• Georg Wohlwend is a Member of the Board of Directors of Neutrik AG, Schaan, and Seed X Liechtenstein AG, as well as Chairman of the Board of Directors of Alegra Capital AG, Vaduz.
• Richard Senti is Chairman of the Board of Directors of the Hoval Group, Vaduz and member of the Board of Directors of Kaiser AG, Schaanwald.
• Thomas Russenberger is Chairman of the Foundation Board of 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, a Member of the Board of Directors of RHI Magnesita NV, Arnhem (NL) / Vienna, and a partner in Andlinger & Company GmbH, Vienna. Furthermore, he is Chairman of the Foundation Board of CUSTOS Privatstiftung, Graz, and Vice Chairman of EcoAustria Economic Research Institute, Vienna.

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). We have not issued any statutory rules on the number of permitted activities. These are governed in the Group regulation “Fit & Proper – Assessment of the members of the Board of Management, the Board of Directors and the holders of key functions”. Accordingly, the following upper limits for time-consuming

• one mandate on a board of management with two mandates on a board of directors
• four mandates on a board of directors
• Board of management and board of directors mandates within the same group count as one mandate. Mandates as a representative of an EU or EEA member state are excluded.
• Exceptions may, with the approval of the FMA, be authorised by the Group Board of Directors.

3.4.1 Principles governing the election procedure

In accordance with the Law on Liechtensteinische Landesbank of 21 October 1992, the Board of Directors of Liechtensteinische Landesbank is composed of five to seven members, who are elected individually by the General Meeting of Shareholders. Their term of office lasts three years, whereby one year is understood to be the period from one ordinary General Meeting of Shareholders to the next. Members can be re-elected for a further two terms. After serving three terms of office, the Chairman of the Board of Directors may, by way of exception and provided the circumstances so warrant, be re-elected for an additional term not exceeding two years.

The Group regulation “Group Nomination & Compensation Committee” (see point 3.5.2) stipulates that the Board of Directors should ensure continuity through planned renewal and succession as well as a sensible staggering of 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 is Chairman of the Board of Directors; Richard Senti is Vice Chairman. Cyrill Sele is Secretary (recorder of the minutes).

3.4.2 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 appoint committees deemed necessary by it.

Currently these comprise:

• Group Nomination & Compensation Committee
• Group Audit Committee
• Group Risk Committee
• Strategy Committee

The Board of Directors elects the committee members from among its members and appoints the chairmen. In principle, the Chairman of the Board of Directors cannot be elected to the Group Audit Committee or the Group Risk Committee. Each committee is composed of at least three members. As preparatory or advisory 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 committees, the Group Nomination & Compensation Committee, the Group Audit Committee and the Group Risk Committee, in which the tasks and areas of responsibility are defined.

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

Group Audit Committee

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 tasks vested in it by the law with respect to its duty of overall direction of the company, as well as supervision and control (Art. 23 of the Banking Law).

The regulation “Group Audit Committee” lays down the organisation 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:

In accordance with Appendix 4.3 of the Banking Ordinance, the guidelines concerning internal controls according to Art. 7a and Art. 21c ff. of the Banking Law, the Group Audit Committee concerns itself especially with the methodology and quality of the external audit, the quality of financial reporting as well as the collaboration between and independence of the internal and external auditors.

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 that the LLB Group’s consolidated financial statement and the financial statement of the LLB parent bank may be presented to the General Meeting of Shareholders and published and that the consolidated interim financial statement may 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 tasks vested in it by the Banking Law with respect to its duty of overall direction of the company, as well as supervision and control (Art. 23 of the Banking Law).

The regulation “Group Risk Committee” lays down the organisation 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 assessment and provision of advice on the current and future overall risk tolerance and strategy of the LLB Group.
• The assessment of the implementation of the risk strategy by the Group Executive Board.
• The monitoring of the integrity and suitability of risk management in the LLB Group, which is based on risk policy, in particular, in regard to market, credit, liquidity 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 Group-wide 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 Board of Directors as the approving authority. All risk-relevant Group rulings and directives that have to be approved by the Board of Directors are to be treated accordingly.
• The assessment of the results of the ICLAAP (internal capital / liquidity adequacy assessment process).
• 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 Risk Report of the LLB Group and submission of a proposal to the Board of Directors as the approving authority.
• The discussion and assessment of the risk analysis and activity report of the LLB Group’s Group Legal & Compliance and submission of a proposal to the 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 tasks vested in it with respect to its duty of overall direction of the company, as well as supervision and control (Art. 23 of the Banking Law).

The regulation “Group Nomination & Compensation Committee” lays down the organisation 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 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 required for the bank, diversity and personal suitability of members;
• 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.

In addition, the Group Nomination & Compensation Committee is responsible for these tasks:

• The annual evaluation of the structure, size, composition and performance of the Board of Directors and the Group Executive Board, as well as recommending any changes, if necessary;
• 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 in their entirety. The submission of the evaluation to the Board of Directors and the Group Executive Board;
• Reviewing the course of the Board of Directors in the selection and appointment of the Group Executive Board and making recommendations to the Board of Directors;
• The ensuring that the decision-making process of the Group Executive Board and the 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;
• Review of the remuneration of the members of the Group Executive Board and senior executives in the areas of risk management and compliance;
• 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 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 has the following tasks in particular:

• 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 their periodic review, both in the case of the end of a term of office and in the case of any member stepping down early;
• 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 appointment of members of the Group Executive Committee and for the appraisal of their 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 Group Executive Board in corpore as well as of individual members;
• The development of succession plans and their periodic review, both in the case of members of the Group Executive Board stepping down for age-related or contingency reasons;
• 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 and for the appraisal of their 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 with the involvement of the Chairwoman of the Group Audit Committee;
• 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 – in co-operation with the Chairman of the Board of Directors and the Chairwoman 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 Chairwoman of the Group Audit Committee.

The nomination of delegates in the Board of Directors’ committees of the 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 Board of Management, 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 for the stipulation of principles and the establishment of regulations for the compensation policy concerning the members of the Board of Directors, the members of the Group Executive Board and the other employees of the bank for submission to the Board of Directors;
• The formulation and annual review of proposals for the compensation of the members of the Board of Directors, the members of the Group Executive Board and 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 Group regulations “Compensation policy of the LLB Group”, “Compensation standards of LLB & LCH & ASM” as well as “Fit & Proper – Assessment of the members of the Board of Management, 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 members of the Group Executive Board, the Head of Group Internal Audit and senior executives in the areas of risk management and compliance pursuant to Group regulations “Compensation policy of the LLB Group” and “Compensation standards of LLB & LCH & ASM” for submission to the Board of Directors in accordance with existing principles and regulations;
• The undertaking of an informed, independent assessment of the compensation policy and practices and of the incentives created for managing risk, capital and liquidity.

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 policy;
• The review of the processes for the systematic development of employees and executives.

Strategy Committee

One of the tasks of the Board of Directors is 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.

3.5.3 Working methods of the Board of Directors and its committees

Board of Directors

The Chairman of the Board of Directors convenes meetings as often as business requires or when requested in writing by a member, but at least four times a year. Board meetings are chaired by the Chairman. A quorum of the Board of Directors is constituted when a simple 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 circulation. A circular resolution is just as binding as a resolution passed at a meeting of the Board of Directors. It is entered in the minutes of the next ordinary meeting.

Meetings of the Board of Directors are held in the form of physical, telephone or video conferences and minutes are taken.

The members of the Board of Directors exercise their tasks, competences and responsibilities with due care and regulate their personal and business matters in such a manner that, as far as possible, real or potential conflicts of interest are avoided. They are obliged to inform the Chairman of any real or potential conflicts of interest. This applies regardless of whether it is a general conflict of interest or a conflict of interest in connection with a matter to be discussed at a meeting. The Chairman informs the Board of Directors and decides how a recusal is dealt with. The following options are possible:

• The member concerned may attend the discussion but may not be present at the passing of the resolution concerning the respective matter. He will receive the corresponding minutes.
• The member concerned may not be present either at the discussion or the passing of the resolution concerning the respective matter. He will receive the corresponding minutes.
• The member concerned may not be present either at the discussion or the passing of the resolution concerning the respective matter. He will not receive the corresponding minutes.

During the 2023 business year, the Board of Directors of Liechtensteinische Landesbank AG held a total of ten ordinary and four extraordinary meetings. A closed meeting lasting one and a half days was conducted by the Board of Directors in collaboration with the Group Executive Board following the ordinary meeting in June 2023. The closed meeting focused on the strategy review. The subject of the extraordinary board meetings were the growth initiative in Switzerland and a legal case.

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. 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 to the date of the meeting. The members of the Group Audit Committee, the Group CEO, the Group CFO, the external auditors and 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 Committee can also invite other persons, such as members of the Group Executive Board, other staff of the LLB Group companies, representatives of the external auditors, staff of Group Internal Audit 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 members of the Board of Directors who are not members of the Group Audit Committee are entitled to participate in the meetings.

During the 2023 business year, the members of the Group Audit Committee met for six 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. 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 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, the Head of Group Credit & Risk Management as well as the Head of Group Legal & Compliance can request the Chairman of the Group 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 Chairmen of the Risk Committees of the LLB Group, 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 members of the Board of Directors who are not members of the Group Risk Committee are entitled to participate in the meetings.

During the 2023 business year, the Group Risk Committee held five ordinary meetings. No external experts were called in during the business year.

Group Nomination & Compensation Committee

During the 2023 business year, the members of the Group Nomination & Compensation Committee met for six meetings. The Group Nomination & Compensation Committee meets as often as business requires, but no less than 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 to the date of the meeting.

To deal with specific issues, the Group Nomination & Compensation Committee can also invite other persons, such as staff of the Group Human Resources Business Area, 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 Group Internal Audit Business Area or the performance appraisal of the Group CEO and the determination 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 are entitled to participate in the meetings.

During the 2023 business year, the members of the Group Nomination & Compensation Committee met for seven meetings.

Strategy Committee

The ACT-26 corporate strategy (see chapter Strategy and organisation) was developed in 2021 and adopted by the Board of Directors in October 2021. At the closed meeting on 29 and 30 June 2023, the Group Executive Board reported to the full Board of Directors on the status of the implementation of the strategic initiatives. In addition to this, the members of the Strategy Committee met for three meetings.

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 matters dealt with and, in particular, the resolutions are recorded in the minutes. The minutes are circulated to the meeting’s participants and the members of the Board of Directors. The Chairmen of the committees report to the Board of Directors at its next meeting on the agenda items discussed and the resolutions passed.

Self-evaluation

As a rule, the Board of Directors evaluates its own performance and that of its committees on an annual basis. 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.

During the reporting year, the Board of Directors carried out such a self-evaluation based on a questionnaire. As in previous years, the overall evaluation was very positive. The collaboration between the Board members works very well. The culture of open and frank discussions is constructive and goal-oriented. The interdisciplinary composition of the Board and the range of ages of the members are regarded as positive. In future, the Board of Directors will deal more with creative and formative elements and market developments. In addition, great importance will continue to be attached to the further training of members.

The Board of Directors is responsible for the overall direction, supervision and control of the LLB Group. It ultimately bears responsibility for the success of the LLB Group as well as for the sustained increase in the value of the company for the shareholders and the employees as well as for the protection of its reputation. It decides on the strategy of the LLB Group and exercises overall supervision of operational management. It defines the risk policy of the LLB Group and monitors compliance with it. Also, it monitors compliance with legal and regulatory provisions. At the request of the Group Executive Board, the Board of Directors determines the financial and human resources required to implement the corporate strategy. It must keep itself adequately informed of the financial and risk situation of the LLB Group. This also applies to decisions made within the Group companies that have an impact on the business activities 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.

3.6.1 Board of Directors

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

• Specifying the guiding principles and values;
• Specifying the strategy (including sustainability) 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.

In connection with specifying the organisation of the business activities of the LLB Group and the issuing of necessary regulations and directives, the Board of Directors has the following tasks in particular:

• 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 specification of 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 regarding compliance with legal provisions, statutes and rulings;
• The appointment of the members of the committees of the Board of Directors from among its members and the appointment of the Chairman;
• The regularisation 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 all employees;
• 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 vocational 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.

As part of its overall responsibility for the organisation of accounting, financial control and financial planning of the LLB Group, the Board of Directors has the following tasks in particular:

• 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 Report;
• The ensuring of regular reporting on the course of business and extraordinary occurrences;
• The stipulation of the competence to authorise expenditure;
• The supervision of the Group’s business development.

Concerning the ultimate responsibility for risk policy and management of the LLB Group, the Board of Directors has the following tasks in particular:

• 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, risks of excessive debt 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 stipulation and the monitoring of compliance with the business continuity management strategy and the receipt of a report at least once a year or on an ad hoc basis;
• The protection of the LLB Group’s reputation.

3.6.2 Group Executive Board

The Group Executive Board is composed of the members of the Board of Management of LLB AG. It, under the leadership of the Group CEO, is responsible for the management of the LLB Group. It is composed of five members: the two heads of the market divisions “Retail & Corporate Banking” and “International Wealth Management”, as well as the Group CFO, the Group CDO 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 through the two market-oriented divisions as well as the shared service functions of the Group CFO and Group CDO. 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. 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 CDO 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 across 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 can be directly binding on one or more divisions or LLB Group companies.

Besides the powers and duties set forth in the statutes, the Group Executive Board has the following tasks in particular:

• 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;
• The annual expenditure and income budget;
• The management of capital;
• Financial reporting and the annual report.
• The setting of 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 adequate and 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.
• Is responsible for the Group-wide implementation and concretisation of the business continuity management strategy and informs the Group Board of Directors about the business continuity management activities at least once a year or on an ad hoc basis.

3.6.3 Group CEO

The Group CEO is the highest authority within the LLB Group management structure. In particular, he bears overall responsibility for the development and implementation of the 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 the 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 the 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.

In principle, the Board of Directors is kept informed about the activities of the Group Executive Board by the Group CEO. The members of the Group Executive Board are responsible for ensuring the reporting to the Group CEO, for the attention of the Board of Directors, is appropriate. 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 adequate manner.

The Group CEO usually attends the meetings of the Board of Directors in an advisory capacity. He informs about the course of business and special occurrences and is available to provide information. 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 are represented for items on the agenda that affect them. 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 standardised bank management systems that generate quantitative and qualitative data for the Group Executive Board and in a summarised 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 receives commented financial and risk management reports every three months. 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 Chairmen of the Boards of Directors of the LLB Group companies as well as to the Group Audit Committee and the Group Risk Committee. 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 minimising 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. Annual audits are planned on the basis of the evaluation of risks and controls and are based on an audit inventory for long-term coverage.

To avoid duplication of work and to optimise 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 each audit by Group Internal Audit are recorded in a written audit report. The audit reports of the parent bank and all LLB 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 as 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 whether the identified deficiencies have been rectified and the recommendations implemented and reports on this to the Group Audit Committee.

Risk management

A proactive approach towards risks is an integral part of our corporate strategy and ensures the LLB Group’s risk-bearing capacity. It attaches great importance to forward-looking and holistic opportunity / risk management. As part of the risk policy, the Board of Directors issues guidelines and regulations concerning the principles of risk management and thus 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 (see chapter Risk management in the financial section).

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 unrestricted right to all information and documents Group-wide. 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. Its 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 Finance 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 common standards and rules of professional conduct. The Board of Directors is responsible for organising and ensuring Group-wide compliance. For this purpose, it has issued detailed regulations in respect of the compliance rulings (in particular the compliance regulations of the Group) dealing with the essentials of compliance organisation for the purpose of 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 Legal & Compliance acts as general counsel and has direct access to the Group Risk Committee. He compiles a written activity report annually for submission to the Group Risk Committee and the Board of Directors. Twice a year, he also submits a risk analysis along with measures and recommendations derived from it. Outside of regular reporting periods, the Group Risk Committee is promptly informed of serious compliance violations and issues of major economic or other significance and supported in determining what instructions or measures are needed (see chapter Finance and risk management).