Compliance with the Dutch Banking Code

Transcription

1 2. Supervisory Board 2.1 Composition and expertise Compliance with the Dutch Banking Code Banking Code Principle The supervisory board shall be composed in such a way that it is able to perform its tasks properly. Complementarity, a collegial board, independence and diversity are preconditions for the supervisory board to perform its tasks properly The supervisory board shall have a sufficient number of members to properly perform its function, including in its committees. The appropriate number of members depends on the nature, size and complexity of the bank The members of the supervisory board shall have thorough knowledge of the bank s functions in society and of the interests of all parties involved in the bank. The supervisory board shall carefully consider the interests of all parties involved in the bank, such as the bank s clients, its shareholders and its employees Each member of the supervisory board shall be capable of assessing the main aspects of the bank s overall policy in order to form a balanced and independent opinion about the basic risks involved. Each member of the supervisory board shall also possess the specific expertise needed to perform his or her role in the supervisory board. To this end, whenever a vacancy arises on the supervisory board, an individual profile shall be drawn up for the new member of the board. ABN AMRO applies this principle. The composition of ABN AMRO s Supervisory Board is in keeping with the Supervisory Board s profile as included in the Rules of Procedure of the Supervisory Board, which is available at The Supervisory Board consists of independent members from different sectors and backgrounds in terms of their knowledge and experience. At this point, the Supervisory Board is made up of six men and two women. The Board s diverse composition, its members different walks of life and backgrounds and their independence assure wideranging and constructive debate as well as considered decision-making. Biographies of the individual Supervisory Board members can be found at ABN AMRO applies this principle. ABN AMRO s Supervisory Board consists of eight members. Given its nature, size and complexity, ABN AMRO has a sufficient number of members to properly perform its duties, as well as those of its committees. ABN AMRO applies this principle. In keeping with its profile, the Supervisory Board is made up of members who together have wide-ranging experience in society in general and a robust understanding of social trends. The Supervisory Board and the Managing Board are jointly responsible for a balanced consideration of the interests of all ABN AMRO stakeholders. ABN AMRO applies this principle. In keeping with its profile, the Supervisory Board is made up of members who together represent all disciplines required to properly carry out its duties. Within their specialist fields and areas of expertise, the individual members of the Supervisory Board contribute a great deal of knowledge and experience, and each member is individually capable of assessing the bank's general and financial policies and of forming a balanced and independent opinion of the bank's risk management systems. If a vacancy arises on the Supervisory Board, it will be filled on the basis of an individual profile that is in keeping with the Supervisory Board's own overall profile. Compliance with the Dutch Banking Code - page 1 -

2 2.1.5 As part of the process to fill the vacancy of chairman of the supervisory board, an individual profile shall be drawn up that also focuses on the bank s requirements in terms of expertise and experience in relation to the financial sector and familiarity with the socioeconomic and political culture and the social environment of the bank s main markets Each member of the supervisory board the chairman in particular shall be sufficiently available and contactable to properly perform his or her tasks in the supervisory board and the supervisory board s committees Each member of the supervisory board shall receive suitable compensation for the amount of time that he or she spends on supervisory board activities. This compensation shall not depend on the bank s results The chairman of the supervisory board shall organise a programme of lifelong learning, with the aim of maintaining the expertise of the supervisory board directors at the required standard and improving their expertise where necessary. The learning programme shall cover relevant developments at the bank and in the financial sector, corporate governance in general and in the financial sector in particular, the duty of care towards the client, integrity, risk management, financial reporting and audits. Every member of the supervisory board shall take part in the programme and meet the requirements of lifelong learning. ABN AMRO applies this principle. If the position of chairman of the Supervisory Board becomes available, ABN AMRO will draw up a profile that is in keeping with the Supervisory Board's own overall profile and that meets the requirements under Dutch law and regulations, including the Dutch central bank s Policy Rule on Expertise 2011 and this Banking Code Principle. ABN AMRO will ensure that any candidate meets the specified criteria. ABN AMRO applies this principle. The chairman and members of ABN AMRO s Supervisory Board have confirmed and demonstrated that they are sufficiently available and contactable to properly perform their duties in the Supervisory Board and the Supervisory Board committees on which they serve. ABN AMRO's annual report includes an overview of the attendance of members of the Supervisory Board over the past full year (see ABN AMRO applies this principle. The chairman and members of the ABN AMRO Supervisory Board are compensated in keeping with standard practice at comparable companies and with the amount of time spent on Supervisory Board duties. Compensation is not performance-linked. The annual report lists in detail the compensation received by Supervisory Board members. ABN AMRO applies this principle. ABN AMRO has a lifelong learning programme in place for its Supervisory Board members to keep their knowledge up to date, and where necessary helps to broaden and deepen their knowledge. Drawing on its strategic priorities and on external developments, the bank annually puts together a programme that features a series of finance, risk, governance and ethics topics as well as focusing on customers and other relevant stakeholders. In addition, senior managers are invited to give presentations to Supervisory Board members about the latest developments in their particular businesses. Also, as part of their lifelong learning programme, Supervisory Board members make regular company visits. ABN AMRO also has an induction programme to ensure that new members of the Supervisory Board gain sufficient knowledge of the organisation to properly perform their duties. As part of this induction programme, Supervisory Board members are offered the opportunity to sign up for various workshops, which will typically be held by experts from within ABN AMRO. Considering the varying background and experience of new Board members, the training programme is tailored to their needs. Compliance with the Dutch Banking Code - page 2 -

3 2.1.9 The assessment of the effectiveness of the lifelong learning referred to in principle shall be part of the annual evaluation performed by the supervisory board In addition to the supervisory board s annual selfevaluation, the functioning of the supervisory board shall be evaluated under independent supervision once every three years. The involvement of each member of the supervisory board, the culture within the supervisory board and the relationship between the supervisory board and the executive board shall be part of this evaluation. ABN AMRO applies this principle. The Supervisory Board Review in ABN AMRO's Annual Report discusses the main findings of this annual assessment. ABN AMRO applies this principle. ABN AMRO's Supervisory Board meets annually to conduct its selfassessment and appraise the workings of its committees and the performance of its individual members in the previous year. In addition to this annual internal evaluation process, the functioning of the Supervisory Board is evaluated under independent supervision once every three years. All topics covered in this Banking Code Principle will come up in these assessments. 2.2 Tasks and working methods As part of its supervisory tasks, the supervisory board shall pay special attention to the bank s risk management. All discussions about risk management shall be prepared by a risk committee or a similar committee, which committee shall be appointed by the supervisory board from its ranks for this purpose Both the risk committee and the audit committee shall be subject to specific requirements as regards competency and experience. For example, a number of members of the risk committee must have sound knowledge of the financial aspects of risk management or the experience needed to make a thorough assessment of risks. A number of members of the audit committee must have sound knowledge of financial reporting and internal control systems and audits or the experience needed to thoroughly supervise these areas. ABN AMRO applies this principle. ABN AMRO s Risk & Capital Committee advises the Supervisory Board on issues related to the bank s risk management and focuses in particular on the effectiveness of the risk management framework and the enterprise risk management dashboard, which captures all risks relevant to the bank and the way these interconnect. The Committee devotes special attention to managing operational and credit risk, as well as to developments in funding requirements and in the bank s capital position. ABN AMRO applies this principle. The specific competence and experience requirements for the members of the Risk & Capital Committee and the Audit Committee are described in the Rules of Procedure of the Supervisory Board as posted on Most members of the Risk & Capital Committee have a sound grasp of the basic risks that ABN AMRO faces and experience of risk management at financial institutions in general. The majority of committee members also have relevant knowledge of financial reporting and compliance at regulated financial institutions. Most Audit Committee members are well versed in internal controls and audits, and have the necessary experience to ensure robust supervision of these aspects. In addition, they have specific knowledge of audits and annual financial reporting by banks. Compliance with the Dutch Banking Code - page 3 -

4 3. Executive Board 3.1 Composition and expertise The executive board shall be composed in such a way that it is able to perform its tasks properly. Complementarity, a collegial board and diversity are preconditions for the executive board to perform its tasks properly Each member of the executive board shall possess a thorough knowledge of the financial sector in general and the banking sector in particular. Each member of the executive board shall have thorough knowledge of the bank s functions in society and of the interests of all parties involved in the bank. In addition, each member of the executive board shall possess thorough knowledge so that he or she is able to assess and determine the main aspects of the bank s overall policy and then form a balanced and independent opinion about the risks involved The chairman of the executive board shall organise a programme of lifelong learning, with the aim of maintaining the expertise of the executive board directors at the required standard and improving their expertise where necessary. The learning programme shall cover relevant developments at the bank and in the financial sector, corporate governance in general and in the financial sector in particular, the duty of care towards the client, integrity, risk management, financial reporting and audits Every member of the executive board shall take part in the programme referred to in and meet the requirements of lifelong learning. They have to satisfy this condition in order to sit on the executive board. The supervisory board shall ascertain whether the members of the executive board continue to fulfil the expertise requirements developed by De Nederlandsche Bank [the Dutch central bank]. ABN AMRO applies this principle. ABN AMRO s Managing Board currently consists of seven members. Taking into account the composition of the Managing Board and its functioning as a collegial board, both the Managing Board and the Supervisory Board consider this number sufficient for the Board to perform its tasks properly. ABN AMRO applies this principle. The bank has drawn up a profile for the composition of the Managing Board, and separate requirements in terms of education, experience and competencies may apply to individual Board members. In keeping with the general profile, all members of the Managing Board have a sound knowledge of the areas covered in this Banking Code Principle. Biographies of the individual Managing Board members may be found at ABN AMRO applies this principle. The bank has a lifelong learning programme in place to enable its Managing Board members to keep their knowledge up to date. The programme covers all areas and trends relevant to the bank, with topics set annually and inspired by current developments. This programme is aligned with that of the Supervisory Board as much as possible, while Managing Board members are also encouraged to take individual courses specific to their fields in order to keep their skills and competencies up to date in their areas of responsibility and to broaden/deepen these where necessary. ABN AMRO also has an induction programme to ensure that new members of the Managing Board timely gain sufficient knowledge of the organisation to properly perform their duties and to participate in the lifelong learning programme. ABN AMRO applies this principle. All members of the Managing Board regularly participate in the lifelong learning programme, and the Supervisory Board reviews their participation in its annual assessment of the Managing Board and that of its individual members. Compliance with the Dutch Banking Code - page 4 -

5 3.1.5 Each year, the bank shall indicate in its annual report in what manner it implemented principles and Taking into account the risk appetite approved by the supervisory board, the executive board shall ensure a balanced assessment between the commercial interests of the bank and the risks to be taken Within the executive board one member shall be responsible for preparing the decision-making with regard to risk management. This member of the executive board shall be involved, in a timely manner, in the preparation of decisions that are of material significance for the bank as regards the risk profile, especially where these decisions may result in departure from the risk appetite approved by the supervisory board. Risk management shall also include a focus on the interests of financial stability and on the impact that systemic risk could have on the risk profile of the bank The member of the executive board who is responsible for preparing the decision-making with regard to risk management may combine his or her function with other focus areas, on the condition that he or she does not bear any individual commercial responsibility for the commercial task areas and operates independently from those areas. ABN AMRO applies this principle. The bank s annual report, available from provides a description of the actual content and activities of the lifelong learning programme for members of the Managing Board in the past year. ABN AMRO applies this principle. The Managing Board is responsible for the systematic supervision and monitoring of risks related to ABN AMRO s operations and ensures a balanced assessment between interests. ABN AMRO applies this principle. The Managing Board has designated one of its members as Chief Risk Officer (CRO), whose main responsibilities are to design, communicate and supervise the bank s desired risk profile. To enhance the bank's robust risk management framework, the CRO is also responsible for the Group Economics and Strategy & Corporate Development functions. The CRO and CFO are jointly responsible for the bank's capital and funding position. The CRO also chairs the Group Risk Committee (GRC) and Central Credit Committee (CCC) and acts as deputy chairman of the Asset & Liability Committee (ALCO). Regular stress tests measure the potential effects on ABN AMRO's risk profile of possible but unlikely events, and show what the consequences of these might be for ABN AMRO's financial stability. ABN AMRO applies this principle. The Chief Risk Officer, a member of the ABN AMRO Managing Board, does not have any individual commercial responsibility and operates independently from the commercial task areas. 3.2 Tasks and working methods In all of its actions, the bank s executive board shall ensure that it carefully considers the interests of all of the parties involved in the bank, such as the bank s clients, its shareholders and its employees. These considerations shall take into account the continuity of the bank, the environment in society in which the bank operates and legislation, regulations and codes that apply to the bank. ABN AMRO applies this principle. The bank attaches great importance to good relationships with all its stakeholders and seeks to engage them in active dialogue. One key example is the ABN AMRO community of 300 customers which it constantly consults on a wide range of aspects in regard to its services. A panel of 10,000 customers advises ABN AMRO on such matters as understandabilty and ease of use of its products. Compliance with the Dutch Banking Code - page 5 -

6 3.2.2 Maintaining a continued focus on its clients interests is a necessary precondition for the continuity of the bank. Without prejudice to the principle formulated in 3.2.1, the executive board shall ensure that the bank always treats its clients with due care. The executive board shall see to it that the duty of care for the client is embedded in the bank s culture. ABN AMRO applies this principle. Customer centricity as defined by ABN AMRO means acting in the interest of its customers. Putting customers first does not always equal customer satisfaction. After all, to do exactly what customers want is not always in their best interest. The Managing Board has defined strategic priorities that clearly reflect the interests of the bank's customers and that are captured in the bank's core values, which, in turn, have been translated into business principles. The ABN AMRO Business Principles apply to all employees of the ABN AMRO Group. "Putting customers first" is a key theme of the cultural programmes currently in place at ABN AMRO, and these programmes should help embed this central tenet even deeper in the bank's culture. This theme also features in annual staff performance appraisals, with clear objectives and performance metrics aimed at achieving a faster and better service to customers. Customer centricity as a core competency for staff is also very much part of the leadership programmes the bank has developed, while induction programmes for new staff pay a great deal of attention to the bank's business principles, emphasising high-quality service and duty of care. Role play is one of the tools used to help train employees in ABN AMRO s "putting customers first" approach. ABN AMRO is aware that customer centricity is a matter of constant vigilance and attention, and it continuously works to improve customer-related processes and services. As part of this ongoing process, ABN AMRO has launched its Customer Excellence drive, which combines customer centricity and operational excellence and is based on a flat organisation with short reporting lines. The Customer Excellence programme is turning the organisation around, enabling ABN AMRO to better serve its customers, work more efficiently and increase employee motivation. The bank s annual report, available from has more details about ABN AMRO's Customer Excellence activities The members of the executive board shall perform their tasks in a meticulous, expert and fair manner, taking into account the applicable laws, codes of conduct and regulations. Each member of the executive board shall sign a moral and ethical conduct declaration. A declaration has been included in the explanatory notes to this code. This declaration is a model declaration, which means that each bank can supplement it as it deems appropriate. ABN AMRO applies this principle. All members of the Managing Board have signed the moral and ethical conduct statement, which is available from The content of the statement is also incorporated in the conditions of employment of ABN AMRO's senior management in the Netherlands, who have thereby explicitly signed the statement. Compliance with the Dutch Banking Code - page 6 -

7 3.2.4 The executive board shall ensure that the declaration referred to in principle is translated into principles that form guidelines for the behaviour of all of the bank s employees. The content of these principles shall be expressly pointed out to every new employee of the bank when he or she joins the bank by inserting a reference to these principles in the new employee s contract of employment. Every new employee shall be required to comply with these principles. ABN AMRO applies this principle. The bank s core values Trusted, Professional and Ambitious have been translated into Business Principles for the bank s employees to abide by. Individual contracts and/or terms and conditions of employment of all employees in the Netherlands refer to the Business Principles, which also apply to all ABN AMRO employees outside the Netherlands. Compliance with the Dutch Banking Code - page 7 -

8 4. Risk Management 4.1 The executive board and primarily the chairman of the executive board shall be responsible for adopting, implementing, monitoring and, where necessary, adjusting the bank s overall risk policy. The executive board shall propose the risk appetite to the supervisory board for approval at least once a year. Any material changes to the risk appetite in the interim shall also require the supervisory board s approval. 4.2 The supervisory board shall supervise the risk policy pursued by the executive board. As part of their supervision, the supervisory board shall discuss the bank s risk profile and assess at a strategic level whether capital allocation and liquidity impact in the general sense are in line with the approved risk appetite. In the performance of this supervisory role, the supervisory board shall be advised by the risk committee formed from the ranks of the supervisory board for this purpose. 4.3 The supervisory board shall assess periodically at the strategic level whether the commercial activities in the general sense are appropriate in the context of the bank s risk appetite. The executive board shall provide the supervisory board with the relevant information for this assessment in such a way that the supervisory board is able to form a sound opinion. 4.4 The executive board shall ensure that risk management is arranged adequately so that the executive board is aware in good time of any material risks run by the bank so that these risks can be managed properly. The executive board shall take any decisions that are of material significance for the risk profile, the capital allocation or the liquidity impact. ABN AMRO applies this principle. The bank annually reviews its risk appetite (risk profile) in line with the constantly changing markets in which it operates, changing views on risks likely to materialise and new rules and regulations that need to be met. Pursuant to the Articles of Association of ABN AMRO, the Managing Board submits the Risk Appetite Statetment for approval to the Supervisory Board at least once a year, and will also seek the Supervisory Board s approval for any significant changes being made to the risk appetite in the interim. The Risk Appetite Statement is also put to the annual general meeting of shareholders for approval. ABN AMRO applies this principle. The bank's Supervisory Board regularly discusses its risk profile and expected developments, drawing on bank-wide risk reports including financial and non-financial risk dashboards. The Risk & Capital Committee advises the Supervisory Board in this respect. ABN AMRO applies this principle. The Supervisory Board performs a review at the strategic level at least once a year. ABN AMRO applies this principle. The Managing Board regularly discusses the bank s risk profile and expected developments, drawing on bank-wide risk reports including financial and non-financial risk dashboards. To monitor its targeted moderate risk profile, ABN AMRO has launched a stress-testing infrastructure covering the entire bank, under the responsibility of its CRO. Regular stress tests measure the potential effects on ABN AMRO's risk profile of possible but unlikely events, and show what the consequences might be for ABN AMRO, depending on various probability levels. The Managing Board regularly discusses stress test outcomes in order to move swiftly if any mitigating measures are required. Compliance with the Dutch Banking Code - page 8 -

9 4.5 Every bank shall have a Product Approval Process. The executive board shall organise the product approval process and shall be responsible for the process working properly. Products that go through the product approval process at the bank shall not be launched on the market or distributed without careful consideration of the risks by the bank s risk manager and a careful assessment of any other relevant factors, including the duty of care towards the client. Based on an annual risk analysis, the in-house auditor shall check whether the product approval process has been designed properly, is present and is working effectively and shall then inform the executive board and the relevant supervisory board committee (risk committee or similar committee) about the results. ABN AMRO applies this principle. The bank has a product approval process in place that incorporates the requirements of the Banking Code. The process was restructured and relaunched in 2011, and now involves all relevant risk management functions in assessing the risks of individual products and their application for customers, taking account of ABN AMRO s core values and regulatory requirements. When launching new products, ABN AMRO observes its own moral and ethical rules, testing the proposed product in terms of the value it adds for customers, its suitability for target customers, the effectiveness of product information, transparency of costs and sustainability. In addition, the bank regularly reviews existing product portfolios on the basis of the same criteria, incorporating ongoing initiatives such as product rationalisation and the redrafting of product information in plain language. Group Audit assesses the operational effectiveness of the governance processes and procedures related to product approval and evaluation, and discusses its findings with the Managing Board and the Audit Committee every quarter. Compliance with the Dutch Banking Code - page 9 -

10 5. Audit 5.1 The executive board shall ensure that a systematic audit is conducted of the management of the risks related to the bank's business activities. 5.2 Each bank shall have its own, internal auditor who shall occupy an independent position within the bank. The head of the internal audit team shall present a report to the chairman of the executive board and shall report to the chairman of the audit committee. 5.3 The internal auditor shall have the task of assessing whether the internal control measures have been designed properly, are present and are working effectively. This assessment shall include the quality and effectiveness of the system of governance, risk management and the bank s control procedures. The internal auditor shall report the findings to the executive board and the audit committee. ABN AMRO applies this principle. The Managing Board has tasked the bank s internal audit department (Group Audit) to continuously monitor the effectiveness of the governance, risk management and other control processes of the whole of ABN AMRO, including its branches and subsidiaries, outsourced activities and joint ventures. ABN AMRO applies this principle. Group Audit enjoys an independent position within ABN AMRO. The Head of Group Audit reports directly to the chairman of the Managing Board and has a reporting line to the chairman of the Audit Committee. ABN AMRO applies this principle. Group Audit reviews the quality and operational effectiveness of ABN AMRO s governance, risk management and control processes, including processes related to the monitoring and management of the bank s risk profile. It regularly reports its findings to relevant management and discusses its main findings with the Managing Board and the Audit Committee every quarter. 5.4 The internal auditor, the external auditor and the supervisory board s risk committee and/or audit committee shall consult periodically, including as regards the risk analysis and the audit plan of both the internal auditor and the external auditor. 5.5 As part of the general audit assignment for the financial statements, the external auditor shall produce a report for the executive board and the supervisory board which shall contain the external auditor s findings concerning the quality and effectiveness of the system of governance, risk management and the bank s control procedures. 5.6 The internal auditor shall take the initiative in arranging talks with De Nederlandsche Bank and the external auditor at least once a year to discuss each other s risk analysis and findings and each other s audit plan at an early stage. ABN AMRO applies this principle. Within ABN AMRO, the Audit Committee meets at least every quarter to discuss the findings of the external auditors, and of Group Audit. In keeping with the Rules of Procedure of the Supervisory Board, the Audit Committee annually reviews and approves the annual Group Audit plan governing the scope, coverage and timing of the annual audit activities. The Audit Committee also annually reviews the scope and coverage of the activities carried out by the external auditors. ABN AMRO applies this principle. At least once every quarter, the Managing Board and the Audit Committee review the reports on internal organisation and controls as drawn up by the external auditors, including the annual management letter, auditor s report (annual accounts) and audit opinion. ABN AMRO applies this principle. Group Audit regularly discusses risk analyses, audit findings and the progress of the audit plan in tripartite meetings with prudential regulators (De Nederlandsche Bank) and external accountants. Compliance with the Dutch Banking Code - page 10 -

11 6. Remuneration policy 6.1 Basis The bank shall implement a meticulous, restrained and long-term remuneration policy that is in line with its strategy and risk appetite, objectives and values, taking into account the long-term interests of the bank, the relevant international context and wider societal acceptance. The supervisory board and the executive board shall take this basis into account when performing their tasks in relation to the remuneration policy. ABN AMRO applies this principle. In 2011, the bank introduced a new remuneration policy reflecting domestic and international rules on pay in the financial sector and the Banking Code Principles. ABN AMRO reviews its remuneration policy annually to ensure that it continues to reflect the bank s long-term interests, objectives and strategy, including the risk appetite as approved by the Supervisory Board. The relevant international context and social climate are also taken on board. 6.2 Governance The supervisory board shall be responsible for the implementation and evaluation of the remuneration policy adopted with regard to the members of the executive board. The supervisory board also approves the remuneration policy for the senior management and oversees its implementation by the executive board. Additionally, the supervisory board approves the principles of the remuneration policy for other bank employees. The bank s remuneration policy shall also comprise the policy on awarding retention, exit and welcome packages The supervisory board shall annually discuss the highest variable incomes at the bank. The supervisory board shall ensure that the executive board assesses whether variable incomes are consistent with the remuneration policy adopted by the bank, and in particular whether they comply with the principles set out in this section. Furthermore, the supervisory board shall discuss material retention, exit and welcome packages, assess whether they are consistent with the remuneration policy adopted by the bank and ensure that these packages are not excessive. ABN AMRO applies this principle. The bank s remuneration policy makes a clear distinction in responsibilities for approving fixed and variable pay, in keeping with the law and Banking Code Principles. Within this framework, the Supervisory Board is fully responsible for carrying out the remuneration policies for the Managing Board and annually reviews variable pay granted to designated employees, where this pay differs from Supervisory Board-approved pay for this group of employees. Its remit also includes exit and welcome packages and other financial incentives. The Supervisory Board also approves the basic remuneration principles for all other ABN AMRO employees, assisted by the Remuneration, Selection and Nomination Committee, whose members are chosen from its own ranks. ABN AMRO applies this principle. The Supervisory Board reviews the highest variable incomes at the bank, including substantial exit and welcome packages and other financial incentives, and ensures that these accord with agreed payment packages. In addition, the Supervisory Board annually discusses the findings of Group Audit with regard to the effectiveness of the Managing Board s remuneration policy. These responsibilities have been set down in the Rules of Procedure of the Supervisory Board and the Managing Board. Compliance with the Dutch Banking Code - page 11 -

12 6.3 Remuneration of members of the Executive Board The total income of a member of the executive board shall be in reasonable proportion to the remuneration policy adopted by the bank. At the time when his or her total income is decided, it shall be slightly below the median level for comparable positions in the relevant markets both inside and outside the financial sector. The relevant international context shall be a major factor In the event of dismissal, remuneration may not exceed one year s salary (the fixed remuneration component). If the maximum of one year s salary would be manifestly unreasonable for an executive board member who is dismissed during his or her first term of office, such board member shall be eligible for severance pay not exceeding twice the annual salary When variable remuneration is awarded to the executive board, the long-term component shall be taken into account as well as profitability and/or continuity of the bank and a material part of the variable remuneration shall be conditional and shall not be paid until at least three years have passed Shares granted to executive board members without financial consideration shall be retained for a period of at least five years or at least until the end of the employment, if this period is shorter. If options are granted, they shall, in any event, not be exercised in the first three years after the date on which they were awarded. ABN AMRO applies this principle. The remuneration package for the members of ABN AMRO s Managing Board and other designated ABN AMRO staff is set on the basis of an independent benchmark and is currently pegged short of the median of a peer group of companies in both the financial and non-financial sectors. Remuneration will be periodically benchmarked for trends in relevant markets. ABN AMRO applies this principle. If a member of ABN AMRO s Managing Board is let go, their severance pay may not exceed one year s salary. The current chairman of the bank is the only exception to this general rule: he will receive no severance pay. ABN AMRO applies this principle. In view of future legislation, members of the Managing Board do not qualify for variable payment as long as ABN AMRO receives state support. ABN AMRO applies this principle. No equity awards are currently granted at ABN AMRO. 6.4 Variable remuneration The allocation of variable remuneration shall be related to the bank s long-term objectives. ABN AMRO applies this principle. The bank s policies on pay are compliant with all applicable rules and regulations on the deferred payment of variable remuneration for companies in the financial industry, as set down in the Dutch central bank s Regulation on Sound Remuneration Policies. ABN AMRO s policies take on board long-term result developments and non-financial indicators relevant to its long-term objectives. Compliance with the Dutch Banking Code - page 12 -

13 6.4.2 Every bank shall set a maximum ratio of variable remuneration to fixed salary that is appropriate for the bank in question. The variable remuneration per annum of members of the executive board shall not exceed 100% of the member s fixed income Variable remuneration shall be based on the performances of the individual, his part of the business and the performance of the bank as a whole according to pre-determined and assessable performance criteria. In addition to financial performance criteria, non-financial performance criteria shall also make up a significant portion of the assessment of the individual. Performance criteria shall be defined in terms that are as objective as possible in the bank s remuneration policy When performances are assessed based on the predetermined performance criteria, financial performances shall be adjusted to allow for estimated risks and capital costs In exceptional circumstances for example, if application of the pre-determined performance criteria would result in undesired variable remuneration for a member of the executive board the supervisory board shall have the discretionary power to adjust the variable remuneration if, in its opinion, this remuneration would have unfair or unintended effects The supervisory board shall be authorised to reclaim variable remuneration allocated to a member of the executive board based on inaccurate data (whether or not the inaccurate data is financial in nature). ABN AMRO applies this principle. The bank observes a maximum ratio of variable remuneration to fixed salary for its senior management and other designated staff, in compliance with domestic and international rules and regulations. In view of future legislation, members of the Managing Board do not qualify for variable remuneration as long as ABN AMRO receives state support. ABN AMRO applies this principle. Variable remuneration is awarded to senior management and other designated staff on the basis of performance objectives that draw on a combination of business-related, bank-wide and personal objectives. Performance targets are based on both financial and non-financial indicators, and are made as objectively measurable as possible. Employees governed by the ABN AMRO s Collective Labour Agreement (CAO) are subject to collective agreements on performance management. Personal performance plans are drawn up annually, bringing together individual, team and company objectives. Objectives are typically both financial and non-financial. ABN AMRO applies this principle. Group-wide financial return objectives are based on the Risk Adjusted Return On Risk Adjusted Capital (RARORAC) ratio. ABN AMRO applies this principle. In view of future legislation, members of the Managing Board do not qualify for variable payment as long as ABN AMRO receives state support. The Supervisory Board has discretionary power to reduce the variable remuneration of designated staff if it feels payment of all or part of this variable remuneration is unacceptable on the grounds of equity and fairness. ABN AMRO applies this principle. Under the bank s remuneration policies, the Supervisory Board has discretionary power to reclaim variable remuneration awarded to a member of the Managing Board, senior manager or other designated staff member over any remuneration period if the award, calculation or payment thereof was based on incorrect data or if, in hindsight, the performance criteria turn out not to have been met after all. These clawback provisions are included in the terms and conditions of employment of the Managing Board, senior management and other designated staff. Compliance with the Dutch Banking Code - page 13 -