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2019 Financial
and Social Report

Decision-making process regarding remuneration policy

The "Employee remuneration policy in the Bank Millennium Group" was developed on the ground of assumptions regarding the remuneration of employees in the Bank Millennium Group referring to management system and internal control rules employed in the Bank. “Employee remuneration policy in the Bank Millennium Group” was supplemented by the “Rules of granting and payment of variable remuneration for Board Members of Bank Millennium SA” and “Rules for granting and payment of variable components of remuneration for persons taking risks in the Bank Millennium Group - excluding Members of the Management Board of the Bank Millennium SA".

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„Policy” and „Rules” were developed by a project team set up for this purpose composed of experts in the field of HR, banking and labor law, risk management and compliance.

On August 27, 2019, the General Meeting of Shareholders established an incentive program for rewarding entitled persons who have a material impact on the risk profile („Risk Takers”) in the Group and authorized the Supervisory Board to adopt, within 4 months from the date of the General Meeting of Shareholders, the Regulations specifying the detailed rules and terms of implementation of the Incentive Program, including the specification of detailed conditions for granting, offering, retaining and issuing Own Shares (the „Regulations”).

The draft Regulations of the incentive program and modified rules for granting variable remuneration presented in  „Remuneration policy with respect to Risk Takers in the Bank Millennium S.A. Group” were consulted with the members of the Personnel Committee of the Supervisory Board. Proposal of documents were recommended by this body for submission to the Supervisory Board.

On November 29, 2019, the Supervisory Board by resolution no 25/2019 and no 26/2019 has approved the remuneration policy  and incentive program by-laws. The principles set out in these documents will apply to the payment of variable remuneration from 2020.

Preparation of the modifications to the rules took place in cooperation with an external consultant, the Gessel law firm, which supported the Bank in preparing the process aimed at granting to Risk Takers the Bank Millennium shares as part of the variable remuneration. The project was developed by representatives of the Human Resources, Legal and Compliance Departments and supervised directly by the Chairman of the Management Board.

By the decision of the Supervisory Board of November 29th, 2019, the Bank implemented modified rules under which 50% of the variable remuneration for Risk Takers will be paid in the Bank’s own shares listed on the Warsaw Stock Exchange.

The Personnel Committee of the Supervisory Board supervised the annual verification process of the list of people identified as Risk Takers. In 2019, the verified list of people having a significant impact on the risk profile remained unchanged compared to 2018.

In 2019, supervision over the remuneration policy in the Bank Millennium Group was performed by the Personnel Committee of the Supervisory Board, composed of:

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

The Committee is responsible, inter alia, for determining assessment criteria and assessing the work of the Bank’s Management Board Members, including their re-evaluation of work in order to decide on granting entitlement to the deferred part of bonuses from previous years. In addition, in accordance with the scope of its competences, the Personnel Committee of the Supervisory Board, among others: (i) verifies meeting the criteria and conditions justifying obtaining variable remuneration components of Management Board Members before paying all or part of this remuneration, (ii) gives opinions on the remuneration policy, including the amount and type of remuneration components , (iii) gives opinions on the amount of remuneration for persons holding key managerial positions in the Group related to risk management and compliance of the Bank’s operations with internal law and regulations.

In 2019, three meetings of the Personnel Committee of the Supervisory Board were held (01/02/2019, 31/05/2019, 27/11/2019). The subject of the Committee’s work was: (i) re-evaluation of the Members of the Bank’s Management Board and establishing the rules for the payment of part of the retained bonus for 2015, 2016 and 2017 to Members of the Bank’s Management Board who performed functions in those years, (ii) evaluation of the work results of individual Members of the Bank’s Management Board in 2016-2018 and granting bonuses to individual Members of the Management Board for this period on the terms set out in the Employee Remuneration Policy in the Bank Millennium Group and the Rules for granting and paying out variable remuneration components to Members of the Management Board of Bank Millennium SA, (iii) consideration of information on decisions regarding bonuses for 2016-2018 for ” Risk Takers ”, who are not Members of the Bank’s Management Board, (iv) analysis of the process of determining the amounts of payment of fixed and variable components of remuneration to persons holding managerial positions, in accordance with the remuneration policy and the rules for granting and payment of variable components of remuneration.

The Supervisory Board presented to the General Meeting (GSM) on March 25, 2019 a report on the assessment of the functioning of the remuneration policy in the Bank Millennium Group. The General Meeting of Shareholders recognized the policy pursued as supporting to the Bank’s development and security.

The decision-making process in the former Eurobank:

At its meeting on March 13, 2019, the Supervisory Board of Euro Bank, after a positive recommendation of the Remuneration and Nomination Committee, adopted changes in the Remuneration Policy regarding „identified employees”. The changes were technical and updating. The adopted Annex 4 defined the key performance indicators (KPI) system for the Management Board, which was adapted to the specific situation of Euro Bank in 2019.

Information on the remuneration system, including the criteria used for performance measurement and risk adjustment, deferred payment policies and vesting criteria:

Pursuant to the remuneration policy, the individual remuneration of persons influencing the risk profile, including members of the Management Board, may not exceed the adopted reference level (currently 100%) in relation to the total annual base salary. In addition, the pool allocated to variable remuneration components of Bank Millennium Management Board Members may not exceed the share in the consolidated net profit of the Bank Millennium Group determined by the Supervisory Board (currently 2%). While maintaining these limitations, the bonus pool can be increased as indicators improve.

The remuneration of persons making decisions affecting the risk profile is shaped in particular in relation to:

  • the scope of tasks carried out in a given organizational unit,
  • the scope of responsibility for employees
  • on the basis of analysis of payroll information presented in payroll surveys on the labor market at financial institutions.

Bonus pool and results

Variable remuneration components – the annual bonus pool for persons in managerial positions is granted after prior analysis of the Bank’s situation in the field of:

  • achieved business results: net profit, result on banking operations, cost to income ratio, ROE;
  • liquidity: loans / deposits ratio, liquid assets value level;
  • capital adequacy ratios in relation to the KNF reference level.

The Bank’s results before granting the bonus pool for variable remuneration for persons in managerial positions are analysed in a three-year perspective.

The level of the bonus pool is correlated with the result on banking activities, net profit, cost / income ratio, ROE. Capital adequacy ratios in the period under assessment may not fall below levels accepted by the PFSA. Risk indicators relating to the Bank’s liquidity in the period under assessment may not fall below levels accepted by the PFSA.

Payment deferral policy

Variable remuneration (annual bonus) paid for 2018 in 2019: The award and payment of 50% of the variable remuneration value took place after the end of the accounting period and after the publication of the financial results, and the payment of 50% of the variable remuneration is postponed for 3 years, payable in equal annual instalments. Members of the Management Board receive each part of the bonus awarded – those paid out in the year following the settlement period and the deferred ones – half in cash and half in financial instrument (phantom shares), the value of which relates to the value of Bank Millennium shares.

The variable remuneration (annual bonus) paid for 2018 in 2019 was subject to the following rules: The bonus was paid in 50% in cash in the year following the given financial year. The remaining 50% was allocated in the financial instrument related to the value of Bank Millennium shares (phantom shares) – which after re-evaluation will be acquired in equal annual instalments during 3 years.

The variable remuneration (annual bonus) paid for 2018 in 2019 was subject to the following rules:

  • 60% of the variable remuneration was not deferred (granted in advance).
  • 40% of the variable remuneration was deferred and can be acquired proportionally over a period of 3 years, which includes three deferral periods (1-year deferral period – 14%, 2-year deferral period – 13% and 3-year deferral period – 13%).
  • 50% of the non-deferred variable remuneration component consists of cash and 50% of financial instruments.
  • 100% of the deferred variable remuneration component consists of financial instruments, which by resolution of the Supervisory Board was defined as Eurobank shares. After the merger with Bank Millennium, the shares of Eurobank granted under bonus programs were – by the decision of the Supervisory Board of Bank Millennium S.A. – converted into Bank Millennium own shares in accordance with the adopted conversion rate.

The bonus, in the deferred part, is subject to re-assessment in subsequent years and may be reduced or retained on the basis of the decision of the Personnel Committee of the Supervisory Board depending on the financial situation of the Bank resulting from actions taken in the assessed period.

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

  • significant correction of results in relation to the assessed period,
  • low level of the Bank’s results threatening the capital base,
  • materialization of the risk of decisions taken in the period under assessment, which negatively affects the bank’s risk profile.

Criteria for assessing results at the level of the Bank, organizational units and individual, which are the basis for determining and paying out individual variable remuneration

Decisions regarding the award of bonuses to Management Board members are made by the Personnel Committee of the Supervisory Board after analysing the results, taking into account the financial criteria:

  • implementation of planned budgets and indicators set for the managed area of activity,
  • comparison with competing banks of similar size,
  • business market criteria established for a given 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 of entities in the area of responsibility.

The Personnel Committee of the Management Board of Bank Millennium assesses work in a given settlement period based on quantitative criteria for a given area of responsibility (results of business operations of banking lines) and discretionary assessment of individual quality of work, with particular emphasis on the quality of decisions affecting the bank’s risk profile in a minimum perspective of three years. Each person identified as taking risk was assigned an individual assessment criterion in the periodic assessment system related to his scope of responsibility regarding the impact on the risk profile of Bank Millennium Group.

Based on the overall evaluation of the results for the period under review, the value of the annual discretionary bonus is determined.

Directors of internal audit, compliance, legal , and risk management are remunerated in terms of variable remuneration for achieving the objectives arising from their functions, and their remuneration is not dependent on financial results executed in the areas controlled by them – both in the Bank and the relevant Subsidiaries.

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 53. Aggregate quantitative information on remuneration per 2019, 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.)

XLS
Business lines Total remuneration
Management Board Risk Takers (without Management Board Members) Total
Retail Banking 0 3 143 3 143
Corporate Banking 0 4 992 4 992
Overall Bank Management 12 314 14 686 26 999
Total 12 314 22 820 35 134

Table 54. The amounts of remuneration for 2019 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.)

XLS
Management Board Members Persons in management positions – reporting directly to Management Board Members (*) Other persons in management positions
Number of persons 7 46 12
Fixed remuneration plus additional benefits 12 314 19 484 3 336
Variable remuneration (*) 0 0 0
Total cash
Cash paid
Cash deferred
Total financial instrument 0 0 0
Vested financial instrument
Paid financial instrument
Deferred financial instrument
(*) As for the publication date, variable remuneration for Management Board memebrs for 2019 was not granted

Table 55. The amounts of outstanding deferred remuneration for the 2019 financial year, split into vested and unvested portions; broken down by Management Board Members, persons reporting directly to Management Board Members holding function in 2019 and other persons in management positions in Bank Millennium Group in 2019, whose actions have a material impact on the risk profile of the institution (PLN thous.)

XLS
Management Board Members Persons in management positions – reporting directly to Management Board Members Other persons in management positions
Variable remuneration with deferred payment  0 0 0
  • part already awarded
Variable remuneration with deferred payment  0 0 0
  • part not yet awarded
Total deferred variable remuneration  0 0 0

Table 56. The amounts of deferred remuneration awarded during 2019 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.)

XLS
Management Board Members Persons in management positions – reporting directly to Management Board Members Other persons in management positions
Number of persons 9 67 13
                  Employed as of end of year 7 45 13
                  Former employees 2 22 0
Deferred remuneration paid out during the financial year, subject to adjustment for performance in previous financial years 4 044 5 793 186
                  Employed as of end of year 3 335 4 814 186
                  Former employees 709 979 0
(*) Deferred remuneration for 2015, 2016 and 2017 programmes

Table 57. New sign-on and severance payments made during the 2019 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.)

XLS
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 25 25
Highest such payment 0 25 25
Number of persons receiving such payments 0 1 1

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 the Management Board Report on Activity of Bank Millennium S.A. for 2019.

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