UOB Annual Report 2002 - United Overseas Bank

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Corporate Governance Internal Audit The UOB Group has a well-established internal audit function ("Group Audit"). Group Audit assists the Board in monitoring and managing business risks and the internal controls of the Group. Group Audit operates within the framework of its Audit Charter. It has adopted the Standards for the Professional Practice of Internal Auditing set by the Institute of Internal Auditors. In addition, Group Audit was awarded the ISO 9001 (2000) Certification by the UK and USA Accreditation Services in August 2001 and has passed all semi-annual inspections for re-certification to-date. The scope of Group Audit covers the audit of all the Bank's units and operations, including its overseas branches and subsidiaries. Group Audit's responsibilities include the audits of operations, lending practices, financial control, management directives, regulatory compliance, information technologies and the risk management processes of the Bank. Group Audit adopts a structured risk-based approach in planning its audit activities annually. Under this approach, all auditable areas identified in the Group are assessed, scored and ranked against the risk factors that Group Audit has compiled. Based on the risk rating of the various auditable areas, Group Audit would prioritise its audits and allocate appropriate levels of resources accordingly. The structured audit risk assessment approach ensures that all risk-rated auditable areas are kept in view to ensure proper coverage and audit frequency. The risk-based audit plan is reviewed annually taking into account the changing risk environment. Group Audit participates actively in major systems development activities and project committees in the role of an auditor. In addition, Group Audit audits the various application systems in production, data centres, network security and the Information Technology Sector, paying special attention to key Internet banking and e-commerce application systems. Group Audit uses the Control Objectives for Information and Related Technology (COBIT) for evaluating the internal control systems of the Bank. The banking subsidiaries, United Overseas Bank (Malaysia), UOB Radanasin Bank in Thailand and United Overseas Bank Philippines, each has its own internal audit function and is also subject to its local regulations. The Head of Internal Audit in each of the banking subsidiaries reports to its respective local audit committee and to Group Audit and administratively, to the local CEO. They are required to provide a monthly report on audit activities and significant issues to the Head of Group Audit. Group Audit conducts audits of selected business areas and reviews the internal audit Mr Larry Lam Senior Vice President & Head, Group Audit Mr Larry Lam joined the Bank in 1998. He holds Bachelor of Information Systems and Master of Business Administration degrees from California State Polytechnic University. Mr Lam is a Certified Public Accountant (USA) as well as a Certified Information Systems Auditor. He brings to the Bank 17 years of internal and external auditing and information technology experience from the United States. Mr Lam is currently serving as a Governor of the Institute of Internal Auditors, Singapore. He is also a voting member of the International Banking Security Association. 22
work of each of the banking subsidiaries. Group Audit is spearheading the standardisation of the banking subsidiaries’ audit charter, practices, planning and reporting processes. There are formal procedures for Group Audit to report its audit findings to management and to the AC. Group Audit works closely with the external auditors to co-ordinate their audit work plans. The Head of Group Audit reports directly to the AC and administratively, to the Chairman and CEO. Risk Management As the management of risk is fundamental to the financial soundness and integrity of the Group, risk evaluation forms an integral part of the Group's business strategy development. The risk management philosophy is that all risks taken must be identified, measured, monitored and managed within a robust risk management framework, and that returns must be commensurate with the risks taken. The Board has overall responsibility for determining the type and level of business risks that the Group undertakes to achieve its corporate objectives. The Board has delegated to various committees the authority to formulate, review and approve policies and limits on monitoring and managing risk exposures. The major policy decisions and proposals on risk exposures approved by these committees are subject to review by the Exco. The various committees comprise top management and senior executives of the Bank who meet regularly to deliberate on matters relating to the key types of risks under their respective supervision. The key risks are credit and country risk, balance sheet risk, liquidity risk, market risk and operational risk. The Credit Committee deals with all credit as well as country/transfer risk matters, including approval of credit applications, formulation of credit policies and the review of existing credit facilities. The Asset Liability Committee formulates, reviews and approves policies, limits and strategies regarding the balance sheet structure, liquidity needs and trading activities. The Investment Committee formulates, reviews and approves policies, limits and strategies regarding the investment and management of funds. The Computer Committee determines and oversees the prioritisation of the Group's investments in IT as well as the resources committed to the development of the Group's technology strategy and infrastructure, and ensures that these are in line with the Group's business strategy. The Management Committee formulates, reviews and approves policies and strategies relating to the monitoring and management of operational risks of the Group across all business and support units, as well as those relating to anti-money laundering measures. Under the Group Operational Risk Management framework, business and support units identify significant operational risks relating to their respective areas of operations and continually assess and monitor these risks through the Operational Risk Self Assessment (ORSA) process and through Key Operational Risk Indicators (KORIs). UNITED OVERSEAS BANK 23
Page 1 and 2: ANNUAL REPORT 2002 United for Growt
Page 3 and 4: Our Mission To be a premier bank in
Page 5 and 6: Performance in Brief Profit For The
Page 7 and 8: Profit growth was derived mainly fr
Page 9 and 10: Financial Highlights Group Assets 2
Page 11 and 12: Group Return On Average Shareholder
Page 13 and 14: Corporate Information Honorary Life
Page 15 and 16: Left to right: Koh Beng Seng, Ngiam
Page 17 and 18: Left to right: Tan Kok Quan, Prof L
Page 19 and 20: Mr Francis Lee Chin Yong Managing D
Page 21 and 22: The Bank has a budget for directors
Page 23: independent and non-executive direc
Page 27 and 28: Risk Management Credit and Country
Page 29 and 30: The composition of loans and advanc
Page 31 and 32: Group Non-Performing Loans (NPLs) a
Page 33 and 34: Group NPLs and Cumulative Provision
Page 35 and 36: Group Specific Provision by Region
Page 37 and 38: Collateral Types The majority of th
Page 39 and 40: Exposure to the Five Regional Count
Page 41 and 42: Cross-Border Exposure to the Five R
Page 43 and 44: Complementing the static analysis i
Page 45 and 46: Sources of Deposits The Group has a
Page 47 and 48: The VaR calculations are performed
Page 49 and 50: Group Daily VaR Distribution for 20
Page 51 and 52: As part of the Group's comprehensiv
Page 53 and 54: The celebratory light-up linking UO
Page 55 and 56: services so as to meet the increasi
Page 57 and 58: Our subsidiary, UOB Asset Managemen
Page 59 and 60: Grow our services In line with the
Page 61 and 62: exercise, achieved well ahead of th
Page 63 and 64: processes in place that will suppor
Page 65 and 66: Group Financial Review Review of Fi
Page 67 and 68: Group Profits The Group achieved a
Page 69 and 70: Analysis of Changes in Net Interest
Page 71 and 72: Cost Savings from Integration The G
Page 73 and 74: Overview of Balance Sheet Assets Mi
Page 75 and 76:
Gross Customer Loans Analysed by Cu
Page 77 and 78:
Capital Adequacy Ratios The Capital
Page 79 and 80:
Directors’ Report for the financi
Page 81 and 82:
In addition, the following subsidia
Page 83 and 84:
Arrangements to Enable Directors to
Page 85 and 86:
Ability to Meet Obligations No cont
Page 87 and 88:
Share Options of the Bank (a) From
Page 89 and 90:
(d) (e) (f) No options have been gr
Page 91 and 92:
Statement by Directors for the fina
Page 93 and 94:
Income Statements for the financial
Page 95 and 96:
The Group The Bank Note 2002 2001 2
Page 97 and 98:
The Group 2001 Non- Share of Share
Page 99 and 100:
The Bank 2001 Non- Share Share Dist
Page 101 and 102:
Notes to the Financial Statements f
Page 103 and 104:
(e) Investments (i) Singapore Gover
Page 105 and 106:
(k) Derivative Financial Instrument
Page 107 and 108:
4 Interest Expense The Group The Ba
Page 109 and 110:
(c) Equity Compensation Benefits Op
Page 111 and 112:
11 Directors’ Fees and Other Remu
Page 113 and 114:
14 Tax (a) The tax charge to the in
Page 115 and 116:
2002 2001 Fair Value of Depreciable
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Deferred tax assets and liabilities
Page 119 and 120:
18 Non-Distributable Reserves (a) T
Page 121 and 122:
19 Revenue Reserves (a) The Group 2
Page 123 and 124:
(c) The interim dividend paid in sp
Page 125 and 126:
23 Debts Issued The Group The Bank
Page 127 and 128:
(b) Included in other government tr
Page 129 and 130:
(c) Total gross trade bills and adv
Page 131 and 132:
29 Other Assets The Group The Bank
Page 133 and 134:
32 Investments in Subsidiaries (a)
Page 135 and 136:
33 Movements in the Provisions for
Page 137 and 138:
34 Fixed Assets (a) The Group 2002
Page 139 and 140:
(e) Certain freehold and leasehold
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39 Derivative Financial Instruments
Page 143 and 144:
(c) Derivative financial instrument
Page 145 and 146:
The Group - 2001 Individual Institu
Page 147 and 148:
(b) Secondary Reporting Format - Ge
Page 149 and 150:
Discussions on the main financial r
Page 151 and 152:
The Group - 2002 Hong Singapore US
Page 153 and 154:
Other foreign exchange exposures of
Page 155 and 156:
The Group - 2002 Non- Over 7 Over O
Page 157 and 158:
The Group - 2001 Non- Over 7 Over O
Page 159 and 160:
The Group - 2002 Over 7 Over Over O
Page 161 and 162:
The Group - 2001 Over 7 Over Over O
Page 163 and 164:
Where quoted and observable market
Page 165 and 166:
Percentage of Paid-Up Capital Held
Page 167 and 168:
Page 169 and 170:
Page 171 and 172:
Investor Reference Financial Highli
Page 173 and 174:
1998 1997 1996 1995 1994 1993 1992
Page 175 and 176:
1998 1997 1996 1995 1994 1993 1992
Page 177 and 178:
Statistics of Shareholdings as at 1
Page 179 and 180:
Changes in Share Capital The follow
Page 181 and 182:
Our International Network Banking S
Page 183 and 184:
United Overseas Bank (Malaysia) Bhd
Page 185 and 186:
UOB Venture Management (Shanghai) C
Page 187 and 188:
Notes to Resolutions 4, 6, 7, 8, 9,
Page 189:
Notes: 1 Please insert the number o
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UOB Annual Report 2002 - United Overseas Bank

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