Renumeration policy

Remuneration policy in PKO Bank Polski SA and other group entities

The basic internal regulation regard of remuneration policy is the Collective Labour Agreement (‘Zakładowy Układ Zbiorowy Pracy’ - ZUZP) concluded with the company trade union organizations on 28 March 1994 (with subsequent amendments), under which employees of the Bank receive the following remuneration components:

  • the base remuneration,
  • additional remuneration for working overtime, as well as under conditions which are especially onerous and detrimental to health,
  • bonuses and awards for special achievements in professional work.

Base salaries and additional benefits granted to employees are formed on the basis of job grading (grading categories assigned to specific organizational positions) and analysis of market remuneration in the banking sector.

Depending on the size of employment remuneration policy is defined in the rules of remuneration or in contracts of employment or only in contracts of employment. Additionally, the Collective agreement concluded with Committee of Trade Union functions in KREDOBANK SA - in 2015 the new deal for years 2015-2017 was reached.

In 2016 no significant changes were made to the remuneration policy.

Number of employees

As at 31 December 2016, the number of employees in the PKO Bank Polski SA Group amounted to 29 441 FTE, which constituted an increase of 220 FTE y/y. The change in the number of employees in the Group y/y resulted from the development of business activities and changes in the structure of the Group (primarily the purchase of RLPL companies).

Number of employees in PKO Bank Polski SA and other Group entities (in number of full-time equivalents)

 31.12.201631.12.201531.12.201431.12.201331.12.2012Change of number of employees 2016/2015
PKO Bank Polski SA25 38125 90925 92724 43725 399-529
Other entities of the Group4 0603 3113 1052 9503 157748
Total29 44129 22129 03227 38728 556220
 

During 2016, 363 employment contracts were terminated for reasons not relating to employees.

Employment was restructured in particular for the following reasons:

  • reorganization in respect of the segregation of duties among units,
  • an increase in the Bank employees’ effectiveness,
  • universalization of positions,
  • changing the typology of branches,
  • centralizing the tasks which had been conducted in field offices.

Incentive system in PKO Bank Polski SA and in other group entities

PKO Bank Polski SA has a remuneration and incentive system, in which the level of variable component of the salary is determined by the degree of achievement of the targets set. It consists of four pillars:

I Pillar, the so-called Management by Objectives (MbO) covers managerial and expert positions crucial for the Bank’s key objectives. The MbO consists of granting bonus which depends on the quality and degree of completion of the tasks.

II Pillar, the so-called Individual Bonus System (IBS) is the system of bonuses which depends on the degree of completion of specific tasks in the areas of sales and effectiveness. The system covers those employees who are performing business tasks, mainly in corporate and investment banking, as well as in debt collection.

III Pillar, the so-called Sales Bonus System is aimed to positions in retail branches, which perform the sale of banking products.

IV Pillar, the so-called Support Bonus System (SBS) includes other employees not covered by the system MbO, IBS and Sales Bonus System.

Regardless of the bonus system there is a system of rewarding employees, under which the Bank creates a prize fund for the purpose of:

  • individual discretionary awards to employees of the Bank, deriving outstanding results in their work or for achievements, which led to results important for the Bank, and
  • awards in competitions relating to performance.

In addition, in accordance with the Resolution No. 258/2011 of the Polish Financial Supervision Authority, Directive No. 2013/36/EU of the European Parliament and the Council, and delegated Regulation No. 604/2014 of the European Commission, the Bank introduced separate regulations fixing the variable salary components policy, applicable to persons on managerial positions.

The PKO Bank Polski SA Group entities have incentive and remuneration systems in which the degree of achievement of individual targets determines the bonus. The procedure for target setting and belonging to the particular system depends on performed tasks including sales tasks and the size of the Company. Management of most of the entities from the PKO Bank Polski SA Group and the directors of selected Group entities are covered by the Management by Objectives System MbO.

Moreover, in connection with the resolution of the Polish Financial Supervisory Authority No. 258/2011, Directive No. 2013/36/EU of the European Parliament and Council, and Commission Delegated Regulation No. 604/2014 in 2016 rules and regulations were implemented in selected companies of the PKO Bank Polski SA Group which determined policies regarding variable remuneration components. The Regulations on variable remuneration components for members of Management Boards (‘Regulaminy zmiennych składników wynagrodzeń dla członków Zarządu’) were used in: PKO Leasing SA, PKO Towarzystwo Funduszy Inwestycyjnych SA, PKO BP BANKOWY PTE SA, PKO Życie Towarzystwo Ubezpieczeń SA, PKO Towarzystwo Ubezpieczeń SA and PKO Bank Hipoteczny SA. Moreover, in PKO Życie Towarzystwo Ubezpieczeń SA, PKO Towarzystwo Ubezpieczeń SA and PKO Bank Hipoteczny SA, the rules for variable remuneration components covered employees in selected management positions.

At the same time, due to the changes in the regulations applicable in investment fund management companies – in particular in connection with the entry into force of Art. 47a (1) of the Act of 27 May 2004 on investment funds and on managing alternative investment funds, as well as the Decree of the Minister of Finance of 30 August 2016 on detailed requirements for remuneration policies in investment fund management companies – on 2 December 2016, the Supervisory Board of PKO Towarzystwo Funduszy Inwestycyjnych SA, adapted the remuneration rules with regard to variable remuneration components for both members of the Management Board and employees of the Management Company to the requirements of the aforesaid Act and Decree.

In 2016, Raiffeisen-Leasing Polska SA applied the rules for variable remuneration components stipulated in the Corporate guidelines - Remuneration rules based on CRD IV Directive, applicable at Raiffeisen-Leasing Polska SA (‘Wytyczne korporacyjne – Zasady wynagradzania oparte na dyrektywie CRD IV, Raiffeisen-Leasing Polska SA’) in line with the rules applicable in the Raiffeisen Bank International AG Group, based on the EU regulations and Austrian Banking Act. Members of the Company’s Management Board were covered by the aforesaid rules.

Benefits for employees

Employee Pension Programme

As of July 2013, the Employee Pension Programme (EPP) functions at the Bank. The EPP was introduced in the form of a contract on the Bank making basic and additional contributions on behalf of the employees to investment funds managed by PKO Towarzystwo Funduszy Inwestycyjnych SA.

In 2016 Employee Pension Programmes (PPE) were functional in PKO BP BANKOWY PTE SA, PKO Towarzystwo Funduszy Inwestycyjnych SA, PKO Życie Towarzystwo Ubezpieczeń SA, PKO Leasing SA and PKO BP Finat Sp. z o.o.

Medical care

The Bank ensures its employees additional healthcare- besides occupational health services which are compulsory according to the regulations of the Polish Labour Code. Employees are entitled to various packages, addressed to particular groups of jobs. Empoyees may benefit from a health promotion programme called ‘Zdrowie jak w Banku’, covering, i.a. a preventive health check and activities directed at health-oriented education and promoting a healthy life style.

Most PKO Bank Polski SA Group companies ensure their employees – apart from occupational medicine benefits – additional healthcare benefits according to universal or differentiated benefit packages, depending on the policies adopted by the companies.

Group insurance

Employees are entitled to join the cost-effective group insurance. The fee is being incurred by the Bank.

My Benefit

The Bank gives its employees the possibility of using the cafeteria system called MyBenefit as part of which each employee of the Bank may use the funds allocated to him/her from the Company Social Benefits Fund via an online platform on his/her own. The platform offers a broad range of benefits for the employees to choose from.

The amount of funds received to be spent at the cafeteria is dependent on the amount of gross income per person in a given family.

Social benefits

In accordance with the Act of 4 March 1994 on the Company Social Benefits Fund, the aid granted out of the Company Social Benefits Fund to the Bank’s employees and former employees (pensioners, people receiving pre-retirement benefits) and members of their families in 2014 was earmarked for the following purposes:

  • various forms of holidays,
  • promotion of education, cultural and sport activities,
  • day carers or nannies looking after children in day care centers, children’s clubs, and kindergartens, and other forms of pre-school education;
  • provision of material aid – in-kind or financial aid, as well as aid for housing purposes under terms and conditions set out in agreements.

The purchase of benefits 1-2 is possible through a modern Internet platform.

 

Training policy

All actions taken as a part of the training policy support the execution of the Bank’s strategy and are adapted to the current needs of the employees and the possibilities of the organization. The training policy implemented in companies in the PKO Bank Polski SA Group is aimed at ensuring the professional development of the staff, including the adaptation of their knowledge and competencies to the changing legal and macroeconomic environment.

Objectives of the training projects executed in PKO Bank Polski SA are especially:

  • development of employees’ competencies in line with the PKO Bank Polski SA agenda,
  • increasing commitment to the performance of business tasks
  • improvement of skills associated with selling techniques,
  • maintaining the highest possible customer service quality,
  • supporting the positive attitude to changes among the Bank’s employees,
  • advancement of the bank’s values.

The Bank offers its employees various forms of improving their professional qualifications. A team of internal trainers provides group, work station training sessions and internal workshops directed at developing sales competencies, product and application knowledge. At the same time, external training firms with which the Bank has signed framework contracts, provide comprehensive development programmes aimed at increasing the level of soft and hard competencies, and increasing specialist knowledge available on the market. In 2016 a total of over 95 796 participants took part in the training organized by PKO Bank Polski SA, which means that one Bank employee on average participated in 4 training sessions.

The internal e-learning platform is actively used by the Bank, mainly for the purpose of training in products, processes and servicing IT platforms. In 2016, 215 920 participants availed themselves of e-learning formula training.

The internal gamification platform, which was implemented in the Bank in 2016, proved to be an additional support in developing employees’ knowledge and skills in retail sales. This platform allows employees to increase their product knowledge and develop their sales skills by participating in training exercises prepared for them in the modern and engaging formula of a business game.

The training courses and workshops conducted at the Bank are addressed to the employees of PKO Bank Polski SA and the network of agencies of PKO Bank Polski SA. This allows the employees of the Bank and the agency network to make use of high quality training courses carried out in line with the training methodology and standards of the Bank. Moreover, the framework agreements signed with training companies offer attractive terms and conditions, including training rates.

The Bank provides catalogue training sessions which are available to all the Group’s employees using external firms and with the support of the Bank’s internal trainers. The said training sessions improve the soft competencies of PKO Bank Polski SA and knowledge from the area of project management and Ms Office tools. In 2016 a total of 1203 PKO Bank Polski SA Group employees availed themselves of catalogue training sessions.

In 2016 two important training/development projects were realized at the Bank:

  • New Manager Programme – adaptation programme for new Bank’s managers - 182 new managers took part in it,
  • The PKO Bank Polski SA Talents Programme – a two-year training and development programme addressed to selected Group employees. In 2016, 126 employees participated in training sessions, workshops and the event summarizing the programme.

Apart from training and development programmes, tailor-made internal workshops are realized at the Bank. They are aimed at building commitment in teams and improving the business activities of individual units (processes, communication, collaboration, business results, etc.). In 2016, a team of internal moderators completed workshops for 523 employees of the Bank.

In connection with the market’s business requirements and the Bank’s strategy, in 2016 the following training actions were performed:

  • adaptation training sessions for employees of the retail sales network in all businesses - 2010 training participants,
  • comprehensive training programme for all employees of the retail sales network – New Sales Rhythm,
  • implementation of the OFWCA examination allowing to gain the status of an individual person performing agency activities related to the sale of insurance products - employees of the agency network of PKO Bank Polski SA – 640 participants,
  • dedicated training programmes for employees from the corporate relations division, such as: recognizing customers’ financial needs based on their financial statements, financial analysis of enterprises – advanced level with a final exam, securing the bank’s credit receivables – 588 participants,
  • dedicated training sessions for employees of the corporate branch in Frankfurt: cross-culture training, compliance with als 1-Mann-Abteilung, foreign banks in Germany, administrator Schulung, administrator Schulung, aufbau Seminar fur Compliance, workshop Geldwasche Fallbeispiele, sales up Training on the Job,
  • specialist training in the serviced IT systems – in 2016 a total of 468 persons participated,
  • e-learning training sessions for the Bank’s auditors: practical aspects of applying the Act on reversed mortgage loans, tax carousel, scope of inspections in branches with reference to FATCA (Foreign Account Tax Compliance). A total of 433 persons participated in those three trainings.

Benefits for supervisors and managers

Principles of remuneration of the Bank’s Management Board members

According to principles of remuneration of the Bank’s Management Board members drew by the Supervisory Board, members of the Bank’s Management Board are entitled to:

  • monthly remuneration at an amount determined by the Bank’s Supervisory Board for each member of the Bank’s Management Board,
  • benefits payable to employees of the Bank (excluding benefits payable to employees under Works Collective Agreements – Zakładowe Układy Zbiorowe Pracy - ZUZP):
    • under the common binding laws,
    • under the Bank’s internal regulations, with standardized or exceptional character, for which the grant basis is not an evaluation of the Member of the Bank’s Management Board work effects or the result of the area supervised by him.
  • variable remuneration components for the results of work, in particular bonuses, awards for outstanding achievements, severance related to the termination of the employment not higher than 3 times the basic salary, which detailed rules of granting and withdrawal determines the ‘Regulations of the variable components of remuneration for the members of the Board’ adopted by the resolution of the Supervisory Board - taking into account the requirements of relevant legislation on the variable components of the remuneration of employees in banking institutions in positions that have a significant impact on the risk profile,
  • Bank-financed insurance, in particular in respect of death and serious illness, permanent disability, permanent or long-term damage to health, incapacity for work (detailed scope of insurance will result from the insurer's offer and conditions negotiated by the Bank).

Remuneration for the Management Board Members paid out in 2016 (in PLN thousand)

RemunarationOther salary componentsPost-employment benefitsTotal
  fixedvariableadditional insurancePPEhealth care and social fundholiday paynon-competitionseverance feePPE+health care 
  2016201520162015201620152016201520162015201620162016201620162015
1.Zbigniew JagiełłoPresident of the Management Board in charge of the President of the Management Board Division, Legal Division and Compliance1 9511 892948875404088841100003 0292 892
2.Piotr AlickiVice-President of the Bank's Management Board in charge of IT and Services1 2191 4197416513340606311405244366123 0812 175
3.Janusz DerdaVice-President of the Bank's Management Board in charge of IT and Services550000000000000550
4.Bartosz DrabikowskiVice-President of the Bank's Management Board in charge of Finance and Accounting1 6261 577804742393974712100002 5442 429
5.Maks KraczkowskiVice-President of the Bank's Management Board in charge of International and Transaction Banking and Cooperation with Self-Government Bodies and Government Agencies683000140001000006980
6.Mieczysław KrólVice-President of the Bank's Management Board in charge of Insurance Banking786000180001000008050
7.Piotr MazurVice-President of the Bank's Management Board in charge of Risk Management1 4631 419619532404064601100002 1872 051
8.Jarosław MyjakVice-President of the Bank's Management Board in charge of Insurance Banking3641 4005905959461857316097310292 3542 099
9.Jacek ObłękowskiVice-President of the Bank's Management Board in charge of Retail Market3671 41973464810462063128257310392 7272 179
10.Jakub PapierskiVice-President of the Bank's Management Board in charge of Corporate and Investment Banking1 4461 419757696434364651100002 3102 223
11.Jan Emeryk RościszewskiVice-President of the Bank's Management Board in charge of the Retail Market62900000001000006290

Variable components of remuneration of board members and key managers with a high impact on the bank's risk profile (Material Risk Takers - MRT)

In accordance with the requirements of the CRD IV and the Decree No. 604/2014 supplementary to the directive of the European Parliament and the Council 2013/36/EU with regard to regulatory technical standards with regard to quality criteria and appropriate quantitative criteria for determining categories of staff whose professional activities have a material impact on the risk profile of the institution dated March 4, 2014, Bank updated rules, previously implemented in 2012 for determining the variable remuneration components of MRT - through resolutions: 

  • Supervisory Board - variable components of remuneration policy under the name of ‘Rules of the variable components of the remuneration of persons holding managerial positions at the Bank’ (which are the basis of further regulation) and ‘Rules of the variable components of the remuneration for the members of the Board’,
  • Board of Managers – ‘Rules of the variable components of the remuneration for persons holding managerial positions.’

The rules and derived regulations of remuneration describe the procedure of granting MRT variable components of remuneration related to the results and effect of their work - awards for special achievements in work and bonuses.

The basis for awarding variable remuneration components are primarily premium targets assigned by the Management by Objectives (MbO).

The adopted objectives are to guarantee accounting for the Bank’s business cycle and the risk related to its business operations. The risks are accounted for both by determining appropriate risk-sensitive criteria for assessing work effectiveness, and reducing or eliminating bonuses in the event of deteriorating financial results, the Bank’s loss or deterioration in other variables (malus).

Variable components of remuneration for the evaluation period (calendar year) are awarded after the settlement of bonus purposes in the form of:

  • not deferred – in the amount of 60% of the variable remuneration (in the first year after a period of assessment),
  • deferred – 40% of the variable remuneration (in equal instalments over the next three years after the first year after a period of assessment).

wherein both the non-deferred and deferred salary is awarded in equal parts in cash and in the form of a financial instrument, i.e. the phantom shares (whose conversion into cash according to the updated of the prices of shares of the Bank is carried out after a period of retention and in the case of deferred compensation - after a period of deferral).

In case the amount of variable remuneration for the year exceeded PLN 1 million, PLN 400 thousand plus 60% of the excess over the amount of PLN 1 million is subject to deferral.

Variable remuneration may not exceed 100% of the annual fixed salary for managerial positions and 70% for members of the Management Board. At the request of the Supervisory Board the limit of variable remuneration for employees who are not members of the Board can be raised up to 200% of fixed remuneration for investment banking jobs - subject to approval by the General Meeting of Shareholders.

Each of the components of accrued variable compensation may be reduced as a result of the following:

  • misconduct,
  • failure to observe the law or standards of customer service,
  • improper perform their professional duties,
  • behaviour in relation to other employees violating the rules of social coexistence.

The bonus amount:

  • for member of the Board may be adjusted in minus or in plus by the certain rate - depending on the achieved results of the Bank specified in the Bank’s Annual Note (a set of key indicators of management specified for a given calendar year),
  • for MRT who is not a member of the Board it may be adjusted in plus by certain rate depending on the results of the Bank specified in the Bank’s Annual Note.

In the case of members of the Board granting and payment of variable remuneration is conditional to approval of the financial statements for the period of evaluation by the General Meeting of Shareholders.

In case of:

  • significant deterioration in the Bank's results,
  • assessment of a significant negative change in equity,
  • violation of law or commitment of significant errors by MRT,
  • adjustment of implementation and completion degree of results or objectives of MRT,
  • performance deterioration of supervised or managed structures,
  • granting of variable remuneration on the basis of incorrect, misleading information or MRT fraud it is possible to use - respectively by the Supervisory Board or Board of Directors – malus-type solution reducing the size of the due variable compensation deferred in subsequent accounting periods.

Material Risk Takers may avail themselves of healthcare services financed by the Bank, the social benefit fund, and employee pension programmes (PPE). Additionally, Members of the Bank’s Management Board are entitled to insurance financed by the Bank, in particular death insurance, terminal illness insurance, permanent handicap insurance, permanent or long-term detriment to health insurance, inability to work insurance.

In case of granting the MRT severance related to the withdrawal from the function associated with the termination of employment (other than resulting from generally applicable laws) its sum reflects the assessment of the work in the last three years of employment. The Bank's internal regulations stipulate the maximum amount of severance pay.

Members of the Board and selected MRT are additionally covered by non-competition agreements. The agreements provide payment of the required labour law damages for refraining from hiring at competition after the termination of employment at the Bank.

Information on availability of non-monetary remuneration components to individual members of the Board of Directors

Members of the Board and key managers of the Bank are entitled to the non-financial benefits that are available to all employees, i.e.: medical care, PPE, group insurance and cafeteria system - MyBenefit and other benefits from the Company's Social Benefits Fund.

Insurance conditions - Members of the Management Board are entitled to Bank-financed insurance, in particular for the death of serious illness, permanent disability, permanent or long-term damage to health and inability to work.

Members of the management board may also join cost-effective group insurance offered to employees, for a fee paid by employees through the Bank.

Principles of the remuneration of Supervisory Board members

Ordinary General Shareholders’ Meeting of PKO Bank Polski SA by the Resolution No. 36/2010 of 25 June 2010 established the monthly salary for members of the Supervisory Board of:

  • Chairman of the Supervisory Board – PLN 16 thousand,
  • Deputy-Chairman of the Supervisory Board – PLN 14 thousand,
  • Secretary of the Supervisory Board – PLN 12 thousand,
  • Member of the Supervisory Board – PLN 10 thousand.

Supervisory Board members are entitled to remuneration regardless of the frequency of meetings convened.

Regardless of the remuneration, the Members of the Supervisory Board are entitled to reimbursement of the costs incurred in connection with performing the function, and in particular travel costs from the place of residence to the location of the Supervisory Board's meeting and back, costs of accommodation and board.

Supervisory Board members remuneration (PLN thousand)

 20162015
Board of Directors  
Remuneration received, due or potentially due from PKO Bank Polski SA1 2671 197
Remuneration received, due or potentially due from subsidiaries*00
Total remuneration received, due or potentially due1 2671 197
 

Short-term benefits include employee benefits, which are fully settled before the elapse of 12 months from the end of the annual reporting period in which the employees performed the work related to them.

Additionally, in 2016 an agreement was concluded for lending cars to Members of the Supervisory Board to enable them to perform their duties and for private purposes.

Full information regarding the remuneration components and other benefits on behalf of the members of the Management Board of PKO Bank Polski SA and the Supervisory Board in the reporting period has been presented in the Financial Statements of PKO Bank Polski SA for the year ended 31 December 2016 (note 49).

Agreements concluded between the issuer and managing persons

Within the meaning of § 2 clause 1 item 30a of the Decree of the Minister of Finance of 19 February 2009 on current and periodical information submitted by issuers of securities and the conditions of considering as equivalent the information required by law of a non-member country (Journal of Laws No. 33, item 259 with subsequent amendments), members of the Management Board are persons managing the Bank.

In 2016, two agreements were signed with each of the members of the Management Board of PKO Bank Polski SA:

  • an employment contract, providing for severance pay in the event of termination from reasons other than violation of the basic obligations arising from the employment relationship, in the amount of three monthly basic salaries,
  • a non-competition agreement, providing for damages for complying with the noncompetition requirement during 6 months after termination of the employment relation, amounting to 100% of the monthly basic salary received before termination of the employment relation, to be paid monthly in arrears during the non-competition period.

Evaluation of the remuneration policy for the realization of its objectives

In 2016 in connection with the requirements of the Articles of Association and the ‘Principles of Corporate Governance for Supervised Institutions’ the ‘Assessment of functioning of the remuneration policy in PKO Bank Polski SA’ was made and approved by the Supervisory Board. In drawing up the report, an assessment by an external advisor – EY Poland – was used.

The key components of the Bank’s assessment are as follows:

1) The Bank’s development and safety were ensured by the following actions:

  • motivating employees to act in line with the Bank’s interests,
  • linking the amount of remuneration paid to the Bank’s position,
  • ensuring an appropriate level of control over the level of fixed and variable remuneration,
  • and non-remuneration benefits.

2) The Bank pursued a policy of remunerating Members of the Management and Supervisory Boards, as well as key managers, which was specified in appropriate internal regulations verified in terms of consistency and transparency.

3) Members of the Management Board received remuneration adequate to the functions held and to the scale of the Bank’s operations.

4) The Supervisory Board introduced regulations determining the principles for remunerating Members of the Management Board, supervised compliance with those policies and set criteria and conditions justifying the payment of variable remuneration, and verified them before paying it.

5) Variable remuneration of Members of the Management Board and key managers depended on achieving specified goals related to the Bank’s strategy. Those goals covered quantitative and qualitative criteria and guaranteed motivating the respective staff to work and forms of behavior which enabled the Bank to achieve the assumed goals.

The amount of variable remuneration of all the employees depended on the level of achieving the said goals.

The Bank as an institution of public confidence conducted operations with utmost diligence and paid special attention to the professionalism and ethical behaviour of its employees. Therefore, the remuneration policy which constituted a significant component of the Bank’s development and operating security was pursued by the Bank’s Management Board with the active participation of the Supervisory Board.

The policy did not encourage taking excessive risk and – taking into consideration the Bank’s financial position – was balanced, supported the pursuit of the Bank’s strategic goals and its long-term development. This policy comprised three components described below, each of which met the requirements of the binding regulations.

FIXED REMUNERATION

In the process of awarding fixed remuneration, the Bank acted in accordance with particular internal position grading categories. These categories were determined using an independent and objective grading method. The positions were graded on a current basis, in particular in the case of material organizational changes in the Bank.

The Bank verified the adequacy of fixed remuneration by regular benchmarking of remuneration performed by external specialized entities.

To ensure safety and control over remuneration, the Bank took action to avoid specifying the level of remuneration above market level – at the same time avoiding excessive outflow of staff and increased costs of employee churn which could occur in the event of determining remuneration at a level lower than market level. To ensure the above, the Bank monitored fluctuation ratios in particular positions to potentially adjust the assumptions of the remuneration system should negative HR phenomena occur.

A limited and strictly determined group of employees defined in the Bank’s internal regulations was entitled to define and change remuneration amounts.

VARIABLE REMUNERATION

The Bank regulated the process of awarding variable remuneration in: The principles of variable components of remuneration of persons in managerial positions within the Bank, ‘Regulations of the variable components of remuneration for Members of the Management Board and MRT’, and ‘Principles of awarding bonuses to the Bank’s employees’.

The process of awarding variable components of remuneration comprised mainly bonus aims specified for particular bonus pillars. The goals adopted were to guarantee accounting for the Bank’s business cycle and the risk related to its business operations. All the goals resulted from the networks of goals approved by the Bank’s Management Board which were mandatorily cascaded to employees of particular structures. MRT were additionally responsible for special projects aimed at pursuing the Bank’s strategy.

MRT – as persons with particular impact on the level of safety and the Bank’s stable development were subject to additional restrictions in the area of remuneration. Variable remuneration components were granted to MRT, including the Management Board, for the given evaluation period (calendar year) after settling the deferred and non-deferred bonus goals. To ensure permanency of the results reduction of deferred components of variable remuneration is possible in the event of deteriorated financial results, the Bank’s loss or deterioration in other variables (malus).

Additionally, one-half of each component was paid in the form of a financial instrument linked to the Bank’s share value. In the event of achieving good and stable results, the Bank’s value increases which leads to an increase in the final cash disbursement. In the opposite situation, the cash disbursement may be reduced. This mechanism motivated MRT and Members of the Management Board to care for the results and development of the Group.

Bonuses were parametrized in consideration of the Bank’s situation and financial sector market benchmarks. The Supervisory Board was authorized to parametrize bonuses (bonus ratios, bonus adjustment ratios, levels of goals achieved remunerated with bonuses) for the Management Board, and the President of the Management Board is exclusively authorized to parametrize bonuses for MRT.

As part of the completed projects key to the safety and development of the Bank dedicated motivational solutions were introduced on a periodic basis.

NON-REMUNERATION BENEFITS

The Bank offered abundant, comparable to market conditions, additional non-remuneration benefits. The benefits granted on the one hand motivated employees to care for the Bank’s results, and on the other, they played a retention function thanks to which the continuity of the Bank’s operations was ensured in respect of particular processes. Additionally, educational incentives granted as part of such benefits (training vouchers, additional funds for educational purposes) translated directly to the Bank’s development through the development of its employees.