Corporate Governance Practices: The Metrobank Way

Banking is about more than money—it's about fostering community change and guiding success. At Metrobank, we prioritize trust, accountability, and governance to ensure Filipinos are in good hands.

Our leaders are committed to transparent and accountable governance, safeguarding the interests of all our stakeholders. At Metrobank, good governance is our cornerstone, reflecting our pledge to keep Filipinos' interests at heart.

We are dedicated to operating with integrity and creating lasting value. Our efforts were recognized with a 3-Golden Arrow award from the ASEAN Capital Markets Forum, inspiring us to further enhance our governance and continue being a leader in responsible banking.

Good Governance: The Metrobank Way

At Metrobank, good governance transcends mere compliance — it is integral to our business ethos.

Our Corporate Governance Manual (CGM) is our blueprint for accountability, integrity, fairness, and transparency, setting high standards for our Board and staff. Updated in 2023 to mirror the latest regulations and best practices, it guides our operations and interactions.

Our Compliance Officer ensures we live up to these principles daily, with full adherence in 2023, reinforcing our commitment to excellence and ethical conduct in all we do.

OUR GOVERNANCE PILLARS

Accountability

We take full responsibility for our decisions and actions. We know our decisions are bound by rules and we act for the benefit of our company and of our stakeholders.

Board of Directors

Our Board drives governance with clear, strategic oversight, embracing diversity and expertise in finance, tech, and sustainability. This approach ensures balanced decisions and robust risk management, maintaining our commitment to transparency and integrity, empowering communities through every decision.

In the 2023 Annual Stockholders Meeting, the Board was reelected, comprising of 12 directors: 10 Non-Executive Directors (NEDs) and two Executive Directors (EDs). Of the 10 NEDs, five, including one female, served as Independent Directors (IDs).

Chairman of the Board and the President

Our Chairman, Mr. Arthur Ty, leads the Board with a focus on decisions that advantage both the bank and its stakeholders, encouraging open, collective dialogue. President Mr. Fabian S. Dee steers our operations, personifying our vision and guiding staff excellence, driving forward the bank's commitment to community empowerment.

Lead Independent Director

In 2020, we introduced the Lead Independent Director role to strengthen our Board's checks and balances. Since 18 August 2021, Director Philip G. Soliven has been working alongside the Chairman to promote productive discussions, enhance independent director involvement, and guarantee fair decision-making.

Nomination and Election

Our Board nomination process is all about transparency and inclusivity, inviting nominations from every shareholder and rigorously selecting candidates who are not just skilled but truly embody our values.

By drawing on diverse sources for nominations, we ensure our Board is equipped with individuals committed to our vision, further empowering the communities we serve.

Engaging for Effective Board Governance

Board Meetings

Our Board ensures strong governance and strategic decisions with high attendance and regular meetings, allowing for special sessions as needed. With the support of the Corporate Secretary and open communication, we foster proactive oversight and informed decisions, underpinning our commitment to effective leadership. Highlighting their dedication to oversight, non-executive directors, led by Lead Independent Director Philip G. Soliven, engaged in a focused dialogue on key issues like cybersecurity and governance on October 25, 2023, enhancing their strategic insights.

Board Committees

Ten Board committees aid in effective governance, chaired by Independent Directors (IDs). Charters outline duties, compositions, and reporting processes, promoting transparency and accountability. Members convene in-person or remotely, following charter guidelines.

The Board is aided by the following: Anti-Money Laundering Committee; Audit Committee; Corporate Governance and Compensation Committee; Executive Committee; Information Technology Steering Committee; Nominations Committee; Overseas Banking Committee; Related Party Transactions Committee; Risk Oversight Committee; Trust Committee.

Onboarding and Continuing Education

Our leadership's quality is crucial for long-term success, so we offer orientation and ongoing education for our directors to ensure they meet our bank's needs and uphold high governance standards.

Through comprehensive programs, they gain essential knowledge, enhance leadership skills, and stay informed on industry trends and regulations, including specialized topics like data privacy and cybersecurity. These efforts, including mandatory annual training and encouraged external professional development, not only boost our Board's effectiveness but also reinforce our commitment to excellence and community empowerment.

Performance Evaluation

Our Board and committees regularly evaluate their performance to align with top governance standards and our bank's strategic goals. Utilizing both data and in-depth reviews, we ensure our leadership's actions match our long-term objectives.

The latest assessments confirm our Board's effectiveness and adherence to responsible banking principles. External evaluations also underscore our commitment to excellence, with the next scheduled for 2024, underscoring our dedication to transparency, accountability, and community empowerment.

Ensuring Board Continuity (Retirement and Succession)

Our Board secures leadership continuity with thoughtful succession planning. Positions are filled by majority vote or shareholder choice, setting retirement ages at 75 for directors and 55 for staff, ensuring a blend of experience and renewal in serving our communities.

Integrity

Good Conduct and Ethics for Directors

Fairness, accountability, transparency, and ethics are non-negotiable for our Board. Our leaders live by these principles, as outlined in our Code of Conduct and Ethics for Directors. They are expected to put the bank's interests first, avoiding any conflict that could bias their decisions. Embodying integrity, they continually sharpen their skills and deepen their bank knowledge.

From day one, directors are familiarized with the Code to guarantee their actions align with our highest ethical standards.

Good Conduct for Employees

Integrity is crucial at our Bank, and every employee plays a part in upholding it. Following our Code of Conduct, our team is dedicated to protecting the Bank and its stakeholders, ensuring no conflict of interest, safeguarding confidential info, and steering clear of any gifts that might sway their decisions.

Every team member, from new hires to veterans, gets the Code to guide their actions. Our HR team keeps everyone in the loop with regular updates on our values and offers refreshers on the Code, ensuring our integrity remains strong and actions aligned with our principles.

People Empowerment for Good Governance

At our bank, empowering our employees is foundational to good governance. We prioritize employee development through tailored learning, regular performance assessments, and strategic talent management to ensure a competent and capable workforce aligned with our organizational goals.

Managing Compliance Risks

At Metrobank, navigating compliance risks is vital. Our detailed Compliance Policy Manual underpins our approach, ensuring we're always in line with current regulations and practices.

Led by the Compliance Officer, our team stays proactive in managing risks and embedding a culture of compliance across the bank. This ongoing effort includes regular updates, training, and advisories, making compliance second nature in our daily operations.

Fairness

With the help of the Board, we make sure our actions are fair and we abide by the rules and relevant laws.

Fairness Business Dealings

We strictly enforce our Anti-Bribery and Corruption Policy, ensuring directors and employees conduct business ethically and transparently, with zero tolerance for briery, and corruption. We encourage reporting of unethical behavior through our Whistleblowing Policy.

All related parties are properly identified and related party transactions are vetted and approved by management-level Related Party Transactions Management Committee (RPTMC) or Board-level Related Party Transactions Committee (RPTC), depending on the threshold.

Protection of Stockholders’ Rights and Interests

At Metrobank, we prioritize the rights and interests of our shareholders, adhering to the Revised Corporation Code.

We ensure fair voting processes, transparent shareholder meetings, and encourage active participation, giving every shareholder a voice, including minority rights. Our practices include clear meeting notices, multiple voting methods, and integrity in the voting process. We also offer comprehensive communication through financial reports, earnings calls, and direct dialogues.

Creditors’ Rights

We prioritize transparency by adhering to accounting standards, ensuring reliable information for stakeholders. Our ethical conduct strengthens trust with depositors and service providers.

Customers’ Interest First

We prioritize our customers' safety and happiness, making it everyone's responsibility to serve and protect them. Our approach is built on fairness, transparency, security, privacy, and resolving issues quickly.

With our Customer Protection Policy, we stay customer-focused and regularly update our practices, including how we handle social media, to keep up with expectations and safety standards. Yearly training for our team ensures we are aligned in protecting our customers, keeping their information safe, and providing transparent services.

Right Suppliers and Contractors

We deal with our suppliers and partners ethically, supporting the economy and inclusion through local buying. Our selection process for suppliers is thorough, following banking regulations and ensuring we get the best value and quality. We also check that our vendors meet environmental and legal standards, including being in good standing with government health and social security agencies, to maintain ethical and compliant operations.

Employees’ Health, Safety, and Wellbeing

Employees’ health and wellbeing is our top priority. We design our safety and wellness programs to ensure all aspects of our employees’ wellbeing are safeguarded.

Metrobank prioritizes employee well-being, enhancing preventive measures and ensuring compliance with labor laws. The Metrobank CARES Program fosters holistic wellness, engaging employees through health assessments, resources, and wellness initiatives.

Physical Well-being

Metrobank advocates and provides a safe and healthy workplace.

We continuously improve our preventive measures and empower employees in their health and wellness, as well as ensure our compliance with relevant labor laws and emergency/disaster preparedness.

In 2023, we continued to engage our employees through the Metrobank CARES Program, the health and wellness initiative of Metrobank that focuses on physical, emotional/mental, social, spiritual, financial and occupational wellness.

Transparency

We ensure and promote transparency in all our affairs, especially when it is aimed at protecting the welfare of our Bank, our shareholders, and our customers.

Insider Trading

As a publicly listed company, Metrobank takes serious steps to prevent insider trading and protect our shareholders. Our policy makes sure only necessary information is shared and sets trading blackout periods for directors, some employees, and their families. They must also openly share any ownership in Metrobank shares and report changes immediately, following strict guidelines.

Whistleblowing Policy

Our Whistleblowing Policy encourages reporting corruption or misconduct safely and anonymously, via our website, email ([email protected]), or text hotline ((+63) 942 747 1359). Complaints can go to our Chief Audit Executive or, in special cases, directly to the Board Chairman.

In 2023, we mainly dealt with employee misconduct, responding with necessary actions and disciplinary measures, always upholding our values and work ethics.

Dividend Policy

Our Dividend Policy supports Metrobank's growth and aims to enhance shareholder returns. In February 2024, we increased regular cash dividends to PHP3.0 per share, payable semi-annually, and declared a PHP2.00 special dividend.

Decisions on dividends, based on the bank's financial health and regulatory compliance, are made by the majority of our Board. While we aim for regular payouts, adjustments may occur if significant investments or projects arise, ensuring our strategic priorities align with shareholder value.

Compensation Policy

Our pay policies align with our goals and market trends, designed to motivate our team and stay competitive in attracting talent. Directors get a standard package based on their role and contribution. Executives and other employees have salaries plus bonuses, regularly checked against industry rates and their performance.

A special committee oversees these strategies, ensuring fairness. For all staff, we follow labor laws and performance-based pay agreements, making sure everyone's compensation is fair and reflects their role and achievements.

For over 60 years, Metrobank has been dedicated to managing your money safely. Risk management is key for us.

We carefully manage risks aligned with our goals, continuously adapt to stay ahead, and believe that keeping the bank safe is a shared responsibility among all of us, including our customers.

Keeping Risks at Bay

We strategically balance risks and rewards, aligning with business needs and capital requirements for sustainable growth. By assessing, managing, and monitoring risks effectively, we safeguard our financial resources and ensure regulatory compliance.

Strengthening Our Risk Management Culture

Our robust risk governance, led by the Board and overseen by the Risk Oversight Committee, ensures balanced risk-taking aligned with our strategic goals. The Risk Management Group coordinates risk identification, measurement, and monitoring across divisions, supported by a comprehensive framework and dedicated teams.

Managing Material Risks

As a Domestic Systematically Important bank, Metrobank faces inherent risks from lending, treasury, and client interactions. We manage risks within capacity, aligning with business goals for sustainable growth.

• Credit Risk: As a major lender, Metrobank mitigates credit risk through robust policies, evaluations, and collateral provisions. We closely monitor portfolios to align with strategy and appetite for risk.
• Credit Concentration Risk: We manage Credit Concentration Risk by maintaining a moderate risk appetite, assessing industries and counterparties, and setting internal limits.
• Market Risk: We manage Market Risk through Asset and Liability Committee, setting low risk appetite. Our Financial Markets Sector crafts strategies based on macroeconomic conditions, setting limits and reviewing them periodically against various risk factors. Compliance reports are provided daily, ensuring alignment with set limits.
• Interest Rate Risk in the Banking Book (IRRBB): We manage this risk by assessing potential impacts before new strategies. Our low-risk appetite is upheld through policies and quantitative limits, regularly reviewed for alignment.
• Liquidity Risk: We manage this risk with a low appetite, ensuring timely financial obligations. Our strategy includes aligning assets and liabilities, maintaining liquid assets, and following funding frameworks. Regular reviews maintain relevance.
• Operational Risk: We mitigate Operational Risk through robust controls and tools. Our low-risk appetite guides policy and procedures, ensuring strong governance and early risk detection.
• Technology Risk: We tackle significant Technology Risk with a robust IT risk management policy, covering assessment, testing, monitoring, and mitigation. This ensures protection against disruptions and cyber threats.
• Compliance and Regulatory Risk: Non-compliance jeopardizes earnings. With low-risk appetite, our Compliance Program ensures adherence to laws and governance. Anti-money laundering efforts report to the Board's AML Committee.
• Reputational Risk: Protecting our brand is paramount. We maintain a low-risk appetite for reputational harm, proactively safeguarding our reputation alongside managing other risks.
• Strategic Risk: Adverse decisions or industry shifts can affect earnings. We mitigate strategic risk by rigorously executing and stress-testing decisions, remaining vigilant for signals necessitating strategic adjustments.
• Contagion Risk: Contagion risk within Metrobank Group is managed through strict policies, limits, and control monitoring for related party transactions (RPTs), Directors, Officers, Stockholders, and Related Interests (DOSRI), and Strategic Allied Agreements (SAAs).

Reporting Risks Diligently and Effectively

The RSK and our specialized units report risks to both our senior management and the Board through the ROC to ensure that we move and accept risks within the Board-approved risk appetite.

Ensuring Capital Adequacy

We manage our capital to meet regulations and enhance shareholder value. Our strategy adjusts to economic changes and risk levels.

Starting with our Strategic Plan, we forecast finances and determine capital needs based on risks. We constantly check our capital against these risks, with regular updates and alerts for any overuse.

COMBATTING MONEY LAUNDERING

At Metrobank, tackling money laundering is crucial for keeping trust solid and our operations clean. Recognizing the serious threat money laundering and terrorist financing pose, not just to us but to society, we fully comply with the Anti-Money Laundering Act (AMLA). This is about following rules and maintaining the trust you place in us.

Customer due diligence (CDD) is at the heart of our strategy. Before we kick off any business relationship, we make sure we know who we're dealing with and the risks involved. It’s our way of keeping the bad out and the good in.

We have built a robust compliance system that covers everything from board oversight to detailed policies, proactive monitoring, and rigorous audits. Our team is well-trained, communication is clear, and our compliance tests are thorough. Thanks to this comprehensive approach, we stay ahead of risks, ensuring Metrobank remains a trusted name in banking, committed to safeguarding your financial well-being and contributing to a stable economy.

The Audit Committee has continued to effectively perform its duties and responsibilities throughout the year, as defined in the Board-approved Committee Charter. It has assisted the Board of Directors in fulfilling its statutory and fiduciary responsibilities, as well as in protecting the value and interests of shareholders, through close coordination with the Management in the light of emerging risks to ensure that processes and operations are kept at optimum level.

The Audit Committee is composed of three qualified non-executive members duly appointed by the Board of Directors, with two of its members as independent directors including the Chairperson. All Committee members have relevant background and experiences, and possess appropriate knowledge and skills necessary in carrying out their functions. The directors also hold membership positions in other Board-level Committees of the Bank, through which they are apprised of developments in other areas and are able to provide advice on risk taking and management activities.

In 2023, the Audit Committee held 12 regular meetings conducted virtually and one face-to-face joint session with the Risk Oversight Committee. Each regular committee meeting was attended by the Chief Audit Executive to report on the progress of plans, implementation of enhanced audit strategies/approaches, and significant issues, with related committed actions, arising from audit reviews. The Chief Risk Officer, Controller, and key Management Officers, and External Auditor attended relevant sessions and provided pertinent information.

The Audit Committee regularly reported results of its activities to the Board of Directors. It met with all other independent and non-executive Board members, together with the External Auditor, and the Heads of Internal Audit, Risk Management and Compliance Functions on a special meeting without the presence of any Senior Executives, and discussed the identified critical and emerging risk areas along with the Management solutions to address these risks and the IA strategies to evaluate the Management solutions and controls put in place and to assess the effectiveness of oversight functions to monitor exposures driven by the changing business landscape.

The Committee completely performed its regular work program for 2023 and had the following key achievements:

1. Financial Reporting and Disclosure: Reviewed and discussed with Management and External Auditor the results of audit of the financial statements and related disclosures for the year ended December 31, 2023, and reported the same to the Board of Directors for approval. In carrying out the review, the Committee ensured that the financial reporting process and disclosure requirements are in compliance with applicable accounting standards and regulations.

2. Risk Management and Internal Controls: Evaluated the Bank’s risk management techniques and results thereof, and the internal control policies and procedures, systems and processes through the audit assessment results derived from the focused testing on high priority business functions and areas particularly controls on fraud prevention, anti-money laundering, cybersecurity/data privacy, business continuity, among others. The Audit Committee continued the proactive engagement and involvement of Management in ensuring timely resolution of audit observations and implementation of control recommendations, effectively conveying the culture of risk ownership within the organization.

3. Regulatory Compliance: Assessed the effectiveness of Governance functions which provided oversight on the Bank’s compliance with new and existing laws and regulations promulgated by the Bangko Sentral ng Pilipinas and other regulatory government agencies.

The Audit Committee has performed the required review of its Charter to ensure that it is updated, aligned with peers, and compliant with regulatory changes and recommended best practice. The Committee also conducted an annual self-assessment to evaluate their performances against the requirements of the Charter.

4. Management and Internal Audit: Confirmed the effectiveness of the internal audit function, including audit services and activities provided to Bank’s subsidiaries and associates. Among the oversight activities performed by the Committee for the internal audit function are the following: (i) reviewed and approved the revised risk assessment framework and the annual audit plan including subsequent revisions and necessary adjustments throughout the year, ensured adequacy of scope and activities, and monitored accomplishments and plan completion to provide basis for the overall audit conclusion; (ii) reviewed the Internal Audit Charter and noted the revisions in the Internal Audit Manual, and supervised its implementation; (iii) reviewed the audit reports received on a regular basis to assess the overall condition of the Bank’s internal control system; (iv) discussed significant matters with Senior Management, as necessary, and evaluated timeliness of resolution of control weaknesses and compliance issues; (v) recommended enhancements and confirmed transformational initiatives in the audit processes for continuous improvement; (vi) reviewed and monitored the engagement of the External Quality Assessor; and, (vii) evaluated the performance of the Chief Audit Executive.

The Committee ensured that the internal audit function has maintained its independence throughout the year, has adequate and competent resources, and has appropriate authority to effectively discharge its duties and achieve its goals and objectives. The Audit Committee extended full support and provided guidance to the Internal Audit Group as it implemented certain changes and reforms in its audit approach, risk assessment, and prioritization strategies to be more dynamically responsive to key business risks and solidify its role as a trusted advisor. These measures, among other transformation activities and initiatives, augmented IA capabilities in achieving audit objectives for relevant and valuable organizational impact.

5. External Audit: Exercised effective oversight of external audit function as the Committee assessed and approved the reappointment of SyCip Gorres Velayo & Co. (SGV), as the Bank’s external auditor for 2023; ensured the external auditor's objectivity, independence and compliance with ethical and professional standards; discussed and agreed to the terms of audit engagement, coverage and audit fees; reviewed and approved all non-audit services and expenses and related fees (i.e., validation of votes cast at the annual stockholders’ meeting and issuance of comfort letter) to ensure no conflict to independence; reviewed the external audit engagement plan, approach and scope of work; reviewed the results of audit and recommendations in the External Auditor’s Management Letter and action plans of the Management on reported observations, including monitoring of disposition and status of corrective actions; and concurred to non-audit services rendered by the external auditor to the controlled entities of the Bank.

Based on the Committee’s accomplishments, representation from the Bank Management, External Auditor’s unqualified opinion on the financial statements, and the Chief Audit Executive’s overall satisfactory assessment on the adequacy and effectiveness of the Bank’s internal controls, risk management, and governance processes, the Audit Committee concludes that the business risks and emerging threats are effectively identified, measured and managed.

Edgar O. Chua Chairman Audit Committee

Solomon S. Cua Member Audit Committee

Angelica H. Lavares Member Audit Committee