Remuneration Information • Mar 18, 2019
Remuneration Information
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Fully paid-up share capital € 9,650,526.24 Tax code and Milan Company Register No. 12870770158 - ABI code No. 03158.3 Largo Augusto 1/A, at the corner of Via Verziere 13, 20122 Milan
__________________ www.bancasistema.it
ORDINARY SHAREHOLDERS' MEETING, HELD ON SINGLE CALL AT THE REGISTERED OFFICE AT LARGO AUGUSTO 1/A, AT THE CORNER OF VIA VERZIERE 13, MILAN 18 APRIL 2019, 10.00 A.M.
(prepared pursuant to Art. 125-ter of Legislative Decree No. 58 of 24 February 1998, as amended and supplemented)
"APPROVAL OF THE REMUNERATION POLICIES OF THE BANCA SISTEMA GROUP FOR 2019 AND SETTING OF THE MAXIMUM LIMIT OF 2:1 AS THE RATIO BETWEEN THE VARIABLE AND FIXED COMPONENTS OF REMUNERATION FOR THE CEO AND GENERAL MANAGER. RELATING AND RESULTING RESOLUTIONS."
your attention is drawn to the following resolution proposals submitted for examination by the ordinary Shareholders' Meeting of Banca Sistema S.p.A. (the "Bank") regarding the Remuneration and Incentive Policies of the Banca Sistema Group (the "Group") for 2019 (the "2019 Policies") and the setting of the maximum limit of 2:1 as the ratio between the variable and fixed components of remuneration for the CEO and General Manager.
Pursuant to article 9.2 of the Articles of Association, the Shareholders' Meeting is asked to approve the remuneration and incentive policies for the members of the Board of Directors and the Board of Statutory Auditors and the Bank's other employees.
The 2019 Policies, which apply throughout the Banca Sistema Group, were drawn up and approved by the Board of Directors on 1 March 2019, with input from the Remuneration Committee, in accordance with Part One, Section IV, Chapter 2 of the Bank of Italy Circular no. 285 of 17 December 2013, as amended and supplemented ("Circular 285"), concerning "Remuneration and incentive policies and practices", the prescriptions of the Corporate Governance Code for listed companies promoted by Borsa Italiana S.p.A. as per the last amendment (the "Corporate Governance Code") and the guidelines of the European Bank Authority ("EBA") on sound remunerations policies (the "Guidelines", and jointly, the "Provisions"). The Provisions are further supplemented by the Regulatory Technical Standards issued by the European Commission on proposal of the EBA. The Provisions also implement the Directive 2013/36/EU ("CRD IV"), insofar as the prescriptions governing remuneration and incentive policies and practices adopted by banks and banking groups are concerned. The Provisions also take into account the guidelines and criteria agreed at international level, including those issued by the EBA and the Financial Stability Board.
The objectives that the Bank, in line with the Group's remuneration strategy consolidated in recent years, and also taking the Provisions into account, intends to attain by implementing the 2019 Policies, can be summarised as follows:
The 2019 Policies govern the remuneration paid to the Group's employees. Remuneration is subdivided into three components: (i) a fixed component that is paid to all employees based on the employees' technical, professional and managerial skills and in proportion to the responsibilities given, (ii) a "benefit" component and iii) a variable component that is paid to the "key personnel" (without prejudice to the exceptions indicated by the Policies), that may be applied to other employees of the Bank in line with the guidelines and principles of the 2019 Policies and in compliance with the applicable law. The variable component of remuneration is based on performance indicators measured net of risks and consistently with the measures used for management purposes by the Risk Management Department (the so-called ex ante risk adjustment) and is subject to attaining specific performance objectives both at Bank and personal level.
Together with the 2019 Policies, the Board of Directors approved a regulation governing the allocation of the variable remuneration component, to be disbursed in cash and shares.
For further information on the 2019 Policies see the Remuneration Report prepared by the Board of Directors pursuant to art. 123-ter of the Consolidated Law on Finance and the information document pursuant to article 84-bis of the Consolidated Law on Finance, which are made available to the public in accordance with the procedures and terms established by law.
Regarding the variable-fixed remuneration ratio, pursuant to article 9.2 of the Articles of Association, at the time of approving the remuneration and incentive policies, the Shareholders' Meeting also resolves on any proposal to cap the ratio between the variable and fixed remuneration paid to individual employees at the ratio of 1:1, but not exceeding the maximum limit of the ratio of 2:1.
The Board of Directors is therefore making a proposal for the Meeting to approve an unchanged variablefixed remuneration ratio of maximum 200% (ratio of 2:1) for the CEO and General Manager, in accordance with the provisions of Circular 285 and in line with the resolutions already taken for the previous year, in relation to the role of special complexity and strategic importance.
Furthermore, to ensure the Bank's continual compliance with the principles of prudence, each year upon approval of the year's budget the Board of Directors - on proposal of the CEO and with input from the Remuneration Committee, the CFO, the Manager in charge of financial reporting, the Head of the Risk Department and the Head of Compliance, determines a "bonus pool", namely the total amount of the variable remuneration to pay to employees of the Bank - without prejudice to the application of the adjustment factors required by the 2019 Policies - based on actual and long-term results, that also takes into account the financial and non-financial quantitative and qualitative objectives, including those established by the business plan approved by the Board of Directors and indicated by the annual budgets, and the Risk Appetite Framework.
In order to ensure the financial sustainability of the Bonus, and to guarantee the Bank's ability to maintain a sufficient level of capital, the overall value of the Bonuses assigned and paid to employees and "key
personnel" cannot exceed the total value of the bonus pool, as defined by the 2019 Policies. If it is necessary to increase the level of capital, the bonus pool is reduced and/or ex-post adjustment mechanisms are applied.
This is to ensure that the obligation to comply with the prudential regulations, especially the requirements associated with own funds, is not undermined when the highest ratio level (2:1) is applied. In addition to the bonus pool, the Bank has also included so-called malus and claw-back rules in the 2019 Policies with respect to the correlation between risks and performance.
Finally, it should be noted that, in accordance with the provisions of applicable law, the Board of Directors has notified the Bank of Italy of today's proposal to set the ratio.
Please note that under article 9.2 of the Articles of Association, the foregoing proposal is approved by the ordinary Shareholders' Meeting when: (i) the Meeting is constituted with at least half of the share capital and the decision is passed by the favourable vote of at least 2/3 of the share capital represented at the Meeting; or (ii) the decision is passed by the favourable vote of at least 3/4 of the share capital represented at the Meeting, regardless of the share capital with which the Meeting is constituted.
* * * *
In view of the above, the following proposed resolution is hereby submitted for your approval:
"The ordinary Shareholders' Meeting of Banca Sistema S.p.A.,
Milan, [●] March 2019
On behalf of the Board of Directors Ms. Luitgard Spögler Chairperson of the Board of Directors
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