Compliance with Articles 88 to 95 of CRD IV

Transcription

1 Compliance with Articles 88 to 95 of CRD IV ABN AMRO Group N.V. and ABN AMRO Bank N.V. January 2016 Article 96 of the fourth Capital Requirements Directive (CRD IV) requires institutions to explain on their website how they comply with the requirements of Articles 88 to and including 95 of CRD IV. This requirement has been implemented in Dutch law by Article 134b of the Decree on prudential measures FMSA (Besluit prudentiële regels Wft, the Prudential Measures Decree). This overview sets out how ABN AMRO Group N.V. (ABN AMRO) complies with Article 134b of the Prudential Measures Decree and Article 96 of CRD IV. Since the Managing Boards and Supervisory Boards of ABN AMRO Group N.V. and ABN AMRO Bank N.V. are and will be identically composed, the following therefore also applies mutatis mutandis to ABN AMRO Bank N.V. Governance, nomination and management body requirements Articles 88 and 91 of CRD IV set (general) requirements in respect of the management body of a financial institution, including its role, its composition, induction and training of its members and the number of directorships an individual member may hold. Article 134b of the Prudential Measures Decree in conjunction with Article 3:8 paragraphs 3 and 4 of the Dutch Financial Markets Supervision Act (Wet op het financieel toezicht, the FMSA) and Article 17c of the Prudential Measures Decree have implemented those requirements in Dutch law. Governance arrangements (Article 88 par. 1 CRD IV) ABN AMRO has a two-tier board structure consisting of the Managing Board and the Supervisory Board. The Managing Board is the statutory executive body (bestuur) and is responsible for the day-to-day management of ABN AMRO. The Supervisory Board (raad van commissarissen) is composed of non-executive directors and supervises and advises the Managing Board. Managing Board The Managing Board is responsible for the management of ABN AMRO s operations. The Managing Board s responsibilities include, among other things, defining and attaining ABN AMRO s objectives, determining the corporate strategy

2 and risk appetite, overseeing the internal governance and day-to-day management of ABN AMRO s operations. In performing its duties, the Managing Board is required to be guided by the interests of ABN AMRO which include the interests of the business associated with it (including the legitimate interests of the customers, the savers and deposit holders, the shareholders, the depositary receipt holders, the employees, and the society in which ABN AMRO carries out its activities). These interests are, amongst other things, represented by the Managing Board pursuing, with the approval of the Supervisory Board, a controlled remuneration policy for Identified Staff that are not part of Managing Board or Supervisory Board (see further the paragraph Remuneration Requirements below). The Managing Board has adopted, with the approval of the Supervisory Board, detailed rules of procedure regarding its functioning and internal organisation, as published on abnamro.com (the Managing Board Rules). The Managing Board Rules also include rules for a number of committees that the Managing Board has established and that are responsible for the preparation of decision-making on certain subjects and for advising the Managing Board on certain matters. Supervisory Board The Supervisory Board supervises the conduct and policies of the Managing Board and the general course of affairs of ABN AMRO and its business. The Supervisory Board also provides advice to the Managing Board. In performing their duties, the members of the Supervisory Board are required to be guided by the interests of ABN AMRO which includes the interests of the business associated with it (including the legitimate interests of the customers, the savers and deposit holders, the shareholders, the depositary receipt holders, the employees, and the society in which ABN AMRO carries out its activities). These interests are, among other things, represented by the Supervisory Board pursuing a controlled remuneration policy for the Managing Board, and approving such policy for other Identified Staff (see further the paragraph Remuneration Requirements below). The Supervisory Board has adopted, with the approval of the General Meeting, detailed rules of procedure regarding its functioning and internal organisation and that of its committees, as published on abnamro.com (the Supervisory Board Rules). The Supervisory Board has also drawn up a profile for its size and composition taking into account the nature of its business, its activities and the desired expertise and background of its members, which is attached to the Supervisory Board Rules as Annex 4. The Managing Board Rules and Supervisory Board Rules further specify the responsibilities and obligations of the Managing Board or the Supervisory Board 2 of 8

3 and its respective committees to ensure inter alia - taking into account their respective roles - compliance with Article 88 paragraph 1 of CRD IV and Article 17c paragraph 1 of the Prudential Measures Decree. The Managing Board Rules and the Supervisory Board Rules also contain detailed arrangements as to the prevention and (if they nevertheless do arise) the appropriate procedure to be followed in case of conflicts of interest as prescribed by the preamble of Article 88 paragraph 1 of CRD IV. However, ABN AMRO makes an exception with respect to conflicts of interest that are exclusively the result of the identical composition of the Managing Boards of ABN AMRO Bank N.V. and ABN AMRO Group N.V. and the respective Supervisory Boards of these entities. Nomination requirements (Article 88 par. 2 CRD IV) The Supervisory Board has established certain committees that are responsible for the preparation of decision-making on certain subjects and for advising the Supervisory Board on certain matters. The Remuneration, Selection and Nomination Committee is one of those committees and is responsible for and advises the Supervisory Board with respect to, amongst other things, nominations and appointments of (potential) members of the Managing Board or Supervisory Board. The responsibilities of the Remuneration, Selection and Nomination Committee further include to (i) make proposals to the Supervisory Board with regard to remuneration policies and execution thereof for members of the Managing Board, the Supervisory Board and other Identified Staff (as defined below), (ii) prepare the selection and (re-)appointments regarding the Supervisory Board and the Managing Board, (iii) prepare and periodically review succession plans of the Supervisory Board and the Managing Board, (iv) periodically (at least annually) assess the knowledge, skills, experience and functioning of (the members of) both boards, (v) periodically (at least yearly) asses the size, structure and composition of the Supervisory Board and the Managing Board, (vi) give advice on the desired size and composition of the Managing Board and Supervisory Board, (vii) make proposals on the profile of the Supervisory Board and (viii) report on the execution of the remuneration policies through a remuneration report. The Remuneration, Selection & Nomination Committee may enlist the services of an internal or external adviser for the performance of its duties. ABN AMRO provides the requisite financial resources, as determined by the Remuneration, Selection & Nomination Committee, to pay the invoices of the advisers it has engaged. Dutch law requires ABN AMRO to pursue a policy of having at least 30% of the seats on the Managing Board and Supervisory Board held by men and at least 3 of 8

4 30% of the seats on the Managing Board and Supervisory Board held by women. ABN AMRO is required to take this allocation of seats into account in connection with the future (nomination for the) appointment of members of the Managing Board and Supervisory Board. In addition, the EBA is also expected to issue guidelines on the notion of diversity to be taken into account for the selection of the members of the Managing Board and Supervisory Board. ABN AMRO currently meets the requirements for the Supervisory Board, but does not meet these gender diversity targets for the Managing Board (1 out of 7 is female: 14%). ABN AMRO will continue to strive for meeting the gender target set by Dutch law for future (re-)appointments in the Managing Board, in line with ABN AMRO s diversity policy, while safeguarding the required continuity in the discharge of the Managing Board s collective tasks and responsibilities. If ABN AMRO continues to fail to meet the gender diversity targets for the Managing Board over the remainder of 2015, it will explain in its Annual Report for the financial year ending 31 December 2015 (i) why the seats are not allocated in a well-balanced manner as aforesaid, (ii) how ABN AMRO has attempted to achieve a well-balanced allocation, and (iii) how ABN AMRO aims to achieve a well-balanced allocation in the future. The Supervisory Board Rules (which include the rules regarding the functioning and internal organization of its committees) further specify the responsibilities and obligations of the Remuneration, Selection and Nomination Committee to facilitate compliance with Article 88 paragraph 2 of CRD IV and Article 17c paragraph 2 of the Prudential Measures Decree. Management body requirements (Article 91 CRD IV) The Managing Board and Supervisory Board of ABN AMRO are structured in such way to ensure that the members provide ABN AMRO with the appropriate balance of skills, experience and knowledge as well as independence. All those members commit sufficient time to allow them to perform their functions and to be able to understand the business of the bank. All members of the Managing Boards and Supervisory Boards have fulfilled prior to their appointment, and continue to fulfil, the fit and proper requirements pursuant to Article 3:8 paragraph 1 of the FMSA. In addition, each member participates in a lifelong learning programme and fulfils the related requirements aimed at ensuring that the members maintain and, where necessary, broaden their expertise. Any potential candidates for the Managing Board or the Supervisory Board that do not pass the suitability screening procedures with the regulators cannot be appointed to the relevant board. As at the date hereof, all members of the Managing Board and Supervisory Board comply with the rules under CRD IV as to the limitation of the number of executive 4 of 8

5 and non-executive directorships such members may hold. However, with respect to one Supervisory Board member, Ms Roobeek, a request is pending with the ECB for authorisation of one additional non-executive directorship that she currently holds. The Managing Board Rules and Supervisory Board Rules further specify the responsibilities and obligations of the Managing Board or the Supervisory Board and its respective committees to ensure - taking into account their respective roles - compliance with Article 91 of CRD IV and Article 134b of the Prudential Measures Decree in conjunction with Article 3:8 paragraphs 3 and 4 of the FMSA. Remuneration requirements Articles 92 to and including 95 of CRD IV provide for requirements as to the remuneration policies for the managing board, supervisory board and other identified staff of institutions. These articles were (largely) implemented in Dutch law through the Regulation on sound remuneration Dutch Financial Markets Supervision Act (Regeling beheerst beloningsbeleid Wft 2014) (the Sound Remuneration Policies Regulation). Remuneration policy and structure The Supervisory Board establishes the remuneration of the individual members of the Managing Board, in accordance with the Managing Board remuneration policy as proposed by the Supervisory Board and adopted by the General Meeting. The remuneration of members of the Supervisory Board is set by the General Meeting based on a proposal of the Supervisory Board. The Managing Board adopts the remuneration policy for Identified Staff (with the exclusion of Managing Board and Supervisory Board members) as approved by the Supervisory Board, with due regard to the advice of the Remuneration, Selection & Nomination Committee. Remuneration policy ABN AMRO pursues a controlled remuneration policy (beheerst beloningsbeleid) taking into account (inter)national laws and regulations, ABN AMRO s strategy and risk appetite, targets and values and the long-term interests of ABN AMRO, the relevant international context and wider societal acceptance. It provides a framework for effectively managing reward and performance across the bank. In view thereof, the applicable remuneration restrictions that follow from Articles 92 to and including 94 CRD IV and the corresponding articles in the Sound Remuneration Policies Regulation have been embedded in (i) the Reward 5 of 8

6 Policy that applies to members of the Managing Board, (ii) the Global Reward Policy applicable to all employees of the bank worldwide and (iii) the ABN AMRO Variable Compensation Plan that applies to all Identified Staff, each as revised and applicable from time to time. ABN AMRO applies the rules and principles set out in the Reward Policy, the Global Reward Policy and the ABN AMRO Variable Compensation Plan to comply with the applicable remuneration restrictions in Articles 92 to and including 94 CRD IV and the corresponding articles in the Sound Remuneration Policies Regulation, it being noted that the application of such rules and principles may include an assessment and interpretation of such restrictions. The Reward Policy for the Managing Board, the Global Reward Policy and the ABN AMRO Variable Compensation Plan is further described in the Remuneration Report of the Supervisory Board as included in ABN AMRO s Annual Report, as published on abnamro.com. Identified Staff Within ABN AMRO the group of Identified Staff consists of (i) members of the Managing Board and Supervisory Board (for which separate remuneration policies apply), (ii) members of the Management Group (being the executives that are part of the three management tiers under the Managing Board), (iii) staff responsible for independent control functions and other risk takers, (iv) other employees whose total remuneration takes them into the same remuneration bracket as senior managers and risk takers, and (v) employees who qualify on the basis of the additional qualitative and quantitative criteria as laid down in the applicable EBA Guideline (together: Identified Staff ). The remuneration package for Identified Staff has been structured in accordance with various regulations and restrictions for the financial sector, including, where applicable, Articles 92 to and including 94 CRD IV, the corresponding articles in the Sound Remuneration Policies Regulation, the Dutch Act on limitation of liability DNB and AFM and bonus prohibition for state-supported enterprises (Wet aansprakelijkheidsbeperking DNB en AFM en bonusverbod staatsgesteunde ondernemingen, the Bonus Prohibition Act ) and the Dutch Act on Remuneration Policies for Financial Undertakings (Wet beloningsbeleid financiële ondernemingen, the Remuneration Policies Act ). Managing Board In principle, the compensation package for the Managing Board consists of an annual base salary and a variable remuneration component. In addition, benefits such as participation in the ABN AMRO pension scheme for all Dutch employees are applicable. However, pursuant to the Bonus Prohibition Act and for as long as 6 of 8

7 NL Financial Investments (NLFI) holds, on behalf of the Dutch State, an interest in ABN AMRO, the members of the Managing Board are not eligible to receive variable remuneration and also cannot participate in the Variable Compensation Plan. Supervisory Board The remuneration of Supervisory Board members is proportional to the time and effort required to perform their duties linked to the membership of the Supervisory Board and the relevant Supervisory Board committees and is independent of ABN AMRO s financial results. ABN AMRO does not grant any variable remuneration or (options for) shares to Supervisory Board members in lieu of remuneration. Other Identified Staff In general, the remuneration package for other Identified Staff has been structured in accordance with various regulations and restrictions for the financial sector, including Articles 92 to and including 94 CRD IV and the corresponding articles in the Sound Remuneration Policies Regulation. Their remuneration package generally consists of the following components: (a) annual base salary, (b) annual variable remuneration (with deferred payout), and (c) benefits and other entitlements. ABN AMRO strives to position the level of total direct compensation for Management Group members just below market median levels. Variable compensation for such other Identified Staff is subject to and structured in accordance with the Variable Compensation Plan. Performance is measured during a one-year performance period at three levels: group, business unit and individual level and by means of (partly) risk-adjusted financial and non-financial performance indicators. At least 50% of performance indicators for the Management Group and other Identified Staff is based on non-financial performance indicators. Pursuant to the Variable Compensation Plan, variable remuneration is awarded over time whereby 60% is paid upfront and 40% is deferred. ABN AMRO may apply that ratio differently at its sole discretion and in compliance with the applicable remuneration restrictions. In accordance with the remuneration restrictions that are applicable to ABN AMRO, each payment is equally divided into cash and non-cash instruments. Deferred variable remuneration vests in equal instalments in three years time. As of the 2016 performance year (for which rewards are attributable for the first time in March 2017) the non-cash instrument portion will be expressed in depositary receipts representing shares in the capital of ABN AMRO, for which a two year retention period applies. Pursuant to the Remuneration Policies Act, the remuneration restrictions of the Bonus Prohibition Act were extended to senior management as defined therein. Accordingly and effective as of 2015, these senior managers shall also not be 7 of 8

8 entitled to variable remuneration until NLFI no longer has an interest in ABN AMRO. The Remuneration Report of the Supervisory Board as included in ABN AMRO s Annual Report, as published on abnamro.com, provides further details on the remuneration received by the Managing Board, Supervisory Board and other Identified Staff in the reported financial year. Remuneration, Selection and Nomination Committee The Remuneration, Selection and Nomination Committee is one of the committees established by the Supervisory Board and responsible for and advises the Supervisory Board with respect to, amongst other things, remuneration policies for members of the Managing Board, the Supervisory Board and other Identified Staff. A further description of the tasks of the Remuneration, Selection and Nomination Committee is set out above under Nomination requirements. The Chair of the Remuneration, Selection and Nomination Committee, Mr. Ten Have, was appointed as member of the Supervisory Board on the recommendation of the Employee Council (being ABN AMRO s central works council). The Managing Board Rules and Supervisory Board Rules further specify the responsibilities and obligations of the Managing Board or the Supervisory Board and its respective committees to facilitate - taking into account their respective roles - compliance with Articles 92 to and including 95 of CRD IV and the corresponding articles in the Sound Remuneration Policies Regulation. Disclosure requirements Articles 89 and 90 of CRD IV provide for country-by-country reporting requirements and the obligation to disclose the return on assets for the institution concerned. These articles were implemented in Dutch law through Articles 3, 4 and 5 of the Decree on the implementation of disclosure requirements CRD IV (Besluit publicatieverplichtingen richtlijn kapitaalvereisten). ABN AMRO reported on the applicable (financial) parameters on a country-bycountry basis 1 and its return on assets 2 in its Annual Report, as published on abnamro.com. 1 Annual Report 2014: Annual financial statements, Note 10 2 Annual Report 2014: Business Report / Financial review / ABN AMRO Group 8 of 8