The world's local bank Annual Report and Accounts CCF - HSBC

CCF
Chairman’s report on corporate governance and internal control procedures (continued)
assisted by the external auditors who commented on
their management letter in the meetings devoted to the
annual accounts for 2002 and the interim accounts for
2003. A key point of concern was to verify the adequacy
of provisions for identified risks and the level
of provisions taken against the bank’s equity book.
The Committee also verified the quarterly accounting
certificates produced at the request of the HSBC
Group.
At each meeting, the Committee reviewed the
bank’s significant risks assisted by the person responsible
for internal control in each case:
– credit risk, with an individual review of major
exposures;
– market risk and trends compared with limits;
– legal and litigation risk;
– operational and information technology risk.
The Committee regularly reviewed the company’s
internal audit work and monitored changes in
the group’s internal control teams. At its meeting of
13 May 2003, it conducted a detailed review of the
annual internal control report required under the
CRBF’s regulations no. 97-02 and 2001-01.
The Committee devoted much time in 2003 to
compliance work and particularly to reviewing the
action plan implemented by CCF to improve its money
laundering prevention systems, in accordance with the
French Banking Commission’s directives. It examined
the annual report submitted to the Conseil des Marchés
Financiers (CMF) on the organisation and operation
of internal control systems for investment services, a
specific report on the control of margin provision for
stock market transactions, and the annual report on
cheque controls as required by the CRBF’s regulation
no. 2002-01. Quarterly compliance certificates, which
list the key shortcomings, are discussed at each meeting.
The Chairman of the Audit Committee reported
in detail on the Committee’s work at the Board
meetings held on 25 February, 14 May, 30 July and
10 December 2003.
Restrictions on the Chief Executive Officer’s
powers
The Articles of Association were amended in 2002
to incorporate the provisions of law no. 2001-420 of
15 May 2001, as approved at the AGM of 8 April 2002.
At its meeting the same day, the Board of Directors
decided not to split the functions of Chairman and
Chief Executive Officer and that Mr. de Croisset would
therefore continue in office as Chief Executive Officer
for the remainder of his term as Chairman of the
Board. The Chairman and Chief Executive Officer
has widest powers to represent the company in all circumstances
within the limits of its corporate objects.
At its meeting of 24 February 2004, the Board of
Director appointed Mr. Charles-Henri Filippi as
Chairman of CCF with effect from 1 March 2004. The
Board renewed also at this meeting its decision not to
split the offices of Chairman and Chief Executive Officer.
Mr. Charles-Henri Filippi, Chairman of the Board, also
takes up the office of Chief Executive Officer.
CHAIRMAN’S REPORT ON INTERNAL
CONTROL PROCEDURES
Internal Control objectives
The purpose of the internal control procedures implemented
by CCF is to ensure that:
– management, operations and personal conduct
comply with the guidance issued by the company’s
governing bodies, with applicable laws and regulations
and with the company’s own values, standards
and internal rules;
– accounting, financial and management information
reported to the company’s governing bodies gives
a true and fair picture of the company’s operations
and position.
CCF’s internal control system follows the guidance
set out in the CRBF’s regulation no. 97-02 and in the
HSBC Group Standards Manual (GSM).
One of the key objectives of the internal control
system is to prevent and manage risk arising from the
company’s business operations and the risk of error or
fraud, particularly in the areas of accounting and
finance. No control system can provide absolute
assurance that all risk will be eliminated.
Description of internal control procedures
General internal control environment
Organisation
The Group has established a structured system of internal
controls as required by the CRBF’s regulation no. 97-02,
supplemented and amended by regulation no. 2001-01.
All the control objectives are described in internal
circulars issued by CCF’s senior executives. Accounting
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