Introduction

Corporate governance; Set of processes, customs, policies, laws

Affecting the way a corporation is directed, administered or controlled. Includes the relationships among the many players involved (the stakeholders) and the goals for which the corporation is governed.

Principal players

Shareholders

Managers

Board of Directors

Other stakeholders
- Employees,
- Suppliers, - Customers, - Banks and other lenders, - Regulators, - Environment and - Community at large.

Corporate governance is a multi-faceted subject;

Accountability and fiduciary duty Implementation of guidelines and mechanisms to ensure good behavior and protect shareholders

Economic efficiency view

Aim to optimize economic results, with a strong emphasis on shareholders welfare

Stakeholder view

More attention and accountability to players other than the shareholders (e.g.: the employees or the environment).

Corporate governance; Used to monitor whether outcomes are in accordance with plans And to motivate the organization to be more fully informed in order to maintain or alter organizational activity.

Is the mechanism by which individuals are motivated to align their actual behaviors with the overall participants.

Corporate governance practices of National Development Bank (NDB)

The governance framework ; Corporate strategy - success of the overall enterprise and contribution of individuals can be measure Organized structure - assignment of responsibilities and - accountability backed by appropriate financial and managerial incentive scheme Internal control systems - internal, external audits and risk management functions independent of the business lines. Appropriate financial and managerial incentives tied to accountability and responsibility

The Board of Directors

Representatives of all shareholders and stakeholders, including depositors Board of NDB bank comprises of 11 Directors, 10 of whom including the Chairman are Non-Executive Directors. The CEO of the Bank, function as an Ex-officio Director. The position of the chairman and CEO are kept separate.

 Strong emphasis on transparency, accountability and integrity of transactions, in line with Central Bank and the Basel Committee on Banking Supervision. Entrusted with the responsibility of providing leadership in terms of Banks strategic aims. Delegated its authority to the corporate management in operational areas within clearly define limits. Met 11 times , Matters concerned review of corporate strategy, budgets and forecasts, operational and financial performance, including portfolio quality and reporting to shareholders

Audit Committee

Credit Committee

Board Sub-Committees

Nomination Committee

Strategic Issue Committee

HR Committee

Audit Committee
Serves as a means of communication between the Board of Directors,

the External Auditors, the Internal Auditors and the Management of the Bank
Internal Audit Department - continuously monitors the internal

controls system and process of the Bank - makes recommendations to improve the process where necessary.

Approves the audit plans in advance and provides a forum for discussion of issues and recommendations highlighted in the audit reports Assists the Board in providing an independent review of financial reporting

Credit Committee
Empowered to approve principles, policies, strategies,

process and control framework for the management of risk

Reviews the quality of the portfolio, large credit exposures,

adequacy of provisioning and impact of macro economic changes

Nomination Committee
Evaluate the requirements of the Board of Directors and are

responsible for the identification of suitable persons to be recommended

Strategic Issues Committee

Responsible for evaluating all major strategic decisions taken

by the bank.

Reviews the strategy development and implementation process and assesses the key business drivers

HR Committee
Responsible for the Banks market oriented remuneration policy for its staff Reviewing recruitment and promotions of the senior management and executive officers

Compliance
Bank has process to ensure compliance with applicable laws and regulations and reports to the Board Audit Committee Monthly and Quarterly Compliance Reports are submitted to the Central Bank of Sri Lanka Quarterly Compliance Reports are submitted to the Board Audit Committee of the bank Monthly and Quarterly Compliance Reports are also circulated to the Board of Directors for their information The Compliance Officer ensures compliance with regulatory requirements and with internal policies