3 Board of Directors

3.1 Members

a) Name, nationality, education and professional career

(XLS:)

Name

Year of birth

Profession

Nationality

*

Chairman

**

Vice Chairman

Hans-Werner Gassner*

1958

Business consultant and certified public accountant

FL

Markus Foser**

1969

Business consultant

FL

Markus Büchel

1953

Human resources manager

FL

Felix R. Ehrat

1957

Attorney-at-law/Group General Counsel

CH

Ingrid Hassler-Gerner

1947

Asset manager

FL

Roland Oehri

1968

Fiduciary

FL

Konrad Schnyder

1956

Entrepreneur

CH

Lic. iur. Siegbert Lampert stepped down from the Board of Directors of the Liechtensteinische Landesbank after nine years on account of the period of office limitation statute. On 6 May 2011, the General Meeting of Shareholders elected Dr. Felix R. Ehrat as a new member of the Board of Directors.

Hans-Werner Gassner
Dr. Hans-Werner Gassner, Business consultant and certified public accountant (photo)

Education:

  • Licentiate in economics at the University of St. Gallen, 1983
  • Swiss federal diploma in accountancy, 1988
  • Dr. oec. HSG, 1989
  • Swiss Banking School, 1996

Professional career:

  • Accountant at Neutra Treuhand Group, 1984 – 1989
  • Head Internal Audit at the Liechtensteinische Landesbank, 1990 – 1998
  • Head Finances at the Liechtensteinische Landesbank, 1998 – 2000
  • Partner at APG Wirtschaftsprüfung AG, Vaduz (formerly Gassner & Partner Wirtschaftsprüfung und Beratung AG, Balzers), since April 2000
  • Proprietor of Adcom Treuunternehmen reg., Balzers, since April 2000
Markus Foser
lic. oec. publ. Markus Foser – Business consultant (photo)

Education:

Licentiate in economics at the University of Zurich, major in business IT, 1996

Swiss federal diploma in financial analysis and asset management CEFA, 2000

Professional career:

  • Equity research and fund management at the Liechtensteinische Landesbank, 1997 – 2002
  • Advisor to mainly institutional clients with derivatives and structured products at Bank Vontobel (Liechtenstein) AG, Vaduz, 2002 – 2003
  • Head of Fund & Investment Services (Asset Management) at swissfirst Bank (Liechtenstein) AG, Vaduz, 2004 – 2007
  • Member of the Executive Board of Banque Pasche (Liechtenstein) SA, Vaduz, responsible for Fund & Investment Services (Asset Management), 2008 – 2009
  • Proprietor of MAFOS Consult Anstalt, since 2009
Markus Büchel
Markus Büchel – Human resources manager (photo)

Education:

  • Apprenticeship as a mechanical draughtsman, 1969 – 1973
  • Commercial college Buchs, 1973 – 1974
  • Mechanical engineer (Dipl. Ing. FH), Vaduz, 1974 – 1978

Professional career:

  • Hilti AG, Schaan, (various technical functions), 1973–1981
  • ThyssenKrupp Presta AG, Eschen, development/engineering (various functions), 1981 – 1991
  • ThyssenKrupp Presta AG, Eschen, Head Technical Services, 1991 – 1995
  • ThyssenKrupp Presta AG, Eschen, Head Human Resources Presta Group, since 1995
Felix R. Ehrat
Dr. Felix R. Ehrat – Attorney-at-law/Group General Counsel (photo)

Education:

  • Licentiate in law at the University of Zurich, 1982
  • Attorney-at-law, 1985
  • LL.M. in Business and Taxation-Transnational Practice at the McGeorge School of Law, Sacramento, California, 1986
  • Dr. iur., University of Zurich, 1990

Professional career:

  • Associate in the law firm Bär & Karrer, Zurich, 1987 – 1992
  • Partner at Bär & Karrer, 1992 – 2000
  • Managing Partner at Bär & Karrer, 2000 – 2003
  • Senior Partner and Chairman of the Board of Management at Bär & Karrer, 2003 – 2011
  • Executive President of the Board of Directors at Bär & Karrer, 2007 – 2011
  • Group General Counsel of the Novartis Group, Basel, since 1 October 2011
Ingrid Hassler-Gerner
Ingrid Hassler-Gerner – Asset manager (photo)

Education:

  • Commercial diploma, 1964
  • Liechtenstein University of Applied Sciences, legal studies in accordance with Art. 180a of person and company law, 2005 – 2006

Professional career:

  • Head Asset Management and Research, A.M.I.S., Schaan, 1976 – 1989
  • Managing Director, Pan Portfolio AG, Schaanwald, since 1989
  • Managing Director, PanFinanzPartner AG, Schaanwald, since 2005
Roland Oehri
Roland Oehri – Fiduciary (photo)

Education:

  • Commercial apprenticeship, 1987
  • Licentiate in economics (HWV), 1993
  • Liechtenstein trustee and fiduciary examinations, 1998

Professional career:

  • Investment advisor, Foreign Private Clients Department of VP Bank AG, Vaduz, 1993 – 1999
  • Head Foreign Private Clients Department of VP Bank AG, Vaduz, 1999
  • Client advisor, Private Trust Banking, VP Bank AG, Vaduz, 2000
  • Client advisor and Head Intermediaries Department of Bank Wegelin (Liechtenstein) AG, Vaduz, subsequently swissfirst Bank (Liechtenstein) AG, Vaduz, 2000 – 2003
  • Vice President of LOPAG Louis Oehri & Partner Trust reg., Ruggell, 2004–2009
  • Partner and Managing Director of Sequoia Treuhand Trust reg., Ruggell, since 2006
  • Partner and Managing Director of Sequoia Capital Management AG, Ruggell, since 2007
Konrad Schnyder
Konrad Schnyder – Entrepreneur (photo)

Education:

  • Training as mechanical engineer, 1977
  • Technical businessman, 1979
  • SKU Swiss Management Course, 1992

Professional career:

  • Proprietor, Vice Chairman and Delegate of the Board of Directors of the Sersa Group of companies, since 1985
  • Member of the Board of Directors of Bank Linth LLB AG, Uznach, 1998 – 2008
  • Delegate of the Board of Directors of Euroswitch AG, Pfäffikon/SZ, since 2004
  • CEO Sersa Group Management AG, Pfäffikon/SZ, since 2001

b) Executive/non-executive members

All members of the Board of Directors of the Liechtensteinische Landesbank are non-executive members. Pursuant to Art. 22 of the Liechtenstein banking law in connection with Art. 10 of the law concerning the Liechtensteinische Landesbank, special bodies must be constituted for the direction, supervision and control of a bank on the one hand and for the management of a bank on the other hand. No member of the Board of Directors is allowed being a member of the Board of Management.

c) Independence

All members of the Board of Directors are independent within the context of the SIX Swiss Exchange «Directive Corporate Governance» (DCG) concerning corporate governance information. In 2011, as well as in the previous three business years, no member of the Board of Directors was a member of the Board of Management of the Liechtensteinische Landesbank or a Group company. No member of the Board of Directors had significant business relationships with the Liechtensteinische Landesbank or with another Group company. In accordance with Art. 12 of the Liechtenstein law concerning the control and supervision of public companies, all contracts with members of the Board of Directors must be in writing and they must be approved by the Board of Directors. The same conditions apply as to contracts concluded with third parties.

3.2 Other activities and commitments

Dr. Felix R. Ehrat has been Chairman of Globalance Bank AG, Zurich, since the end of 2010 and Member of the Board of Directors of the Müller-Möhl Group, Zurich, since 2003.

Since 1 January 2010, Ingrid Hassler-Gerner has been Chairwoman of the Foundation Board of the Liechtenstein Civil Service Pension Fund.

Konrad Schnyder has been Chairman of the Board of Directors of Raility AG, Biel, since 2006, Delegate of the Board of Directors of Euroswitch AG, Pfäffikon/SZ since 2004, Member of the Board of Directors of Sustra Tiefbau + Strassen AG, Sursee, since 1998, Member of the Board of Directors of Dedalus Holding AG, Sursee, since 2005, Vice Chairman of the Association of Swiss Railway Trackwork Contractors (VSG), Zurich, since 2000, Chairman of the Swiss Rail Engineering Companies (VSBTU), Baden, since 2011, Delegate of the VSBTU to the European Federation of Railway Trackwork Contractors (EFRTC), Paris, since 2007, and Chairman of the Board of Directors of SCL Zürich AG, Unterägeri, since July 2011.

Otherwise, the members of the Board of Directors are not involved in the management or supervisory boards of important Liechtenstein, Swiss or foreign private or public law corporations, establishments or foundations, nor do they exercise any permanent management or consultancy functions for important Liechtenstein, Swiss or foreign interest groups, nor do they perform official functions or hold political office.

3.3 Election and term of office

3.3.1 Principles governing election procedure

The Board of Directors of the Liechtensteinische Landesbank is – in accordance with the law and the company statutes – composed of five to seven members, who are elected individually by the General Meeting for a term of office of three years. Thereby, a year corresponds to the period from one General Meeting to the next. Members can be re-elected for a further two terms. After three terms of office, the Chairman of the Board of Directors can – in justified cases – be re-elected for an extraordinary term of office of at most two years. The Chairman of the Board of Directors is elected by the General Meeting. The Vice Chairman is elected from among the members of the Board of Directors by its members. New members of the Board of Directors elected as substitutes shall be elected for a full term of office of three years. The General Meeting can dismiss members of the Board of Directors on important grounds. The age limit is 70 years for members of the Board of Directors.

Dr. Hans-Werner Gassner has been Chairman of the Board of Directors since 2006. Markus Foser has been Vice Chairman since 2009. Patrick Helg (Head Group Internal Audit) has been the Secretary (recorder of the minutes) since September 2009.

3.3.2 First-time election and remaining term of office

(XLS:)

Name

Elected by

First-time appointment

Elected until

Hans-Werner Gassner

Landtag

2006

2012

Markus Foser

Landtag

2009

2012

Markus Büchel

Landtag

2009

2012

Felix R. Ehrat

General Meeting

2011

2014

Ingrid Hassler-Gerner

General Meeting

2005

2014

Roland Oehri

Landtag

2009

2012

Konrad Schnyder

General Meeting

2008

2014

Since May 2010 the General Meeting has elected all members of the Board of Directors. Prior to that, four members were appointed by the Landtag of the Principality of Liechtenstein and three members were elected by the General Meeting.

3.4 Internal organisation

3.4.1 Separation of tasks of the Board of Directors

(XLS:)

Name

Function

Committee memberships

*

Chairman

Hans-Werner Gassner

Chairman

Appointments and Compensation Committee*
Strategy Committee*

Markus Foser

Vice Chairman

Group Audit & Risk Committee
Appointments and Compensation Committee
Strategy Committee

Markus Büchel

Member

Appointments and Compensation Committee

Felix R. Ehrat

Member

Group Audit & Risk Committee

Ingrid Hassler-Gerner

Member

Group Audit & Risk Committee

Roland Oehri

Member

Group Audit & Risk Committee*

Konrad Schnyder

Member

Strategy Committee

3.4.2 Composition of all Board of Directors committees, their tasks and terms of reference

The Board of Directors may delegate a portion of its duties to committees. To support the Board of Directors in performing their tasks, the Board implemented two standing committees: the Group Audit & Risk Committee as well as the Appointments and Compensation Committee. In addition, there is a Strategy Committee formed on an ad hoc basis. The Board of Directors elects the committee members from among its members and appoints the Chairmen. Each committee is composed of at least three members. As preparatory bodies, these committees deal in detail with the tasks assigned to them, submit the results of their work to the Board of Directors and make proposals if decisions are required. The Board of Directors is entitled to transfer decision-making authority to the committees. To date, it has, however, not made use of that right. Consequently, the committees solely act in an advisory function.

The committee members must possess the expertise for the tasks and duties they have taken on. All committee members must be independent. The Board of Directors issued separate regulations for the two standing committees, which stipulate their duties and individual competencies as summarized below.

Group Audit & Risk Committee

The Group Audit & Risk Committee supports the Board of Directors in fulfilling the duties and responsibilities vested in it by banking law with respect to the direction, supervision and control of the company. The «Regulations concerning the Group Audit & Risk Committee of the LLB Group» lay down the organisation and working method as well as the competencies and duties of the Group Audit & Risk Committee, insofar as these are not prescribed by the law, statutes or business regulations. Roland Oehri was Chairman of the Committee; Markus Foser, Ingrid Hassler-Gerner and, following his election, Dr. Felix R. Ehrat were Members of the Committee.

The Group Audit & Risk Committee has the following tasks in the Committee. In particular, it:

  • monitors and evaluates the integrity of the financial reporting including the structure of the accounting systems, the financial controls and financial planning;
  • monitors and evaluates the internal controls in relation to financial reporting;
  • monitors and evaluates the effectiveness of the external auditors and their cooperation with Group Internal Audit;
  • evaluates the internal controls extending beyond the financial reporting system and the Group Internal Audit;
  • monitors and evaluates the risk profile and the risk situation of the LLB Group.

Appointments and Compensation Committee

The «Regulations concerning the Appointments and Compensation Committee» of the LLB Group lay down the organisation and working method as well as the competencies and duties of the Appointments and Compensation Committee, insofar as these are not prescribed by the law, statutes or business regulations. Dr. Hans-Werner Gassner was Chairman of the Committees; Markus Foser and Markus Büchel were Members of the Committee. Markus Büchel followed Siegbert Lampert in this function, who stepped down from the Board of Directors in May 2011 on account of the period of office limitation statute.

The Appointments and Compensation Committee has the following functions, in particular:

  • development of criteria for proposals concerning the selection and assessment of the members of the Board of Directors to be elected at the General Meeting, as well as the submission of election proposals to the Board of Directors for the attention of the General Meeting;
  • formulation of successor plans and their periodic review both in the event of the age related and the ad hoc stepping down of members of the Board of Directors;
  • development of criteria for proposals concerning the selection and appointment of members of the Board of Management for the attention of the Board of Directors;
  • formulation and annual review of the principles and regulations for the compensation of the members of the Board of Directors, the members of the Board of Management and the employees of the Liechtensteinische Landesbank for submission to the Board of Directors;
  • formulation of proposals for the compensation of members of the Board of Directors, the members of the Board of Management and the staff of the Internal Audit Department for submission to the Board of Directors in accordance with existing principles and regulations;
  • annual review of the compensation of the members of the Board of Directors and the members of the Board of Management for submission to the Board of Directors in accordance with existing principles and regulations.

Representation in foundations

Hans-Werner Gassner is Member of the Foundation Board of the «Future Foundation of Liechtensteinische Landesbank AG».

In 2011, two members of the Board of Directors were represented in the staff welfare foundations of Liechtensteinische Landesbank AG: Markus Büchel as Chairman of the Board of the Staff Welfare Foundation as well as Member of the Board of the Supplementary Staff Welfare Foundation and the Employer Foundation. Ingrid Hassler-Gerner was Member of the Board of the Staff Welfare Foundation as well as Chairwoman of the Board of the Supplementary Staff Welfare Foundation and the Employer Foundation.

3.4.3 Working methods of the Board of Directors and its committees

The Board of Directors of Liechtensteinische Landesbank AG convenes once a month (except for July) for an ordinary meeting lasting at least half a day. During the 2011 business year, the Board held a total of 15 ordinary and extraordinary meetings, which included nine whole-day meetings, five half-day meetings and a two-day seminar. The seminar was organised by the Board of Directors in cooperation with the Board of Management following the ordinary meeting in June 2011. The seminar focused exclusively on risk topics. The extraordinary meetings primarily dealt with strategic topics. All members of the Board of Directors were present at all meetings with the exception of the following: Dr. Felix R. Ehrat was not present at three and a half meetings on account of his other professional obligations relating to his new function as Group General Counsel of the Novartis Group; Markus Foser was not present at one meeting due to the birth of his daughter.

The Board is convened by invitation of its Chairman and is presided over by him, or if he is absent, by its Vice Chairman. Together with the written invitation, the members of the Board of Directors also receive the agenda for the meeting, the minutes of the last meeting and other important documentation required for the meeting. If there are important grounds, two members of the Board can demand an immediate meeting.

A quorum of the Board of Directors is constituted when a majority of its members is present. The Board of Directors passes its resolutions by a simple majority of the votes present. In the event of a tie, the Chairman has the casting vote. Resolutions may be passed by circular in urgent cases. Unanimity is required for resolutions to be dealt with by circular. Resolutions shall be passed by a simple majority of votes. In the case of a tie, the Chairman shall have the casting vote. Members of the Board of Directors are obliged to inform the Chairman in cases of possible conflicts of interest. The Board of Directors shall decide whether there are grounds for the member concerned to abstain from voting. In such a case, the member concerned may neither participate in the discussion of the matter concerned nor vote on it. In general, the Chairman of the Board of Management attends the meetings of the Board of Directors. The other members of the Board of Management attend meetings of the Board of Directors when matters involving them are dealt with.

At the beginning of 2011, the Board of Directors evaluated its own performance as part of a self-assessment process, which also included the work of the Group Audit & Risk Committee and the Appointments and Compensation Committee. The self-assessment was done using structured and anonymous questionnaires in order to ensure the high informative value of the results. The questionnaires were evaluated by the management consulting firm PricewaterhouseCoopers. The results of the self-evaluation demonstrated the high quality of work done by the Board of Directors and its committees.

The members of the Group Audit & Risk Committee meet at least four times a year. These ordinary meetings are convened by the Chairman. An agenda is compiled prior to each meeting, which is sent together with the necessary information to the meeting participants. The members of the Group Audit & Risk Committee, the external auditors, the Head of Group Internal Audit and the Chairmen of the Group Risk Committee can request the Chairman of the Group Audit & Risk Committees to convene extraordinary meetings. During the 2011 business year, seven ordinary meetings were held that lasted between two and a half and eight hours. At one meeting, one member was excused; however, all the other committee members were present. To deal with specific issues, the Group Audit & Risk Committee can invite other persons such as members of the Group Executive Management, the Chairmen of the Group Risk Committees, other staff of the LLB Group companies, representatives of the external auditors or external consultants. Generally, the Chairman of the Board of Management and the Head of Internal Audit participate in the meetings in an advisory capacity. No external experts were called in during the 2011 business year.

The Appointments and Compensation Committee meets as often as business requires, but at least once a year. In 2011, five meetings were held. They lasted between two and three and a half hours. All committee members were present at all meetings. The Chairman of the Board of Management did not attend the meetings. No external experts were called in during the 2011 business year.

In 2011, the Strategy Committee did not convene separately. The strategy review was conducted at an extraordinary meeting. The Board of Directors confirmed the three-pillar strategy, which targets growth in both Liechtenstein and Switzerland as well as the opening of new markets. An external expert was called in for the preparation and implementation.

Resolutions at the meetings are passed with an absolute majority of the members present. Only the members of the relevant committee are eligible to vote. In the case of a tie, the Chairman has the casting vote. The subjects dealt with and resolutions passed are recorded in the corresponding minutes. The minutes are circulated to the meeting participants and the Board of Directors. The Chairmen of the committees inform the full Board of Directors about the agenda dealt with at the last committee meeting and submit proposals for those points requiring decisions. Furthermore, they submit an activity report to the full Board of Directors once a year on the work of the committees.

3.5 Definition of areas of responsibility

The Board of Directors is responsible for the direction, supervision and control of the company. It is responsible for all duties and is vested with all powers not reserved to other corporate bodies by the law, statutes or other internal regulations. In addition to the duties and responsibilities specified in the statutes, the Board of Directors has the following non-transferable duties and responsibilities:

  • the formulation and periodic review of medium-term and long-term corporate strategy as well as the allocation of resources to attain the objectives specified in the corporate strategy;
  • the approval of the annual budget;
  • the definition of management policy;
  • the appointment of
    • the members of the committees from among its members;
    • the Chairman and other members of the Board of Management;
    • the staff of the Internal Audit Department;
  • the discussion of the reports submitted by Internal Audit and the external auditors as well as the approval of measures implemented on the basis of audit reports;
  • the duty to keep itself regularly informed about the course of business and special occurrences, in particular by:
    • discussing and approving the quarterly reports with comments on the development of business, earnings situation, balance sheet development, liquidity, equity requirements and risk situation;
    • ensuring prompt information in the event of imminent risk threats;
  • the issuing of guidelines and regulations concerning the principles of risk management as well as the accountabilities and the processes for the approval of risk-related transactions, whereby in particular market, credit, default, process, liquidity and reputation risks as well as operational and legal risks are to be identified, limited and monitored;
  • the decision regarding the acquisition or sale of participations in other companies as well as the establishment or liquidation of subsidiaries and the appointment of board members, who are employees of the Liechtensteinische Landesbank;
  • the decision regarding the setting up and closure of bank offices, branches and representative offices;
  • the decision regarding the initiation of legal actions as well as judicial and extrajudicial settlements involving amounts of over CHF 10 million;
  • the stipulation of credit competences and decisions regarding large commitments (including cluster risks) and loans to corporate bodies, as well as the issuing of regulations regarding transactions for the account of corporate bodies and employees;
  • the stipulation of overall and individual limits at least once a year;
  • the approval of the annual report and decisions regarding all other proposals to the General Meeting;
  • the formulation of the principles governing the compensation system including stipulation of the salaries of the members of the Board of Management and the staff of the Internal Audit Department;
  • the stipulation of competence to authorise expenditure and decisions concerning business dealings that exceed specified limits;
  • the decision regarding the exercising of external mandates and activities by members of the Board of Management and the Internal Audit Department.

The Board of Management is the supreme governing body of the company and it represents the company vis à vis external parties, provided the Board of Directors does not appoint a special delegation for specific cases. In addition to the duties and responsibilities specified in the statutes, the Board of Management is responsible, in particular, for the following:

  • ensuring that the resolutions of the Board of Directors and its committees are implemented;
  • submitting suggestions concerning the organisation of business operations in general, and proposals for specific business matters, to the Board of Directors and the responsible committees, provided these matters exceed the scope of authority of the Board of Management, in particular with respect to:
    • the formulation and periodic review of medium-term and long-term corporate strategy and the allocation of resources to attain the corporate objectives;
    • participations, subsidiaries, business offices, branches and representative offices;
    • annual income and expenditure budget;
    • preparation of the annual report;
  • implementing of efficient processes and procedures as well as an effective internal control system to avoid and limit risks of all kind;
  • appointing persons (excluding staff of the Internal Audit Department) to sign on behalf of the Liechtensteinische Landesbank as authorised signatories, bank officers, assistant directors, deputy directors and directors in accordance with legal provisions;
  • regular reporting to the Board of Directors, the responsible committees and, above all, to the Chairman regarding, among other things, the development of business and extraordinary occurrences as well as the presentation of the draft annual report;
  • issuing of the rulings and directives necessary for the conduct of business by the Liechtensteinische Landesbank, its branches and representative offices;
  • deciding on cross-business unit transactions or business transactions which exceed the joint authority vested in the head of a business unit and the Chairman of the Board of Management;
  • coordinating the management and administration of subsidiaries and participations;
  • stipulating take-up limits for securities and value rights within the scope of primary market transactions;
  • coordinating the product offer of the Liechtensteinische Landesbank and specifying the pricing policy as well as conditions for the offered products and services;
  • deciding on or issuing rulings governing the exercise of external mandates and activities by employees, where this is not reserved to the authority of the Board of Directors;
  • performing representation duties as a full corporate body and/or as individual members of the Board of Management;
  • signing of cooperation and partnership agreements as well as membership of professional bodies and associations;
  • deciding on the acquisition and sale of properties within the scope of the general power to authorise expenditure.

3.6 Information and control instruments vis à vis the Board of Management

The Chairman of the Board of Directors participates once a month in the meetings of the Board of Management in an advisory capacity. The purpose of this is for both parties to update each other on important topics.

Principally, the Board of Directors is kept informed by the Chairman of the Board of Management. He generally attends the meetings of the Board of Directors in an advisory capacity, informs it about the development of business as well as extraordinary occurrences and provides additional information on request. The other members of the Board of Management attend meetings of the Board of Directors when matters involving them are dealt with. The Chairman of the Board of Management usually also participates in the meetings of the Group Audit & Risk Committee.

Every member of the Board of Directors can request information about all matters relating to the Liechtensteinische Landesbank at the meetings. Outside board meetings, every member of the Board of Directors can also request to see the minutes of the Board of Management meetings, information about the development of business from members of the Board of Management and, with the approval of the Chairman of the Board of Directors, also about individual business transactions.

The Chairman of the Board of Management informs the Chairman of the Board of Directors – if necessary, outside board meetings – about the development of business and extraordinary occurrences. The Chairman of the Board of Directors is responsible for informing the full Board of Directors about extraordinary occurrences.

Internal supervision and control

The LLB Group has a comprehensive and standardized management information system (MIS) for monthly reporting that comprises both quantitative and qualitative past and future-related data. It enables the Board of Directors to inform itself in a focused manner about the most important business developments, such as the business performance, earnings situation, balance sheet structure, liquidity and the risk situation.

In exercising its supervision and control functions, the Board of Directors is also assisted by the Group Internal Audit Department, which is subordinate directly to the Board. As an independent body, it examines in particular the risk management, as well as the effectiveness of internal controls and management and supervisory processes. The powers and duties of the Internal Audit are stipulated in a special set of regulations (terms of reference). The annual auditing activity is defined in accordance with the risk and controlling criteria and is guided by a long-term auditing plan. To avoid duplication of work and to optimise controls, the auditing plans are coordinated with the statutory auditors. The short-term auditing plan and the personnel requirement plan are reviewed by the Group Audit & Risk Committee and submitted to the Board of Directors for approval. In addition, Group Internal Audit regularly monitors whether the deficiencies found have been rectified and whether its recommendations have been implemented, and submits reports about this to the Group Audit & Risk Committee.

Risk management

The LLB Group attaches great importance to proactive and comprehensive opportunity/risk management. The Board of Directors has issued guidelines and regulations concerning the principles of risk management, as well as the responsibilities and procedure for approval of business transactions involving various levels of risk.

In 2011, we revised our risk policy guidelines and adapted them to the changed market conditions, the new regulatory requirements (Basel III) as well as growth in our corporate structure. We updated and established detailed qualitative and quantitative standards for risk responsibility, risk management and risk control. Furthermore, we highlighted the importance of finance and risk management by creating the position of a chief financial officer (CFO) as of the beginning of 2012 at the level of the Group Executive Board and the Board of Management. At the same time, we defined adequate organizational and methodical parameters for specifying and managing risks. With the introduction of the «Internal Capital Adequacy Assessment Process» (ICAAP) we ensure that there is always adequate capital to cover all essential risks.

The risk management specialists strive to create and maintain a uniform risk culture and risk approach. This establishes the fundamentals for an appropriate risk/return profile and an optimum allocation of capital. The Group Audit & Risk Committee invites the Chairmen of the following Group Risk Committees to a quarterly discussion of the status reports: the Group Risk Management Committee, the Group Asset & Liability Committee, the Group Credit Risk Committee and the Group Operational Risk Committee. Their reports are summarized every six months in an overall risk report of the LLB Group, which is dealt with by the Board of Directors. Further details concerning risk management can be seen in the Notes to the consolidated financial statement of the LLB Group in chapter Risk management.

Information security

All employees of the LLB Group are obliged to comply with all legal, regulatory and internal regulations. In doing so, they are supported by the Group Compliance Staff Department, whose tasks and principles are specified in a set of internal regulations. This also comprises a strict compliance management, which guarantees that all employees unreservedly comply with the laws of those countries in which the LLB Group is active. Its responsibilities include the systematic training of LLB staff and the issuing of detailed compliance directives, as well as the management of effective control and monitoring instruments. The Board of Directors, with the assistance of the Group Audit & Risk Committee, is responsible for the supervision and control of the compliance function. At least once a year, the Board of Directors reviews whether the compliance standards applicable to it and the company are sufficiently well known and whether they are permanently observed.

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