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2018 Financial and Social Report

Decision-making processes regarding remuneration policy

“Employee Remuneration Policy in Bank Millennium Group” was developed on the basis of assumptions regarding remuneration of employees in the Bank Millennium Group – taking into account the applied management and internal control system. “Rules of granting and payment of variable remuneration for Board Members of Bank Millennium SA” and “Rules of granting and payment of variable remuneration for Risk Takers – excluding Board Members of Bank Millennium SA” function as part of the “Employee Remuneration Policy in Bank Millennium Group”. “Policy” and “Rules” mentioned above were developed by a project team set up for this purpose composed of HR experts, banking law and labor law, management risk and compliance. When drawing up “Policy” no external consultants were used.

Dedicated internal Steering Committee supervised the method of analysis of scopes of responsibility for risk-based decisions, adopted remuneration assumptions as well as evaluation rules. Subject to the Committee’s verification was the list of positions and persons responsible for taking decisions significantly affecting the bank’s risk profile.

Policy updates were prepared internally by a project team composed of experts in risk management, compliance and law – under the direction of the HR Department director.

In 2017, the policy was verified from the perspective of compliance with the Regulation of the Minister of Development and Finance of March 6, 2017 on the risk management system and internal control system, remuneration policy and detailed method of estimating internal capital in banks.

In 2018, as part of the annual identification process of employees having a significant impact on the risk profile of the Bank Millennium Group, the Head of the Tax Department was added to the existing list of risk takers. The list of risk takers has been accepted by the Management Board of Bank Millennium SA based on recommendation of an expert team responsible for the identification process. The identification of persons having a significant impact on the risk profile of the Bank Millennium Group was confirmed by the Personnel Committee of the Supervisory Board of Bank Millennium S.A.

Composition, scope of tasks and procedure of work of the Supervisory Board Personnel Committee in 2018

In 2018, supervision of remuneration of persons holding managerial posts in Bank Millennium Group was held by Personnel Committee of the Supervisory Board, composed of:

  1. Andrzej Koźmiński – President
  2. Nuno Manuel da Silva Amado
  3. Miguel de Campos Pereira de Bragança
  4. Bogusław Kott

The Committee is responsible i.a. for defining terms and conditions of employment, defining evaluation criteria and evaluating work of members of the Bank’s Management Board. Moreover the Supervisory Board Personnel Committee in line with its powers pronounces opinions on the remuneration policy, including amount and type of components awarded to persons occupying management positions, including persons involved with risk management and compliance of the Bank’s activity with legal provisions and internal regulations.

In 2018, two meetings of the Personnel Committee were held: on 26.03.2018 and on 9.04.2018.

In 2018, in order to ensure the correct implementation of the tasks set for the Committee, the Committee members took actions both during and outside the meetings – by conducting mutual consultations and meetings and conversations with other persons, including members of the Bank’s Management Board. The subject of the Committee’s work was the reassessment of the members of the Bank’s Management Board and determination of the rules for paying part of the deferred bonus for 2014, 2015 and 2016 to the members of the Bank’s Management Board who performed their functions in those years; assessment of the results of work of individual members of the Bank’s Management Board in 2017 and granting individual members of the Management Board for this period bonuses based on the policy of remuneration; consideration of information about decisions regarding bonuses for 2017 for the so-called Risk Takers, who are not members of the Bank’s Management Board; analysis of the process of determining the amounts of payment of fixed and variable remuneration in the Bank.

The Supervisory Board presented to the General Meeting of Shareholders a report on the assessment of the remuneration policy in the Bank Millennium Group. The General Meeting of Shareholders acknowledged the policy pursued as conducive to the development and security of the Bank.

Information about the remuneration system, including criteria used when measuring results and adjusting for risk; about payments deferral policy and about eligibility criteria

Remuneration of persons taking decisions affecting the risk profile is determined in particular with consideration of:

  • Scope of tasks performed in the organisational unit,
  • Scope of responsibility of the employees,
  • Based on analysis of salary information presented in labour market surveys of salaries in financial institutions.

Bonus pool vs. results

Variable remuneration components – annual bonus pool for persons occupying management positions is approved after prior analysis of the Bank’s situation regarding:

  • Actual business performance: net profit, Result on Banking Activity, Cost to Income ratio, ROE;
  • Liquidity: Loans/Deposits ratio, value of liquid assets;
  • Capital adequacy ratios with respect to the KNF reference level.

The Bank’s results before approval of bonus pool for variable remuneration for persons occupying management positions are analysed in a three-year perspective.

The level of the bonus pool is correlated with the actual Result on Banking Activity, net profit, Cost to Income ratio, ROE. Capital adequacy ratios in the evaluated period cannot fall below levels accepted by KNF. Risk ratios regarding the Bank’s liquidity in the evaluated period cannot fall below levels accepted by KNF.

The bonus pool may be raised as the ratios improve. The bonus pool assigned for payment of bonus to Management Board Members cannot exceed 100% of total annual base remuneration and 2% of Consolidated Net Profit of Millennium Group. Variable remuneration of a person covered by the Policy cannot exceed 100% of the person’s total annual fixed remuneration.

Payments deferral policy

Awarding and payment of 50% of the value of variable components of remuneration occurs after the end of the settlement period and after announcement of financial results, while payment of 50% of variable remuneration is deferred for 3 years, payable in equal annual instalments. Members of the Management Board receive each part of the awarded bonus – paid in the year coming after the settlement period and deferred – half of it in cash and half in a financial instrument, the value of which is related to the value of shares of Bank Millennium.

Other persons covered by the Policy for Variable Components of Remuneration have the bonus paid in 50% in cash form in the year coming after the given financial year. The remaining 50% is paid in a financial instrument, the value of which is related to the value of shares of Bank Millennium – in equal annual instalments during 3 years.

The bonus, in the deferred part, is subject to reassessment in subsequent years and may be reduced or withheld on the basis of a decision of the Personnel Committee depending on the Bank’s financial situation resulting from actions undertaken in the evaluated period.

The condition for payment is the non-occurrence of following events:

  • Significant correction of results with respect to the evaluated period,
  • Low level of results of the Bank threatening the capital base,
  • Materialisation of risk of decisions taken in the evaluated period, adversely affecting the bank’s risk profile.

Criteria of evaluation of results on the level of the Bank, organisational units and personal, providing a basis for ascertaining and paying individual variable remuneration

Decisions concerning awarding of bonus to Members of the Management Board are taken by the Supervisory Board Personnel Committee after analysis of results, with consideration of financial criteria:

  • Fulfilment of planned budgets and ratios defined for the managed area of activity,
  • Comparison with competitive banks of similar size,
  • Market business criteria defined for the specific period;

And non-financial criteria, in particular:

  • Overall quality of management in the area of responsibility,
  • Effective leadership and contribution to the Bank’s development,
  • Management and supervision over units in the area of responsibility.

The Personnel Committee of the Management Board of Bank Millennium evaluates work in the given settlement period looking at quantitative criteria for the particular area of responsibility (results of banking activity of business lines) as well as discretionary evaluation of personal work quality with particular consideration of the quality of decision affecting the bank’s risk profile in an at least three-year perspective. The each employee identified as Risk Taker had a measure in performance evaluation system assigned, tied to her/his scope of responsibility and related to influence on risk profile.

On this basis it determines the value of annual discretionary bonus.

Aggregated quantitative information concerning remuneration of persons in management positions in Bank Millennium Group. who have material impact on its risk profile, in the meaning of article 450 of CRR.

Table 49 Aggregate quantitative information on remuneration per 2018, broken down by areas of the company's activity and by senior management and members of staff whose actions have a material impact on the risk profile of the institution (PLN thous.)
Business lines Total remuneration
Management Board Risk Takers (without Management Board Members) Total
Retail Banking 1 897 1 897
Corporate Banking 4 611 4 611
Overall Bank Management 11 654 9 089 20 743
Total 11 654 15 598 27 252

 

Table 50 The amounts of remuneration for 2018 the financial year, split into fixed and variable remuneration. and the number of beneficiaries; the amounts and forms of variable remuneration, split into cash, shares, share-linked instruments and other types; the amounts of outstanding deferred remuneration, split into vested and unvested portions; broken down by Management Board Members, persons reporting directly to Management Board Members and other persons in management positions in Bank Millennium Group, whose actions have a material impact on the risk profile of the institution (PLN thous.)
Management Board Members Persons in management positions – reporting directly to Management Board Members Other persons in management positions
Number of persons 8 29 6
Fixed remuneration plus additional benefits 11 654 11 262 1 805
Variable remuneration (*) 2 143 387
Total cash 1 093 194
Cash paid 1 093 194
Cash deferred 0 0
Total financial instrument 1 051 194
Vested financial instrument 0 0
Paid financial instrument 1 051 194
Deferred financial instrument 0 0

(*) A at the day of the Report publication, variable remuneration of Management Board Members for 2018 has not been granted yet

 

Table 51 The amounts of outstanding deferred remuneration for the 2018 financial year, split into vested and unvested portions; broken down by Management Board Members, persons reporting directly to Management Board Members holding function in 2018 and other persons in management positions in Bank Millennium Group in 2018, whose actions have a material impact on the risk profile of the institution (PLN thous.)
Management Board Members Persons in management positions – reporting directly to Management Board Members Other persons in management positions
Variable remuneration with deferred payment – part already awarded 0 0
Variable remuneration with deferred payment – part not yet awarded 1 051 194
Total deferred variable remuneration 1 051 194

 

Table 52 The amounts of deferred remuneration awarded during 2018 year, paid out and reduced through performance adjustments for persons in management positions (including former employees), broken down by Management Board Members, persons reporting directly to Management Board Members and other persons in management positions in Bank Millennium Group, whose actions have a material impact on the risk profile of the institution (PLN thous.)
Management Board Members Persons in management positions – reporting directly to Management Board Members Other persons in management positions
Number of persons 9 37 6
Employed as of end of year 5 28 6
Former employees (*) 4 9 0
Deferred remuneration paid out during the financial year, subject to adjustment for performance in previous financial years (**) 3 761 950 152
Employed as of end of year 2 826 725 152
Former employees 953 225 0

(*) included former member of Management Board, on duty till 20.04.2018
(**) Deferred remuneration for 2014, 2015 and 2016 programmes

 

Table 53 New sign-on and severance payments made during the 2018 financial year, and the number of beneficiaries of such payments among persons in management positions, broken down by Management Board Members, persons reporting directly to Management Board Members and other persons in management positions in Bank Millennium Group, whose actions have a material impact on the risk profile of the institution (PLN thous.)
Management Board Members Persons in management positions – reporting directly to Management Board Members Other persons in management positions
New sign-on and severance payments 0 0 0
Highest such payment 0 0 0
Number of persons receiving such payments 0 0 0

 

The number of individuals being remunerated EUR 1 million or more per financial year

 

1 person – remuneration in band 1-1,5 mln EUR.

 

Detail information concerning remuneration of Management Board Members are presented in chapter Remuneration policy of Management Board Report on Activity of Bank Millennium S.A. for 2018.