• Gabriela Nagel-Jungo is a Member of the Board of Directors of Ruetschi Technology AG, Muntelier, and of the GVZ Building Insurance Institute of Canton Zurich.
• Patrizia Holenstein is a Member of the Board of Directors of Argos Holding AG, Sarnen, as well as of Oase Holding AG, Baar und Bellerive Estates AG, Zurich.
• Urs Leinhäuser is a Member of the Board of Directors of Burckhardt Compression Holding AG, Winterthur, of Ammann Group Holding, Berne, of VAT Group, Haag, of Pensador Partner AG, Zurich, as well as Chairman of the Board of Directors of AVESCO AG, Langenthal.
• Thomas Russenberger is Chairman of the Foundation Board the "Presta Stiftung" pension fund, Eschen.
• Karl Sevelda is a member of the Supervisory Board of SIGNA Development Selection AG and SIGNA Prime Selection AG, Vienna / Innsbruck, as well as a member of the Board of Directors of RHI Magnesita NV, Arnhem (NL) / Vienna. Furthermore, he is a member of the Foundation Board of CUSTOS Privatstifung, Graz, Chairman of EcoAustria Economic Research Institute, Vienna, and Chairman of the Austrian Financial Reporting Enforcement Panel.

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.

Liechtensteinische Landesbank AG is not subject to the Swiss ordinance against excessive compensation in listed public companies (OaEC). Liechtensteinische Landesbank AG has not issued any regulations on the number of permitted activities.

3.4.1 Principles governing the election procedure

In accordance with the Law on the Liechtensteinische Landesbank of 21 October 1992, the Board of Directors of the Liechtensteinische Landesbank is composed of five to seven members, who are elected individually by the General Meeting of Shareholders for a term of office of three years; whereby a year corresponds to the period from one ordinary General Meeting of Shareholders 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 "Group regulation concerning the Group Nomination & Compensation Committee" (see point  "Composition of all Board of Directors’ committees, their duties and individual competences”) stipulates that the Board of Directors aims at continuity through the orderly renewal of the Board, succession planning, as well as through the appropriate staggering of the terms of office (no complete renewal) pursuant to current corporate governance provisions.

The Chairman of the Board of Directors is elected by the General Meeting of Shareholders. The Vice Chairman is elected from among the members of the Board of Directors by its members. New members or the Chairman of the Board of Directors elected as substitutes shall be elected for a full term of office of three years. The General Meeting of Shareholders can dismiss members of the Board of Directors on important grounds.

Georg Wohlwend was Chairman of the Board of Directors until 3 November 2020. Gabriela Nagel-Jungo, Vice Chairwoman since 2018, took over the duties and responsibilities of the Chair of the Board of Directors on 4 November 2020, and she will continue in this role until the General Meeting on 7 May 2021. Cyrill Sele has been Secretary (recorder of the minutes) since April 2013.

3.4.1 First-time election and remaining term of office

3.5.1 Separation of tasks of the Board of Directors

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

In accordance with the statutes, the Board of Directors may according to its discretion appoint committees. To support it in performing its tasks, the Board has so far implemented four standing committees: the Group Nomination & Compensation Committee, the Group Audit Committee, the Group Risk Committee and the Strategy Committee. The Board of Directors elects the committee members from among its members and appoints the chairmen. The Chairman of the Board of Directors can principallynot be elected to the Group Audit Committee or the Group Risk Committee. 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 committee members must possess the expertise for the tasks and duties they have taken on. All committee members must be independent.

Terms of office on committees correspond to the length of terms of office on the Board of Directors. Committee membership also ends when members step down from the Board of Directors

The Board of Directors has issued separate regulations for the three standing committees, the Group Nomination & Compensation Committee, the Group Audit Committee, the Group Risk Committee, which stipulate their duties and individual competencies.

The committees can invite outside persons as experts and entrust LLB staff, in particular, with administrative duties.

Group Audit Committee

Das Group Audit Committee ist im Sinne von Art. 22 Abs. 2a BankG aufgesetzt und unterstützt den The Group Audit Committee is set up pursuant to Art. 22, Para. 2a of the Banking Law and supports the Board of Directors in fulfilling the duties and responsibilities vested in it by banking law with respect to its duty of overall direction of the company, as well as supervision and control (Art 23 banking law).

The Group Audit Committee regulation lays down the organization, as well as the competencies and responsibilities of the Committee, in so far as these are not prescribed by law, the statutes or the rules of procedure. The following persons are members of the Group Audit Committee:

According to Appendix 4.3 of the Banking Ordinance, "Guidelines concerning internal controls according to Art. 7a and Art. 21c ff. of the Banking Law", the Group Audit Committee mainly concerns itself with the methodology and quality of the external auditors, the quality of financial reporting, as well as the collaboration between the internal and external auditors and their independence.

The Group Audit Committee assesses the quality and integrity of the financial reporting including the structure of the financial accounting function, the financial controlling and financial planning.

This includes:

• Petitioning the Board of Directors about whether the LLB Group’s Consolidated Annual Report and the financial statement of the parent bank can be presented to the General Meeting of Shareholders and published; and whether the Consolidated Interim Financial Report can be published;
• Monitoring and assessing the suitability and effectiveness of the internal control system in the area of financial reporting;
• Assessing the documentation regarding forthcoming amendments of the accounting principles;
• Evaluating the budgeting process as well as the budget proposal of the Group Executive Board for the following year and submitting a proposal to the Board of Directors as the approval body.

Group Risk Committee

The Group Risk Committee is set up pursuant to Art. 22, Para. 2a of the Banking Law and Art. 21e of the Banking Ordinance and supports the Board of Directors in fulfilling the duties and responsibilities vested in it by banking law with respect to its duty of overall direction of the company, as well as supervision and control (Art 23 banking law).

The Group regulation concerning the Group Risk Committee lays down the organization, as well as the competencies and responsibilities of the Committee, in so far as these are not prescribed by law, the statutes or the rules of procedure. The following persons are members of the Group Risk Committee:

The Group Risk Committee has the following risk-related tasks:

• The provision of advice to the Board of Directors on the current and future overall risk tolerance and strategy of the LLB Group;
• The supporting of the Board of Directors in monitoring the implementation of the risk strategy by the Group Executive Board;
• The monitoring of the integrity and suitability of the risk management in the LLB Group, which is based on risk policy, in particular, in regard to market, credit and liquidity risks, as well as operational risks;
• The assessment of the integrity and suitability of the internal control system in regard to the identification, measurement, limitation and monitoring of risks. In the areas of compliance and risk control this includes, in particular, the assessment of the precautions that are to ensure the observance of the legal (e.g. capital adequacy, liquidity and risk distribution regulations) and bank-internal (e.g. risk policy framework) provisions. In the area of operational risk management this encompasses, in particular, the annual review of the OpRisk Assessment of the LLB Group, which is based on the risk taxonomy;
• The supporting of the Board of Directors to formulate and implement the risk-relevant Group rulings and directives issued by it as well as the relevant guidelines and processes that are set down in these rulings and directives;
• The assessment, at least on an annual basis, of the Groupwide policy on risks (e.g. risk policy framework). In doing so, the concerned authorities are to be consulted and the suggestions and proposals of the Group Executive Board are to be considered. A proposal is then to be made to the Group Board of Directors as the approving authority. All risk-relevant Group rulings and directives that have to be approved by the Group Board of Directors are to be treated accordingly;
• The assessment of the results of the internal capital adequacy assessment process (ICAAP) and the internal liquidity adequacy process (ILAAP);
•  The examination of the risk propensity within the scope of the risk-bearing capacity statement. This is performed both from the perspective of the going concern and also of the gone concern. Based on the risk appetite, the Group Risk Committee can propose adjustments to the limits system to the Board of Directors;
• The assessment of the overall risk situation and supervising adherence to the limits set by the Board of Directors;
• The discussion and assessment of the annual risk report of the LLB Group and the submission of a proposal to the Group Board of Directors as the approving authority;
• The discussion and assessment of the annual legal and compliance risk report of the LLB Group and the submission of a proposal to the Group Board of Directors as the approving authority;
• The examination of whether the pricing of the investments and liabilities takes into reasonable consideration the business model and the risk strategy of the LLB Group and, if this is not the case, the submission of a plan of appropriate measures;
• The examination of whether the incentives offered in the compensation system take into consideration risk, capital, liquidity and the probability and timing of earnings.

Group Nomination & Compensation Committee

The Group Nomination & Compensation Committee is set up pursuant to Art. 22, Para. 2a of the Banking Law and Art. 29b of the Banking Ordinance, as well as Appendix 4.4.2 of the Banking Ordinance "Compensation Committee and Risk Committee". It supports the Board of Directors in fulfilling the duties and responsibilities vested in it by banking law with respect to its duty of overall direction of the company, as well as supervision and control (Art 23 Banking Law).

The Group regulations concerning the Group Nomination & Compensation Committee regulate the organisation, working methods, as well as the competences and responsibilities of the committee, in so far as these are not prescribed by law, the statutes or the rules of procedure. The following persons are members of the Group Nomination & Compensation Committee:

On behalf of the Board of Directors and the Group Executive Board, the Group Nomination & Compensation Committee strives to achieve the following goals while complying with the applicable principles of corporate governance:

• A balanced composition of the bodies taking into consideration the professional knowledge and skills, diversity and personal suitability required by the bank;
• Continuity thanks to planned renewal and succession as well as a reasonable staggering of terms of office (no complete renewal);
• The smooth transfer of functions and official responsibilities thanks to a systematic introduction to the specific tasks and operations of the bank.

Furthermore, the Group Nomination & Compensation Committee is responsible for the following tasks and duties:

• The annual evaluation of the structure, size, composition and performance of the Board of Directors and the Group Executive Board and, if necessary, the recommendation of changes;
• The annual evaluation of the knowledge, abilities and experience of the individual members of the Board of Directors and the Group Executive Board, as well as its bodies;
• The submission of the evaluation to the Board of Directors and the Group Executive Board;
• The review of the procedure adopted by the Board of Directors in selecting and appointing the Group Executive Board, as well as submission of recommendations to the Board of Directors;
• The review of the remuneration of the members of the Group Executive Board and senior executives in the areas of risk management and compliance;
• The ensuring that the decision-making process of the Group Executive Board and the Group Board of Directors cannot be influenced by an individual person or a group of persons in a manner detrimental of the LLB Group's interests;
• The formulating of compensation regulations for the parent bank and the LLB Group;
• The preparation of decisions regarding the compensation of the members of the Board of Directors and the Group Executive Board, as well as of other employees, in so far as their compensation is to be determined by the Board of Directors in accordance with the compensation regulations and taking into consideration the long-term interests of stakeholders, investors and other parties;
• The establishment of the guidelines for the human resources policy.

The Group Nomination & Compensation Committee ensures an expedient and smooth procedure for the nomination, election and re-election of the members of the Board of Directors. It is responsible, in particular, for the following tasks:

• The development of criteria for the selection, election and re-election of candidates;
• the selection and evaluation of candidates as well as the submission of election proposals to the Board of Directors for submission to the General Meeting of Shareholders in accordance with the developed criteria;
• The development of succession plans and the periodic review of them, both in the case of the end of a term of office and in the case of an early stepping down of members;
• Ensuring the further training of the entire Board of Directors;  
  
• Planning the introductory phase for new members.

The Group Nomination & Compensation Committee ensures an expedient and smooth procedure for the election and re-election of the members of the Group Executive Board, as well as for the appraisal of their performance . It is responsible, in particular, for the following tasks:

• The development of criteria for the selection and appointment of candidates for the attention of the Board of Directors;
• The selection and evaluation of candidates as well as the submission of proposals to the Board of Directors at the request of the Group CEO in accordance with the developed criteria;
• The development and application of criteria for the performance appraisal of the Group Executive Board in corpore as well as of individual members;
• The development of succession plans and the periodic review of them, both in the case of the age-related or contingency stepping down of members of the Group Executive Board;
• Ensuring the further training of the members of the Group Executive Board.

The Group Nomination & Compensation Committee ensures an expedient and smooth procedure for the appointment of the Head of Group Internal Audit, as well as for the appraisal of his performance. It has the following tasks in particular:

• The development of criteria for the selection and appointment of candidates for the attention of the Board of Directors;
• The selection and evaluation of candidates as well as the submission of proposals to the Board of Directors in accordance with the developed criteria;
•  The development and application of criteria for the performance appraisal of the Head of Group Internal Audit, this in collaboration with the Chairman of the Board of Directors and the Chairman of the Group Audit Committee;
• The development of succession plans and the periodic review of them, both in the case of the age-related or contingency stepping down of the Head of Group Internal Audit, this in collaboration with the Chairman of the Board of Directors and the Chairman of the Group Audit Committee.

The nomination of delegates in the Board of Directors’ committees of the LLB Group and associated companies should ensure the implementation of the Group strategy and a uniform external perception of the LLB Group.

The Group Nomination & Compensation Committee is responsible for fulfilling the tasks defined in the Group regulation "Fit & Proper – assessment of the members of the Group Executive Board, the Board of Directors and the holders of key functions".

The Group Nomination & Compensation Committee has the following tasks, in particular, in relation to compensation:

• the formulation of recommendations, both for the definition of basic principles and for the stipulating of regulations, regarding the compensation policy of the members of the Board of Directors, of the Group Executive Board and of other employees of the bank for submission to the Board of Directors;
•  the formulation of proposals for the annual review of the compensation of the members of the Board of Directors, of the Group Executive Board and of the Head of Group Internal Audit for submission to the Board of Directors in accordance with the existing principles and regulations;
• the annual review of the Group regulation "Compensation standards", the LLB AG regulation of the same name, as well as the Group regulation “Fit & Proper – assessment of the members of the Group Executive Board, the Board of Directors and the holders of key functions" for submission to the Board of Directors;
• the annual review of the compensation of the members of the Board of Directors, the Group Executive Board, the Head of Group Internal Audit and senior executives in risk management and compliance in accordance with the Group regulation "Compensation standards" and the parent bank regulation of the same name for submission to the Board of Directors in accordance with the existing principles and regulations.

The Group Nomination & Compensation Committee has the following responsibilities in relation to strategic human resources management:

•  the stipulation and periodic review of the principles of human resources strategy;
• the review of the processes for the systematic development of employees and executives.

Strategy Committee

It is one of the tasks of the Board of Directors to formulate and periodically evaluate the LLB Group’s strategy. In this task it is supported by the Strategy Committee. The members of the committee are:

Representation in foundations

Thomas Russenberger and Richard Senti have seats on the Board of Trustees of the Personnel Pension Fund Foundation of Liechtensteinische Landesbank AG as employer representatives. Thomas Russenberger has been Chairman of the Board of Trustees since December 2018.

3.5.3 Working methods of the Board of Directors and its committees

Board of Directors

A meeting of the Board of Directors is convened by invitation of its Chairman as often as business requires, but at least four times a year. 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 at least five business days prior to the date set for the meeting. Meetings of the Board of Directors can also be called with a shorter period of notice if there is a pressing matter. It is within the discretion of the Chairman to determine the urgency of that matter. Board meetings are chaired by the Chairman. A quorum of the Board of Directors is constituted when a majority of the members is present. Resolutions shall be passed by a simple majority of votes. In the case of a tie, the Chairman shall have the casting vote. In urgent cases, resolutions may be passed by circular. Unanimity is required for resolutions to be dealt with by circular. A resolution passed by circular are just as binding as resolutions passed at a Board of Directors meeting. The Chairman of the Board of Directors shall promptly inform the other Board members about the outcome of the circular vote.

Meetings of the Board of Directors can be held where the members are physically present, or as telephone or video conferences. Minutes will be taken of meetings held as telephone or video conferences as well as the resolutions passed in the same manner as at meetings where members are physically present.

The members of the Board of Directors are to regulate their personal and business matters in such a manner that, as far as possible, actual or potential conflicts of interest are avoided. The members of the Board of Directors are obliged to inform the Chairman in cases of real or potential conflicts of interest. This is regardless of whether the real or potential conflicts of interest are of a general nature or related to a matter to be discussed at a meeting. The Chairman of the Board of Directors shall decide whether there are grounds for a recusal of the member. In such a case, that member may participate in the discussion of the matter in question but may not vote on it.

During the 2020 business year, the Board of Directors of Liechtensteinische Landesbank AG held a total of eleven ordinary and five extraordinary meetings. The meetings lasted between 0.75 and 7.00 hours. A closed meeting lasting half a day was conducted by the Board of Directors in collaboration with the Group Executive Board following the ordinary meeting in June 2019. The closed meeting focused on the annual strategy review of StepUp2020, as well as the IT and sustainability strategy. The subjects of the extraordinary board meetings were the corona pandemic and the resignation of the Chairman of the Board of Directors.

Group Audit Committee

The members of the Group Audit 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 and the minutes of the last meeting to the meeting’s participants at least five days prior to the date of the meeting. The members of the Group Audit Committee, the Group CEO, the Group CFO, the external auditors, the Head of Group Internal Audit can request the Chairman of the Group Audit Committee to convene extraordinary meetings. To deal with specific issues, the Group Audit Risk Committee can also invite other persons, such as members of the Group Executive Board, the Chairman of the Group Risk Committee, other staff of the LLB Group companies, representatives of the external auditors or external consultants. The Group CEO, the Group CFO and the Head of Group Internal Audit usually participate in the meetings in an advisory capacity. The other members of the Board of Directors, who are not members of the Group Audit Committee, are entitled to participate in the meetings.

During the 2020 business year, the members of the Group Audit Committee met for eight meetings. No external experts were called in during the business year.

Group Risk Committee

The members of the Group 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 and the minutes of the last meeting to the meeting’s participants at least five days prior to the date of the meeting. The members of the Group Risk Committee, the Group CEO, the Group CFO, the external auditors, the Head of Group Internal Audit and the Head of Group Credit and Risk Management can request the Chairman of the Group Credit & Risk Committee to convene extraordinary meetings. To deal with specific issues, the Group Risk Committee can also invite other persons, such as members of the Group Executive Board, the Chairman of the Group Risk Committee, other staff of the LLB Group companies, representatives of the external auditors or external consultants. The Group CEO, the Group CFO, the Head of Group Internal Audit and the Head of Group Credit & Risk Management usually participate in the meetings in an advisory capacity. The other members of the Board of Directors, who are not members of the Group Risk Committee, are entitled to participate in the meetings.

During the 2020 business year, the Group Risk Committee held four ordinary meetings. No external experts were called in during the business year.

Group Nomination & Compensation Committee

The Group Nomination & Compensation Committee convenes as often as business requires, but at least twice a year. The meetings are convened by the Chairman. He compiles an agenda prior to each meeting, which is sent together with the necessary information and the minutes of the last meeting to the meeting’s participants at least five days prior t the meeting.

To deal with specific issues, the Group Nomination & Compensation Committee can also invite other persons, such as members of the Group Human Resources Department, representatives of the external auditors or external consultants. The Group CEO usually participates in the meetings in an advisory capacity; except when topics are discussed that particularly concern the business area of Group Internal Audit or the performance assessment of the Group CEO and the establishment of his compensation. Furthermore, the Head of Group Human Resources and the Head of Group Internal Audit usually participate in the meetings in an advisory capacity. The members of the Board of Directors, who are not members of the Group Nomination & Compensation Committee, have the right to attend the meetings.

During the 2020 business year, the Group Nomination & Compensation Committee held seven meetings.

The Strategy Committee

The Strategy Committee held five meetings in 2020 at which preparations were made for the meetings of the Board of Directors with Group Executive Management to discuss organic and inorganic growth options, as well as the relevant parameters for the development of the follow-up strategy to StepUp 2020.

Resolutions at the committee meetings

The committees carry out solely preparatory or advisory tasks on behalf of the Board of Directors. Resolutions at the meetings are passed with an absolute majority of the members present. The attendance of more than half of the members is required for a quorum. Only the members of the committees 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’s participants and the members of the Board of Directors. The Chairmen of the committees inform the Board of Directors about the agenda dealt with at the last committee meeting and submit proposals for those points requiring resolutions. Furthermore, they submit an annual activity report to the Board of Directors, which contains a summary of their activities and of pending matters.

Self-evaluation

In general, the Board of Directors evaluates its own performance annually and also that of the committees. This evaluation serves to determine whether the Board of Directors and the committees are functioning appropriately. The results of the self-evaluation are recorded in writing.

In mid 2020, the Board of Directors carried out a self-evaluation on the basis of a questionnaire. The consolidated responses were discussed at the meeting in June. The overall evaluation was very positive. The collaboration between the board members is very good. The culture of open and frank discussions is constructive and effective. The interdisciplinary composition of the Board and the range of ages are regarded as very positive. In addition to the many items on the agenda to be reviewed and assessed, in future the Board of Directors would like to deal more frequently with creative and formative elements.

The Board of Directors is responsible for the direction, supervision and control of the LLB Group. It is ultimately responsible for the success of the LLB Group as well as for attaining sustained value for both shareholders and employees, as well as protecting the Group’s reputation. It makes decisions concerning the LLB Group’s corporate strategy and assumes final responsibility for monitoring the conduct of business. It stipulates the risk policy of the LLB Group and monitors compliance with it. Furthermore, the Board of Directors monitors compliance with applicable legal provisions and regulations. At the request of the Group Executive Management, the Board of Directors determines the financial and human resources required to implement the corporate strategy. The Board of Directors must keep itself informed in an appropriate manner about the financial and risk situation of the LLB Group. This also applied to the decisions made within the Group companies, which in practice have an effect on the business activity of the LLB Group.

Within the scope of the duties and responsibilities defined in the Statutes, the Board of Directors has the following tasks:

• Strategy and management;
• Organisation;
• Financial management;
• Risk policy and management.

In relation to strategy and management, the Board of Directors is responsible, in particular, for the following tasks:

• Specifying the corporate mission statement and values;
• Specifying the strategy and its periodic review;
• Specifying the management structure;
• Deciding on important structural changes;
• Deciding about expanding into important new business areas or the withdrawal from existing important business areas;
• Approving the acquisition or sale of participations in other companies as well as the establishment or liquidation of LLB Group companies and the nomination of their Boards of Directors;
• Approving the purchase or sale of real estate having a purchase price of more than CHF 20 million (or equivalent);
• Assignment of tasks and responsibilities to the Group Executive Management;
• Approving all business matters and business decisions that exceed the authority of the powers delegated by the Board of Directors;

Concerning the organization of business activities of the LLB Group and the required concomitant issuing of rulings and directives, the Board of Directors is, in particular, responsible for:

• The regular monitoring of corporate governance principles and management structures laid down in the rules of procedure;
•  The issuing of rulings and directives that are binding Group-wide, subject to respective applicable local law and the declaration of their binding character for the respective Group company, as well as the regulations of LLB;
• The organisation and management of Group Internal Audit including the issuing of the “Group Internal Audit» Group regulation, approval of the annual auditing plan and the annual auditing objectives, discussion of the reports submitted by Group Internal Audit and the external auditors, and approval of the reports concerning measures implemented on the basis of audit reports and their monitoring;
• The selection, appointment and dismissal of the Group CEO, the Vice Group CEO, the other members of the Group Executive Board and the Head of Group Internal Audit, the review of their performance, including succession planning;
• The supervision of the Group CEO and the other members of the Group Executive Board with regard to compliance with legal provisions, statutes and regulations;
•  The appointment of the for the committees of the Board of Directors from among its members and the appointment of the Chairman;
• The regularization of the compensation principles within the LLB Group;
• The specification of a process for selecting and evaluating the suitability of candidates for key functions;
•  The issuing of a code of conduct for employees and corporate bodies in relation to dealing with conflicts of interest, as well as rules to prevent the use of confidential information;
• The issuing of a code of conduct for employees and monitoring compliance with it;
• The approval of the composition of the Boards of Directors in the Group companies with the exception of LLB AG;
• Deciding about, or approving, the avocational activities of members of the Group Executive Board and the Head of Internal Audit;
• The preparation of the General Meeting of Shareholders and the implementation of its resolutions.

Concerning the ultimate liability for the organization of accounting, financial control and financial planning of the LLB Group, the Board of Directors is, in particular, responsible for:

• The approval of the applicable accounting standards;
• The approval of medium-term planning and budgeting;
• The overall supervision of the complete equity and liquidity management system;
•  The approval of the Consolidated Annual Report with the consolidated financial statement and the consolidated management report;
•  The approval of the Consolidated Interim Reporting;
• The ensuring of regular reporting on the course of business and extraordinary occurrences;
• The stipulation of the competence to authorize expenditure;
• The supervision of the Group’s business development.

Concerning the ultimate responsibility for risk policy and management, the Board of Directors is, in particular, responsible for:

• The definition of the risk policy framework as well as the regular review of the strategies and principles for the acceptance, management, monitoring and mitigation of the risks, to which the LLB Group is exposed;
• The issuing of Group regulations concerning the fundamentals of risk management, determination of risk appetite, risk control as well as accountability and the processes for the approval of risk-related transactions, whereby interest fluctuation, credit, counterparty, cluster, liquidity, market price and operational risks, as well as legal and reputational risks, in particular, are to be identified, controlled, reduced and monitored;
• The definition of the risk-bearing capacity and decision on the maximum ceiling of the risk cover amount;
• The definition of a maximum debt ratio;
• The definition and monitoring of the maximum market risk to be borne;
• The responsibility for an adequate market and liquidity risk management as an integral part of the risk policy;
• The approval of the recovery plan;
•  The approval of the capital plan within the scope of medium-term planning;
• The stipulation of overall and individual limits at least once a year;
• The approval of quarterly reports, including comments on the risk situation;
• The issuing of a Group regulation concerning the fundamentals of a compliance organisation within the LLB Group for the purpose of creating and implementing a common understanding of compliance;
• The stipulation of credit competences and the regulation of transactions for the account of corporate bodies and employees as well as resolutions regarding large commitments including cluster risks;
• The evaluation of the effectiveness of the internal control system;
•  The ensuring of the prompt provision of information in the event of imminent risks or losses having significant implications;
• The decision concerning capital market refinancing through the borrowing of outside capital;
• The approval of the initiation of legal actions involving claims of over CHF 10 million, as well as judicial and extrajudicial settlements involving amounts of over CHF 10 million;
• The protection of the LLB Group’s reputation.

The Group Executive Board, under the leadership of the Group CEO, is responsible for the management of the LLB Group. It is composed of six members, the three heads of the market divisions: Retail & Corporate Banking, Private Banking and Institutional Clients, as well as the Group CFO, the Group COO and the Group CEO. The Group Executive Board meets as often as business requires, but at least once a month.

The LLB Group conducts its business within a framework of the three market-oriented divisions: Retail & Corporate Banking, Private Banking and Institutional Clients as well as the shared service functions of the Group CFO and Group COO. The heads of the divisions are responsible for the operative management of the divisions.

The heads of the market-oriented divisions are responsible for the cross-divisional collaboration of their business areas and they represent the LLB Group vis-à-vis the general public and other stakeholders in their relevant markets, and vis-à-vis the relevant client groups. Together with the heads of the Group CFO and Group COO Divisions and the heads of the business areas, they implement and coordinate the strategy of their divisions.

The heads of the divisions create the organisational prerequisites in order to manage the business areas assigned to their divisions over all the LLB Group companies. They actively coordinate all business activities with each other.

Taking into consideration prevailing local law, the Group Executive Board issues the regulations necessary for the operation and management of the divisions, provided this does not lie within the competence of the Board of Directors. These regulations may be binding for individual or several divisions of LLB Group companies.

In addition to the powers and duties set forth in the statutes, the Group Executive Board is responsible, in particular, for:

• Operative management;
• Implementation of the strategy;
• Risk management.

The Group Executive Board:

• Implements the Group regulations and the resolutions of the Board of Directors;
• Informs the Board of Directors and its committees, but in particular, its Chairman regularly about the course of business and important events;
• Issues further regulations for the management of business;
• Coordinates the LLB Group’s range of products as well as specifying the pricing policy and the terms and conditions for the products and services offered;
• Approves the setting up and closing of business offices, bank branches and representative offices, provided this is explicitly envisaged in the strategy;
• Is authorised to approve investments for personnel expenses and general and administrative expenses of more than CHF 0.25 million up to CHF 1 million in specific cases, and investments of from CHF 0.5 million up to CHF 3 million (with prior notification of the Chairman of the Board of Directors) which are not included in the budget adopted by the Board of Directors. In such a case, the Chairman decides about any matters to be presented to the Board of Directors;
• Continuously monitors the developments within the divisions and business areas, as well as initiating problem-solving measures;
• Continuously monitors the financial reporting and risk situation.

The Group Executive Board:

• Submits suggestions concerning the organisation of business activities of the LLB Group in general and proposals for specific business matters of the LLB Group to the Board of Directors and the responsible committees, provided these matters exceed the scope of authority of the Group Executive Board, in particular, with respect to:
• The definition and periodic review of the LLB Group’s corporate strategy as well as the allocation of resources to implement the strategy and attain corporate objectives;
• Participations, Group companies, business offices, branches and representative offices; medium-term planning;
• Medium-term planning;
•  Annual expenditure and income budget;
•  Financial reporting and the annual report;
• Setting the objectives for business activities and the course of business as it executes the strategy approved by the Board of Directors;thereby ensuring that decision-making is timely and of a high quality as well as monitoring the implementation of the decisions made.

The Group Executive Board:

• Implements an efficient structure and organisation and an effective internal control system for the prevention and limitation of risks of all types;
• Within the risk policy framework of the LLB Group has the following tasks, in particular:
• Implementing and reviewing compliance with the risk policy and risk regulations approved by the Board of Directors;
• Managing all significant risks;
• Ensuring a reasonable valuation of assets;
• Using external and internal models to manage and monitor key risks;
• Ensuring comprehensive reporting to the Board of Directors regarding the risk situation in accordance with the provisions of risk policy;
• Deciding on the composition of the Risk Committee of the LLB Group.

The Group CEO is the highest authority within the LLB Group management structure. He is, in particular, entirely responsible for the development and implementation of the corporate strategy of the LLB Group and the divisions as approved by the Board of Directors. The Group CEO represents the Group Executive Board vis-à-vis the Board of Directors and externally.

The Group CEO

• Ensures the coherent management and development of the LLB Group as well as the implementation of the strategy that is stipulated and periodically monitored by the Board of Directors;
• Sets objectives for business activities and the course of business;
• Ensures high-quality and timely decision-making;
• Ensures that the objectives set by the members of the Group Executive Board comply with management objectives;
• Submits recommendations to the Board of Directors concerning compensation principles within the LLB Group;
• Monitors the implementation of any decisions that are made;
• Monitors the implementation of the resolutions made by the Board of Directors and its committees;
• Is responsible – in coordination with the Chairman of the Board of Directors – for concrete succession planning within the Group Executive Board and submits proposals to the Board of Directors regarding the nomination of members of the Group Executive Board with the exception of the Group CEO.

The Chairman of the Board of Directors is informed about the agenda of Group Executive Board meetings and receives the minutes. He participates in its meetings in an advisory capacity as required. The purpose of this is for both parties to update each other and form their opinions on important topics.

Basically, the Board of Directors, the individual committees and especially the Chairman of the Board are kept informed about the activities of the Group Executive Board by the Chairman of the Group Executive Board. The members of the Group Executive Board report to the Group CEO for the attention of the Board of Directors. The Group CEO ensures that the Chairman of the Board of Directors and the Board of Directors as well as its committees are informed in a timely and appropriate manner. The Group CEO regularly reports to the Board of Directors about current business developments and important business issues, including all matters that fall within the remit of the Board of Directors.

The Group CEO generally attends the meetings of the Board of Directors in an advisory capacity, informs it about the development of business as well as about extraordinary occurrences and provides additional information on request. The Group CFO regularly informs the Board of Directors about finances and risk management as well as about the proper implementation of the Bank’s risk policy. The other members of the Group Executive Board attend meetings when matters involving them are dealt with. The Group CEO and the Group CFO usually participate in the meetings of the Group Audit Committee and the Group Risk Committee in an advisory capacity.

If required, the Group CEO can inform the Chairman of the Board of Directors outside of meetings of the Board of Directors about the course of business and special occurrences. The Chairman of the Board of Directors informs the other Board members about important events.

During meetings, each member of the Board of Directors can request information about all matters relating to the LLB Group. Outside of meetings, each member of the Board of Directors can also request information about the course of business from members of the Group Executive Board and, with the approval of the Chairman of the Board of Directors, also about individual business transactions.

Internal supervision and control

The LLB Group has standardized bank management systems that generate quantitative and qualitative data for the Group Executive Board and in a summarized form for the Board of Directors. This enables the Board of Directors to inform itself about significant business developments, such as the course of business, earnings situation, budget utilisation, balance sheet development, liquidity, risk situation and the fulfilment of equity requirements. The Board of Directors discusses and approves the annotated reports on finances and risk management on a quarterly basis.

In exercising its supervision and control functions, the Board of Directors is also assisted by Group Internal Audit, which is subordinate directly to the Chairman of the Board of Directors. Group Internal Audit has open, direct and unrestricted access to the Chairman of the Boards of Directors of the LLB Group companies, as well as to the Group Audit Committee and the Group Risk Committer. It is independent in its reporting and is not subject to any directive or other limitations, and within the LLB Group, it has an unrestricted right to peruse all information and documents. Group Internal Audit assumes the function of the internal auditor for all Group companies that are required to prepare a consolidated statement of accounts and submits the reasons for its decision to the Board of Directors or the respective Board of Directors of the Group company as to whether there exists an effective internal control system and whether risks are being adequately monitored. If a Group company has in place its own internal audit function, this is functionally subordinate to the Head of Group Internal Audit. Group Internal Audit provides independent, objective and systematic reporting services regarding:

• The effectiveness of processes for defining the strategy and principles of risk policy as well as the general compliance with the approved strategy;
• The effectiveness of governance processes;
• The effectiveness of the risk management, including the evaluation of whether risk identification and management are adequate;
• The effectiveness of internal controls, in particular, whether these are adequate in relation to the risks taken;
•  If necessary, the effectiveness and sustainability of measures for reducing and minimizing risks;
• The reliability and completeness of financial and operational information (that is, whether activities are correctly and fully documented) as well as the quality of the underlying data and models;
• Compliance with legal and regulatory requirements as well as with internal rulings and directives and agreements.

The powers and duties of Group Internal Audit are stipulated in a special set of regulations. The planning of annual auditing is carried out on the basis of the evaluation of risks and controls and is guided by a long-term auditing plan.

To avoid duplication of work and to optimize controls, the auditing plans are coordinated with the statutory auditors. The auditing plan and the personnel requirement plan are reviewed by the Group Audit Committee and submitted to the Board of Directors for approval. 

The results of every examination are recorded in a written audit report. The audit reports of the parent bank and all Group companies are sent to the Chairman of the Board of Directors, the members of the Group Audit Committee and the Group Risk Committee, the Group Executive Board, the Head of Group Credit & Risk Management, as well as to the Head of Group Legal & Compliance and the external auditors. The Head of Group Internal Audit compiles a report on a quarterly basis for submission to the Group Audit Committee and the Group Executive Board as well to the responsible committees of the other banks of the LLB Group. He also compiles a written activity report annually for submission to the Board of Directors. Particular findings that need to be dealt with immediately are communicated to the Chairman of the Board of Directors without delay by the Head of Group Internal Audit. In addition, Group Internal Audit regularly monitors the rectification of any deficiencies found and the implementation of its recommendations; it submits reports about this procedure to the Group Audit Committee.

Risik management

The proactive approach towards risks is an integral part of the LLB Group’s corporate strategy and ensures the Group’s risk-bearing capacity. The LLB Group attaches great importance to proactive and comprehensive opportunity / risk management. As part of the risk policy, the Board of Directors issues guidelines and regulations concerning the principles of risk management. In this way, the Board of Directors sets qualitative and quantitative standards for risk responsibility, risk management, risk reduction and risk control.

The LLB Group manages risks according to strategic objectives. It evaluates and manages risks through the application of detailed, qualitative and quantitative standards for risk responsibility, risk management and risk control. The LLB Group utilises the "Internal Capital Adequacy Assessment Process" (ICAAP) and "Internal Liquidity Adequacy Assessment Process" (ILAAP) to deal with equity capital and liquidity issues, both of which are extremely important factors for banks. These processes ensure that adequate capital and liquidity to cover all essential risks are always available.

The Group Credit & Risk Management Business Area is responsible for the risk management function. It monitors the risks to which the LLB Group is exposed, or could be exposed, including risks arising from the macro-economic environment. Group Credit & Risk Management is independent of the operative business areas and, within the regulatory framework, it has an unrestricted right to all information and documents. The Head of the Group Credit & Risk Management Business Area has direct access to the Group Risk Committee and reports directly to the Group CFO. It principal duties and responsibilities are: 

• Ensuring a complete overview of the entire risk spectrum, especially of the character of the existing types of risk and the risk situation;
• Formulation of the risk policy as well as the preparation and analysis of all important decisions regarding risk management;
• Identification and measurement of significant risks as well as reporting to the Board of Directors and the Group Executive Board;
• Continual checking of the effectiveness of risk management measures.

The Group Risk Committee invites the persons responsible for risk management to a quarterly discussion of the risk status. Their reports are summarised every six months in an overall risk report of the LLB Group, which is submitted to the Board of Directors. Further details of risk management can be found in the chapter “Financial and risk management”, as well as in the notes to the consolidated financial statement of the LLB Group.

Compliance

The employees of the LLB Group are obliged to comply with all legal, regulatory and internal regulations as well as to observe common market standards and professional codes of conduct. The Board of Directors is responsible for organising and ensuring Group-wide compliance. For this purpose, it has issued a Group regulation entitled "Compliance management at the LLB Group" dealing with the essentials of compliance organisation for the purpose creating and implementing a common understanding of the principles of compliance. The Group Executive Board is responsible for the implementation and observance of compliance. In doing so, it is supported by the compliance functions within the LLB Group. These functions are led by the Head of the Group Legal & Compliance Business Area, and are independent of the operative business areas. The Head of Group & Compliance has direct access to the Group Risk Committee. He compiles an annual written activity report for the Group Risk Committee and the Board of Directors, and submits a risk analysis to them twice a year with an estimate of the most significant compliance risks and the measures and recommendations to be considered as a result. Outside the ordinary reporting periods, he promptly informs the Group Risk Committee about serious infringements of compliance regulations, and about issues of great economic or other significance, and supports it in implementing the appropriate instructions or measures (see chapter "Financial and risk management").