QUEENBANK RISK MANAGEMENT SYSTEM

QCDB Risk Management

     The Queenbank Risk Management System has adopted an efficient approach in controlling its risk management. Proper management and handling of its assets and operations will improve the bank's growth and value for its shareholders and clients. We assure that every Queenbanker is responsible in the implementation of our risk management system in order to promote stability and efficiency while risks are mitigated and realization of opportunities is maximized.


BOARD AND MANAGMENT COMMITTEES

Audit Committee

     The Audit Committee is composed of five directors, two of whom are independent directors. Each member has adequate understanding at least or competence at most of the Bank's financial management systems and environment. The committee is responsible for the review of the reports of internal and external auditors, assess the Bank's internal controls and processes and oversee the proper implementation. It likewise ensures proper and timely response to all issues identified in audit processes.

Chairman: Romulo Bas
Members: Ma. Aurora G. Garcia
Gregorio M. Rubias
Rodolfo B. Pollentes
Manuel J. Miraflores

Risk Management Committee

     The Risk Management Committee ensures that the corporation is taking appropriate measures to properly balance risks and rewards in the areas of credit, operations and technology. It also periodically reviews and approves the corporation risk management framework, including the development of effective policies, processes and procedures as well as information on the compliance in both internal and external regulations and internal policies.

Chairman: Gregorio M. Rubias
Members: Ma. Aurora G. Garcia
Romulo Bas
Rodolfo B. Pollentes
Manuel J. Miraflores

Related Party Transactions Committee

     The Related Party Transactions Committee has primary responsibility of evaluating on an ongoing basis existing relations between and among businesses and counterparties to ensure that all related parties are continuously identified, RPTs are monitored, and subsequent changes in relationships with counterparties from non-related to related and vice versa) are captured.

Note: Same Chairman and Members with Risk Management Committee

Assets and Liability Committee (ALCO)

     The Assets and Liability Committee (ALCO) identifies, monitors and manages the bank's exposure to the following risk areas, namely, Liquidity Risk, Interest Rate Risk, Market Risk, Foreign Exchange Risk, Market Risk, Regulatory, and Credit Risk. It also develops strategies, oversees, and formulates risk tolerances in the risk management process. It is comprised of four Board Directors/Executive Officers, Group Heads for Branch Banking and Commercial Banking Groups, Department Heads representing the Portfolio Administration Unit and Treasury and the Compliance Officer. This committee meets every month regularly.


Money Laundering and Terrorist Financing

     The bank's money laundering and terrorist financing prevention program (MLPP) embodies sound risk management policies and practices that has been developed to ensure that risks associated with money laundering are identified, assessed, monitored, mitigated and controlled and to make certain that by effectively implementing it, the bank shall not be used as a vehicle to legitimize proceeds of unlawful activity or to facilitate or finance terrorism.

     The MLPP is geared toward the promotion of high ethical and professional standards and the prevention of the bank being intentionally or unintentionally used for money laundering and terrorism financing. The program consists of thorough customer due diligence and know-your-customer processes, reporting of Covered and Suspicious Transactions and retention of records. It likewise includes effective and continuous training program including refresher trainings to promote full awareness and thorough understanding of officers and employees of their respective duties and responsibilities and that they carry them out in accordance with superior and principled culture of compliance. A mandate is provided that the bank shall adequately screen job applicants according to the standards set forth in the Human Resource Policy Manual to ensure only qualified personnel without criminal records are employed to assume sensitive banking functions.

     The bank is regularly reviewing the program in order to incorporate updates needed brought by legislative and regulatory developments. The Compliance Unit and the Risk Management Committee are responsible of this function. The Board of Directors and management propel all employees to conduct business in conformity with high ethical standards in order to protect the safety and soundness as well as the integrity of the bank and the national banking and financial system.


EMPLOYEE WELFARE

Performance and Assessment Program

     The Bank values the performance and contribution of employees. It believes that performance review is a key component of employee development. An annual review through a performance appraisal sheet is utilized by the officers to properly be guided on how to evaluate their designated staff. It is required and designed to provide a fair assessment of an employee's job performance (outcomes and behavior). Immediate supervisor should discuss with the employee his/her performance during the previous calendar year, job duties, performance expectations, any specific objectives to be achieved and professional development goals for the employee.

     The Bank's board-level committees such as the Audit Committee, Risk Management Committee and Related Party Committee, management committee that includes ALCO, Executive Committee and Credit Committee and self-assessment functions comprising of Internal Audit Group and Compliance Group are evaluated annually. In addition, the Chairman/President and Senior Officers are evaluated by the Board of Directors on a yearly basis. To properly assess one's performance, the Bank is also conducting a Board Self-Assessment to validate the board's appreciation of its roles and responsibilities.


Orientation and Educational Program

     Education and training programs are designed, in accordance with the Bank's objectives and strategies, to meet the personal and career development needs of all employees. Orientation is part of a long-term investment in a new employee. It is an initial process that provides easy access to basic information and gives clarification and allows new employees to take an active role in the Bank. The process of which includes the introduction of new employees to its new environment, informing about company policies and procedures.


Retirement and Succession Planning

     Queenbank plans for its manpower needs as far ahead as possible. Thus, the bank endeavors to maintain a required number of employees, possessing the necessary skills, experience, and qualifications, to efficiently carry out its operations. It has a documented succession plan to cover the eventuality of an individual holding a key position that can no longer be employed by the bank.

     Line management, in conjunction with Human Resource Group, identifies individuals demonstrating superior performance and potential for future promotion. These individuals will then be assessed for the training and development they further need in order to prepare them to a higher level whenever it becomes vacant.

     The bank's retirement and succession plan is reviewed annually. Any changes or updates are to be concurred by the Head of Human Resource Group and the Executive Committee.


Remuneration Policy and Structure for Executive and Non-Executive Directors and Senior Management

     The Bank's remuneration policy is aligned with the bank's overall strategic plan, objectives and values. The Bank from time to time, as determined by an annual/periodic review thereof, may adjust the salary as appropriate, taking into account the Bank's performance, employee's performance and the prevailing economic conditions.

     Remuneration of Executive Directors consists of fixed salary, director's fee and pension benefits. They are also entitled to fringe benefits such as car subsidies, medical insurance and other fixed benefits. Non-Executive Directors, on the other hand, receive allowances and per diems for each attendance at board meetings or board level committee meetings. Senior Management receives allowances and fixed salary which is determined on the basis of the nature of the position, including responsibility and its complexity. Remuneration to Directors and Senior Management are reviewed annually and approved by the Board.


Related Party Transactions Policy

     Transactions such as loans, lease agreements/contracts and purchases and sales of assets to related parties (stockholders, directors, senior officers, related interest and subsidiaries) are evaluated by the Related party Committee to ensure that these are undertaken on an arm's length transaction and not on a more favorable economic terms than similar transactions with non-related parties.

     The management implements appropriate controls to effectively manage and monitor related party transactions on a per transaction and aggregate basis. Ongoing monitoring on the exposures to related parties is conducted to ensure compliance with the policy and BSP's regulations thru the internal audit and compliance function.


Internal Audit

     The bank's Internal Audit Group provides an independent, objective assurance and consulting activity designed to examine, evaluate and improve the effectiveness of risk management, internal control, governance processes and compliance thereby adding value and enhancing the quality of bank's operations. The group consists of an Internal Audit Head and audit staffs who undergone continuous education on auditing techniques, regulations, and banking products and services. The internal audit head reports directly to the board of directors through the Audit Committee which ensures that the group is independent from the bank's management.


Compliance

     The Compliance Unit is an independent unit that oversees and coordinates the implementation of compliance program, identify the relevant Philippine laws and regulation, analyze the corresponding risks of non-compliance and identify monitors and control these risks. The Chief Compliance Officer is free to report to Senior Management and to the Board of Directors thru the Risk Management Committee on any irregularities or breaches of laws, rules and standards discovered, without fear of retaliation or disfavor from the management or other affected parties.


Consumer Protection

     The Board of Directors (BOD) has the ultimate responsibility for the level of customer risk assumed by Queenbank. Accordingly, the Board approves the Bank's overall business strategies and significant policies, including those related to managing and taking customer risks. They take steps to develop an appropriate understanding of the customer risks the Bank faces through briefings from auditors and experts external to the organization. Senior management is responsible for implementing a program to manage the customer compliance risks associated with the Bank's business model and ensuring compliance with laws and regulations on both a long-term and a day-to-day basis. Accordingly, management is fully involved in its activities and possesses sufficient knowledge of all major products to ensure that appropriate risk controls are in place and that accountability and lines of authority are clearly delineated. They are also responsible for establishing and communicating a strong awareness of, and need for, effective customer protection risk controls and high ethical standards

     Queenbank acknowledges the indispensable role of its financial consumers in bringing about a strong and stable financial system, their right to be protected in all stages of their transactions with the bank, and be given an avenue to air their grievances in the product and services of the bank. Consumer protection is regarded as a core function complementary to BSP's prudential regulation and supervision, financial stability, financial inclusion, and financial education agenda.

     Queenbank's Consumer Assistance Group is composed of the Consumer Assistance Group Head which is handled by the bank's Compliance Officer and Branch Heads or Branch Officer¬In-Charged of every Queenbank branch are designated to handle consumer concern.

CONSUMER PROTECTION CORPORATE STRUCTURE

CONSUMER PROTECTION CORPORATE STRUCTURE


CREDIT RISK

     The Bank has defined credit risk as the risk of loss that the bank faces the situation when the counterparty fails to fulfill wholly or partly of his obligations in a timely manner by breaching of contractual obligations or its ability to perform such obligation is impaired resulting in economic loss to the institution. In order to mitigate this risk, our Portfolio Administration Unit follows the credit policy guidelines as provided by the Board. These serve as minimum standards in extending loans to our clientele. Maintenance and strict implementation of sound credit in the granting of loans is observed. We also integrate adequate internal control procedures in the credit—granting process.

     Credit risk is controlled through establishment of appropriate and sufficiently defined environments. We manage this based on the type, economic sector, geographic allocation, maturity and anticipated profitability of individuals and other borrowers.

     In 2015, the Bank initiated the amendments of some of its policies and procedures to conform with BSP Circular No. 855, Guidelines on Sound Credit Risk Management Practices, that include Credit Risk Management Structure and Credit Approval Limits and Delegations. It has likewise updated its product manual on Salary-Based General Purpose Consumption Loan to comply with BSP's mandate under Circular No. 886.

     Stress testing on credit risk is regularly conducted by the Bank that includes Real Estate Stress Test (REST) Limit for Real Estate Exposures and uniform credit risk stress test on its loan portfolio covering the large exposures, exposure as to the economic activity and consumer loan.

MARKET RISK

     Market risk arises from adverse movements in the level or volatility of market prices and interest rates of loans, deposits, bonds, investments and foreign currencies. At Queenbank, the Treasury Group reports to ALCO on the developments and suggests strategies to be adopted.

OPERATIONAL RISK

     Operational risk is the current and prospective risk to earnings and capital arising from inadequate or failed internal processes, people and systems or from external events. The Bank is being guided by its Operations Manual, which serves as a policy guideline and makes sure that these are adhered to, properly implemented and strictly followed. It maintains a close watch over the financial and economic market and oversees operations with care.

     The bank's Internal Audit Group (IAG) monitors the strict compliance with these guidelines. It also recommends policies for adoption or for further improvement to the Audit Committee. The Internal Audit Group presents findings and recommendation to the Audit Committee/Board regularly on a monthly basis.

INTEREST RATE RISK

     The bank's Assets and Liability Committee (ALCO) is tasked in monitoring and measuring interest rate risk by identifying gaps between repricing dates of assets and liabilities and minimize mismatches by accrediting itself to various financial institution for funding purposes such as BSP rediscounting program, Small and Medium Enterprise Credit (SMEC), and the Small Business Corporation.

LIQUIDITY RISK

     The liquidity risk is controlled by the consistent maintenance of well—calculated reserves, accurate measurement and management of funding requirement, effective management of the bank's access to the financial market, and establishment of updated contingency plans based on the bank's familiarity with various assumptions underlying the possible cash flows.

TECHNOLOGY RISK

     This is controlled through the implementation of adequate maintenance procedures for all bank equipment, continuous research and study on the development of systems and the integration of efficient and highly dependable audit trails in all the bank's operational systems.

LEGAL RISK

     At Queenbank, the Risk Management Committee addresses legal issues that the bank faces. It performs the legal review process for major transactions that the bank may undertake. This committee meets regularly on a monthly basis.

REGULATORY RISK

     The bank ensures its compliance towards laws, rules and regulations, policies and procedures and ethical standards.

REPUTATIONAL RISK

     To address this, the bank maintains consistent and adequate compliance of the bank's operations, proper and timely disclosure of the bank's condition, and provision of constant information and assurance to the public on the bank's growth and development plans.