management values and ultimately support our business goals and vision.
The Sustainability Steering Committee and Working
42% (C-Suite) Committee meets once a quarter to discuss matters related
to sustainability.
25%
Hong Leong Bank Sustainability Governance Chart FY2017

EMPLOYEE Board
DEVELOPMENT: Guidance and

FY2017 Oversight BOARD
OF DIRECTORS

Classroom E-Learning Board BOARD
Committee RISK MANAGEMENT
Average training hours Average training hours COMMITTEE
per employee per employee

34 7

RESULTS FROM CUSTOMER SATISFACTION SURVEYS

Positive Feedback Areas for improvement Senior SUSTAINABILITY PROJECT
• Everyone, regardless of • Long wait times Management STEERING COMMITTEE
• Unresolved issues after (Chaired by GMD/CEO HLB)
social class, is treated
with respect consultations
• Patient in dealing with • No Mandarin language
customers option on website
• Good service provided • Malfunction of ATM HONG LEONG BANK BERHAD
• Making customers feel machines ANNUAL REPORT 2017
prioritised by providing • Limited automated
excellent service teller machine (“ATM”)
• Operates even on public presence in shopping
holidays malls SUSTAINABILITY
• Cash Deposit Machine • Little privacy available at Working WORKING COMMITTEE
(“CDM”) is faster ATM machines Level (Chaired by a member of
than other banks in the Steering Committee)
calculating notes

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CORPORATE

Sustainability Statement

HOW WE ENGAGE WITH OUR STAKEHOLDERS

Engagement Channel Issues Actions

Employees • Bank-wide Townhalls • Ensure the organisation is fully • Sharing sessions with employees on business updates and
• Social media and career aligned to achieve business overall direction to achieve vision and annual deliverables
results
fairs • Make known the Bank’s employee value proposition at
• Performance appraisal • Build HLB and HLISB brand key career fairs and events throughout the year such as
equity within the financial Graduan, and through social media platforms such as
process industry; and garner the LinkedIn
• Learning & development attention of talent by
showcasing our heritage as well • Launched a development planning process in conjunction
discussions as the best we have to offer as with the performance appraisal process
• Employee survey an employer
• Scholarship program • Ensure managerial readiness to handle Performance and
• Graduate Training • Drive high performance Development discussions by developing managers on
leadership to consistently these topics (incorporating SMART principle, GROW model,
Program deliver our business priorities Coaching, Agile Learning Framework, talent retention
and goals conversations/tracker and stay interviews)

• Continue to invest in our • Launched the 70:20:10 learning framework to ensure
employees through different learning interventions like classroom, e-learning and micro
learning interventions for their learning platforms are made available to employees for
personal and professional their development and long-term progress
success
• Launched “My Thoughts, Our Future” employee survey to
• Create a conducive work gather insights from all employees on how management
environment that genuinely can draw up action plans to create a conducive work
takes into account the needs of environment
our employees
• Offer scholarships and career opportunities to top scholars
• Build a pipeline of homegrown • Enrol fresh graduates in an 18-month development
young banking talents to take
on future leadership positions program

Suppliers • Supplier engagement • To ensure suppliers meet Bank • Various internal stakeholders conduct assessments to
rating process requirements for technical and evaluate supplier capabilities
functional capabilities
• E-Bidding (live auction) • E-bidding process allows for transparent sourcing and
• Tender process • Maintain a transparent supply selection of most competitive suppliers through a ‘live
• Proof of Concept value chain while optimising auction’ online system
costs through E-Bidding
engagements • An independent Tender Review Committee comprising
• Annual supplier due • Ensure comprehensive due senior managers access and approve proposals above a
diligence conducted on certain threshold
diligence review potential suppliers
• Engage in a rigorous and robust process to identify and
• Zero tolerance towards select potential suppliers based on their experience level,
corruption and unfair practices financial strength, years in business and industry reputation

• Ensuring approach and • Due diligence reviews include past performance, disaster
concept are both feasible and recovery and business continuity plans, financial strength
measurable and performance

• Compliance with BNM’s • Suppliers are able to raise any concerns through the
guidelines on “credit whistleblowing channel - a copy of our whistleblowing
transactions and exposure with policy, including contact details, is published on our HLB
connected parties” website

• Conduct limited scope ‘pilot’ tests to ensure viability of
proposals and implementation plans

• Signed declarations by Procurement employees confirming
that they have no connection with existing suppliers

HONG LEONG BANK BERHAD Customers • At our branches • Reduce waiting times at • Digital (online) initiatives that reduce queueing time
ANNUAL REPORT 2017 • Internet and mobile branches and while making • Plan to survey cash recycling terminals and relationship
applications
banking managers, thus enhancing service
• Customer surveys • Reduce number of complaints • Term loans with multilevel matrix of interest rates to suit:
• Telephone and via email • Provide assistance to ease
• Social media e.g.: Hong incomes from RM2k/month; tenures of 2-5 years; and loan
customers’ loan burden amounts from RM5k
Leong Facebook, Twitter, • Protect customer data • Anti-persistent threat mitigation applied to cyber threats
LinkedIn, YouTube • Engagement of experts in the Security Operations Center to
54 help protect data security
• Enforce Personal Data Protection and secrecy policy by
imposing severe fines and penalties for non-compliance by
employees

CORPORATE

Sustainability Statement

Constructive engagement with stakeholders within and outside Hong Leong is fundamental to our approach to Sustainability. It helps us to decide which issues
to prioritise as material throughout the year, understand our impact more broadly, and challenge ourselves as we strive to become a more sustainable bank. Our
goal is to be responsive to the expectations of our stakeholders and to safeguard our business from potential future shocks such as economic or cyber security.
The results of this dialog feed into our materiality analysis, environmental and social risk management and annual reporting.

Engagement Channel Issues Actions

Investors • Annual General • Transparency • Compliance officers and representatives support
Meetings (“AGMs”) • Information leaks, loss, theft comprehensive assurance and review program

• Investor roadshows • Constant tightening of our compliance and cyber security
• Meetings with investors policy to ensure zero customer information leak/theft/loss
• Meetings with analysts
• Maintaining an independent Group compliance function
• Group internal audit to conduct independent reviews

Community • SME segment • Provision of financial aid to • Deployment of 150 community banking managers at
engagement programs empower SMEs branches nationwide to better serve the SME segment, and
increase the Bank’s coverage by approximately 5 times
• Hong Leong • Uplifting marginalised
Foundation’s programs communities through • Support the Shariah-compliant SME Financing Scheme
development programs (“SSFS”) by SME Corporation Berhad

• Increase financial literacy of • Support BNM schemes e.g. Fund for Small and Medium
school children Industries 2 (“FSMI2”) and New Entrepreneurs Fund 2
(“NEF2”)
• Enhancement of educational
attainment of marginalised • Support CGC schemes e.g. BizJamin and the Green
groups Technology Financing Scheme (“GTFS”)

• Educational initiatives such as the scholarship programme,
after school programme, and German Dual Vocational
Training

• Community initiatives such as food for the homeless, youth
skills training, donations and other forms of aid

• Initiating financial planning and education workshop
targeting teenagers and school children

Regulators • Bank Negara Malaysia • Compliance with financial • BNM’s dedicated supervisory team has oversight of the
(“BNM”) services legislation, including Bank. BNM conducts an annual composite risk review of
the Financial Services Act the Bank, in addition to ad-hoc surveys and reviews to
• Bursa Malaysia 2013 and the Islamic Financial ensure continuing compliance with its requirements
• Perbadanan Insurans Services Act 2013. Compliance
with requirements published by • The Bank operates a three-line defence model
Deposit Malaysia BNM. encompassing control embedded in the business through
(“PIDM”) Business Unit Compliance Representatives (“BUCRs”),
• Securities Commission • Compliance with Bursa listing Group Compliance and Group Risk and Internal Audit.
(“SC”) requirements
• Federation of • The Group Company Secretariat ensures the Bank meets
Investment Managers • Compliance with PIDM Bursa Malaysia’s Listing Requirements
Malaysia (“FIMM”) requirements
• PDPA Commissioner • Compliance officers and representatives embedded in the
• Ombudsman for • Compliance with SC business support and advise on compliance with regulatory
Financial Services requirements requirements
(“OFS”)
• Compliance with FIMM • The Group Compliance function is responsible for ensuring
requirements that controls to manage compliance risk are adequate and
operating as intended, as well as to assess and monitor
• Compliance with Personal Data compliance risk within the Bank
Protection Act
• The Bank is committed to embedding a strong compliance
• Compliance with OFS culture within the organisation, through a wide range
requirements of initiatives including targeted compliance training
for employees thus ensuring they hold appropriate
accreditation and licences for the roles they perform HONG LEONG BANK BERHAD
ANNUAL REPORT 2017
• The Bank has established a robust Shariah Governance
framework to ensure our Islamic Banking business and 55
operations comply with Shariah at all times

• The Bank keeps abreast of changes in relevant legal
and regulatory requirements through monitoring the
publication of new requirements by regulators, responding
to consultations on new requirements, and attending
training and seminars conducted by regulators

CORPORATE

Sustainability Statement

In order to present a report that is meaningful to our stakeholders, we conducted
a materiality assessment to determine those issues that are important to both the
Bank itself as well as our stakeholders. The assessment comprises four steps:

1. IDENTIFICATION

We collated preliminary issues Identification 12 Prioritisation
which we believed could be 34
material to the Bank and our
stakeholders through internal Validation Review
management discussions, an
analysis of issues that have
been reported by other banks
and companies in Malaysia, as
well as by looking into industry
best practice. We then conducted
interviews with members of the
Sustainability Steering Committee
and three Executive and Non-
Executive Directors to identify
those issues and concerns that
are material to Hong Leong Bank
in particular. Through these
interviews, we were able to
finalise key issues, opportunities
and challenges facing the Bank.

2. PRIORITISATION

From the list of issues that had
been identified as being material,
we prioritised them (i.e. provided
a measure of ‘weightage’ to each).
This was accomplished via three
employee focus group sessions
and a materiality assessment
workshop with the Sustainability
Working Committee. We involved
a good cross-section of internal
stakeholders in the focus group
sessions – from managers to heads
of department and members of
the C-Suite as well as Directors 3. VALIDATION 4. REVIEW
HONG LEONG BANK BERHAD – and obtain inputs from their
ANNUAL REPORT 2017 engagement with external The materiality matrix was then This final step encompasses
stakeholders. At the end of this presented to the Sustainability feedback from our stakeholders.
step, we were able to plot a
materiality matrix, indicating the Steering Committee, Group From your feedback, we will
Managing Director/Chief Executive be able to further refine our
relative importance of each issue Officer and Board, all of whom sustainability approach so as to
to the Bank and our stakeholders.
validated the findings. present even more meaningful
56 reports in the future.

CORPORATE

Sustainability Statement

OUR MATERIALITY MATRIX
Material issues identified

• Digital Innovation • Fair Banking Legend:
• Compliance • Customer Experience
• Employee Experience • Cyber Security and Data Privacy Most Important
• Ethics and Integrity • Responsible Lending Very Important
• Community Banking • Managing Our Environmental Footprint Important
• Supplier Assessment Material Issues

Most Important Cyber Security and Data Privacy Digital
Community Banking Innovation
Concern to Stakeholders Ethics and Integrity
Very Important Fair Banking Customer
Experience
Responsible Lending Compliance
Employee
Experience

Important Managing Our
Environmental

Footprint
Supplier Assessment

Important Very Important Most Important HONG LEONG BANK BERHAD
Significance To Business ANNUAL REPORT 2017

57

CORPORATE

Sustainability Statement

ABOUT OUR MATERIAL ISSUES

HLB Mission Material Issue GRI Aspect Description

Digital Innovation - We strive to innovate with digital products and services for
greater customer accessibility and convenience.
Customer Product and Service We make every effort to enhance our product and service
Experience Labeling delivery to create a positive customer experience. This includes
meeting our customers’ preferences and needs.
Helping Customers Cyber Security Customer Privacy We protect our organisation and customer data from
Succeed and unauthorised access or attacks aimed to exploit such
Data Privacy information. This involves implementing processes and
measures that prevent, identify and address vulnerabilities
Fair Banking Product and Service and threats to personal and confidential customer data.
Labeling We aim to provide goods and services that meet our customers’
expectations and take into consideration the interests of both
parties in terms of fairness in all aspects.

Employee Employment, We aim for a high-performance culture, honed from the
Experience Labour/Management way we attract, develop and retain the next generation of
Providing Our Relations, Training leaders to ensure we are fit for the future. Our employees are
People with the and Education, empowered to deliver and take ownership of results. We also
Best Opportunities Diversity and Equal provide relevant learning and development opportunities,
Opportunity, Labour competitive rewards and recognition programs and more
Practices Grievance importantly, a conducive work environment, in order to
Mechanisms ensure our people are able to serve the community better
continuously and uncompromisingly

Compliance Compliance We are committed to meeting all local regulations and core
operational regulations (e.g. CCM and BNM regulations, Data
Ethics and Anti-corruption Protection Acts, AMLA, etc) as a measure of management’s
Integrity Local Communities, ability to ensure our operations conform to certain
Community Market Presence performance parameters and long-term viability.
Banking Product Portfolio We expect our employees to adhere to our values, principles,
standards and norms of behaviour, as outlined in our Code of
Creating Responsible Materials, Energy, Conduct and Ethics. This is supported by a Whistleblowing policy.
Stakeholder Lending Emissions We seek to help local communities develop via programs
Procurement that have been designed to meet their specific needs. This
Value Practices includes providing employment opportunities to members of
these communities.
HONG LEONG BANK BERHAD Managing Our We have policies, principles and codes of conduct to ensure the
ANNUAL REPORT 2017 Environmental interests of HLB are aligned with the interests of existing and
Footprint potential customers. These include audits to assess and screen
Supplier for environmental and social risks, financial health assessments
Assessment of existing and potential customers, and the provision of basic
banking products to those who cannot afford to pay for fees so
58 that they can participate in the financial system.
We endeavour to reduce waste (such as paper and water),
and to use energy efficiently thus reduce our greenhouse gas
(“GHG”) emissions and our carbon footprint.

We have an independent Tender Review Committee to assess
and approve proposals above a certain threshold. This is
supported by due diligence reviews of suppliers' financial
strength and performance as well as disaster recovery and
business continuity plans. Suppliers have to satisfy our zero
tolerance for corruption and unfair practices.

CORPORATE

Sustainability Statement

HOW OUR MATERIAL ISSUES RELATE TO THE UN SDGS

We are pleased to be able to map our sustainability performance against the United Nation Sustainable Development Goals
(“SDGs”) in areas that are relevant to our operations. Of the 17 SDGs, we believe we are in a position to make a positive impact
on the following eight, and have mapped our performance to the relevant SDGs to Malaysia and the financial services sector:

• Goal 4: Quality Education • Goal 10: Reduced Inequalities
• Goal 5: Gender Equality • Goal 12: Responsible Consumption and Production
• Goal 8: Decent Work and Economic Growth • Goal 13: Climate Action
• Goal 9: Industry Innovation and Economic Growth • Goal 16: Peace, Justice and Strong Institutions

We recognise it is important to engage regularly with our stakeholders in order to understand their needs as well as their
expectations of us, creating an environment of openness and trust.

SDGs relevant to SDGs relevant to
Malaysia and the Financial Services sector1 our material issues

Economic

Environmental

Social HONG LEONG BANK BERHAD
1 Source: PwC SDG selector tool (dm.pwc.com/SDGSelector/) ANNUAL REPORT 2017

59

HONG LEONG BANK BERHAD CORPORATE
ANNUAL REPORT 2017
Corporate Information

60

CORPORATE

Corporate Information

YBhg Tan Sri Quek Leng Chan DIRECTORS Mr Kwek Leng Hai
(Chairman)
Mr Tan Kong Khoon

Ms Lim Lean See Ms Chok Kwee Bee YBhg Dato’ Nicholas John Lough
@ Sharif Lough bin Abdullah

YBhg Datuk Wira Azhar YBhg Datuk Dr Md Hamzah
bin Abdul Hamid bin Md Kassim

GROUP MANAGING
DIRECTOR/CHIEF

EXECUTIVE OFFICER

Mr Domenic Fuda

GROUP COMPANY
SECRETARY

Ms Christine Moh Suat Moi
MAICSA 7005095

AUDITORS REGISTRAR REGISTERED OFFICE

Messrs PricewaterhouseCoopers Hong Leong Share Registration Level 8, Wisma Hong Leong
Chartered Accountants Services Sdn Bhd 18 Jalan Perak

Level 10, 1 Sentral, Jalan Rakyat Level 5, Wisma Hong Leong 50450 Kuala Lumpur
Kuala Lumpur Sentral 18 Jalan Perak Tel: 03-2164 8228
50706 Kuala Lumpur Fax: 03-2164 2503
Tel: 03-2173 1188 50450 Kuala Lumpur
Fax:03-2173 1288 Tel: 03-2164 1818
Fax: 03-2164 3703

WEBSITE HONG LEONG BANK BERHAD
ANNUAL REPORT 2017
www.hlb.com.my

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Notice of Annual General Meeting

NOTICE IS HEREBY GIVEN that the Seventy-Sixth Annual General Meeting of Hong Leong
Bank Berhad (“Bank”) will be held at the Theatrette, Level 1, Wisma Hong Leong, 18 Jalan
Perak, 50450 Kuala Lumpur on Monday, 23 October 2017 at 10:00 a.m. in order:

1. To lay before the meeting the audited financial statements together with the reports of the Directors and
Auditors thereon for the financial year ended 30 June 2017.

2. To declare a final single-tier dividend of 30 sen per share for the financial year ended 30 June 2017 to be (Resolution 1)
paid on 15 November 2017 to members registered in the Record of Depositors on 31 October 2017.

3. To approve the payment of Director Fees of RM965,000 for the financial year ended 30 June 2017 to
be divided amongst the Directors in such manner as the Directors may determine and Directors’ Other
Benefits of up to an amount of RM200,000 for the period of 31 January 2017 until the next Annual General
Meeting. (Resolution 2)

4. To pass the following motions as ordinary resolutions:

(a) “THAT Ms Chok Kwee Bee who retires by rotation pursuant to Article 113 of the Bank’s Constitution, (Resolution 3)
be and is hereby re-elected a Director of the Bank.”

(b) “THAT YBhg Dato’ Nicholas John Lough @ Sharif Lough bin Abdullah who retires by rotation pursuant to (Resolution 4)
Article 113 of the Bank’s Constitution, be and is hereby re-elected a Director of the Bank.”

(c) “THAT YBhg Tan Sri Quek Leng Chan be and is hereby re-appointed a Director of the Bank.” (Resolution 5)

5. To re-appoint Messrs PricewaterhouseCoopers as Auditors of the Bank and authorise the Directors to fix (Resolution 6)
their remuneration.

SPECIAL BUSINESS
As special business, to pass the following motions as ordinary resolutions:

6. Ordinary Resolution
Authority to Directors to Allot Shares

HONG LEONG BANK BERHAD “THAT subject to the Companies Act 2016, the Main Market Listing Requirements of Bursa Malaysia (Resolution 7)
ANNUAL REPORT 2017 Securities Berhad, the Bank’s Constitution and approval of the relevant governmental regulatory
authorities, if required, the Directors be and are hereby empowered pursuant to Sections 75 and 76 of the
Companies Act 2016 to allot shares in the Bank, grant rights to subscribe for shares in the Bank, convert
any security into shares in the Bank, or allot shares under an agreement or option or offer at any time
and from time to time, and upon such terms and conditions and for such purposes as the Directors may,
in their absolute discretion, deem fit, provided that the aggregate number of shares issued and allotted,
to be subscribed under any rights granted, to be issued from conversion of any security, or to be issued
and allotted under an agreement or option or offer, pursuant to this resolution does not exceed 10% of
the total number of issued shares (excluding treasury shares) of the Bank for the time being and that the
Directors be and are also empowered to obtain approval for the listing of and quotation for the additional
shares so allotted on Bursa Malaysia Securities Berhad and that such authority shall continue in force until
the conclusion of the next Annual General Meeting of the Bank.”

62

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Notice of Annual General Meeting

7. Ordinary Resolution
Proposed Renewal of and New Shareholders’ Mandate for Recurrent Related Party Transactions of
a Revenue or Trading Nature with Hong Leong Company (Malaysia) Berhad (“HLCM”) and Persons
Connected with HLCM

“THAT approval be and is hereby given for the Bank and/or its subsidiaries to enter into any of the
transactions falling within the types of recurrent related party transactions of a revenue or trading nature
as disclosed in Section 2.3 (A) and (B) of the Bank’s Circular to Shareholders dated 29 September 2017 (“the
Circular”) with HLCM and persons connected with HLCM (“Hong Leong Group”), as set out in Appendix II
of the Circular provided that such transactions are undertaken in the ordinary course of business, on arm’s
length basis and on commercial terms which are not more favourable to the Hong Leong Group than
those generally available to and/or from the public and are not, in the Bank’s opinion, detrimental to the
minority shareholders;

AND THAT such approval shall continue to be in force until:

(a) the conclusion of the next Annual General Meeting (“AGM”) of the Bank at which time it will lapse,
unless by a resolution passed at the meeting, the authority is renewed; or

(b) the expiration of the period within which the next AGM of the Bank after that date is required to be
held pursuant to Section 340(2) of the Companies Act 2016 (but shall not extend to such extension as
may be allowed pursuant to Section 340(4) of the Companies Act 2016); or

(c) revoked or varied by resolution passed by the shareholders in general meeting,

whichever is the earlier;

AND THAT the Directors of the Bank be and are hereby authorised to complete and to do all such acts and (Resolution 8)
things (including executing all such documents as may be required) as they may consider expedient or
necessary to give effect to the transactions contemplated and/or authorised by this ordinary resolution.”

8. To consider any other business of which due notice shall have been given.

FURTHER NOTICE IS HEREBY GIVEN that a depositor shall qualify for entitlement to the final dividend only in
respect of:

(a) shares transferred into the depositor’s securities account before 4:00 p.m. on 31 October 2017 in respect
of ordinary transfers; and

(b) shares bought on Bursa Securities on a cum entitlement basis according to the Rules of the Bursa
Securities.

By Order of the Board

CHRISTINE MOH SUAT MOI (MAICSA 7005095) HONG LEONG BANK BERHAD
Group Company Secretary ANNUAL REPORT 2017
Kuala Lumpur
29 September 2017

63

HONG LEONG BANK BERHADCORPORATE
ANNUAL REPORT 2017
Notice of Annual General Meeting

NOTES:
1. For the purpose of determining members’ eligibility to attend this meeting, only members whose names appear in the Record

of Depositors as at 17 October 2017 shall be entitled to attend this meeting or appoint proxy(ies) to attend and vote on their
behalf.
2. Save for a member who is an exempt authorised nominee, a member entitled to attend and vote at the meeting is entitled
to appoint not more than two (2) proxies to attend, participate, speak and vote in his stead. A proxy may but need not be
a member of the Bank. A member who is an authorised nominee may appoint not more than two (2) proxies in respect
of each securities account it holds. A member who is an exempt authorised nominee for multiple beneficial owners in one
securities account (“Omnibus Account”) may appoint any number of proxies in respect of the Omnibus Account.
3. Where two (2) or more proxies are appointed, the proportion of shareholdings to be represented by each proxy must be
specified in the instrument appointing the proxies, failing which the appointments shall be invalid.
4. The Form of Proxy must be deposited at the Registered Office of the Bank at Level 8, Wisma Hong Leong, 18 Jalan Perak,
50450 Kuala Lumpur not less than 24 hours before the time and date of the meeting or adjourned meeting.
5. Pursuant to Paragraph 8.29 A (1) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, all the
resolutions set out in this Notice will be put to a vote by way of a poll.

EXPLANATORY NOTES
1. Resolution 2 on Director Fees and Other Benefits

• Director Fees of RM965,000 are inclusive of Board Committees Fees of RM365,000.
• Directors’ Other Benefits of up to an amount of RM200,000 refer to Directors’ & Officers’ Liability Insurance coverage

based on premium paid/payable and Directors’ Training Benefits.
2. Resolution 5 on Re-appointment of Director
Under the new Companies Act 2016, the requirement to put forth the re-appointment of Directors of or over the age of 70

years had been repealed. At the Seventy-Fifth Annual General Meeting (“AGM”) held on 26 October 2016, the Bank had
obtained shareholders’ approval for the re-appointment of YBhg Tan Sri Quek Leng Chan as a Director of the Bank and for
him to continue in office as a Director until the conclusion of the next AGM of the Bank. In this regard, the Bank is seeking
shareholders’ approval for the re-appointment of YBhg Tan Sri Quek Leng Chan as a Director of the Bank.
YBhg Tan Sri Quek Leng Chan’s retirement by rotation at subsequent AGMs will be in accordance with the Bank’s Constitution.
3. Resolution 7 on Authority to Directors to Allot Shares
The proposed Ordinary Resolution, if passed, will renew the general mandate given to the Directors of the Bank to issue
ordinary shares of the Bank from time to time and expand the mandate to grant rights to subscribe for shares in the Bank,
convert any security into shares in the Bank, or allot shares under an agreement or option or offer, provided that the
aggregate number of shares allotted, to be subscribed under any rights granted, to be issued from conversion of any security,
or to be allotted under an agreement or option or offer, pursuant to this resolution does not exceed 10% of the total number
of issued shares of the Bank for the time being (“Renewed General Mandate”). In computing the aforesaid 10% limit, shares
issued or agreed to be issued or subscribed pursuant to the approval of shareholders in a general meeting where precise
terms and conditions are approved shall not be counted. The Renewed General Mandate, unless revoked or varied at a
general meeting, will expire at the conclusion of the next AGM of the Bank.
As at the date of this Notice, no new shares in the Bank were issued and allotted pursuant to the general mandate given to
the Directors at the last AGM held on 26 October 2016 and which will lapse at the conclusion of the Seventy-Sixth AGM.The
Renewed General Mandate will enable the Directors to take swift action in case of, inter alia, a need for corporate exercises
or in the event business opportunities or other circumstances arise which involve the issuance and allotment of new shares,

64 grant of rights to subscribe for shares, conversion of any security into shares, or allotment of shares under an agreement or
option or offer, and to avoid delay and cost in convening general meetings to approve the same.

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Notice of Annual General Meeting

4. Resolution 8 on Recurrent Related Party Transactions of a Revenue or Trading Nature
The proposed Ordinary Resolution, if passed, will empower the Bank and its subsidiaries (“HLB Group”) to enter into recurrent

related party transactions of a revenue or trading nature which are necessary for HLB Group’s day-to-day operations, subject
to the transactions being in the ordinary course of business and on terms which are not more favourable to Hong Leong Group
than those generally available to the public and are not, in the Bank’s opinion, detrimental to the minority shareholders of
the Bank (“Proposed Renewal of and New Shareholders’ Mandate”).
Detailed information on the Proposed Renewal of and New Shareholders’ Mandate is set out in the Circular to Shareholders
dated 29 September 2017 which is dispatched together with the Bank’s 2017 Annual Report.

Statement Accompanying
Notice of Annual General Meeting

(Pursuant to Paragraph 8.27(2) of the Main Market Listing Requirements of Bursa Malaysia Securities
Berhad)

• Details of individuals who are standing for election as Directors
No individual is seeking election as a Director at the forthcoming Seventy-Sixth Annual General Meeting of the Bank.
• Statement relating to general mandate for issue of securities in accordance with Paragraph 6.03(3) of the Main Market

Listing Requirements of Bursa Malaysia Securities Berhad
Details of the general mandate to issue securities in the Bank pursuant to Sections 75 and 76 of the Companies Act 2016 are

set out in Explanatory Note 3 of the Notice of Seventy-Sixth Annual General Meeting.

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

65

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Board of Directors

YBHG TAN SRI MR TAN KONG KHOON MR KWEK LENG HAI
QUEK LENG CHAN
Executive Director/Non-Independent Non-Executive Director/
Chairman/Non-Executive/ Age 60, Male, Singaporean Non-Independent
Non-Independent Age 64, Male, Singaporean
Age 74, Male, Malaysian

YBhg Tan Sri Quek Leng Chan qualified as Mr Tan Kong Khoon holds a Bachelor of Mr Kwek Leng Hai qualified as a
a Barrister-at-Law from Middle Temple, Business Administration degree from Chartered Accountant and has extensive
United Kingdom. He has extensive Bishop’s University, Canada and is an experience in financial services,
business experience in various business alumnus of the Harvard Business School manufacturing and property investment.
sectors, including financial services, Advanced Management Program. Mr Kwek was appointed to the Board of
manufacturing and real estate. Mr Tan is currently the President & Directors of HLB on 3 January 1994. He
YBhg Tan Sri Quek is the Chairman of Chief Executive Officer of HLFG. He was is also a Director of Hong Leong Islamic
Hong Leong Bank Berhad (“HLB”) and the Group Managing Director/Chief Bank Berhad (“HLISB”) and HLCM, both
was appointed to the Board of Directors Executive Officer of HLB from 1 July public companies.
of HLB on 3 January 1994. He is the 2013 to 4 February 2016. Prior to joining Mr Kwek is the Executive Chairman of
Chairman of the Credit Supervisory HLB, Mr Tan was the Group Executive, Guoco Group Limited (“GGL”). He was
Committee (“CSC”) and a member of the Consumer Banking Group of DBS Bank appointed as a director of GGL in 1990
Board Remuneration Committee (“RC”) Ltd (“DBS”) from 1 December 2010 to 15 and assumed the position of President,
of HLB. April 2013 where he led and managed Chief Executive Officer from 1995 to 1
He is the Chairman & Chief Executive strategy formulation and execution for September 2016. He is also the Chairman
Officer of Hong Leong Company consumer banking globally across the of Lam Soon (Hong Kong) Limited
(Malaysia) Berhad (“HLCM”), a public DBS Group. (“LSHK”). Both GGL and LSHK are listed
company; Chairman of Hong Leong Mr Tan began his banking career in Hong Kong. Mr Kwek is also a director
Financial Group Berhad (“HLFG”), with DBS in 1981. Since then, he has of GGL’s key subsidiaries, including
Hong Leong Capital Berhad (“HLCB”) successfully built consumer banking his positions as the Non-Executive
and GuocoLand (Malaysia) Berhad, franchises across multiple markets in Chairman of GL Limited and a director
companies listed on the Main Market Asia for Citibank, Standard Chartered of GuocoLand Limited, both public listed
of Bursa Malaysia Securities Berhad Bank and ANZ Bank. companies in Singapore. He is also a
(“Bursa Securities”); and Chairman of From March 2007 to December 2009, Mr director of Bank of Chengdu Co., Ltd.
Hong Leong Assurance Berhad (“HLA”) Tan was President and Chief Executive
and Hong Leong Foundation, both public Officer of Bank of Ayudhya, the fifth
companies. largest bank in Thailand listed on the
Thailand Stock Exchange.

HONG LEONG BANK BERHAD Mr Tan was appointed to the Board
ANNUAL REPORT 2017 of Directors of HLB on 1 July 2013 and
is a member of the CSC, Executive
Committee and Nomination Committee
(“NC”) of HLB.

66 Mr Tan is a Director of HLFG and HLCB,
both companies listed on the Main
Market of Bursa Securities. He is also
a Director of HLA and Hong Leong
Investment Bank Berhad, both public
companies.

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Board of Directors

MS LIM LEAN SEE MS CHOK KWEE BEE YBHG DATO’ NICHOLAS JOHN
LOUGH @ SHARIF LOUGH BIN
Non-Executive Director/Independent Non-Executive Director/Independent ABDULLAH
Age 64, Female, Malaysian Age 65, Female, Malaysian
Non-Executive Director/Independent

Age 65, Male, British and Malaysian
Permanent Resident

Ms Lim Lean See holds an Associateship Ms Chok Kwee Bee holds a Bachelor YBhg Dato’ Nicholas John Lough @ Sharif
in Accounting and an Associateship in of Art (Honours) degree in Business Lough bin Abdullah holds a Gemmology
Secretarial and Administrative Practice Studies from Kingston University, United Diploma from The National Association
both from the Curtin University, Australia. Kingdom and is also a member of the of Goldsmiths, London, Great Britain and
Her professional qualifications include Associate of the Chartered Institute of is a Fellow member of The Gemmological
being a Fellow of the Australian Society Bankers, United Kingdom. Association of Great Britain.
of Certified Practising Accountants, Ms Chok is presently the Managing YBhg Dato’ Nicholas Lough has extensive
Registered Accountant with the Director of Teak Capital Sdn Bhd, a experience in the corporate sector,
Malaysian Institute of Accountants, a venture capital management company serving in various capacities, including
Trade Member of Financial Planning and a Principal of Intres Capital Partners Group Executive Director of The Melewar
Association of Malaysia and a member Sdn Bhd. Prior to that, she was with Corporation Berhad from 1987 to 1995.
of the Asian Institute of Chartered Walden International, a Silicon Valley YBhg Dato’ Nicholas Lough is currently a
Bankers. based venture capital firm, overseeing Director of GLM REIT Management Sdn
Ms Lim has 33 years of experience in the the operations and investments of Bhd, the Manager of Tower Real Estate
banking industry and has held various Walden International and BI Walden in Investment Trust and Scicom (MSC)
senior positions including the Head of Malaysia. Ms Chok was also previously Berhad, both listed on the Main Market
Corporate Banking and Head of Business Head of the Corporate Finance at of Bursa Securities.
Banking Division, the last being the AmInvestment Bank Berhad. She YBhg Dato’ Nicholas Lough was
Chief Representative of a foreign bank previously held posts as a member of the appointed to the Board of Directors of
Representative Office with the corporate Securities Commission Capital Market HLB on 23 June 2014 and is the Chairman
rank of an Executive Director. Advisory Council, the Chairman of the of the BRMC and RC, and a member of
Ms Lim was appointed to the Board of Malaysian Venture Capital and Private the BAC and NC of HLB.
Directors of HLB on 5 May 2010 and is the Equity Association, a Non-Executive
Chairman of the Board Audit Committee Board Member of the Audit Oversight
(“BAC”) and a member of the Board Risk Board and also a member of the
Management Committee (“BRMC”) of Malaysian Venture Capital Development
HLB. Council of the Securities Commission.
Ms Lim is also a Director of HLFG, a Ms Chok is currently the Chairman of
company listed on the Main Market of Aemulus Holdings Berhad, a public
Bursa Securities. company. She is also a Non-Executive
Board Member of MIMOS Technology
Solutions Sdn Bhd, a wholly-owned HONG LEONG BANK BERHAD
subsidiary of MIMOS Berhad. She also ANNUAL REPORT 2017
sits on the board of several portfolio
companies.

Ms Chok was appointed to the Board
of Directors of HLB on 2 December 2013
and is the Chairman of the NC and a
member of the BRMC of HLB.

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Board of Directors

YBHG DATUK WIRA AZHAR YBHG DATUK DR MD
BIN ABDUL HAMID HAMZAH BIN MD KASSIM

Non-Executive Director/Independent Non-Executive Director/Independent
Age 56, Male, Malaysian Age 68, Male, Malaysian

YBhg Datuk Wira Azhar bin Abdul Hamid Manager. He returned to Malaysia in YBhg Datuk Dr Md Hamzah bin Md
is a Chartered Accountant by training. He 1991 and joined Malaysian Cooperative Kassim holds a PhD in Business from
is a Fellow member of the Association Insurance Society as Head of Internal Aston University, United Kingdom and
of Chartered Certified Accountants, Audit. From 1994 to 2001, he was with a Master in Business Administration. He
United Kingdom and a member of the the Sime Darby Group serving Sime was inducted in 2012 into the Alumni
Malaysian Institute of Accountants. Tyres International Sdn Bhd as Financial Hall of Achievement of Monmouth
Controller, Sime Conoco Sdn Bhd as College in Illinois.
YBhg Datuk Wira Azhar is presently Business Development Director and the YBhg Datuk Dr Md Hamzah specialises
the Chairman of Felda Global Ventures Group’s Engineering, Oil & Gas Division in large scale institutional and
Holdings Berhad. He was the Chairman/ as Group General Manager. From 2001 business transformation, working
President/Group Managing Director of to 2002, YBhg Datuk Wira Azhar was across several sectors with established
Tradewinds Corporation Berhad and the the Group Chief Executive of Pernas organisations ranging from banks to
Group Managing Director of Malakoff International Holdings Bhd. telecommunication companies, public
Corporation Berhad. Prior to that, he was YBhg Datuk Wira Azhar was appointed to institutions and foreign governments.
the Chief Executive Officer of Mass Rapid the Board of Directors of HLB on 15 May He is the Co-founder/Group Managing
Transit Corporation Sdn Bhd from 2011 to 2015 and is a member of the BAC of HLB. Director of iA Group established in
2014. He was with the Sime Darby Group YBhg Datuk Wira Azhar is a Director 2002, specialising in business and public
from 2003 to 2010 where he served of ICON Offshore Berhad and Hume sector transformation, technology and
in various senior capacities including Industries Berhad, both listed on the human capital with offices in Malaysia
Managing Director of Sime Darby Main Market of Bursa Securities. He and Jakarta.
Plantation Sdn Bhd and Acting President is also a Director of Malakoff Power Prior to the iA Group, he was the Executive
& Group Chief Executive, overseeing the Berhad and Epic Products Berhad, both Director/Partner of international firm
entire Group’s operations. public companies, and a Board member of Ernst & Young, Vice President and
of State Economic Development Country Head of the global consulting
YBhg Datuk Wira Azhar began his Corporation for the state of Perak Darul firm of Cap Gemini and member of the
senior executive career in 1989 in the Ridzuan. global management team and Country
United Kingdom, where he served Head of PA Consulting Group.
British Telecom Plc as Internal Audit

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

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Board of Directors

Prior to joining the consulting industry appointed as member of the National Notes:
in 1995, YBhg Datuk Dr Md Hamzah Economic Advisory Council. YBhg Datuk 1. Family Relationship with Director
held various senior positions in Dr Md Hamzah was a member of the
the government. For over 18 years Review and Operational Panel to the and/or Major Shareholder
he served in the field of industrial Malaysian Anti-Corruption Commission YBhg Tan Sri Quek Leng Chan and Mr
R&D management and public policy from 2013 to February 2015. In 2015, he
on technology development and was appointed as member of the Anti- Kwek Leng Hai are brothers. Save
innovation. He also served as a member Corruption Advisory Board. as disclosed herein, none of the
of expert/advisory groups in various YBhg Datuk Dr Md Hamzah is currently a Directors has any family relationship
national and international organisations board member of University Kebangsaan with any other Director and/or major
such as United Nations Conference on Malaysia and Chairman of Heriot Watt shareholder of HLB.
Trade and Development and Islamic University Malaysia. 2. Conflict of Interest
Development Bank, Jeddah. He was YBhg Datuk Dr Md Hamzah was None of the Directors has any
the Project Director for the Industrial appointed to the Board of Directors of conflict of interest with HLB.
Technology Master Plan for Malaysia HLB on 19 May 2016 and is a member of 3. Conviction of Offences
in the Institute of Strategic and the RC of HLB. None of the Directors has been
International Studies and subsequently YBhg Datuk Dr Md Hamzah is also the convicted of any offences (excluding
took up the position as Director of Board Chairman of HLISB, a public traffic offences) in the past 5 years
Science and Technology, Ministry of company. and there were no public sanctions
Science, Technology and Environment or penalties imposed by the relevant
to spearhead the implementation of the regulatory bodies during the
plan as part of the national strategies financial year ended 30 June 2017.
to accelerate growth and technology 4. Attendance of Directors
development. Details of Board meeting attendance
of each Director are disclosed in the
In 2006, YBhg Datuk Dr Md Hamzah was Statement on Corporate Governance,
appointed as the consulting advisor Risk Management and Internal
to the National Implementation Task Control in the Annual Report.
Force to oversee the 9th Malaysia
Development Plan and in 2009 he was

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

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Key Senior Management

MR DOMENIC FUDA Mr Domenic Fuda holds a Bachelor of 2010 as Chief Financial Officer of
Economics from Macquarie University, Regional Consumer Banking & Wealth
Group Managing Director/Chief Sydney, as well as a Master of Business Management. During his tenure
Executive Officer (Banking & Finance) and a Master of with DBS, Mr Domenic Fuda was
Age 50, Male, Australian Business Administration (M.B.A.), both responsible for the formulation and
from University of Technology, Sydney. execution of a multi-year growth
Mr Domenic Fuda was appointed as strategy for the 6 Asian markets in
the Group Managing Director/Chief which DBS operates its consumer and
Executive Officer of Hong Leong Bank wealth management businesses.
Berhad (“HLB”) on 5 February 2016. Prior to his position in DBS, he spent
Mr Domenic Fuda is a member of 16 years at Citigroup where he served
the Executive Committee and Credit in various senior management roles
Supervisory Committee of HLB. He is across Asia, the latest being Chief
also a Director of Hong Leong Islamic Operating Officer for South East Asia
Bank Berhad (“HLISB”), a wholly-owned Pacific, Australia and New Zealand,
subsidiary of HLB. where he helped to drive execution
Prior to HLB, Mr Domenic Fuda was the of Citi’s strategy across 10 countries,
Managing Director and Deputy Group launched Citi’s Consumer Banking
Head, Consumer Banking & Wealth business in Vietnam and helped to
Management of DBS Bank Ltd (“DBS”), manage the banking operations
Singapore. He joined DBS in March during the 2008/2009 financial crises.

MSIRK WCHAANRKLEISNG Mr Charles Sik Wan King holds a Bachelor Prior to HLB, Mr Charles Sik has most
of Commerce (Hons) from University of recently served as the Head, Group
Managing Director, Personal Ottawa, Canada. In addition, he has also Retail Banking with RHB Bank Berhad
Financial Services completed management programmes and prior to that, he was the Head of
Age 55, Male, Malaysian at the Procter & Gamble School of Consumer Financial Services at OCBC
Management, the INSEAD Graduate Bank (Malaysia) Berhad. He was also
School and the Columbia Senior previously the Wealth Management
Executive Programme at the Columbia Product Director at Citibank, Malaysia.
Business School. Prior to banking, Mr Charles Sik spent
Mr Charles Sik joined HLB on 4 February his formative years in FMCG (fast
2015 as Chief Operating Officer, moving consumer goods) companies
Personal Financial Services. He leads in various sales and marketing
and manages the HLB Retail Banking positions across Asia and United
portfolio. He assumed his current States.
position on 1 September 2016.
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Key Senior Management

MR YOW KUAN TUCK Mr Yow Kuan Tuck holds a Bachelor of Prior to HLB, Mr Yow was with
Laws and Letters degree from University Standard Chartered Bank (“SCB”)
Managing Director, Business and of Leicester, United Kingdom as well as Malaysia as Managing Director, Head
Corporate Banking a Certificate of Legal Practice from the of Financial Institutions between 2013
Age 46, Male, Malaysian Legal Qualifying Board, Malaysia. and 2017. He commenced his banking
Mr Yow joined HLB on 2 May 2017 career with Citibank Malaysia in
as Managing Director, Business and Country Compliance for a number of
Corporate Banking. years before a career change into
Mr Yow has over 20 years of experience institutional banking where over the
in the financial services sector having next 15 years, he held various senior
built a successful track record in growing positions including Head of Financial
corporate and financial institutions Institutions & Public Sector Group in
businesses, managing portfolios such as Citibank Malaysia’s Corporate Bank.
Financial Institutions, Public Sector and
other industry groups.

ENCIK JASANI Encik Jasani bin Abdullah holds a Post the Chief Executive Officer of HLISB
BIN ABDULLAH Graduate Diploma in Islamic Banking on 17 July 2017.
& Finance from International Islamic Encik Jasani has more than 30 years’
Chief Executive Officer, HLISB, a University, Malaysia; a Bachelor degree working experience in the banking
wholly-owned subsidiary of HLB in Business Administration from Ohio industry with the last 18 years in
Age 57, Male, Malaysian University, USA; and a Diploma in Public Islamic finance.
Administration from MARA Institute of Prior to HLISB, Encik Jasani spent
Technology. more than 20 years in various senior
Encik Jasani joined HLISB in June 2007 positions in RHB Bank Berhad and
as Assistant General Manager and was RHB Islamic Bank Berhad, his last
promoted to Chief Operating Officer of position being the Vice President,
HLISB in June 2010. He was appointed Head-Product Development Division.

MR HOR KWOK WAI Mr Hor Kwok Wai holds a Bachelor of Prior to HLB, Mr Hor was Head of HONG LEONG BANK BERHAD
Science in Actuarial Mathematics and Global Markets for The Royal Bank ANNUAL REPORT 2017
Managing Director, Global Markets Statistics from Heriot-Watt University, of Scotland Malaysia where he spent
Age 43, Male, Malaysian United Kingdom. seven years working in various
He joined HLB in January 2011 as Chief roles. Prior to that, he had worked
Operating Officer of Global Markets. for several major foreign banks in
He assumed his current position on 1 Malaysia such as JPMorgan Chase
September 2016. Bank, SCB and OCBC Bank in various
roles.

71

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Key Senior Management

MS FOONG PIK YEE Ms Foong Pik Yee is a qualified chartered Prior to joining HLB, Ms Foong was
accountant from the Institute of with SCB where her roles included
Chief Financial Officer Chartered Accountants in Australia and being the Chief Executive Officer and
Age 58, Female, Malaysian New Zealand. She holds a Bachelor of Managing Director of SCB Lebanon, a
Commerce from University of Melbourne subsidiary of SCB Plc, Chief Financial
and a Master of Business Administration Officer of SCB Malaysia as well as
from Monash University, Australia. Chief Operating Officer, Wholesale
Ms Foong joined HLB on 18 January 2013 Bank at SCB Malaysia. She has also
as Chief Financial Officer of HLB. worked in ANZ Bank, HSBC and JP
Morgan in Australia.

She has over 25 years of experience She is a member of the Business
at strategic and tactical levels in the Advisory Council at the Business
banking sector across Asia and Middle School of Monash University Malaysia
East markets, including Malaysia, Hong and a member of the Women In
Kong, Singapore, Australia and the Leadership group, a joint collaboration
Middle East. She brings a distinctive between Talentcorp and ICAEW.
mix of financial management, Ms Foong is a director of HLF Credit
corporate finance and investor relations, (Perak) Bhd, a wholly-owned
strategy and service quality skills in subsidiary of HLB.
delivering strategic growth ambitions
and establishing robust governance
frameworks for financial institutions.

MHORNJALSUORNN WONG Mr Jason Wong Hon Lurn holds Singapore for the past 7 years. He
an Executive Master of Business has more than 28 years of hands-
Chief Executive, Administration from Helsinki School of on banking experience in running
HLB Singapore Branch Economics and Business Administration key business operations in treasury,
Age 54, Male, Malaysian and possesses graduate diplomas in corporate and commercial banking
Techno-Entrepreneurship and Electronic and consumer banking businesses
Business programmes. in Singapore. He has a very good
Mr Jason Wong joined HLB on 1 knowledge of both Malaysia and
November 2016 as Chief Executive, HLB Singapore banking market, having
Singapore Branch. spent his first 12 years working with
Prior to HLB, Mr Jason Wong was the different financial institutions in
former Chief Executive of RHB Bank Malaysia and subsequently 16 years
with RHB Bank Singapore.

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Key Senior Management

CMHROAOANRGON HO WAI Mr Aaron Ho Wai Choong holds a Mr Aaron Ho has more than 30
Bachelor of Engineering (Hons) from years’ experience in the banking
Managing Director, China Operations University of Malaya and a Master of industry. Prior to HLB, he had held
Age 62, Male, Malaysian Business Administration from University various managerial positions such
of Rochester, USA. as Manager of Operations/Credit of
Mr Aaron Ho joined HLB on 7 April American Express (Malaysia), General
2008 as Chief Operating Officer of Manager of MBf Card Services
International Banking of HLB China. (Malaysia), Senior Manager/Head of
He assumed his current position on 1 RHB Bank Card Center (Malaysia), Vice
September 2016. He was appointed President, Operations and Technology
Vice Chairman of Bank of Chengdu Co., of MasterCard International
Ltd (an associate company of HLB) since (Singapore), Vice President/Senior
July 2008. He is also the Vice Chairman Country Operations Officer, Citibank
of Sichuan JinCheng Consumer Finance Malaysia and Citibank Taiwan as
Company (a joint venture company well as General Manager/Director
of HLB), a position he assumed since of Citicorp Software and Technology
February 2010. Services (Shanghai) Ltd under
CitiGroup China.

MR JOSEPH FARRUGIA Mr Joseph Farrugia completed a Prior to HLB, he was the Head of Retail
Marketing Strategy short course at Banking and Wealth Management,
Chief Executive Officer, Hong Leong Melbourne Business School, Australia. ANZ Bank Vietnam & Greater Mekong
Bank (Cambodia) PLC (“HLBCAM”), a Mr Joseph Farrugia joined HLB on 30 Region, which incorporates Cambodia
wholly-owned subsidiary of HLB July 2012 as Chief Executive Officer of and Laos.
Age 54, Male, Australian HLBCAM.

SMIRA RSAAYYMGOUANND Mr Raymond Sia Say Guan holds a Vietnam and Malaysia in various roles
Bachelor of Business from Monash covering Corporate & Institutional
General Director, Hong Leong Bank University, Melbourne, Australia. Banking, Commercial & SME Banking
Vietnam Limited (“HLBVN”), a Mr Raymond Sia joined HLBVN on 2 and General Director/Chief Executive
wholly-owned subsidiary of HLB November 2015 as Chief Operating Officer for Hanoi Branch. Prior to SCB,
Age 45, Male, Malaysian Officer. He is presently the General Mr Raymond Sia was with Usaha
Director of HLBVN, a position he assumed Tegas Sdn Bhd where he spent 4 years
since 16 December 2015. as a Corporate Treasury Manager. He HONG LEONG BANK BERHAD
Prior to HLBVN, he was with SCB where started his banking career in Public ANNUAL REPORT 2017
he spent 8 years, 4 years each in Bank Berhad where he spent 11 years
in Corporate Banking.

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Key Senior Management

MS MARGARET LEUNG Ms Margaret Leung is a Chartered Executive for the branch, a position
Accountant of The Chartered Professional she assumed since 1 June 2016.
Chief Executive, HLB Hong Kong Accountants of Ontario, Canada and also Ms Margaret Leung has over 20
Branch a fellow member of the Hong Kong years of Corporate and Institutional
Age 56, Female, Hong Kong, SAR Institute of Certified Public Accountants. banking experience across Asia. Prior
She graduated from the University to joining HLB, Ms Margaret Leung
of McGill, Canada with Bachelor of has worked for several international
Commerce degree. banking corporations including SCB,
Ms Margaret Leung joined HLB as JPMorgan Chase and ANZ Bank.
General Manager of HLB Hong Kong on
18 April 2016 and is presently the Chief

Notes:
1. Family Relationship with Director and/or Major Shareholder
None of the Key Senior Management has any family relationship with any Director and/or major shareholder of HLB.
2. Conflict of Interest
None of the Key Senior Management has any conflict of interest with HLB.
3. Conviction of Offences
None of the Key Senior Management has been convicted of any offences (excluding traffic offences) in the past 5 years and there were no

public sanctions or penalties imposed by the relevant regulatory bodies during the financial year ended 30 June 2017.

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

74

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Board Audit Committee Report

CONSTITUTION MEETINGS

The Board Audit Committee of Hong Leong Bank Berhad (“HLB” The BAC meets at least eight (8) times a year and additional
or “the Bank”) has been established since 18 August 1994 and meetings may be called at any time as and when necessary.
was re-designated as the Board Audit & Risk Management All meetings to review the quarterly reports and annual
Committee (“BARMC”) on 10 January 2002. Subsequently, on financial statements are held prior to such quarterly reports
2 October 2006, the Board of Directors decided to reconstitute and annual financial statements being presented to the Board
the Board Audit Committee (“BAC”) separately from the Board for approval.
Risk Management Committee (“BRMC”). The Group Managing Director/Chief Executive Officer, Chief
Financial Officer, Chief Risk Officer, Chief Internal Auditor, Chief
COMPOSITION Compliance Officer, other senior management and external
Ms Lim Lean See auditors may be invited to attend the BAC meetings whenever
(Chairman, Independent Non-Executive Director) required. At least twice a year, the BAC will have separate
YBhg Dato’ Nicholas John Lough @ Sharif Lough bin sessions with the external auditors without the presence of
Abdullah Executive Directors and management.
(Independent Non-Executive Director) The BAC will also engage privately with the Chief Internal
YBhg Datuk Wira Azhar bin Abdul Hamid Auditor on a regular basis to provide the opportunity for the
(Independent Non-Executive Director) Chief Internal Auditor to discuss issues faced by the internal
audit function.
SECRETARY Issues raised, discussions, deliberations, decisions and
The Secretary(ies) to the BAC is/are the Company Secretary(ies) conclusions made at the BAC meetings are recorded in the
of the Bank. minutes of the BAC meetings. Where the BAC is considering a
matter in which a BAC member has an interest, such member
shall abstain from reviewing and deliberating on the subject
matter.

TERMS OF REFERENCE Two (2) members of the BAC, who shall be independent and
non-executive, shall constitute a quorum.

The terms of reference of the BAC are published on the Bank’s After each meeting, the BAC shall report and update the
website (‘www.hlb.com.my’) Board on significant issues and concerns discussed during the
AUTHORITY BAC meetings and where appropriate, make the necessary
recommendations to the Board.

The BAC is authorised by the Board to review any activity of ACTIVITIES
the Group within its Terms of Reference. It is authorised to The BAC carried out its duties in accordance with its Terms of
seek any information it requires from any Director or member Reference.
of management and all employees are directed to co-operate During the financial year ended 30 June 2017, eleven (11) BAC
with any request made by the BAC. meetings were held and the attendance of the BAC members
The BAC is authorised by the Board to obtain independent was as follows:
legal or other professional advice if it considers necessary.

Members Attendance HONG LEONG BANK BERHAD
Ms Lim Lean See 11/11 ANNUAL REPORT 2017
YBhg Dato’ Nicholas John Lough
@ Sharif Lough bin Abdullah 11/11
YBhg Datuk Wira Azhar bin Abdul Hamid 10/11

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Board Audit Committee Report

HOW THE BAC DISCHARGES ITS RESPONSIBILITIES year ended 30 June 2017 amounted to RM 4,064,486 of which
Financial Reporting RM770,350 was payable in respect of non-audit services. Non-
The BAC reviewed the quarterly reports and financial statements audit services accounted for 34% of the total fees payable. The
of the Company and of the Group focusing particularly on: BAC assessed the objectivity and independence of the external
auditors prior to the appointment of the external auditors for
ad-hoc non-audit services.

(i) any changes in accounting policies and practices; The BAC also evaluated the performance of PwC in the
(ii) significant adjustments arising from the audit; following areas in relation to its re-appointment as auditors
(iii) the going concern assumptions; and for the financial year ended 30 June 2017 and considered PwC
(iv) compliance with accounting standards and other legal to be independent.
(a) level of knowledge, capabilities, experience and quality of
requirements.
In preparation for the MFRS 9 implementation, BAC also previous work;
reviewed with Management the progress update reports and (b) level of engagement with BAC;
replies to the surveys conducted by Bank Negara Malaysia.

The legal and regulatory environment was monitored and (c) ability to provide constructive observations, implications
consideration given to changes in law, regulation, accounting and recommendations in areas which require
policies and practices including the new Auditor Reporting improvements;
Standards – ISA 701 on key audit matters and the additional
disclosure requirements under the amended Main Market (d) adequacy in audit coverage, effectiveness in planning and
Listing Requirements of Bursa Malaysia Securities Berhad. conduct of audit;

External Audit (e) ability to perform the audit work within the agreed
The external auditors of the Group for the financial year ended timeframe;
30 June 2017 is Messrs PricewaterhouseCoopers (“PwC”). The
BAC discussed and reviewed with the external auditors, before (f) non-audit services rendered by PwC does not impede
the audit commences for the financial year: independence;
(i) the audit plan and timetable for the financial audit of
(g) ability to demonstrate unbiased stance when interpreting
the Group including the focus areas and approach to the the standards/policies adopted by HLB; and
current financial year’s audit and any significant issues
that can be foreseen, either as a result of the past year’s (h) risk of familiarity in respect of PwC’s appointment as
experience or due to new accounting standards or other external auditors.
changes in statutory or listing requirements; and
(ii) the methodology and timetable of the Statement on PwC, in accordance with professional ethical standards, has
Internal Control and Risk Management. provided the BAC with confirmation of their independence for
the duration of the financial year ended 30 June 2017 and the
measures used to control the quality of their work.

HONG LEONG BANK BERHAD The BAC reviewed the report and audit findings of the external The BAC has therefore recommended to the Board that PwC
ANNUAL REPORT 2017 auditors and considered management’s responses to the be re-appointed as the auditors. Resolution concerning the re-
external auditors’ audit findings and investigations. The BAC appointment of PwC will be proposed to shareholders at the
also had two (2) separate sessions with the external auditors 2017 Annual General Meeting.
without the presence of Executive Directors and management Related Parties Transactions
whereby matters discussed include key reservations noted by The BAC conducted quarterly review of the recurrent related
the external auditors during the course of their audit; whilst party transactions (“RRPT”) entered into by the Group to
the BAC Chairman maintained regular contact with the audit ensure that such transactions are undertaken on commercial
partner throughout the year. terms and on terms not more favourable to the related parties
The BAC reviewed the external auditors’ fees and their scope than those generally available to and/or from the public.
of services. The approved and incurred fees for the financial

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Board Audit Committee Report

HOW THE BAC DISCHARGES ITS RESPONSIBILITIES The BAC has reviewed the audit findings and recommendations
(CONTINUED) of the GIAD, including any findings of internal investigations,
The Group had put in place the procedures and processes to and has ensured that management has taken the necessary
monitor, track and identify the RRPT as well as to ensure that corrective actions in a timely manner to address control
the RRPT are conducted on commercial terms consistent with weaknesses, non-compliance with laws, regulatory
the Group’s usual business practices and policies and on terms requirements and policies. The BAC also reviewed at every
not more favourable to the related parties than those generally BAC meeting the status update of management’s corrective
available to and/or from the public, where applicable. action plans for the resolution of internal audit’s findings and
The BAC reviewed the said procedures and processes on an recommendations. Recommendations were made by BAC
annual basis and as and when required, to ensure that the said to ensure that the root causes raised by GIAD in their audit
procedures are adequate to monitor, track and identify RRPT in reports were effectively resolved and that any outstanding
a timely and orderly manner, and are sufficient to ensure that audit findings be tracked for timely resolution.
the RRPT will be carried out on commercial terms consistent
with the Group’s usual business practices and policies and on GROUP INTERNAL AUDIT DIVISION (“GIAD”)
terms not more favourable to the related parties than those The GIAD of HLB assists the BAC in the discharge of its duties
generally available to and/or from the public. and responsibilities. GIAD employs a risk-based assessment
Credit transactions and exposure with connected parties approach in auditing the Bank’s Group business and operational
The Group is guided by the Guidelines on Credit Transactions activities. The high risk activities are given due attention and
and Exposures with Connected Parties to ensure that credit audited on a more regular basis while the rest are prioritised
transactions with connected parties are carried out on an arm’s to potential risk exposure and impact.
length basis on terms and conditions not more favourable During the financial year ended 30 June 2017, GIAD carried
than those entered into with other counterparties with similar out its duties covering audit on operations, information
circumstances and creditworthiness. technology system, credit, head office, branches, business
The BAC had conducted quarterly review of credit transactions centre, mortgage sales centre, loan centre, investigation and
of the Group with connected parties to ensure compliance with other assignments as directed. These audits are performed in
the said Guidelines. line with the BNM Guidelines on Internal Audit Function.
Internal Audit GIAD participated in an advisory or consulting role in a number
The BAC reviewed the adequacy of internal audit scope, of products and projects reviews. Besides performing internal
internal audit plan and resources of the various internal audit audit functions to the Bank Group, it also through a service
functions within Group Internal Audit Division (“GIAD”). agreement, provides internal audit services to Hong Leong
During the financial year, BAC noted that GIAD had effectively Capital Berhad Group, Hong Leong Assurance Berhad, Hong
carried out internal audits to all business entities of the Group, Leong MSIG Takaful Berhad and HL Fund Management Sdn
and reviewed the GIAD’s reports on the audits performed on Bhd. The cost incurred for the Internal Audit function of the
the Group as set out in the Internal Audit Function section Bank in respect of the financial year ended 30 June 2017 was
below. RM12.1 million.
This BAC Report is made in accordance with the resolution of
the Board of Directors.

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

77

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Board Risk Management Committee Report

CONSTITUTION 4. To review management’s overall framework on the
The Board Risk Management Committee (“BRMC”) is Internal Capital Adequacy Assessment Process (“ICAAP”),
established to support the Board in discharging the following annual risk appetite and Capital Management Plan for
responsibilities: Board’s approval.
1. Oversee management’s implementation of the Company’s
5. To review management’s development and effective
governance framework and internal control framework/ implementation of the ICAAP.
policies.
2. Oversee that management’s meets the expectations on 6. To review management’s stress testing governance
risk management as set out in the policy document on including the evaluation on the capital stress test
Risk Governance. scenarios, parameters, key assumptions and results.
3. Oversee management’s implementation of compliance
risk management. 7. To review management’s periodic reports on risk appetite,
4. Promote the adoption of the sound corporate governance risk exposure, risk portfolio composition, stress testing
principles set out in the Policy Document on Corporate and risk management activities.
Governance within the Bank and its subsidiaries (“the
Group”). 8. To review the adequacy and effectiveness of
management’s internal controls and risk management
Composition process.

9. To review the adequacy of risk management policies
and frameworks in identifying, measuring, monitoring
and controlling risk and the extent to which these are
operating effectively.

The BRMC should comprise of only non-executive directors 10. To review risk management function’s infrastructure,
with at least three (3) members. The BRMC should be chaired resources and systems and that the staff responsible for
by an independent director. implementing risk management systems perform those
duties independently of the Group’s risk taking activities.

SECRETARY 11. To receive reports from pertinent management
The Secretariat to the BRMC is the Group Risk Management committees.
(“GRM”) of the Bank.
12. To review management’s implementation of risk
TERMS OF REFERENCE management as set out in BNM’s policy documents on Risk
Governance, Approaches to Regulating and Supervising
Financial Group and Corporate Governance.

Risk Management 13. To review and advise on the appointment, remuneration,
removal and redeployment of the Chief Risk Officer.
1. To review management’s activities in managing principal
risks such as credit, market, liquidity, operational, 14. To engage privately with Chief Risk Officer on a regular
compliance and IT risks and the risk management process. basis (and in any case at least twice annually) to provide
opportunity for the Chief Risk Officer to discuss issues
2. To review management’s reporting to the Board on faced by the risk management function.
measures taken to:
15. To review management’s implementation of the
HONG LEONG BANK BERHAD a) Identify and examine principal risks faced by the remuneration system on whether incentives provided by
ANNUAL REPORT 2017 Company. the remuneration system take into consideration risks,
b) Implement appropriate systems and internal controls capital, liquidity and the likelihood and timing of earnings,
to manage these risks. without prejudice to the tasks of the Board Remuneration
Committee.
3. To review management’s major risk management
strategies, policies and risk tolerance for Board’s approval. 16. Other risk management functions as may be agreed by
78 the BRMC and the Board.

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Board Risk Management Committee Report

Compliance 3. Other compliance functions as may be agreed to by the
1. To assist the Board in the oversight of the management of BRMC and the Board.

compliance risk by: Group Governance
a) reviewing compliance policies and overseeing 1. Noted that:

management’s implementation of the same;

b) reviewing the establishment of the compliance (a) The Bank, as a company with licensed subsidiary HONG LEONG BANK BERHAD
function and the position of the Chief Compliance companies has overall responsibility for ensuring the ANNUAL REPORT 2017
Officer/Head of Compliance (“CCO”) to ensure the establishment and operation of a clear governance
compliance function and CCO have appropriate structure within its subsidiaries (“Bank Group”).
standing, authority and independence;
(b) The Board’s responsibility is to promote the adoption
c) discussing and deliberating compliance issues of sound corporate governance principles throughout
regularly and ensuring such issues are resolved the Bank Group.
effectively and expeditiously;
(c) The Bank’s risk and compliance functions may propose
d) reviewing annually the effectiveness of the Company’s objectives, strategies, plans, governance framework
overall management of compliance risk, having and policies for adoption and implementation within
regard to the assessments of senior management the Bank Group.
and internal audit and interactions with the CCO;
(d) The respective subsidiaries’ board and senior
e) updating the Board on all compliance matters, management must validate that the objectives,
including providing its views on (a) to (d) above. strategies, plans, governance framework and
policies set at the Bank level are fully consistent
2. In relation to the role of the CCO, support the Board in with the regulatory obligations and the prudential
meeting the expectations on compliance management as management of the subsidiary and ensure that
set out in BNM’s policy document on Compliance by: entity specific risks are adequately addressed in the
a) reviewing and advising on the appointment, implementation of Bank Group policies.
remuneration, removal and redeployment of the CCO;
b) ensuring that CCO has sufficient stature to allow AUTHORITY
for effective engagement with the CEO and other The BRMC is authorised by the Board to review any activities
members of senior management; of the Group within its terms of reference. It is authorised to
c) engaging privately with the CCO on a regular basis seek any information it requires from any Director or member
(and in any case at least twice annually) to provide of management and all employees are directed to co-operate
the opportunity for the CCO to discuss issues faced by with any request made by the BRMC.
the compliance function; The BRMC is authorised by the Board to obtain independent
d) ensuring that the CCO is supported with sufficient legal or other professional advice if it considers necessary.
resources to perform his duties effectively;
e) where CCO also carries out responsibilities in respect MEETINGS
of other control functions, the BRMC shall be satisfied The BRMC meets at least eight (8) times a year and additional
that a sound overall control environment will not be meetings may be called at any time as and when necessary.
compromised by the combination of responsibilities The group managing director/chief executive officer, chief
performed by the CCO. financial officer, chief risk officer, chief internal audit, chief
compliance officer, other senior management and external
auditors may be invited to attend the BRMC meetings, 79
whenever required.

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Board Risk Management Committee Report

Issues raised, discussions, deliberations, decisions and For the financial year ended 30 June 2017, seven (7) BRMC
conclusions made at the BRMC meetings are recorded in the meetings and two (2) special BRMC meetings were held and
minutes of the BRMC meetings. Where the BRMC is considering the attendance of the BRMC members is recorded as follows:
a matter in which a BRMC member has an interest, such
member shall abstain from reviewing and deliberating on the Member Attendance
subject matter. YBhg Dato’ Nicholas John Lough 9/9
Two (2) members of the BRMC, who shall be independent and @ Sharif Lough bin Abdullah
non-executive, shall constitute a quorum. Ms Lim Lean See 9/9
After each BRMC meeting, the BRMC shall report and update Ms Chok Kwee Bee 9/9
the Board on significant issues and concerns discussed
during the BRMC meetings and where appropriate, make the The BRMC also reviewed major risk management strategies,
necessary recommendations to the Board. policies and risk tolerance levels for Board’s approval. Where
the significant risk policies and frameworks relate to the Group’s
Revision of the Terms of Reference majority owned subsidiaries, the BRMC ensures alignment
Any revision or amendment to the Terms of Reference, as to the Group’s risk management appetite, frameworks and
proposed by the BRMC, shall first be presented to the Board policies.
for its approval. Upon the Board’s approval, the said revision or
amendment shall form part of this Terms of Reference which In addition, the BRMC has reviewed periodic risk management
shall be considered duly revised or amended. reports, i.e. Risk Management Dashboards covering among
others Credit Risk, Market Risk, Liquidity Risk, Operational
Risk, and IT Risk. The BRMC also reviewed periodic group
compliance reports, i.e. Regulatory Compliance Highlights and
New Regulations Update.

ACTIVITIES Bank-wide compliance matters are also deliberated by the
The BRMC carried out its duties in accordance with its Terms of BRMC, and this includes the Bank’s subsidiaries and overseas
Reference supported by the GRM and Group Compliance (“GC”) branches. The BRMC continuously provides oversight of the
functions. Group’s compliance activities to ensure that the Group is in
compliance to all established policies, guidelines and external
regulations.

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

80

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Corporate Governance,
Risk Management & Internal Control

“Corporate Governance is the process and structure used to direct
and manage the business and affairs of the Company towards
enhancing business prosperity and corporate accountability with
the ultimate objective of realising long term shareholder value,
whilst taking into account the interest of other stakeholders.”

~ Finance Committee on Corporate Governance

The Board of Directors (“Board”) has reviewed the manner in which the Malaysian
Code on Corporate Governance 2012 (the “Code”) is applied in the Group as set out
below. The Board is pleased to report compliance of the Group with the principles and
recommendations as set out in the Code except where otherwise stated.
The Board took cognisance of the new Malaysian Code on Corporate Governance
published in April 2017 (“MCCG 2017”) which is applicable to annual reports published
from 2018 onwards.
The Board also reviewed the manner in which the Bank Negara Malaysia’s (“BNM”)
policy document on Corporate Governance (“BNM CG”) is applied in the Group, where
applicable, as set out below.

A. ROLES AND RESPONSIBILITIES OF THE BOARD HONG LEONG BANK BERHAD
The Board assumes responsibility for effective stewardship and control of the ANNUAL REPORT 2017

Bank and has established terms of reference (“TOR”) to assist in the discharge 81
of this responsibility.
In discharging its responsibilities, the Board established functions which are
reserved for the Board and those which are delegated to management. The key
roles and responsibilities of the Board are set out in the Board Charter, which
is reviewed periodically by the Board and published on the Bank’s website at
‘www.hlb.com.my’. The last review of the Board Charter was carried out in
September 2017. The key roles and responsibilities of the Board broadly cover
formulation of corporate policies and strategies; overseeing and evaluating
the conduct of the Group’s businesses; identifying principal risks and ensuring
the implementation of appropriate systems to manage those risks; and
reviewing and approving key matters such as financial results, investments and
divestments, acquisitions and disposals, and major capital expenditure and such
other responsibilities that are required of them by BNM as specified in guidelines
and circulars issued by BNM from time to time.

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Corporate Governance,
Risk Management & Internal Control

A. ROLES AND RESPONSIBILITIES OF THE BOARD The Group continues to operate in a sustainable manner
(CONTINUED) and seeks to contribute positively to the well-being of
stakeholders. The Group takes a progressive approach in
The day-to-day business of the Bank is managed by the integrating sustainability into its businesses as set out in
Group Managing Director/Chief Executive Officer (“GMD/ the Sustainability Report which forms part of the Annual
CEO”) who is assisted by the management team. The Report.
GMD/CEO and his management team are accountable to
the Board for the performance of the Bank. In addition, The Board observes the Code of Ethics for Company
the Board has established Board Committees which Directors established by the Companies Commission of
operate within clearly defined TOR primarily to support the Malaysia (“CCM”) which is available at CCM’s website at
Board in the execution of its duties and responsibilities. ‘www.ssm.com.my’. In addition, the Bank also has a Code
of Conduct and Ethics that sets out sound principles and
To discharge its oversight roles and responsibilities more standards of good practice which are to be observed by
effectively, the Board has delegated the independent the employees. A Whistleblowing Policy has also been
oversight over, inter alia, internal and external audit established by the Bank and it provides a structured
functions and internal controls to the Board Audit channel for all employees of the Bank and any other
Committee (“BAC”); and risk management to the Board persons providing services to, or having a business
Risk Management Committee (“BRMC”). The Nomination relationship with the Bank, to report any concerns about
Committee (“NC”) is delegated the authority to, inter alia, any improper conducts, wrongful acts or malpractice
assess and review Board, Board Committees and GMD/ committed within the Bank.
CEO appointments and re-appointments and oversee
management succession planning. Although the Board has B. BOARD COMPOSITION
granted such authority to Board Committees, the ultimate The Board comprises eight (8) directors, seven (7) of
responsibility and the final decision rest with the Board.
The chairmen of Board Committees report to the Board on whom are non-executive. Of the non-executive directors,
matters dealt with at their respective Board Committee five (5) are independent. The profiles of the members of
meetings. Minutes of Board Committee meetings are also the Board are provided in the Annual Report.
tabled at Board meetings.

There is a clear division of responsibilities between the The Bank is guided by BNM CG and the Main Market Listing
Chairman of the Board and the GMD/CEO. This division of Requirements (“MMLR”) of Bursa Malaysia Securities
Berhad (“Bursa”) in determining its board composition.
responsibilities between the Chairman and the GMD/CEO The Board shall determine the appropriate size of the
ensures an appropriate balance of roles, responsibilities
and accountability. Board to enable an efficient and effective conduct of
Board deliberation. The Board shall have a balance of
skills and experience commensurate with the complexity,
The Chairman leads the Board and ensures its smooth and size, scope and operations of the Bank. Board members
effective functioning.
should have the ability to commit time and effort to carry
out their duties and responsibilities effectively.
The GMD/CEO is responsible for formulating the vision
and recommending policies and the strategic direction
of the Bank for approval by the Board, implementing The Board has in place a Board Diversity Policy. The Board
the decisions of the Board, initiating business ideas and recognises the merits of Board diversity in adding value to
collective skills, perspectives and strengths to the Board.
corporate strategies to create competitive edge and The Board will consider appropriate targets in Board
enhancing shareholder wealth, providing management
of the day-to-day operations of the Bank and tracking diversity including gender balance on the Board and will
take the necessary measures to meet these targets from
compliance and business progress. time to time as appropriate. The Board will work towards

HONG LEONG BANK BERHAD Independent Non-Executive Directors (“INEDs”) are increasing women participation on the Board in line with
ANNUAL REPORT 2017 the MCCG 2017.
responsible for providing insights, unbiased and
independent views, advice and judgment to the Board
and bring impartiality to Board deliberations and decision- Based on the review of the Board composition in July
making. They also ensure effective checks and balances 2017, the Board is of the view that the current size and
composition of the Board are appropriate and effective
on the Board. There are no relationships or circumstances for the control and direction of the Group’s strategy and
that could interfere with or are likely to affect the exercise
82 of INEDs’ independent judgment or their ability to act in business. The composition of the Board also fairly reflects
the best interest of the Bank and its shareholders. the investment of shareholders in the Bank.

CORPORATE HONG LEONG BANK BERHAD
ANNUAL REPORT 2017
Corporate Governance,
Risk Management & Internal Control

C. BOARD COMMITTEES
Board Committees have been established by the Board to assist in the discharge of its duties.

(a) BAC
The composition of the BAC and a summary of its activities in the discharge of its functions and duties for the financial

year and explanation on how the BAC had met its responsibilities are set out in the BAC Report in this Annual Report.
The BAC’s functions and responsibilities are set out in the TOR which is published on the Bank’s website

(‘www.hlb.com.my’).
(b) BRMC
The composition of the BRMC and a summary of its activities in the discharge of its functions and duties for the financial

year and explanation on how the BRMC had met its responsibilities are set out in the BRMC Report of this Annual Report.
The BRMC’s functions and responsibilities are set out in the TOR which is published on the Bank’s website

(‘www.hlb.com.my’).
(c) NC
The NC was established on 17 June 2003. The composition of the NC is as follows:

Ms Chok Kwee Bee
(Chairman, Independent Non-Executive Director)
(Appointed as Chairman of the NC with effect from 22 November 2016)
Mr Tan Kong Khoon
(Executive Director)
YBhg Dato’ Nicholas John Lough @ Sharif Lough bin Abdullah
(Independent Non-Executive Director)
Ms Lim Lean See
(Independent Non-Executive Director)
(Resigned from the NC with effect from 22 November 2016)
YBhg Tan Sri Quek Leng Chan
(Non-Independent Non-Executive Director)
(Resigned from the NC with effect from 22 November 2016)
The NC’s functions and responsibilities are set out in the TOR which is published on the Bank’s website
(‘www.hlb.com.my’).
The Bank has in place Fit and Proper (“F&P”) Policy as a guide for the following process and procedure for assessment of
(i) new appointment, re-appointment, re-election and retention of directors, (ii) the appointment of Board Committee
members, and (iii) the appointment and re-appointment of GMD/CEO, and the criteria used for such assessments. Upon
the approval of the Board, an application on the prescribed forms will be submitted to BNM for approval in respect of
new appointments and re-appointments.

83

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Corporate Governance,
Risk Management & Internal Control

C. BOARD COMMITTEES (CONTINUED)
(c) NC (continued)
(i) New Appointments
The nomination, assessment and approval process for new appointments is as follows:

Identification Meeting with • Assessment against Deliberation
of candidates candidates Assessment Criteria and BNM by the Board
Guidelines and decision
thereof
• F&P Declaration by candidates
• Relevant Credit Bureau Checks
• CTOS (Bankruptcy) search.
• Recommendation by the NC

In assessing the candidates for Board appointments, the NC will take into account, inter alia, the strategic and
effective fit of the candidates for the Board, the overall desired composition and the mix of expertise and
experience of the Board as a whole and having regard to the candidates’ attributes, qualifications, management,
leadership, business experience and their F&P Declarations in respect of their probity, competence, qualifications,
skills, experience and financial integrity in line with the standards required under the BNM Guidelines. The Bank
has taken steps to build and maintain a pool of potential Board candidates from internal and external introductions,
recommendations and director databases in its search for suitable Board candidates.

In the case of GMD/CEO, the NC will take into account the candidate’s knowledge and experience in the industry,
market and segment. The NC will also consider the candidate’s F&P Declaration in line with the standards required
under the relevant BNM Guidelines.

(ii) Re-Appointments
The assessment and approval process for re-appointments is as follows:

CTOS • Assessment against Assessment Criteria and BNM Deliberation
(Bankruptcy) Guidelines by the Board
search and decision
• F&P Declaration thereof
• Recommendation by the NC

HONG LEONG BANK BERHAD For re-appointments, the Directors/GMD/CEOs will be evaluated on their performance in the discharge of duties and
ANNUAL REPORT 2017 responsibilities effectively, including, inter alia, contribution to Board deliberations, time commitment as well as the
Annual Board Assessment (as defined below) results, contributions during the term of office, attendance at Board
meetings, F&P Declarations and for independent directors, their continued independence.

(iii) Board Committee Appointments
The nomination, assessment and approval process for appointments to Board Committees (“Board Committee

Appointments”) is as follows:

84 Identification • Assessment against Assessment Criteria and BNM Deliberation
of Directors for Guidelines by the Board
Board Committees and decision
membership • Recommendation by the NC thereof

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C. BOARD COMMITTEES (CONTINUED)
(c) NC (continued)
(iii) Board Committee Appointments (continued)
The assessment for Board Committee Appointments will be based on the Directors’ potential contributions and
value-add to the Board Committees with regard to Board Committees’ roles and responsibilities.
In addition, a formal evaluation process has been put in place to assess the effectiveness of the Board as a whole, the
Board Committees and the contribution and performance of each individual director on an annual basis (“Annual Board
Assessment”) in conjunction with the annual F&P assessment of Directors and GMD/CEO per BNM Guidelines. The NC will
deliberate on the results of the Annual Board Assessment and submit its recommendation to the Board for consideration
and approval. For newly appointed director/GMD/CEO, the Annual Board Assessment will be conducted at the next
annual assessment exercise following the completion of one year of service.
Assessment criteria for Board as a whole include, inter alia, the effectiveness of the Board composition in terms of size and
structure vis-à-vis the complexity, size, scope and operations of the Bank; the core skills, competencies and experience
of the Directors; and the Board’s integrity, competency, responsibilities and performance. The assessment criteria for
Board Committees include the effectiveness of the respective Board Committees’ composition in terms of mix of skills,
knowledge and experience to carry out their respective roles and responsibilities per the Board Committees’ TOR and
the contribution of Board Committees members. Each individual director is assessed on, inter alia, the effectiveness of
his/her competency, expertise and contributions. The skills, experience, soundness of judgment as well as contributions
towards the development of business strategies and direction of the Bank and analytical skills to the decision-making
process are also taken into consideration.
For management succession planning, it has been embedded in the Group’s process over the years to continuously
identify, groom and develop key talents from within the Group. The Group also has a talent development programme to
identify, retain and develop young high potential talents.
The NC meets at least once in each financial year and additional meetings may be called at any time as and when
necessary.
During the financial year ended 30 June 2017 (“FYE 2017”), four (4) NC meetings were held and the attendance of the NC
members was as follows:

Member Attendance
Ms Chok Kwee Bee 4/4
Mr Tan Kong Khoon 4/4
YBhg Dato’ Nicholas John Lough @ Sharif Lough bin Abdullah 4/4
Ms Lim Lean See(1) 2/2
YBhg Tan Sri Quek Leng Chan(1) 2/2

Note:
(1) Resigned from the NC with effect from 22 November 2016.

The NC carried out the following activities in the discharge of its duties in accordance with its TOR during the FYE 2017: HONG LEONG BANK BERHAD
ANNUAL REPORT 2017
• Reviewed and recommended to the Board for approval the rationalisation on Board and Board Committees
composition in line with BNM CG and MMLR;

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HONG LEONG BANK BERHAD C. BOARD COMMITTEES (CONTINUED)
ANNUAL REPORT 2017 (c) NC (continued)
• Reviewed the re-appointments of Directors in accordance with the F&P Policy, BNM CG and MMLR and recommended
86 to the Board for consideration and approval;
• Carried out the Annual Board Assessment and was satisfied that the Board as a whole, Board Committees and
individual directors have continued to effectively discharged their duties and responsibilities in accordance with
their respective TORs, and that the current Board composition in terms of Board balance, size and mix of skills is
appropriate and effective for the discharge of its functions. The NC took cognisance of the merits of Board diversity
including women participation on the Board, in adding value to the Bank. The NC will work towards increasing
women participation on the Board in line with the MCCG 2017;
• Considered and assessed the position of independent directors of the Bank and was satisfied that the independent
directors met the regulatory requirements for independent directors;
• Reviewed the F&P Declarations by Directors in line with the BNM Policy Document on F&P Criteria and was satisfied
that the Directors met the requirements as set out in BNM Policy Document on F&P Criteria;
• Reviewed and recommended to the Board for adoption the revisions to the F&P Policy on new appointments and
re-appointments of directors and GMD/CEO; Board Committees appointments and Annual Board Assessment;
• Refined the assessment process for new Board appointments in the assessment process to include a credit bureau
check to improve the effectiveness of the evaluation of Board candidates on financial probity;
• Reviewed and recommended to the Board for approval to include an additional function of the NC to review
annually the term of office and performance of the BAC and each of its members to determine whether the BAC
and its members have carried out their duties in accordance with the TOR of the BAC in compliance with the MMLR;
• Reviewed the term of office and performance of the BAC and each of its members in accordance with the TOR of
BAC and was of the view that the BAC and each of its members had carried out their duties in accordance with the
BAC TOR for the periods under review.
(d) Remuneration Committee (“RC”)
The RC was established on 17 June 2003. The composition of the RC is as follows:
YBhg Dato’ Nicholas John Lough @ Sharif Lough bin Abdullah
(Chairman, Independent Non-Executive Director)
YBhg Tan Sri Quek Leng Chan
(Non-Independent Non-Executive Director)
YBhg Datuk Dr Md Hamzah bin Md Kassim
(Independent Non-Executive Director)
(Appointed as RC member with effect from 22 November 2016)
Mr Tan Kong Khoon
(Non-Independent Executive Director)
(Resigned from the RC with effect from 22 November 2016)
The RC’s functions and responsibilities are set out in the TOR which is published on the Bank’s website
(‘www.hlb.com.my’).

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C. BOARD COMMITTEES (CONTINUED)
(d) Remuneration Committee (“RC”) (continued)
During the FYE 2017, one (1) RC meeting was held and the attendance of the RC members was as follows:

Member Attendance
YBhg Dato’ Nicholas John Lough @ Sharif Lough bin Abdullah 1/1
YBhg Tan Sri Quek Leng Chan 1/1
Mr Tan Kong Khoon(1) 1/1

Note:
(1) Resigned from the RC with effect from 22 November 2016.

YBhg Datuk Dr Md Hamzah bin Md Kassim was appointed to the RC after the RC meeting.

The Group’s remuneration scheme for executive directors is linked to performance, service seniority, experience and
scope of responsibility and is periodically benchmarked to market/industry surveys conducted by human resource
consultants. Performance is measured against profits and targets set in the Group’s annual plan and budget.

The level of remuneration of non-executive directors reflects the scope of responsibilities and commitment undertaken
by them.

The RC, in assessing and reviewing the remuneration packages of executive directors, ensures that a strong link is
maintained between their rewards and individual performance, based on the provisions in the Group’s Human Resources
Manual, which are reviewed from time to time to align with market/industry practices. The fees of directors are
recommended and endorsed by the Board for approval by the shareholders of the Bank at its Annual General Meeting
(“AGM”).

The aggregate remuneration of directors (including the director who had resigned during the FYE 2017, and remuneration
earned as director of a subsidiary) for the FYE 2017 is as follows:

Fees Salaries & Other Total
(RM) Emoluments (RM)
(RM)

Company Group Company Group Company Group

Executive Director – – 4,807,696* 4,807,696 4,807,696 4,807,696
Non-Executive Directors 965,000 1,103,055 – – 965,000 1,103,055

* For the period of directorship from 1 July 2016 to 31 December 2016

The number of directors whose remuneration (including the director who had resigned during the FYE 2017, and
remuneration earned as director of a subsidiary) falls into the following bands is as follows:

Executive Non-Executive HONG LEONG BANK BERHAD
ANNUAL REPORT 2017
Range of Remuneration (RM) Company Group Company Group

100,001 – 150,000 –– 1–
150,001 – 200,000
200,001 – 250,000 –– 22
250,001 – 300,000 –– 11
4,800,001 – 4,850,000 –– 12

11 –– 87

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C. BOARD COMMITTEES (CONTINUED) Remuneration Process
(d) Remuneration Committee (“RC”) (continued) The remuneration of senior management and
Remuneration
The Bank’s rewards strategy is in alignment with material risk takers are presented and approved
the Hong Leong Group’s total compensation by the Board annually. The Bank is enhancing the
philosophy which supports and promotes a high process of annual review of management scorecards
performing culture to deliver the Bank’s Vision to be to include formal review by Risk and Compliance
a highly digital & innovative ASEAN financial services to ensure adequate weightages are placed on risk
company. The rewards strategy focuses on providing and compliance related KPIs. Risk control objectives
a competitive remuneration and benefits package, as that are not met and any non-compliance will have
well as ample career progression opportunities for significant consequence to remuneration decisions.
employees. Role of BRMC in remuneration matters
The Bank’s rewards framework focuses on a balanced BRMC is tasked to review management’s
and right pay mix to achieve the desired long term implementation of the remuneration system on
business performance. The framework includes base whether incentives provided by the remuneration
pay, fixed cash allowances, performance-based system take into consideration risks, capital, liquidity
variable pay, sales incentive, long term incentives, and the likelihood and timing of earnings, without
benefits and other employee programs. prejudice to the tasks of the Board RC.
The rewards framework ensures that employees are Deferred Compensation and Clawbacks
paid competitively against the industry and talent The deferred compensation is applicable to some of
market the Bank is operating in; delivered via a the incentive schemes introduced in the Bank. These
combination of cash and non-cash elements such as are mostly for sales-type roles with built-in clawback
shares or share-linked instruments. mechanism. The clawback mechanism is introduced
The Bank also adopts a rigorous and robust key to ensure excessive risk taking behavior of staff is
performance indicators (“KPIs”) setting process that minimised and that the system does not induce
incorporates risk management (to fulfill risk control excessive risk taking and sufficient control is in place.
objectives) as part of the scorecards for each division Periodic reviews as well as post-implementation
(in particular each Head of Division). This is to ensure reporting to the BRMC are carried out to examine
excessive risk taking behaviour of staff is minimised the effectiveness of the schemes in driving the right
and sufficient control mechanisms are in place. behaviours in achieving business goals and that
KPIs and key results areas of employees are measured there are no adverse risk elements in the approved
and tracked diligently to ensure strong alignment of schemes. The clawbacks mechanism is triggered
employee output to the overall business strategy and when there are non-compliances to regulations and
direction of the Bank. policies.

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

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C. BOARD COMMITTEES (CONTINUED)
(d) Remuneration Committee (“RC”) (continued)
Deferred Compensation and Clawbacks (continued)
The remuneration of the GMD/CEO, Senior Management and other Material Risk Takers for FYE 2017 is shown in the table
below:

GMD/CEO Senior Management and other
Material Risk Takers

Total value of remuneration awards Unrestricted Deferred Unrestricted Deferred
for FYE 2017 (RM) (RM) (RM) (RM)

Fixed Remuneration 2,610,000 – 24,125,371 –
Cash-based 2,610,000 – 24,125,371 –
Shares and share-linked instruments – –
Other – – – –
Variable Remuneration – 1,975,847 – –
Cash-based 3,500,000 – 13,422,377 –
Shares and share-linked instruments 3,500,000 1,975,847 13,422,377 –
Other – – – –
– –

D. INDEPENDENCE HONG LEONG BANK BERHAD
The Board takes cognisance of Recommendations 3.2 and 3.3 of the Code. Recommendation 3.2 states that the tenure of an ANNUAL REPORT 2017

independent director should not exceed a cumulative term of 9 years and upon completion of the 9 years, an independent
director may continue to serve on the Board subject to the director’s re-designation as a non-independent director.
Recommendation 3.3 states that in the event the Company wishes to retain an independent director who has served a
cumulative term of 9 years and above, shareholders’ approval shall be sought at the AGM every year with justification.
The tenure of all the independent directors on the Board of the Bank does not exceed 9 years. The independent directors
have declared their independence, and the NC and the Board have determined, at the annual assessment carried out, that
the independent directors have continued to bring independent and objective judgment to Board deliberations and decision
making.
The Bank has in place a policy in relation to the tenure for independent directors of the Bank (“Tenure Policy”) under the
F&P Policy of the Bank. Pursuant to the Tenure Policy, an independent director who has served on the Board of any company
under the Hong Leong Financial Group for a period of 9 years continuously or more shall submit a Letter of Intent to the NC
informing of his intention to continue in office or to retire from the Board as an independent director, upon:
(a) the expiry of his term of office approved by BNM; or
(b) the due date for his retirement by rotation pursuant to the Constitution of the Bank.
If the intention is to continue in office, the NC shall consider based on the assessment criteria and guidelines set out in the
F&P Policy and make the appropriate recommendation to the Board. If the intention is to retire from office, an application
shall be made to BNM to seek clearance in accordance with BNM Guidelines. For public listed bank/companies under the
Hong Leong Financial Group, shareholders’ approval at AGMs shall be sought in accordance with the relevant requirements
under the Code and the MMLR subject to favourable assessment of the NC and the Board.

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D. INDEPENDENCE (CONTINUED) and senior management. All directors also have access
The Board seeks to strike an appropriate balance between to the advice and services of the internal auditors and
in addition, to independent professional advice, where
tenure of service, continuity of experience and refreshment necessary, at the Bank’s expense, in consultation with the
of the Board. Although a longer tenure of directorship Chairman or the GMD/CEO of the Bank.
may be perceived as relevant to the determination of a At Board meetings, active deliberations of issues by
director’s independence, the Board recognises that an Board members are encouraged and such deliberations,
individual’s independence should not be determined decisions and conclusions are recorded by the Company
solely based on tenure of service. Further, the continued Secretary accordingly. Any director who has an interest in
tenure of directorship brings considerable stability to the the subject matter to be deliberated shall abstain from
Board, and the Bank benefits from directors who have, deliberating and voting on the same during the meetings.
over time, gained valuable insight into the Group, its The Board met nine (9) times for the FYE 2017 with timely
market and the industry. notices of issues to be discussed. Details of attendance of
each director are as follows:
E. COMMITMENT

The directors are aware of their responsibilities and devote Director Attendance
sufficient time to carry out such responsibilities. In line YBhg Tan Sri Quek Leng Chan 9/9
with the MMLR, directors are required to comply with the Mr Tan Kong Khoon 9/9
restrictions on the number of directorships in public listed Mr Kwek Leng Hai 9/9
companies. Directors provide notifications to the Board for Ms Lim Lean See 9/9
acceptance of any new Board appointments. This ensures Ms Chok Kwee Bee 9/9
that their commitment, resources and time are focused YBhg Dato’ Nicholas John Lough
on the affairs of the Bank to enable them to discharge @ Sharif Lough bin Abdullah 9/9
their duties effectively. Board meetings are scheduled a YBhg Datuk Wira Azhar bin Abdul Hamid 8/9
year ahead in order to enable full attendance at Board YBhg Datuk Dr Md Hamzah bin Md Kassim 9/9
meetings. Additional meetings may be convened on an Mr Domenic Fuda(1) 4/4
adhoc basis as and when necessary. Where appropriate,
decisions are also taken by way of Directors’ Circular Note:
Resolutions. Directors are required to attend at least 75% (1) Resigned as Board member with effect from 1 January
of Board meetings held in each financial year pursuant to
the BNM CG. 2017 and remains as GMD/CEO (non-Board member).

All Board members are supplied with information in a The Bank recognises the importance of continuous
timely manner. The Bank has moved towards electronic professional development and training for its directors.
Board reports. Board reports are circulated electronically
HONG LEONG BANK BERHAD prior to Board and Board Committee meetings and the The Bank is guided by a Directors’ Training Policy,
ANNUAL REPORT 2017 reports provide, amongst others, financial and corporate which covers an Induction Programme and Continuing
information, significant operational, financial and Professional Development (“CPD”) for directors of the
corporate issues, updates on the performance of the Bank Bank. The Induction Programme is organised for newly
and of the Group and management’s proposals which appointed directors to assist them to familiarise and to
require the approval of the Board. get acquainted with the Bank’s business, governance
process, roles and responsibilities as director of the Bank.
All directors have access to the advice and services The CPD encompasses areas related to the industry or
of a qualified and competent Company Secretary to business of the Bank, governance, risk management
facilitate the discharge of their duties effectively. The and regulations through a combination of courses and
Company Secretary is qualified to act under Section 235 conferences. A training budget is allocated for Directors’
of the Companies Act 2016. She supports the effective training programmes.
functioning of the Board, provides advice and guidance
to the Board on policies and procedures, relevant rules, All directors of the Bank have completed the Mandatory
regulations and laws in relation to corporate secretarial Accreditation Programme.
and governance functions and facilitates effective
90 information flow amongst the Board, Board Committees

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E. COMMITMENT (CONTINUED) • 4th BNM – FIDE Forum Annual Dialogue with the HONG LEONG BANK BERHAD
The Bank regularly organises in-house programmes, Deputy Governor of Bank Negara Malaysia ANNUAL REPORT 2017

briefings and updates by its in-house professionals. The • FIDE Forum - Efficient Inefficiency: Making Boards 91
directors are also encouraged to attend seminars and Effective in a Changing World
briefings in order to keep themselves abreast with the
latest developments in the business environment and to • FIDE Forum - 2nd Distinguished Board Leadership
enhance their skills and knowledge. Directors are kept Series & 6th Annual General Meeting
informed of available training programmes on a regular
basis. • FIDE Forum – FinTech: Business Opportunity or
The Bank has prepared for the use of its directors, a Disruptor
Director Manual which highlights, amongst others, the
major duties and responsibilities of a director vis-a-vis • FIDE Forum – Technology-based Innovation that
various laws, regulations and guidelines governing the Counts
same.
In assessing the training needs of directors, the Board • MINDA & Bursa Malaysia – Corporate Governance
has determined that appropriate training programmes Breakfast Series: Cybersecurity Threat and How Board
covering matters on corporate governance, finance, Should Mitigate the Risks
legal, risk management, information technology, internal
control and/or statutory/regulatory compliance, be • MINDA & Bursa Malaysia – Corporate Governance
recommended and arranged for the directors to enhance Breakfast Series: Anti-corruption & Integrity -
their contributions to the Board. Foundation of Corporate Sustainability
During the FYE 2017, the directors received regular briefings
and updates on the Group’s businesses, operations, risk • MINDA & Bursa Malaysia – Sustainability Forum for
management, internal controls, corporate governance, Directors/CEOs: The Velocity of Global Change &
finance and any changes to relevant legislation, rules and Sustainability - The New Business Model
regulations from in-house professionals. The Bank also
organised an in-house programme for its directors and • ICLIF & MINDA – Breakfast Talk with Asian Corporate
senior management. Governance Association: Corporate Governance
The directors of the Bank have also attended various Watch 2016 - Ecosystems Matter
programmes and forums facilitated by external
professionals in accordance with their respective needs in • Malaysian Institute of Corporate Governance (“MICG”)
discharging their duties as directors. – Boards and C-Level Executives: Balancing Trust and
During the FYE 2017, the directors of the Bank, collectively Tension
or on their own, attended various training programmes,
seminars, briefings and/or workshops including: • MICG – Assessment of the Board, Board Committees
• BNM – Financial Institutions Directors’ Education and Individual Directors – Taking Stock of Performance

(“FIDE”) Core Programme • MICG – The Companies Act 2016 – Key Changes and
• BNM – Compliance Conference 2017 Implications to Directors and Management
• BNM & World Bank – Global Symposium on Innovative
• MICG – Related Party Transactions: Their Implications
Financial Inclusion to the Board of Directors, Audit Committee &
• FIDE Forum – Focus Group Session – Discussion Management

in Preparation for Dialogue with BNM’s Senior • MICG – The New Malaysian Code on Corporate
Management on the Conventional Banking, Islamic Governance - How To Walk The Talk?
Banking, Investment Banking and Development
Financial Institution Businesses • MAICSA – Companies Act 2016 and its Implications to
Directors

• Companies Act 2016 Update
• Global Transformation Forum

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E. COMMITMENT (CONTINUED) The BRMC is delegated with the responsibility to
• 4th Industrial Revolution: Impact and Opportunities provide oversight on the Bank’s management of
for Manufacturing and Financial Services critical risks that the Group faces while the BAC
• Securities Industry Development Corporation – Capital is delegated with the responsibility to review the
Market Director Programme effectiveness of internal controls implemented in the
• Anti-Money Laundering, Anti-Terrorism Financing and Bank.
Proceeds of Unlawful Activities Act 2001: The Law &
Compliance The Statement on Risk Management and Internal
• Briefing Session on Shariah Compliance Trading Control as detailed under Section I of this Statement
Window provides an overview of the system of internal
• An Overview of Latest Development of Shariah controls and risk management framework of the
Standards issued by Bank Negara Malaysia – Group.
Investment Account & Investment Account Platform
• Sustainability Reporting: Awareness Session III. Relationship with Auditors
• Clarification of Audit Rating Methodology The appointment of external auditors is recommended
• Advocacy Sessions on Management Discussion
& Analysis for Chief Executive Officers and Chief by the BAC, which determines the remuneration of
Financial Officers of Listed Issuers the external auditors. The BAC reviews the suitability
and independence of the external auditors annually.
F. ACCOUNTABILITY AND AUDIT In this regard, an annual assessment is conducted by
The Bank has put in place a framework of processes the BAC to evaluate the performance, independence
and objectivity of the external auditors prior to
whereby Board committees provide oversight on critical making any recommendation to the Board on the re-
processes of the Bank’s reporting of financial statements, appointment of the external auditors.
in order to ensure that accountability and audit are integral The Bank also has a Policy on the Use of External
components of the said processes. Auditors for Non-Audit Services to govern the
I. Financial Reporting professional relationship with the external auditors
The Board has a fiduciary responsibility to ensure in relation to non-audit services. Assessment will be
conducted by the BAC for non-audit services to ensure
the proper maintenance of accounting records of the that the provision of non-audit services does not
Group. The Board receives the recommendation to interfere with the exercise of independent judgment
adopt the financial statements from the BAC, which of the external auditors.
assesses the integrity of financial statements with During the financial year under review, the external
the assistance of the external auditors. auditors met with the BAC to:
II. Risk Management and Internal Control • present the scope of the audit before the
The Board has overall responsibility for maintaining
a system of internal controls which covers financial commencement of audit; and
and operational controls and risk management. • review the results of the audit as well as the
This system provides reasonable but not absolute
assurance against material misstatements, losses management letter after the conclusion of the
and fraud. audit.
The external auditors meet with the BAC members at
92 least twice a year without the presence of Executive
Directors and management.

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

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G. DISCLOSURE
The Bank has in place a corporate disclosure policy for compliance with the disclosure requirements set out in the MMLR,

and to raise awareness and provide guidance to the Board and management on the Group’s disclosure requirements and
practices.
All timely disclosure and material information documents will be posted on the website after release to Bursa.

H. SHAREHOLDERS

I Dialogue between Companies and Investors

The Board acknowledges the importance of regular communication with shareholders and investors via the annual
reports, circulars to shareholders and quarterly financial reports and the various announcements made during the year,
through which shareholders and investors can have an overview of the Group’s performance and operation.

Notices of general meetings and the accompanying explanatory notes are provided within the prescribed notice period
on the Bank’s website, Bursa’s website, in the media and by post to shareholders. This allows shareholders to make the
necessary arrangements to attend and participate in general meetings either in person, by corporate representative, by
proxy or by attorney.

The Bank has a website at ‘www.hlb.com.my’ which the shareholders can access for information which includes the
Board Charter, TORs of Board Committees, corporate information, announcements/press releases/briefings, financial
information, products information and investor relations. A summary of the key matters discussed at the AGM is
published on the Bank’s website.

The Board has identified Ms Lim Lean See, the Chairman of the BAC, as the Independent Non-Executive Director of the
Board to whom concerns may be conveyed, and who would bring the same to the attention of the Board.

In addition, shareholders and investors can have a channel of communication with the following persons to direct
queries and provide feedback to the Group:

GENERAL MANAGER, GROUP CORPORATE AFFAIRS & PUBLIC RELATIONS
Tel No. : 03-2081 8888 ext. 61916
Fax No. : 03-2081 8932
e-mail address : [email protected]

CHIEF FINANCIAL OFFICER
Tel No. : 03-2081 8888
Fax No. : 03-2081 8924
e-mail address : [email protected]

II AGM

The AGM provides an opportunity for the shareholders to seek and clarify any issues and to have a better understanding HONG LEONG BANK BERHAD
of the Group’s performance. Shareholders are encouraged to meet and communicate with the Board at the AGM and ANNUAL REPORT 2017
to vote on all resolutions. Senior management and the external auditors are also available to respond to shareholders’
queries during the AGM. All directors and the GMD/CEO attended the last AGM held on 26 October 2016.

Pursuant to Paragraph 8.29A(1) of the MMLR, all resolutions tabled at general meetings will be put to a vote by way of
a poll and the voting results will be announced at the meetings and through Bursa.

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I STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL
I. Introduction
The Board recognizes that practice of good governance is an important process and has established the Board Audit
Committee (“BAC”) and Board Risk Management Committee (“BRMC”) to ensure maintenance of a sound system of
internal controls and good risk management practices. The processes for risks and controls assessment and improvement
are on-going and are regularly reviewed in accordance with the guidelines on the ‘Statement on Risk Management and
Internal Control: Guidelines for Directors of Listed Issuers’.
II. Board Responsibilities

The Board acknowledges its overall responsibility for the risk management and internal control environment and its
effectiveness in safeguarding shareholders’ interests and the Group’s assets. The risk management and internal control
framework is designed to manage rather than eliminate the risk of failure in the achievement of goals and objectives of
the Group, and therefore only provide reasonable assurance and not absolute assurance, against material misstatement
or loss.

The system of risk management and internal control instituted throughout the Group is updated from time to time to
align with the dynamic changes in the business environment as well as any process improvement initiatives undertaken.
The Board confirms that its management team responsibly implements the Board policies, procedures and guidelines on
risk management and internal control.

III. Risk Management and Internal Control Framework
The organizational structure of the Group clearly defines the lines of accountability and responsibility. Risk assessment

and evaluation is an integral part of the Group’s strategic planning cycle and are responsive to business environment
and opportunities. Management committees are appropriately set up to ensure proper utilization and investment of
the Group’s assets for effective risk return rewards or to limit losses. The Group Risk Management (“GRM”) and Group
Compliance (“GC”) Divisions have implemented an enterprise-wide integrated risk management framework to inculcate
continuous risk and regulatory compliance awareness, understanding of procedures and controls and thus, improve the
overall control environment. In addition, GC is responsible for assessing and monitoring compliance risks of the Group.
Operationally, the Group operates multiple lines of defenses to effect a robust control framework. At the first level,
the operating business and support units are responsible for the day-to-day management of risks inherent in the
various business activities. Regulatory and operational compliance units are set up in the various lines of business and
support departments. They oversee the day-to-day compliance to all regulatory requirements, business and process
controls. At the second level, GRM is responsible for setting the risk management framework and developing tools and
methodologies for the identification, measurement, monitoring, control and pricing of risks whereas GC is responsible
for ensuring that controls to manage compliance risks are adequate and operating as intended. Thirdly, the Internal
Audit function complements GRM and GC by its activity of monitoring and evaluating significant exposures to risk
and contributing to the improvement of the risk management and control systems. It also provides an independent
perspective and assessment on the adequacy and effectiveness of the risk management framework and governance
systems and processes, including those instituted by the compliance function.

The above is depicted in the following diagram:

HONG LEONG BANK BERHAD FIRST LINE OF DEFENCE SECOND LINE OF DEFENCE THIRD LINE OF DEFENCE
ANNUAL REPORT 2017
Business and Support Group Risk Management Group Internal Audit
Regulatory and Operational Group Compliance

94 Day-to-day risk management and compliance Sets policies, reviews portfolio risks and Independent assessment of effectiveness and
provides oversights of the management of enforcement of frameworks and policies

risk and compliance.

CORPORATE

Corporate Governance,
Risk Management & Internal Control

I STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (CONTINUED)
III. Risk Management and Internal Control Framework
a) Risk Management
Managing risks is an integral part of the Group’s overall business strategy. It involves a process for identifying,
assessing and managing risks and uncertainties that could inhibit the Group’s ability to achieve its strategy and
strategic objectives. The Board sets the risk appetite and tolerance level and allocates the Group’s capital that is
consistent with the Group’s overall business objectives and desired risk profile. Recognizing the need to be proactive
in the management of risks, the Group has implemented an Integrated Risk Management (“IRM”) framework
where the Group’s risks are managed at various levels.

Integrated Risk Management Framework

Top Down Board of Directors Monitoring and
Set Risk Appetite Effective stewardship and control Reporting
& Tolerance Limit Board Risk Management Committee Bottom Up
Set Policies and Present single view of risks and to ensure adequate
Capital Allocation policies and controls within the Group
Group Risk Management & Group Compliance

Credit Risk Market & Liquidity Operational & Regulatory
Management Risk Management Information Technology Compliance
Risk Information

Daily management of risk, limits, policies, procedures and reports

Consumer Business Islamic Global Branches Business/ Payments Human Information
Banking Banking Banking Markets Consumer Resources Technology
Credit

At the apex of the IRM framework, the Board has the overall responsibility to ensure there is proper oversight of
the management of risks in the Group. GRM monitors and reports the Group’s Credit, Market, Liquidity, Operational
and IT Risks. GC monitors regulatory compliance issues and reports the non-compliance incidences; including Anti
Money Laundering and Combating the Financing of Terrorism (“AML/CFT”) matters. These risks are presented in a
single consolidated view to the BRMC regularly.

The BRMC deliberates and evaluates the reports prepared by GRM and GC on the adequacy and effectiveness of
the controls to mitigate the Group’s risks and provides updates to the Board, and where appropriate, make the
necessary recommendations to the Board.

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

95

CORPORATE

Corporate Governance,
Risk Management & Internal Control

I STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (CONTINUED)
III. Risk Management and Internal Control Framework (continued)
a) Risk Management (continued)

HONG LEONG BANK GROUP’S KEY RISKS

Credit Risk OPERATIONAL RISK

Credit Risk is the risk of loss if a borrower Operational Risk loss is the risk of loss
or counterparty in a transaction fails to resulting from inadequate or failed
meet its obligations. internal processes, people and
REGULATORY systems or from external events
COMPLIANCE RISK which also include IT and legal
Regulatory Compliance risks.
Risk is the risk of legal
or regulatory sanctions,
material financial loss or loss
MARKET RISK to reputation as a result of LIQUIDITY RISK
Market Risk is the risk of loss in failure to comply with laws Liquidity Risk is the risk of loss
financial instruments or the balance resulting from the unavailability
sheet due to adverse movements and regulations. of sufficient funds to fulfill financial

in market factors such as interest commitments, including customers’
liquidity needs, as they fall due. Liquidity
and exchange rates, prices, spreads, Risk also includes the risk of not being able to
volatilities, and/or correlations. liquidate assets in a timely manner.

b) Basel II and IIIHONG LEONG BANK BERHAD
The Group places great importance to Basel II and III and views Basel II and III as a bank-wide initiative that willANNUAL REPORT 2017

ensure that the Group continues to meet international best practices for the Group’s credit, market, operational and
liquidity risk management practices. By adopting Basel II and III, the Group is able and will continue to enhance
and embed sound risk management practices within the Group and be equipped with the right risk management
discipline, practices, processes and systems.
For Basel II Pillar 1, the Group is in compliance with the regulatory standards and is progressively employing advance
risk measurement in the respective businesses. For Basel II Pillar 2, the Group has established an Internal Capital
Adequacy Assessment Process (“ICAAP”) framework that forms an integrated approach to manage the Group’s risk,
capital and business strategy. For Basel II Pillar 3, which is related to market discipline and disclosure requirements,
the Group has provided the disclosures under a separate Pillar 3 section in this Annual Report.
For Basel III, the Group has put in place plans to continuously strengthen its capital and liquidity positions well
ahead of the Basel Committee’s time schedule and in advance anticipation of any local jurisdiction guidelines in all
the countries that the Bank operates in.
c) Internal Audit
The Bank’s Group Internal Audit Division (“GIAD”) performs the internal auditing function for the various entities in
the financial services group. GIAD regularly reviews the critical operations (as defined in BNM Guidelines on Internal
Audit Function of Licensed Institutions) and critical controls in the Information Technology environment (as outlined
in BNM GPIS) of the Group to ensure that the internal controls are in place and working effectively.

96

CORPORATE

Corporate Governance,
Risk Management & Internal Control

I STATEMENT ON RISK MANAGEMENT AND INTERNAL IV. Assessment of Risk Management and
CONTROL (CONTINUED) Internal Control System

III. Risk Management and Internal Control The Board has received assurances from the group
Framework (continued) managing director/chief executive officer, chief
c) Internal Audit (continued) financial officer, chief risk officer, chief internal audit
The results of the audits conducted by GIAD and chief compliance officer that the Group’s risk
are reported to the BAC. Follow-up actions and management and internal control system is operating
the review of the status of actions taken as per adequately and effectively.
the auditors’ recommendations are carried out
by management via the Management Audit Based on the assurances it has received from
Committee (chaired by the Chief Risk Officer) management, the Board is of the view that the
whose members comprise senior management. Group’s risk management and internal control
The minutes of meetings of the Management system is operating adequately and effectively for
Audit Committee are tabled to the BAC for the financial year under review and up to the date of
notation. approval of this report.

V. Review of the Statement by External Auditors

Implementation of audit recommendations are As required by Paragraph 15.23 of the Bursa Malaysia
followed up on a monthly basis and reported Securities Berhad Main Market Listing Requirements,
to the BAC. Highlights of the BAC meetings are the external auditors have reviewed this Statement on
submitted to the Board for review and further Risk Management and Internal Control. Their limited
deliberation. assurance review was performed in accordance with
Recommended Practice Guide (“RPG”) 5 (Revised)
In addition, internal controls are also effected issued by the Malaysian Institute of Accountants. RPG
through the following processes: 5 (Revised) does not require the external auditors to
form an opinion on the adequacy and effectiveness
• The Board receives and reviews regular of the risk management and internal control systems
reports from management on the key of the Group.
operating statistics, business dynamics,
legal matters and regulatory issues that
would have implications on internal control J. DIRECTORS’ RESPONSIBILITY IN FINANCIAL
measures. REPORTING

• The BAC regularly reviews and holds The MMLR requires the directors to prepare financial HONG LEONG BANK BERHAD
discussions with management on the actions statements for each financial year which give a true and ANNUAL REPORT 2017
taken on internal control issues identified in fair view of the financial position of the Group and of the
reports prepared by GIAD, external auditors Bank as at the end of the financial year and of its financial
and regulatory authorities. performance and cash flows of the Group and of the Bank
for the financial year.
• Policies on delegation and authority limits
are strictly implemented to ensure a culture The directors are satisfied that in preparing the financial
that respects integrity and honesty, and statements of the Group and of the Bank for the FYE 2017,
thereby reinforce internal controls. the Group has used the appropriate accounting policies
and applied them consistently. The directors are also of
• Policies and procedures are set out in the view that relevant approved accounting standards
operation manuals and disseminated have been followed in the preparation of these financial
throughout the organization in support statements.
of a learning culture, so as to reinforce an
environment of internal controls discipline. This Statement on Corporate Governance, Risk Management
and Internal Control is made in accordance with the resolution
• Policies for recruitment, promotion and of the Board.
termination of staff are in place to ensure
the Group’s human resources comply to 97
internal controls requirements.

HONG LEONG BANK BERHADFINANCIALS
ANNUAL REPORT 2017
Directors’ Report

for the financial year ended 30 June 2017

The Directors have pleasure in presenting their report together with the audited financial statements of the Group and of the
Bank for the financial year ended 30 June 2017.
PRINCIPAL ACTIVITIES
The Bank is principally engaged in all aspects of commercial banking business and in the provision of related services. The principal
activity of the significant subsidiary consists of Islamic Banking services. Other subsidiary companies are primarily engaged in
property investment, investment holding and nominee services. The details of the subsidiary companies are disclosed in Note 13
to the financial statements.

BUSINESS STRATEGY FOR THE CURRENT FINANCIAL YEAR
Malaysia is expected to maintain a healthy growth rate in 2017 on improving global macroeconomic prospects and industrial
activities as well as sustained demand from the regional economies, all of which are expected to lift the demand for Malaysian
exports. Meanwhile, domestic demand continues to be stable, driven by a steady labour market and wage growth, as well as
increased investment activities. Reduced financial markets volatility and a still healthy banking system also augur well with
overall growth prospects of the Malaysian economy.
On the expectation of a pick-up in the domestic economy, business activities and loans are expected to accelerate which will
cushion some of the impact of slower household sector loans. The banking sector is expected to remain resilient with sufficient
liquidity, stable asset quality, and strong capitalization despite margin compression from ongoing competition. Nevertheless,
the Bank remained focused on our digital strategy to transform and optimize our business to enhance customer experience and
deliver operational excellence. We will continue to grow our domestic franchise and regional business through our Community
Banking approach and differentiate ourselves via our multi-channel banking services to cater to the evolving needs of the
customers.

OUTLOOK AND BUSINESS PLAN FOR NEW FINANCIAL YEAR
The world economy is expected to grow moderately in 2018, supported by more synchronized expansion across advanced and
developing economies.
In tandem, the Malaysian economic growth prospects are expected to improve further going into 2018, underpinned by
sustained domestic demand and prospects of a brighter external environment. Steady labour market, continuous wage growth
and improving consumer sentiments will continue to underpin private consumption growth. Meanwhile, increased domestic
and external demand is expected to translate into higher investment spending, with ongoing implementation of infrastructure
projects providing further impetus for growth going forward.
In view of the heightened competition and moderate economic growth outlook, the Bank will continue to pursue sustainable
growth in our domestic and regional business by embedding ourselves in the community and strengthening our digital offerings.
At the same time, the Bank remained committed to drive rapid and continuous improvement in our business and strive to pursue
operational excellence through strategic cost management whilst channeling some of these savings into investment in digital
initiatives to transform our products and services and provide seamless and personalized banking experience to our customers.

PERFORMANCE REVIEW AND MANAGEMENT REPORTS
The Board receives and reviews regular reports from the Management on key financial and operating statistics as well as legal
and regulatory matters. The performance of each business unit is assessed against the approved budgets and business objectives
whilst explanation is provided for significant variances.

98