Remuneration Information • Mar 8, 2019
Remuneration Information
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| LETTER FROM THE CHAIRMAN OF REMUNERATION COMMITTEE |
3 |
|---|---|
| SECTION I – EXECUTIVE SUMMARY |
5 |
| SECTION II – COMPENSATION POLICY |
13 |
| 1. Introduction 2. Governance 3. Fundamentals 4. 2019 Compensation Structure |
16 17 19 25 |
| SECTION III – ANNUAL COMPENSATION REPORT |
31 |
| 1. Introduction 2. Governance & Compliance 3. Continuous Monitoring of Market Trends and Practices 4. Compensation paid to Members of the Administrative and Auditing Bodies, to General Managers and to other Executives with strategic responsibilities |
34 35 39 40 |
| 5. Compensation Systems 6. Compensation Data |
43 66 |
Letter from the Chairman of the remuneration committee
as Chairman of the Remuneration Committee, I am pleased to present you the FinecoBank Compensation Policy for 2019.
The document is divided into three sections: an "Executive Summary", which summarizes the features of the new Remuneration Policy and the main results achieved in 2018; the "Compensation Policy", which describes the key principles of our approach to the remuneration and incentive systems for Employees and Financial Advisors in 2019; finally, the "Annual Remuneration Report", which provides detailed information on FinecoBank remuneration practices and the results of the processes implemented in 2018.
Also this year, pursuing the goal of guaranteeing the utmost clarity in remuneration policies, we propose a transparent and easily accessible Policy, oriented towards rewarding merit and promoting the value of diversity and sustainability. Our pillars are based on the concept of transparency, as an element able to protect and strengthen our reputation and to create value over long term, in the interest of all the Bank's stakeholders.
Also 2018 closed for Fineco with particularly positive results, an important element because it was obtained in a challenging and complex context for the financial markets.
The results show how our well-diversified business model is able to face every stage of the market, thanks to a strategy oriented towards a path of long-term sustainable growth and capable of generating value for all our stakeholders. Results are the confirmation of a relational approach with customers guided and inspired by criteria of integrity, transparency, equity and cooperation.
In this context, our Bank is constantly engaged in combining values such as development, responsibility and business activities, which are fundamental for improving risk management and being highly competitive on the market.
The guiding principles of our way of doing business have always been at the base of our Compensation Policy, which - in turn confirms that it is a key tool for guiding behaviors, both in the short and long term.
The goal of our remuneration policy is to attract, motivate and retain the best resources, rewarding merit and talent, ensuring a solid process of performance assessment, while avoiding excessive risktaking.
In this context we have worked with a view to consolidation and continuous improvement, involving - in the definition phase of the incentive plans - the main corporate Bodies and Functions. Our model of remuneration governance is aimed at ensuring adequate control of all the Bank's remuneration processes, ensuring that informed decisions are taken independently and promptly, in order to avoid conflicts of interest.
In order to better respond to its tasks, the Remuneration Committee took part in each phase of the remuneration processes, including, in fact, the project, with the objective of guaranteeing an architecture suited to the Bank's remuneration strategy, in line with the regulations and consistent with best market practices.
In light of the 25th update of Bank of Italy Circular 285 "Supervisory Provisions for banks", we generally aligned the remuneration policies with the new discipline. In particular, the pay-out mechanism for bonuses for the Identified Staff has been reviewed with regard to short-term systems and the "particularly high" threshold of variable remuneration to which the most prudential rules apply has been identified.
The new provisions also led to the update of the Termination Payments Policy.
In general, in the definition of the 2019 Remuneration Policy we have taken into consideration the sectorial regulations also in light of the company's international developments.
Having said that, in light of the favorable opinion of the shareholders collected by the 2018 Remuneration Policy and taking into account the benchmark analyses, we considered appropriate to maintain the structure of the Remuneration Policy, preserving the main elements and the functioning mechanisms of the incentive systems adopted last year, still considered to be already very effective for the achievement of the results defined in the strategic plan.
On behalf of the Remuneration Committee, I would like to thank you Shareholders for the constant willingness to compare and share each need and point of view, and for the time you will spend reading our 2019 Policy, trusting in your positive appreciation
Sincerely,
GIANMARCO MONTANARI
Chairman of the Remuneration Committee
FINECO. SIMPLIFYING BANKING.
FinecoBank S.p.A. – Member of Unicredit
The implementation of the principles set in our Compensation Policy provides the framework for the design of reward programs across the Bank.
FinecoBank compensation approach, coherent with the regulations, the best market practices and with the approach of the Holding UniCredit S.p.A, guarantees the link to the performance, the market framework, the alignment with business strategy and the long-term shareholders' interest.
The key principles of our Compensation Policy (Section II) reflect the most recent regulations in terms of remuneration and incentive policies and practices, in order to build, year-by-year – in the interest of all stakeholders – remuneration systems aligned with long-term strategies and goals. These are linked with company results and adequately adjusted in order to take into account all risks consistent with capital and liquidity levels needed to support all the activities, and to avoid distorted incentives that could lead to a breach of law or to excessive risk taking.
Application of qualitative and quantitative criteria which are common at European level defined by EBA Regulatory Technical Standards
In compliance with the regulatory requirements, the 2:1 ratio represents the maximum limit to the ratio between variable and fixed components of the remuneration for all employees belonging to business functions, including Identified Staff
The Remuneration Committee, with particular reference to the population of FinecoBank's Identified Staff, through the support of an independent external consultant identifies the peer group, defined considering the main Italian and European peers on which specific comparative analyzes are carried out (Benchmark). As a policy objective, the fixed component of the remuneration for Identified Staff takes as reference the market median, with individual positioning defined taking into account the specific performance, potential and strategic decisions on FinecoBank people and performance over time.
Aso for 2019 the definition of the Identified Staff has followed a structured assessment process both at Group and local level, involving Compliance and Risk Management functions of FinecoBank. The self-evaluation brought to a total number of Identified Staff for 2019 equal to 14 employees and 8 Financial Advisors
1 i.e. Capital Requirement Directive IV (CRD IV); EBA Regulatory Technical Standards (RTS); Bank of Italy "Disposizioni di vigilanza per le Banche", 25th update to the Circular n. 285 of 23th October 2018. 2 Meaning Risk Management, Compliance. Audit is outsourced in UniCredit S.p.A.
Share ownership guidelines are confirmed for the Chief Executive Officer and the other Executives with strategic responsibilities in order to align the Top Management and the Shareholders interests
Termination pay-outs take into consideration long-term performance, in terms of shareholder added-value, do not reward failures or abuses and shall not exceed in general 24 months of total compensation (including the indemnity in lieu of notice)
Review of the "KPI (Key Performance Indicators) Bluebook", that supports manager and incumbent to define the Performance Screen that refers to the annual Incentive System for the employees Identified Staff
The Chief Executive Officer and the other Executives with strategic responsibility, should ensure appropriate levels of personal investment in FinecoBank shares (equal to 100% of fixed remuneration for the Chief Executive Officer and to 50% for the other Executives with strategic responsibility)
The update of the Termination Payments Policy – approved by the 2017 AGM – is submitted to the Shareholders' Meeting of April 10th 2019, to implement some amendments to the regulation set forth in the 25th update of Bank of Italy Circular n. 285, issued on October 23th 2018. The changes are mainly related to the introduction of a predefined formula for the calculation of the "severance" and to better specify some elements of detail, while they do not involve changes as regards the main criteria or limits.
The KPI Bluebook supports the definition of Performance Screens providing a set of performance indicators and guidelines. The categories of the main indicators of financial and non-financial Group performance, annually defined within the KPI Bluebook, are certified with the involvement of Group functions Human Capital, Finance, Risk Management, Compliance, Group Sustainability, Group Stakeholder Insight and Audit, which reflect the Bank's core operating profitability and risk profile. Also this year the KPI Bluebook has been structured and clustered on the basis of the different Group's business
The Annual Compensation Report (Section III) - issued pursuant to art. 123-ter of Legislative Decree 58/1998 (Consolidated Text of Finance" - "TUF") - provides the description of our compensation practices and the implementation outcomes of FinecoBank Incentive Systems, as well as remuneration data, with a focus on the Identified Staff, defined in line with regulatory requirements.
Full disclosure on compensation payout amounts, deferrals and ratio between variable and fixed components of remuneration for the Identified staff is provided in the Annual Compensation Report (Section III - paragraph 6.1), including data regarding Directors, General Managers and other Executives with strategic responsibility.
Data pursuant sect. 84-quarter Consob Issuers Regulation Nr. 11971, Compensation report – Section III, as well as the information on incentive systems under 114-bis of legislative decree 58/1998 ("Consolidated Text of Finance" – "TUF") are included in this document as well as in the annexes of the 2019 FinecoBank Compensation Policy.
2018 Performance evaluation of the Chief Executive Officer and General Manager's individual goals resulted excellent ("Exceeds Expectations"), on the basis of elements reported in section III – paragraph 5.2.1 and evaluated by the Remuneration Committee and the Board of Directors of February 1th and 5th, 2019.
In 2018, also considering the excellent business results – the incidence of the short and long term variable remuneration on fixed remuneration for the CEO and General Manager has been equal to 200%.
Here is detailed the remuneration structure of the FinecoBank CEO and General Manager for 2018.
| # | GOAL NAME PERIMETER REFERENCE TARGET |
LINK TO 5 FUNDAMENTALS |
KPIBB CUSTOM |
RISK CORRELATION SUSTAINABILITY GOAL |
||
|---|---|---|---|---|---|---|
| $\mathbf{1}$ | ROAC / EVA | FinecoBank | vs. budget | Execution & Discipline |
Յ | |
| $\overline{2}$ | New Business EL % | FinecoBank | vs. target | Risk Management | ❸ | |
| з | OPEX | FinecoBank | vs. budget Operating costs as reported in reclassified P&L, i.e.: Staff expenses + Other Administrative Expenses (direct + indirect) - Expenses Recovery + Depreciations. |
Execution & Discipline |
||
| 4 | Net new clients | FinecoBank | vs. target | Customers First | ❸ | |
| 5 | Net sales of Guided Products | FinecoBank | vs. budget | Execution & Discipline |
||
| 6 | New Strategic Plan preparation | FinecoBank | vs. qualitative assessment based on: • contribution to the preparation of the new MYP • development of Proof of Concepts on the effective implementation of new technologies (e.g.: Artificial Intelligence, big data, etc.) in own domain |
Execution & Discipline |
❸ | |
| 7 | Gender balance and pay gap | FinecoBank | vs. qualitative assessment based on: • Group-wide % of women in EVP roles vs. 2019 target • Y/Y delta on % of women in VP, FVP, SVP roles • Y/Y delta on gender pay-gap |
People Development | ||
| 8 | Tone from the top on conduct and compliance culture |
FinecoBank | vs. qualitative assessment based on: .Scope, kind and numbers of documented initiatives - pre-committed with EMC, aimed at promoting staff integrity / customer protection / trustworthiness . The overall status of findings or proceedings in place (internal or external) considering the trend, type, severity and the timely completion of the related remediation actions |
Risk Management |
FINECO. SIMPLIFYING BANKING.
FinecoBank S.p.A. – Member of Unicredit
| 1. Introduction | 16 | |
|---|---|---|
| 2. Governance | 17 | |
| 2.1 Role of the Remuneration Committee 2.2 Market Benchmark 2.3 FinecoBank Compensation Policy definition 2.4 Role of Compliance Function 2.5 Role of Risk Management Function 2.6 Role of Audit Function |
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| 3. | Fundamentals | 19 |
| 3.1 Ratio between variable and fixed compensation 3.2 Sustainability of the variable compensation 3.2.1 Definition of performance targets 3.2.2 Performance appraisal 3.2.3 Payment of the variable compensation 3.3 Termination payments 3.4 Non-standard compensation 3.5 Share ownership guidelines 3.6 Compliance drivers |
||
| 4. Compensation Structure | 25 | |
| 4.1 Employees 4.1.1 Fixed compensation 4.1.2 Variable compensation 4.1.3 Benefit 4.2 Financial Advisors 4.2.1 Recurring remuneration 4.2.2 Non-recurring remuneration |
4.3 Non Executives members of Administrative and Auditing Bodies
Our set of values is based on integrity as a condition to transform profit into value for our stakeholders.
By upholding the standards of sustainability behaviours and values which drive our mission, our compensation strategy represents a key enabler to enhance and protect our reputation and to create long-term value for all stakeholders.
Also through appropriate compensation mechanism, we aim to create a work environment which is comprehensive of any form of diversity and which foster and unlock individual potential, to attract, retain and motivate highly qualified employees, capable of creating a competitive advantage and to reward those who reflect our standards of consistently ethical behaviour in conducting sustainable business.
Relying on our governance model, our Compensation Policy sets the framework for a common and coherent design, implementation and monitoring of compensation practices across our Company that reinforce sound risk management policies and our long-term business strategy. In so doing, we most effectively meet the specific and evolving needs of our different businesses and populations, and ensure that business and people strategies are always appropriately aligned with our remuneration approach.
To ensure the competitiveness and effectiveness of remuneration as well as transparency and internal equity, the key principles of our Compensation Policy were confirmed:
Our compensation governance model aims to assure clearness and reliability in the governance processes related to remuneration through a right control of Company's remuneration practices by ensuring that decisions are made in an independent, informed and timely manner at appropriate levels, avoiding conflicts of interest and guaranteeing appropriate disclosure in full respect of the general principles defined by Regulators.
The Board of Directors established a Delegation of Powers system to appropriately regulate effective decision-making processes throughout the organization.
In particular, the Remuneration Committee is vested with the role of providing advice and opinions to the Board of Directors with regard to FinecoBank Remuneration Strategy, also with the support of Risk and Compliance functions, as well as of an independent external advisor, if required and needed, in order to make the incentives underlying the remuneration system consistent with the management of risk, capital and liquidity profiles by the Bank.
The main topics discussed by the Committee are also submitted to the attention of the Board of Statutory Auditors, in advance over their submission to the Board of Directors. The Remuneration Committee, consists of 3 non-executive members4 .
With specific reference to Identified Staff, an independent external advisor supports the Remuneration Committee on the definition of a list of selected competitors that represent our peer group with regards to whom compensation benchmarking analysis is performed, considering our main national and European competitors in terms of market capitalization, total assets, business scope and dimension, to assure a competitive alignment with the market of reference.
The results of this analysis will be at FinecoBank Remuneration Committee's disposal, in order to support the formulation of opinions to the Bodies of the Bank responsible for taking such decisions.
On the basis of constant benchmarking, we aim at adopting a competitive compensation structure for effective retention and motivation of our critical resources, as well as payments consistent with long-term value for stakeholders.
FinecoBank salary and compensation structures defined on the basis of business or market-specific benchmarking must, in any case, be fully aligned with the general principles of the Group Compensation Policy, with particular reference to the pillars of compliance and sustainability.
The FinecoBank Compensation Policy, as drawn up by the Human Resources function, with the involvement of Risk Management, Finance and Network Controls, Monitoring and Service Department functions for all related aspects, is validated by the Compliance and Risk Management functions for all compliance-related aspects, before being submitted to the Remuneration Committee. On annual basis the Compensation Policy, as proposed by the Remuneration Committee, is submitted to the Board of Directors for approval and then presented to the Shareholders' Meeting for approval, in line with the regulatory requirements.
The principles of FinecoBank Compensation Policy, coherently with the Group's ones, are applicable to the entire organization and includes:
Compliance function operates in close co-ordination with the Human Resources function, in order to support the design and the definition of compensation policy and processes and to evaluate them for the profiles in scope.
In this framework, Compliance function verifies the consistency with "the goal of complying with regulations, articles of association and any other code of ethics or other standards of conduct applicable to the bank, so that legal and reputational risks mostly embedded in the relationship with customers are duly contained" (ref. Bank of Italy, 285 Circular).
In particular, Compliance function, evaluates, for all aspects that fall within its perimeter, the FinecoBank Compensation Policy and – referring to applicable regulations – the incentive systems for Bank staff as drawn up by Human Resources function for the employees and by PFA Network & Private Banking Department / Network Controls, Monitoring and Service Department for the Financial Advisors, providing input – as far as it is concerned – for the design of compliant incentive systems. Furthermore, Compliance function, for all aspects that fall within its perimeter, is involved in the process for the identification of Bank's risk takers.
4 For details on composition and activities of the Remuneration Committee, please refer to the specific section of the Annual Compensation Report
In accordance with the regulatory framework and our governance, the guidelines for the definition of the incentive systems for non-Identified Staff population are arranged, in collaboration with Compliance function:
FinecoBank ensures consistency between remuneration and accountable and sustainable risk assumption. This policy is ensured through rigorous governance processes based on informed decisions taken by Corporate Bodies. Compensation plans include the risk adjustment appetite defined through the evaluation of the consistency with the results achieved and the FinecoBank Risk Appetite Framework, which is consistent with Group Risk Appetite Framework.
The Risk Management function is constantly involved in the definition of the remuneration policy, the incentive system and compensation processes as well as in the identification of objectives, in the performance appraisal and in the identification of Bank's Identified Staff. This involvement implies explicit link between the Bank incentive mechanisms, selected metrics of the Risk Appetite Framework, the validation of performance and pay, so that the incentives are consistent with the risk assumption identified and approved by the Board of Directors.
Within the remuneration governance process, the Audit function5 yearly verifies the implementation of Fineco policies and practices and carries out controls on data and processes. The function provides a final judgement on remuneration practices, providing recommendations aimed at improving the processes, informing the competent Bodies on the possible findings, in order to adopt the corrective measures.
5 Outsourced in UniCredit S.p.A
10 Where CRO roles cover both Underwriting and Risk Management functions, goals assigned must not represent a source of conflict of interest between Risk Management and Underwriting activities.
6 For Fineco Asset Management DAC (FAM) Employees not identified as Bank's risk takers - taking into account the current regulatory framework - the sectorial regulation applies, not providing a pre-determined maximum cap to the variable remuneration.
7 As approved by the Fineco Shareholders Meeting on June 5th 2014. The rationales of the originary request did not change, thus no further maximum ratio approval is requested.
8 Meaning Risk Management and Compliance. Audit is outsourced in UniCredit S.p.A.. 9 As provided by the CRDIV art 94, 1 a) financial criteria includes performance indicators reported in the annual financial report and in particular linked with the profit and loss report, the balance sheet and relevant components or indicators.
Fineco reserves the right to activate malus and claw-back mechanisms, meaning respectively the reduction/cancelation and the return of any form of variable compensation.
The malus mechanisms, (i.e. the reduction/cancelation of all or part of the variable remuneration) can be activated with reference to the variable remuneration to be paid or awarded but not already paid, related to the performance period in which the compliance "violation" is referable. In case the variable pay affected is not enough to ensure an adequate malus application, the reduction can be referred also to other components of variable remuneration.
The claw-back mechanisms, (i.e. the restitution of all or part of the variable remuneration) can be activated with reference to the overall variable remuneration already paid, awarded for the performance period to which the "violation" is referable, without prejudice to more restrictive local laws or provisions.
The claw-back mechanisms can be activated for a period up to 5 years after the payment of each tranche, also after the termination of the employment relationship and/or of the role and take into account of the legal, pension and tax aspects and the time limits provided by law and practices locally applicable.
The claw-back mechanisms can be activated, in the case of verification of behaviours adopted in the reference period for which the variable remuneration has been awarded (performance period), in which the employee for which the employee12:
11 For instance: Common Equity Tier 1 Ratio dropping under the minimum regulatory limit, in a persistent "recession" scenario. 12 Employees and Personal Financial Advisors.
infringed the requirements set out by articles 26 TUB and 53 TUB, where applicable, or the obligations regarding remuneration and incentives.
Moreover, the malus mechanisms are activated to take into account the performance adjusted for the risks actually taken and the liquidity and capital conditions of the bank.
In the year 2018 the Compliance Breaches Committee was established13 , composed of the Chief Executive Officer and General Manager, the Head of Human Resources and the Head of Compliance14 .
With reference to Fineco's Identified Staff, the Committee has the function of assessing the severity of any anomalous behavior / violations due to non-compliance by the parties involved, following notification by Bank or Internal Audit structures. On the basis of the analyzes carried out and in relation to the seriousness of the violation, the Committee proposes to the Remuneration Committee and to the Board of Directors - on the basis of the established governance - the consequent measures to be adopted with reference to the variable remuneration of the Identified Staff (reduction / cancellation - malus - or return - clawback). The establishment of the Committee and the functioning process respond to the guidelines defined by UniCredit.
As a consequence, a further update of the policy of payments for severance pay is submitted to the Shareholders' Meeting on 10 April 2019 which, without changing the main criteria and limits, incorporates the new regulations, providing - among other things - a predefined formula for the calculation of severances that, if used, allows not to compute them within the maximum limit set for variable remuneration.
Reference is made to the aforementioned Policy regarding criteria, limits and authorization processes in relation to termination payments:
13 For the PFA Identified Staff, the functions of Compliance Breaches Committee are made by the competente Disciplinary Committee
14 The Head of Audit (outsourced in UniCredit S.p.A,) is permanent guest of the Committee, without any voting rights.
Moreover, these awards must in any case be in accordance with regulations time to time in force (e.g. cap on the ratio between variable and fix remuneration, technical features fixed by regulation where applicable for bonus pay-out) and subject to Group and FinecoBank governance processes, periodically monitored and disclosed and must be subject to malus conditions and claw-back actions, as legally enforceable.
Share ownership guidelines set minimum levels for company share ownership by covered Executives, aiming to align managerial interests to those of shareholders by assuring appropriate levels of personal investment in FinecoBank shares over time. As part of our total compensation approach, we offer equity incentives that provide for opportunities of share ownership, in compliance with the applicable laws.
The ownership of shares by our Company leaders is a meaningful and visible way to show our investors, clients and employees that we believe in our Company.
FinecoBank's Board of Directors approved in 2017 specific share ownership guidelines, as shown in the following table, for the Chief Executive Officer and General Manager and for the other Executives with strategic responsibilities, in order to reinforce the alignment between managerial and shareholders' interests in the achievement of goals.
| Population | Share ownership |
|---|---|
| CEO/General Manager | 1 x annual fixed pay |
| Executives with strategic responsibilities | 0,5 x annual fixed pay |
The established levels described in the above table, should be reached, as a rule, within 5 years from first appointment in the covered role and they should be maintained for the entire duration of the role covered.
The established levels should be reached through a linear pro-rata approach during the 5-year period, providing for a minimum portion every year.
Involved Executives are also expected to refrain from entering into schemes or arrangements that specifically protect the unvested value of equity granted under incentive plans ("hedging").
Any violation of the share ownership guidelines and any form of hedging, shall be considered in breach of compliance rules with such consequences as provided for under enforceable rules, provisions and procedures.
TO SUPPORT THE DESIGN OF REMUNERATION AND INCENTIVE SYSTEMS, THE FOLLOWING "COMPLIANCE DRIVERS" HAVE BEEN DEFINED: maintenance of an adequate ratio between economic and noneconomic goals, depending on the role (in general, at least one goal should be non-economic) qualitative measures must be accompanied by an ex-ante indication of objective parameters to be considered in the evaluation, the descriptions of expected performance and the person in charge for the evaluation non-economic quantitative measures should be related to an area for which the employee perceives a direct link between her/his performance and the trend of the indicator among the non-financial goals (quantitative and qualitative), include, where relevant, goals related to Risk as well as to Compliance (e.g. credit quality, operational risks, application of MIFID principles, products sale quality, respect of the customer, Anti Money Laundering requirements fulfillment) set and communicate ex-ante clear and pre-defined parameters as drivers of individual performance avoidance of incentives with excessively short timeframes (e.g. less than three months) promotion of a customer-centric approach which places customer needs and satisfaction at the forefront and which will not constitute an incentive to sell unsuitable products to clients take into account, even in remuneration systems of the external networks (Financial Advisors), the principles of fairness in relation with customers, management of legal and reputational risks, protection and loyalty of customers, compliance with the provisions of law, regulatory requirements, and applicable self-regulations create incentives that are appropriate in avoiding potential conflicts of interest with customers, considering fairness in dealing with customers and the endorsement of appropriate business conduct for Control Functions16 , HR and Manager in charge for preparing financial statements, economic goals must be avoided and individual goals set for employees in these functions shall reflect primarily the performance of their own function and be independent of results of monitored areas, in order to avoid conflict of interest define – for personnel providing investment services and activities – incentives that are not only based on financial parameters, but also take into account the qualitative aspects of the performance; this in order to avoid potential conflicts of interest in the relationship with customers17 the approach for Company Control Functions is also recommended where possible conflicts may arise due to function's activities. This is the case in particular of functions of the Company (if any) performing control activities pursuant to internal/external regulations18 avoidance of incentives on a single product / financial instrument or specific categories of financial instruments, as well as single banking product for the purpose of granting incentive, take also into account any disciplinary sanctions and/or sanctions by regulatory authorities imposed on the resource. In the presence of these measures, the possible allocation of the incentive will require a written explanation, which will make possible a case-by-case verification of the managerial decisions for Commercial Network Roles, goals shall be defined including drivers on quality / riskiness / sustainability of the products sold, in line with client risk profiles. Particular attention shall be paid to the provision of non-economics goals for customer facing roles selling products covered by MiFID Directive; for those roles, incentives must be set in order to avoid potential conflict of interest with customers all rewarding system communication and reporting phases shall clearly indicate that the final evaluation of the employee achievements will also rely, according to local requirements on qualitative criteria such as: - compliance to external (i.e. laws / regulations) and internal rules (i.e. policies) and company values - mandatory training completion - existence of disciplinary procedures officially activated and/or
16 Company Control Functions meaning Risk Management and Compliance. Where CRO covers both Underwriting and Risk Management activities, the goas assigned shall not be source of conflict of interests between Underwriting and Risk Management. Audit function is outsourced in UniCredit S.p.A.
17 For instance – ESMA Guidelines on remuneration policies and practices– MiFID;
– ESMA Technical Advise on MiFID II (Final Report 2014/1569);
– MiFiD II Directive provisions for remuneration/incentives of relevant subjects.
18 For instance, functions covering accounting and tax functions.
| disciplinary sanctions actually applied | |
|---|---|
| maintenance of adequate balance of fixed and variable compensation elements also with due regard to the role and the nature of the business performed. The fix portion is maintained sufficiently high in order to allow the variable part to decrease, and in some extreme cases to drop down to zero |
the entire evaluation process must be conveniently put in writing and documented |
| in case of individual performance evaluation systems are fully or partially focused on a managerial discretional approach, the evaluation parameters should be defined ex-ante, should be clear and documented to the manager at the beginning of the evaluation period. Such parameters should reflect all applicable regulation requirements19 . The results of managerial discretional evaluation should be formalized for the adequate and predefined monitoring process by the proper functions |
Within network roles incentive systems, particular attention is put on all commercial initiatives that involve the Personal Financial Advisor network20 .
Such initiatives may be organized after the evaluation and authorization of the competent Company's Bodies. They represent business actions aimed at providing guidance to the sales network towards the achievement of the period's commercial targets (also intermediate) and with a direct impact on the budget and related incentive systems.
Among the distinctive features of the initiatives, there is the expectation of an award - in cash or non-monetary reward. The initiatives can also have the function to accelerate the achievement of certain objectives of the incentive system. The grant of awards related to the initiatives will be subordinated to behaviours compliant with the external and internal regulations.
Under no circumstances may the system of remuneration and evaluation of the sales network employees constitute an incentive to sell products unsuitable to the financial needs of the clients.
In particular the following "compliance drivers" have been defined:
20 As described in paragraph 4.2.2
19 Also in line with the regulation references reported in the note above
.
Within the framework provided by the "FinecoBank Compensation Policy", FinecoBank is committed to ensure fair treatment in terms of compensation and benefits regardless of age, race, culture, gender, disability, sexual orientation, religion, political belief and marital status. Our total compensation approach provides for a balanced package of fix and variable, monetary and non-monetary elements, each designed to impact in a specific manner the motivation and retention of employees.
In line with the applicable regulations, particular attention is paid to avoid incentive elements in variable compensation which may induce behaviours not aligned with the company's sustainable business results and risk appetite.
As policy target, fix compensation for Identified Staff considers as a reference the market median, with individual positioning being defined on the basis of specific performance, potential and people strategy decisions.
With particular reference to Identified Staff – within the governance defined according to the applicable laws and regulations - the Board of Directors, upon proposal of the Remuneration Committee, establishes the compensation structure for top positions, defining the mix of fix and variable compensation elements, consistently with market trends and internal analyses performed.
Moreover, the Board of Directors annually approves the criteria and features of Identified Staff incentive plans, ensuring the appropriate balance of variable reward opportunities within the pay-mix structure.
| TYPE OF REMUNERATION | PURPOSES | FEATURES |
|---|---|---|
| 4.1.1. FIXED COMPENSATION | ||
| The fixed compensation is the part of the remuneration which Is stable and unrevocable, pre determined and payed on the basis of predefined and non discretionary criteria such as in particular the professional experience and responsabilities, and does not create incentive to risk assumptions and does not depend on the Bank's performance. |
Fixed salary is appropriately defined for the specific business in which an individual works and for the talent, skills and competencies that the individual brings to the Bank. The relevance of fixed compensation weight is sufficient to reward the activity rendered even if the variable part of the remuneration package is not paid due to non-achievement of performance goals such as to reduce the risk of excessively risk-oriented behaviours, to discourage initiatives focused on short-term results and to allow a flexible bonus approach. |
Specific pay-mix guidelines for the weight of fix versus variable compensation are defined with respect to each target of employee population. With particular reference to Identified Staff, the Remuneration Committee proposes to the Board of Directors: the criteria and guidelines to perform market benchmarking analysis for each position in terms of compensation levels and pay-mix structure, including the definition of a specific peer group at local level and the identification of an external consultant to provide "executive compensation" services the positioning in terms of compensation, in line with relevant market's competitive levels, defining operational guidelines to perform individual compensation reviews as necessary. For the Identified Staff in Control Functions, it is foreseen the introduction of specific Role Based Allowance (or RBA) in cash, defined ex ante on the basis of the "band"21 and Function, pursuant to UniCredit S.p.A Guidelines. In case of changes in the banding, the RBAs can be increased, decreased or zeroed. RBAs are not linked to performance and consequently cannot be discretionally reduced, suspended or cancelled as far as the employee covers a specific roles providing the allowance. Pursuant to law the RBA are considered fixed remuneration. The RBA are introduced in 2019 and assigned individually to the employees upon the appointment in the Control Function Role and revoked in case of movement to position for which no RBA is provided. |
21 Pursuant to the Global Job Model: an advanced organizational system that describes, standardizes and calibrates all the roles within UniCredit Group. The "Banding" system (Global Banding Structure) is one of the elements of the Global Job Model and it is constituted by 9 bands.
| The variable compensation includes payments depending on performance, independently from how it is measured (profitability goals, volumes, etc.) or on other parameters (e.g. length of service), discretionary pension benefits and amounts agreed between the bank and personnel in view or upon the early termination of the employment or office (excluding termination benefits and indemnity in lieu of notice), carried interests and more generally any other form of remuneration that is not uniquely qualifiable as fixed remuneration. |
Variable compensation aims to remunerate achievements by directly linking pay to performance outcomes in the short, medium and long-term, and risk adjusted. To strengthen the alignment of shareholders' interest and the interests of management and employees, performance measurement reflects the actual results of the Company overall, the business unit of reference and the individual. As such, variable compensation constitutes a mechanism of meritocratic differentiation and selectivity. |
|
Adequate range and managerial flexibility in performance-based pay-outs are an inherent characteristic of well-managed, accountable and sustainable variable compensation, which may be awarded via mechanisms differing by time horizon and typology of reward. Incentives remunerate the achievement of performance objectives, both quantitative and qualitative, by providing for a variable bonus payment. An appropriately balanced performance-based compensation element is encouraged for all employee categories as a key driver of motivation and alignment with organizational goals, and is set as a policy requirement for all business roles. The systems features, including performance measures and pay mechanisms, must avoid an excessive short-term focus by reflecting the principles of this policy, focusing on parameters linked to profitability and sound risk management, in order to guarantee sustainable performance in the medium and long term. The Identified Staff contracts provide only the "eligibility" to the variable compensation. The amounts related to the variable compensation and all the technical details of the pay-out (instruments, pay-out structure, timing) are included in a specific communication not included in the Identified Staff contract and are managed in strict coherence with the governance and the rules of the delegation of authorities. More details on the design of remuneration and incentive systems, with particular reference to Control Functions, are reported in the section "Compliance Drivers". |
|---|---|---|---|
| Incentive Systems linked to yearly performance (Short Term Incentives or STI) |
Aim to attract, motivate and retain strategic resources and maintain full alignment with national and international regulatory requirements and with best market's practices. |
|
Pay-out is based on a "bonus pool" approach providing for a comprehensive performance measurement at individual and at Group and local level. Reward is directly linked to performance, which is evaluated on the basis of results achieved and on the alignment with our leadership model and values. The Executive Development Plan (EDP) as the Group-wide framework for Identified Staff performance management is a cornerstone of fair and coherent appraisal across the organization. For the remaining employees – within the bonus pool logic as described above - annual incentives are determined on a discretionary basis according to the individual performance appraisal (e.g. Performance Management) that foresees a yearly, written, and documented process for the goals setting, self-assessment, managerial assessment and the definition of an individual development plan. Where foreseen by regulations, the pay-out is phased to coincide with an appropriate risk time horizon. The design features of incentive plans for Identified Staff are aligned with shareholder interests and long-term, firm-wide profitability, providing for an appropriate allocation of a performance related incentive in cash and in shares, upfront and deferred Each year, detailed information about our compensation governance, key figures and the features of our incentive systems, is fully disclosed in the Annual Compensation Report. The individuals' behaviours (compliance with internal and external rules and regulations, absence of disciplinary actions and completion of mandatory training) are also elements on which individual incentives award is based. |
| Long-term Incentive plans (Long Term Incentive or LTI) |
The aim of these plans is to strengthen the link between variable pay and long term results and to further align the interests of Management to those of Shareholders |
|
For 2018-2020 three years performance period, a share based Long Term Incentive Plan for selected Employees considered "key roles", has been approved. The plan is based on Bank's goals with targets set at 2020, in terms of value creation, business sustainability and risk, coherently with the long term Fineco goals. The Plan provides entry and malus conditions set at Bank and Group level, a claw-back condition and a specific risk adjustment. The Plan provides for the payment of a bonus in Fineco shares, in a multi-year period. For the Plan details, please refer to the specific section of the Annual Compensation Report. |
|---|---|---|---|
| 4.1.3. BENEFIT | |||
| Include welfare benefits supplementary to social security plans, and are intended to provide substantial guarantees for the well-being of staff and their families during the active career as well as the retirement. In addition, special terms and conditions of access to various FinecoBank and UniCredit Banking products and other services may be offered to employees in order to support them during different stages of their lives |
Benefits aim to reflect internal equity and overall coherence of our remuneration systems, catering to the needs of different categories as appropriate and relevant. |
| In coherence with Group governance framework and Global Job Model, benefits are aligned against general common criteria for each employee category, while benefits plans are established on the basis of FinecoBank practices. |
Financial Advisors are tied to the Company by an agency agreement, under which the Advisor is engaged on a permanent basis (without representation) to provide independent services, exclusively for the Bank, for the promotion and placement of financial instruments and Banking / financial services in Italy, as well as insurance and welfare products or any other products indicated in the contract. Advisors are also responsible for diligently monitoring the assistance to the existing and/or allocated customers in order to fulfil the Company's objectives.
In accordance with existing regulations, contractual relationships with customers acquired by the Financial Advisor, and any other that is subsequently allocated, are conducted exclusively between the customer and the Bank.
FinecoBank's Network of Financial Advisors is composed by:
The Group Managers and the Area Managers are Financial Advisors with the accessory assignment to coordinate other Financial Advisors. In particular, Area Managers are responsible for coordinating Advisors in their geographic area, for growing the business and for reaching the targets set by Commercial Department, and are supported - for the purposes of coordination activity - by Group Managers.
The Commercial Department uses Company's internal structures, to provide support to the network. Their tasks are to control the local activities and provide support for commercial activity.
As mentioned in the preamble, the provisions of this Compensation Policy also apply to the members of the Financial Advisors' Network, in line with the Advisors' specific remuneration.
Financial Advisors are freelancers and their remuneration is entirely variable. The regulatory requirements, in order to adapt the same employees' rules on compensation structure, based on a fixed and on a variable component, established for Financial Advisors a distinction between a "recurring" and a "non-recurring" pay component.
| TYPE OF REMUNERATION | PURPOSES | FEATURES |
|---|---|---|
| 4.2.1. RECURRING REMUNERATION | ||
| This is the most stable and ordinary part of the total remuneration, equivalent to the fixed salary of employees |
Recurring remuneration is sufficient to reward the activity rendered even if the variable part of the remuneration package is not paid due to non-achievement of performance goals such as to reduce the risk of excessively risk-oriented behaviours, to discourage initiatives focused on short-term results and to allow a flexible bonus approach. |
Sales commission, in other words the payment to the Financial Advisor of a percentage of the sales charge, paid by the customer at the time of purchase of investment instruments. It is paid on an individual basis or as a supplement if the Advisor has been given coordination tasks. Management and maintenance commission, in other words the Financial Advisor monthly remuneration for assistance provided to customers during the contract, commensurate with the average value of the investments and the type of product, paid on an individual basis or as a supplement if the Advisor has coordination tasks. |
| 4.2.2. NON RECURRING REMUNERATION | ||
|---|---|---|
| Incentive Systems linked to short term performance. This is the incentive element, in other words it is tied to reach certain goals, equivalent to the variable compensation of employees |
Aims at motivating, retaining and rewarding Financial Advisors and Managers of the Network, in full alignment with the regulatory requirements. |
Pay-out is based on a "bonus pool" approach providing for a comprehensive performance measurement at individual and at Group and local level. Reward is directly linked to performance, which is evaluated on the basis of results achieved. For the Financial Advisors belonging to Identified Staff, a dedicated incentive system ("PFA Incentive System") was defined, whose pay-out, as foreseen by regulations, is phased to coincide with an appropriate risk time horizon. The design features of the plan is aligned with shareholder interests and long-term, firm-wide profitability of the Bank, providing for an appropriate allocation of a performance related incentive in cash and in shares, upfront and deferred. For all the Financial Advisors not belonging to Identified Staff, specific incentive systems were defined, as, for example, "Incentive Plans for PFA-Area Managers-Group Managers", and specific retention initiatives such as the "Additional Future Program". This plan, in particular, is dedicated to selected PFA and network Managers not Identified Staff and provides the accrual of annual awards (subject to the achievement of specific performance conditions and the compliance of individual behaviours) in specific insurance policies. The release of those awards is provided at the reach of the retirement age. All the incentive systems provide for ex-ante ("entry conditions") and ex-post (malus on any deferred components) adjustment mechanisms and claw-back clauses. The individual behaviours (compliance with internal and external rules and regulations and absence of disciplinary actions) are also evaluation elements to assign individual incentives. |
| Long Term Incentive Plans (Long Term Incentive or LTI) |
The long term Incentive Plans aim at retaining and rewarding selected Financial Advisors and Network Managers towards commercial Network goals for the 2018-2020 performance period. |
Within a wider long-term incentive and retention program for the Financial Advisors network in 2018-2020 three years performance period, the following Plans have been approved by the Board of Directors: A long term Incentive Plan with bonuses in cash and Fineco shares for Financial Advisors that will be qualified as Identified Staff in the performance year 2020. The Plan is based on commercial goals with cumulated target in the three years 2018-2020, coherently with the long term goals of Fineco Network. The Plan provides specific entry conditions at individual, Bank and Group level, a claw-back condition ahd a risk adjustment mechanism. At last, the Plan provides the payment of a bonus in cash and Fineco shares, in a multi-year period, as provided by law. The Plan details are described in the specific section of the Annual Compensation Report. A Long Term cash-based Incentive plan for selected Financial advisors not belonging to Identified Staff population. The Plan is based on the same logics of the LTI Plan described above, including – for the purpose of bonus provision – a further permanence duty after the payment of at least 36 months. |
For non-executives members of Board of Directors and for the members of the Board of Statutory Auditors, in line with the regulatory provisions, stock option based or more in general, instrument based incentives are avoided. The remuneration of said subjects is fixed, and determined on the basis of the relevance of the role, of possible additional duties, and of the requested efforts for carrying out the assigned tasks and is not linked to economic results.
As provided by Bank of Italy provisions on remuneration policies and practices, the Board of Directors' Chairman remuneration is not higher than the fixed one provided for the Chief Executive Officer.
FINECO. SIMPLIFYING BANKING.
FinecoBank S.p.A. – Member of Unicredit
| 1. Introduction | 34 |
|---|---|
| 2. Governance & Compliance | 35 |
| 2.1 Remuneration Committee 2.2 The Role of the Company Control Functions: Compliance, Risk Management and Audit |
|
| 3. Continuous Monitoring of Markets Trends and Practices |
39 |
| 4. Compensation paid to Members of the Administrative and Auditing Bodies, to General Managers and to other Executives with strategic responsibilities |
40 |
| 5. Compensation Systems | 43 |
| 5.1 Target Population 5.2 2018 Systems implementation and outcomes 5.2.1 2018 Incentive System for employees belonging to Identified Staff 5.2.2 2018 Incentive System for Financial Advisors belonging to Identified Staff 5.3 2019 Incentive System for employees belonging to Identified Staff 5.3.1 Comprehensive Performance Measurement 5.4 2018-2020 Long Term Incentive Plan for Employees 5.5 2019 Incentive System for Financial Advisors belonging to Identified Staff 5.5.1 Comprehensive Performance Measurement 5.6 2018-2020 Long Term Incentive Plan for Financial Advisors Identified Staff |
|
| 6. Compensation Data | 66 |
6.1 2018 Compensation Outcomes
6.2 2019 Compensation Policy
6.3 Benefits Data
The Annual Compensation Report (hereinafter, the "Annual Report") discloses all relevant FinecoBank compensation-related information and methodologies with the aim to increasing Stakeholders' awareness of our compensation policies, practices and outcomes, demonstrating their coherence with business strategy and performance, responsible remuneration and sound risk management.
The Report provides ex-post information on 2018 outcomes, as well as ex-ante disclosure for 2019 approach, covering our Identified Staff population (both employees and Financial Advisors) and Corporate Bodies' members. Remuneration solutions implemented in 2018 provided for:
Over the years we constantly kept abreast of ongoing changes in national and international regulations (see, for instance, EBA Guidelines on Remuneration Policies and practices).
The most recent changes in the regulatory framework include the issuance by the Bank of Italy of the update (25th update) of Circular 285, with reference to the rules on remuneration and incentive policies and practices in banks and banking groups. The new provisions have been fully implemented within the scope of the present Remuneration Policy and the Termination Payments Policy
During 2018 and early 2019, we continued the annual structured dialogue process with international investors and proxy advisors, receiving valuable insights on our compensation approach and specific suggestions for effective public disclosure, based on of Italian and international standards
The Annual Report, a unique document providing complete and comprehensive information on compensation, includes details referring to Members of Administrative and Auditing bodies, General Manager and Executives with strategic responsibilities.
Data pursuant section 84-quater approved with resolution of the Italian National Commission for Listed Companies (Consob) no.11971, dated May 14th 1999 (as subsequently modified), providing the rules for Issuers (so called "Issuers Regulation"), as well as the information on incentive systems pursuant to section 114-bis of the Legislative Decree issued on February 24th n. 58 (the Consolidated Text on Finance –"TUF"), and to the provisions of the Issuers Regulation on information that have to be communicated to the market on compensation plans based on financial instruments, are included in this document, further to be included in the Annexes to the 2019 FinecoBank Compensation Policy
To this regard, is highlighted that the aforementioned information are provided also pursuant to the Report on Corporate Governance and Ownership Structures, issued pursuant to art. 123-bis of TUF.
The Remuneration Committee, established by the Board of Directors' resolution on April 11th, 2017, performs a strategic role in supporting Board of Directors' oversight of FinecoBank Compensation Policy and plans design.
According to the internal provisions approved by the Board of Directors, ruling the functioning and competencies of corporate bodies and related information flows (hereinafter the "Corporate Governance Rules"), this Committee is composed by 3 non-executive members, Mr. Gianmarco Montanari, Ms. Elena Biffi and Mr. Enrico Cotta Ramusino.
As provided by law, at least a Committee Member has adequate knowledge and experience in finance or accounting topics or remuneration policies.
The FinecoBank Board of Directors verified the Directors independence requirements pursuant to art. 148 TUF and art. 3 of the Corporate Governance Code. Pursuant to this, with reference to the Remuneration Committee members:
The Committee meetings held in 2018 have been coordinated by the Chairman Mr Gianmarco Montanari.
In performing its duties and if important and suitable, also availing itself with the support of an external consultant, The Remuneration and Committee:
(i) presents proposals or issues opinion to the Board for the definition of a general remuneration policy for the CEO, the General Manager, and other Managers with Strategic Responsibilities and the identified staff, also with reference to the identification process, so that the Board is also able to prepare the Report on Remuneration to be presented to the Shareholders' Meeting on an annual basis and to periodically assess the suitability, overall consistency and effective application of the general remuneration policy approved by the Board;
(ii) presents proposals or issues opinion to the Board relating to the overall remuneration of the CEO, the General Manager, and other Managers with Strategic Responsibilities, and the identified staff and for determining criteria for the remuneration of the Company's senior management, including the relevant performance targets related to the variable component of the remuneration;
(iii) monitors the implementation of the decisions adopted by the Board and specifically verifies that the performance targets are actually achieved;
(iv) examines any share-based or cash incentive plans for employees and financial advisors of the Company and strategic staff development policies;
(v) directly supervises the correct application of the remuneration rules related to the persons in charge of the Company's control functions, in close liaison with the Board of Statutory Auditors;
(vi) cooperates with the other Committees, in particular with the Risk and Related Parties Committee, which, with reference to the remuneration and incentive policies, examines whether the incentives provided by the remuneration system take into account the risks, share capital and liquidity, provided that this does not affect the tasks assigned to the Remuneration Committee, with which adequate coordination must be ensured;
(vii) ensures the involvement of the relevant business functions in the process of drawing up and monitoring remuneration and incentive policies and practices;
(viii) provides an adequate reporting on the activities carried out by the Corporate Bodies, including the Shareholders' Meeting
In 2018 the Remuneration Committee met 11 times. The meetings had an average duration of two hours. From the beginning of 2019 and until the approval of the present 2019 Compensation Policy, 3 meetings of the Committee have been held this year. Minutes are taken of each meeting and placed on record by the Secretary designated by Committee itself. From the approval of "Corporate Goverance Rules", the Chairman of the Committee provided time by time the information on the Committee meetings to the subsequent Board meeting.
From December 2014 on the Committee, by means of its budget assigned for the year (amounting to 35.000 € for 2018), has started a collaboration with an external advisor - whose independence has been previously verified - who is invited to the Committee's meeting when required.
The Committee may, when it deems it appropriate, invite other individuals from within the Company to attend the meetings, in relation to the corporate functions and organizations concerned by the issues at hand, including members of other committees within the Board of Directors, or external parties. The Committee shall meet when convened by its Chairman, whenever he/she deems necessary, or upon the request of one of its members. In any case the Committee has always been able to access the information and the Company Functions necessary to perform its activities.
In 2018 the Head of Human Resources has been always invited to Committee's meetings. The Chairman has also invited the Head of Legal & Corporate Affairs for the matters within the competence, and the Head of Network Controls, Monitoring and Service Department for topics related to PFA network (see for instance the Incentive Systems and related rules for the PFA population). In addition to the aforementioned Functions, the Chairman invited - to specific Committee's meetings and for topics in the respective competence perimeters – the CRO, CFO and Compliance Officer of FinecoBank. In particular the CRO and CFO participated in the meetings regarding the 2018 Incentive Systems evaluation while the Compliance Officer has been invited, among the others, to participate in the discussions related to the Identified Staff definition.
The Chairman has also invited the Internal Audit22 function to the meeting related to the annual audit performed on FinecoBank remuneration policies and practices.
During 2018 the key activities of the Remuneration Committee included:
| MAIN COMMITTEE'S ACTIVITIES IN 2018 | |
|---|---|
| January | 2018 Employees Identified Staff and related 2018 Incentive System 2018-2020 LTI for the Employees 2018-2020 LTI for the Financial Advisors Identified Staff 2018-2020 LTI for selected Financial Advisors Non Identified Staff 2018 Incentive System for PFA Identified Staff New Contest "Qualità" |
| February | "2014-2017 Multi-year Plan Top Management" implementation Bonus Pool 2017 and 2017 and previous years Incentive Systems implementation 2018 Performance goals of Employees Identified Staff 2018 Incentive System Rules for Employees Identified Staff 2018-2020 LTI for Employees Rules 2018 PFAs Identified Staff definition Stock Granting "2015-2017 Plan PFA" implementation 2017 Bonus Pool and 2017 and previous years Incentive Systems implementation for PFAs Identified Staff 2018 Incentive System Rules for PFAs Identified Staff 2018-2020 LTI Rules for PFAs Identified Staff 2018-2020 LTI Rules for PFAs Non Identified Staff 2017 Incentive Plans and Additional Future Program for PFAs implementation 2018 Incentive Plans for PFAs 2018 FinecoBank Compensation Policy Identified Staff Salary Review Report on Corporate Governance and Ownership Structures - for the section related to the Directors remuneration |
| April | New "Contest Qualità" |
| May | Review of the "Additional Future Program" Rules for PFAs 2018-2020 LTI for Employees – grant of shares to the beneficiaries |
| July | New "Contest Qualità" Report to the Board of Committee's activities in the 1H of 2018 |
| October | New "Contest Qualità" |
| November | Identified Staff Salary Review |
| December | 2019 Guidelines for PFAs Incentive System Compliance Breaches Committee |
22 Internal Audit function is outsourced in UniCredit and works based on a specific service contract.
| | Selection of the Independent Advisor of the Committee in 2019 |
|---|---|
| | Report to the Board of Committee's activities in the 2H of 2018 |
The main topics discussed by the Committee are also submitted to the attention of the Board of Statutory Auditors, in advance over their submission to the Board of Directors.
Moreover, at least a member of the Board of Statutory Auditors, attended to the meetings of the Committee in 2018.
We highlight that the Directors do not participate in the Committee meetings in which are made the proposals to the Board concerning their remuneration.
The following table summarizes the composition of the Committee in 2018 and, in addition to the information on the independency of the members, provides details regarding their attendance to the meetings that have been called during the year.
| Name | Executive | Non executive |
Indip. Code | Indip. TUF | % (*) | (**) | ||
|---|---|---|---|---|---|---|---|---|
| Gianmarco Montanari | X | X | X | 100% | C | |||
| Elena Biffi | X | X | X | 100% | M | |||
| Enrico Cotta Ramusino | X | X | 100% | M | ||||
| N. Comittee meetings: 11 | ||||||||
| (*) in this column is indicated the percentage of participation of the directors in the Committee's meetings (n. of presences/n. of meetings held during the actual period in which the director was in charge, in the Exercise). |
||||||||
| (**) In this column is reported the qualification of the director in the Committee ("C" Chairman; "M" member) |
Key contributions in 2018 of FinecoBank Compliance function, for all aspects that fall within its perimeter, included:
In 2019, the Compliance function will continue to operate in close co-ordination with the Human Resources function to support not only in the validation but also in the design and definition of compensation policy and processes.
The link between compensation and risk has been maintained in 2018 with the involvement of the Risk Management function in compensation design and the definition of an explicit framework to base remuneration within an overarching FinecoBank Risk Appetite Framework, which is consistent with Group Risk Appetite Framework, so that incentives to take risk are appropriately constrained by incentives to manage risk. In particular, the Board of Directors and Remuneration Committee draw upon the input of involved functions to define the link between profitability, risk and reward within FinecoBank incentive systems.
Internal Audit performed the annual audit on the Bank variable remuneration system, aimed at verifying the design, implementation and effects of the remuneration process, as well as its compliance with relevant regulatory requirements and Bank compensation policy.
The audit verified the payment and deferral phase of previous year incentive system, the bonus pool definition and distribution process and the procedures to respect the variable/fixed remuneration caps defined by the Bank remuneration rules.
The audit scope included also the Identified Staff definition process, with the aim to check its compliance with the requirements provided by Delegated Regulation (EU) No 604/2014. Furthermore, a follow up of the previous audit recommendation was performed. Main audit results were presented to the Remuneration Committee on 1st March 2019.
The audit tests have been performed on a sample of population including the following groups within FinecoBank compensation policy:
employees belonging to the Identified Staff at 31/12/2018, with the exception of one resource for which Audit verified the compliance with the regulation of the severance paid by the Bank, following the consensual resolution of the employment relationship;
a sample of 212 employees non-Identified Staff (the so called "below executives"), selected considering the roles to whom a bonus higher than € 5.000 has been granted in 2018 (19% ca of the overall population as on 31/12/2018);
Corporate Bodies members;
Bank's Financial Advisors, with specific focus on categories of "non recurring" remuneration named "bonus on net sales" and "additional future program", equal to the 75% ca of 2018 total incentives.
The Internal Audit "good" evaluation was based on the overall correct application of the 2018 "bonus pool" approach and Bank Remuneration Committee/Board of Directors relevant decisions.
With regard to the Personal Financial Advisors Network, the process provided the inclusion in the Identified Staff category of the Financial Advisors with a total remuneration, recurring and nonrecurring, higher than Euro 750,000, as well as of the Managers coordinating Financial Advisors that manage assets equal or higher than 5% of overall network assets, on the basis of quantitative criteria defined in the EU Regulation and of a qualitative criteria based on business risk (reduction of Bank's profitability as a consequence of Advisors leaving and the subsequent loss of customers' portfolios). The Bank evaluation performed with the aim of excluding from the Identified Staff category roles with total compensation between Euro 500,000 and 750,000, subject to communication to ECB, is consistent with the internal accounting figures and with the risk profiles of Personal Financial Advisors activities.
Key highlights of the Compensation Policy defined this year with the support of external benchmarking and trends analysis provided by the independent external advisor to the Remuneration Committee include:
The peer group used to benchmark compensation policy and practice with particular reference to employees Identified Staff has been defined by the Remuneration Committee upon proposal of the independent external advisor on the basis of criteria including: comparability of size, complexity and business model, presence in customer, talent and capital markets, risk and legal-social-economic environment. The main peer group is subject to annual review to assure its continuing relevance. For 2019 it has been defined a national peer group that
includes:
.
In addition to what mentioned above, for the Chief Executive Officer and General Manager and for the Executives with strategic responsibilities it will be realized a benchmark also with European market, based on a sample of European Banks.
The remuneration for members of the administrative and auditing Bodies of FinecoBank is represented only by a fix component, determined on the basis of the importance of the position and the time required for the performance of the tasks assigned.
This policy applies to non-Executive Directors and to the Supervisory Body members that are not employees of FinecoBank or other Legal Entities of UniCredit Group, as well as to Statutory Auditors.
The compensation paid to non-Executive Directors, to the Supervisory Body members and to the Statutory Auditors is not linked to the economic results achieved by FinecoBank and none of them take part in any incentive plans based on stock options or, generally, based on financial instruments.
| BENEFICIARY | REMUNERATION COMPONENT |
APPROVED BY | AMOUNT (€)23 | REMARKS |
|---|---|---|---|---|
| Non-Executive Directors |
Only fixed compensation | Shareholders' Meeting and Board of Directors of April 11th, 2017 |
Compensation for each year of activity: € 330.000 for the Board of Directors24 € 50.000 for Board Committees € 20.000 and € 15.000 for the Chairman and member of the Supervisory Board25 € 300 as attendance fee for partecipating to each meeting of26: - Board of Directors - Board Committees |
|
| Board of Directors of April 11th, 2017 , persuant to sect. 2389 of the Civil Code par. 3and Articles of Association, heard the opinion of Statutory Auditors |
€ 200.000 for each year of activity, split between: - Board Chairman - Board Vice Chairman |
The compensation is determined on the basis of the importance of the position and the time required for the performance of the tasks assigned |
||
| Statutory Auditors | Only fixed compensation | Shareholders' Meeting of April 11th 2017 |
Compensation for each year of activity27: € 50.000 for the Chairman of Board of Statutory Auditors € 40.000 for each Standing Auditor € 300 as attendance fee for partecipating to each meeting of the Board of Directors |
|
| Executives with strategic responsabilities28 |
Fixed and variable compensation |
Board of Directors | 2018 Compensation level: € 850.000 fixed + € 850.000 variable for the CEO and GM € 1.416.053 fixed + € 1.813.166 bonuses for the other 4 Executives with strategic responsabilities |
Fixed and variable remuneration components of the CEO/GM and of the other Executives with strategic responsibilities are balanced, through the ex-ante definition of the maximum ratio between variable and fixed remuneration component. |
23 2018-2020 LTI Plan is not included since it is long term performance and it has not been evaluated.
24 Total compensation for the entire Board of Directors (Executive Directors included) approved by the Shareholders' Meeting is equal to Eur 370.000.
25 With the resolution of the Board of Directors on April 11 2017, have been nominated as Chairman and as member of Corporate Governance 231/2001 external members persuant of the new Unicredit guidelines related to the update "modello di organizzazione, gestione e controllo ex D. Lgs. 231/2001".
26 Even if these meetings held in the same day
27 Alternate Auditors do not receive any compensation unless they are actually asked to join the Board of Statutory Auditors in substitution of a standing member.
28 the Chief Executive Officer and General Manager, the Deputy General Manager and Head of Global Banking Services, the Deputy General Manager and Head of Global Business, the Head of Commercial PFA Network & Private Banking as well as the Chief Financial Officer.
For 2018, according to our Compensation Policy, in line with regulatory provisions, it has been defined ex-ante the maximum ratio between variable and fix component of the compensation both for the Chief Executive Officer and General Manager (the sole executive director sitting on the Board of Directors and employee of the Company) and for the other Executives with strategic responsibilities.
The balance between variable and fixed components has been defined considering also the Company's strategic goals, risk management policies and other elements influencing firm's business.
With reference to the above table, for Executives with strategic responsibilities it is specified that:
-the fix component is defined taking into opportune consideration market information and in such a way to be sufficient to reward the activity rendered even if the variable part of the remuneration package were not paid due to non-achievement of performance goals;
-in line with the latest regulatory requirements, the Chief Executive Officer and General Manager – as well as the Executives with strategic responsibilities – have a balanced part of their remuneration linked to the overall profitability of FinecoBank and the Group, weighted by risk and cost of capital, as well as sustainability goals (based on capital and liquidity ratios) of FinecoBank and the Group.
The variable compensation considers the achievement of specific goals which are previously approved by the Board of Directors upon proposal of the Remuneration and Committee and having informed the Board of the Statutory Auditors.
In particular, ex-ante defined specific metrics that reflect categories of our FinecoBank Risk Appetite Framework, which is consistent with Group Risk Appetite Framework, align the remuneration of the Chief Executive Officer and General Manager and of the others Executives with strategic responsibilities to sustainable performance and value creation for the shareholders in a medium / long term perspective. Specific individual goals are set out taking into consideration the market practices and the role assigned within the Bank, through the systematic use of specific indicators aimed at strengthening the sustainability of business, such as, for example, risk and financial sustainability indicators and profitability measures29 . More information regarding our performance management and evaluation are provided further in chapter 5.3.1
It is also foreseen the deferral in cash and shares of minimum 60% of the incentive. All the instalments are subject to the application of malus and/or claw-back conditions, if legally enforceable. 2018 Incentive System provides for 50% of the annual incentive to be deferred and paid in the five following years through the granting of Fineco shares. The number of such shares is set at the beginning of the deferral period, thus creating a link between the evolution of the share price and the actual value of the incentive.
More information regarding the 2018 incentive plan implementation and outcomes are provided further in chapter 5.2.
The Chief Executive Officer and General Manager, on top of 2018 Incentive System, benefits also from:
"2014 Incentive System" (hereinafter also "Group Incentive System 2014")
"2015 Incentive System" (hereinafter also "Group Incentive System 2015")
"2016 Incentive System" (hereinafter also "Group Incentive System 2015")
"2014-2017 Multi-year Plan Top Management"
"Long Term Incentive Plan 2018-2020"
More information regarding the plans above mentioned are provided further in chapters 6 and in the Annexes.
The measure and duration of the deferral are aligned with the provisions set by regulators and are consistent with the characteristics of the business and with the Company's risk profiles.
For the Heads of the Company Control Functions, HR and Manager in charge for preparing financial statement the goals, pursuant to the provisions of Bank of Italy, are established by the Board of Directors in line with the tasks assigned to them and avoiding, unless good reasons exist, goals connected to the Bank's performance.
29 Since the CFO- included in the Executives with Strategic Responsibilities - cover also the activities related to the Finacial Statements – the individual goals are defined in coherence with the assigned tasks
None of the Directors have contracts containing clauses envisaging the payment of indemnities, or the right to keep post-retirement benefits, in the event of resignations or dismissal / revocation without just cause or if the employment relationship is terminated following a public purchase offer. In case of early termination of the mandate, the ordinary law provisions would therefore apply.
The individual employment, as Executive, of the Chief Executive Officer and General Manager, Mr. Alessandro Foti, is today governed - also with regards to the event of resignations, dismissal / revocation or termination - by the ordinary provisions of the law and National Labor Agreement for Banking Industry Executives. In such context, the annual remuneration used to define the possible indemnity due in the above mentioned instances would include the fix remuneration, any other continuative compensation and the average of the variable pay (inclusive of the components paid in equity - such as for example free shares, restricted shares, performance shares - with the only exclusion of the valorisation of the stock options potentially assigned within long-term incentive plans) received in the last three years prior to the termination. The actual amount of such indemnity – in terms of months of compensation considered – is then bound to vary depending on the events which led to the termination and on the relationship's duration and is anyway subjected to provisions of the "Severance Policy" of FinecoBank approved by Shareholders' Meeting.
Non-executive Directors do not receive, within incentive plans, stock options or others equities. For the Chief Executive Officer and General Manager no specific provisions are provided with reference to the right to keep, in case of termination, the options received and the plans' provisions apply.
For none of the Directors currently in office, provisions exist regarding the establishment of advisory contracts for a term following the termination of the directorship, nor the right to keep post retirement perks. No agreements exist either providing compensation for non-competition undertakings.
FinecoBank, starting from 2014 conducted, in alignment with specific regulation, the annual self-evaluation process to define Identified Staff population, both employees and Financial Advisors, to whom, according to regulators, specific remuneration rules apply.
The definition of 2019 Identified Staff, pursuant to the European criteria foreseen in the European Banking Authority Regulatory Technical Standard (RTS)30, followed a structured and formalized assessment process both at Group and local level, based on the guidelines provided by the Group functions Human Capital with the contribution of Risk Management and Compliance, to guarantee a unique and common approach at Group level.
In line with the regulatory provisions, the criteria used to define the Identified Staff are those defined by the aforementioned European standards, and incorporated into the national legislation (Circular 285 of the Bank of Italy). In line with the Group guidelines, FinecoBank - for the purposes of identifying the Identified Staff - adopts the additional criterion for the "band" for Employees, including all Employees with band 5 (Senior Vice President)31 or higher, in the risk takers category.
The recognition of subjects with significant impact on risk, further to be finalized to the definition of Bank's Identified Staff, is subject to the consolidation activity performed by the Holding Company, for the definition of Group Identified Staff.
This is valid, in particular for the Employees, while the PFAs are not included in the consolidation perimeter, as considered Identified Staff just at a Bank level32 .
As every year, the assessment performed took into account the role, the decision-making power, the effective responsibilities of the employees and of the Financial Advisors and, in addition, the total compensation level
The result of the assessment process, submitted to Internal Audit scrutiny and documented into FinecoBank Compensation Policy, brought to the identification of a total number of 14 employees and 8 Financial Advisors33 for 201934 .
Regarding the employees, as a result of the analysis and as approved by the Board of Directors upon Remuneration Committee proposal, the following categories of employees have been defined for 2018 as Identified Staff: Chief Executive Officer and General Manager, Executives with
30 European Banking Authority (EBA) Regulatory Technical Standards on criteria to identify categories of staff whose professional activities have a material impact on an institution's risk profile under Article 94 (2) of Directive 2013/36/EU. 31 According to Global Job Model
32 The qualification of Group Identified Staff or local Identified Staff does not prejudice the application of all the criteria defined by the regulation for the Identified Staff remuneration.
33 Vs 16 Employees and 7 Financial Advisors identified in 2018
34 Identified Staff data refers to the population at the date of February 2019, providing for an ex-ante definition, in line with regulatory requirements.
strategic responsibilities, executive positions in Company Control Functions (Compliance, Risk Management) and other positions that are responsible at local level for strategic decisions which may have a relevant impact on the Bank's risk profile35 .
Regarding the Financial Advisors, FinecoBank has applied a qualitative criteria to select those belonging to Identified Staff, on the basis of their impact on business risk (represented by the risk that the Bank's profitability decreases consequently to the exit of Advisors from the Network and the related loss of customers and assets), the only type of risk that the Bank considers attributable to PFA, due to the absence of power of attorney they have to assume any other kind of risks.
Compensation data and vehicles used for the target population in 2018 are disclosed in chapter 6 and in the Annexes .
As a result of the analysis and as approved by the Board of Directors upon Remuneration Committee proposal as shown above, the following categories of Financial Advisors have been identified for 2019 as Identified Staff:
Pursuant to the regulatory requirement and the process defined at EU level36 the exclusion from Identified Staff of 17 PFA whose total remuneration in 2018 is equal or exceeds € 500,000 is submitted to the European Central Bank and to Bank of Italy.
The 2018 Incentive System, approved by FinecoBank Board of Directors on January 9th, 2018, provides - in continuity with 2017 System - for a "bonus pool" approach which directly links bonuses with Company results at Group and local level, ensuring the link between profitability, risk and reward.
The System, implemented within the framework of our policy and governance, provides for the allocation of a performance related bonus in cash and/or free ordinary shares over maximum 6 years
The bonus pool dimension is related to the actual profitability measure multiplied for the percentage of the bonus pool funding rate defined in the budgeting phase.
This calculation determines the so called "theoretical bonus pool" that, during the year of performance, has been adjusted based on the effective performance trend.
For the purpose of alignment with regulatory requirements, specific indicators are set at both local and Group level to measure profitability, solidity and liquidity on an annual basis that act as access conditions. In particular, the indicators and thresholds that are defined as access conditions for the 2018 Incentive System - which confirm, reduce or cancel immediate and deferred payments - are as follows:
| Group Level | Local Level |
|---|---|
| Net Operating Profit adjusted ≥ 0 and | Net Operating Profit adjusted ≥ 0 and |
| Net Profit ≥ 0 and | Net Profit ≥ 0 and |
| Common Equity Tier 1 ratio transitional > 10,43% and | Common Equity Tier 1 ratio transitional > 10,43% and |
| Liquidity Coverage Ratio > 101% and | Liquidity Coverage Ratio > 101% and |
| Net Stable Funding Ratio > 101% | Net Stable Funding Ratio > 101% |
35 The list of FinecoBank and Group Identified Staff includes also the Fineco Asset Management DAC CEO 36 ECB Decision (EU) 2015/2218 dated November 20th 2015; EBA RTS chapter 4, §4
According to the actual results, verified and approved by the Board of Directors of FinecoBank on February 1st 2019, the relevant entry conditions have been achieved both at Group and local level, confirming the theoretical37 FinecoBank bonus pool.
Once the entry conditions have been verified, the effective bonus pool for FinecoBank's employees was confirmed, also in light of the overall assessment of the performance of the s.c. "CRO dashboard"38, carried out by the Fineco CRO on the basis of a specific methodology defined at Group level.
This method provides a quarterly monitoring of the progress of the indicators included in the Dashboard and an annual assessment.
In line with FinecoBank governance, 2018 evaluations and pay-outs for Chief Executive Officer and General Manager, Deputy General Managers, other Executives with strategic responsibilities and other Identified Staff have been approved by the Board of Directors, based on the positive opinion of Remuneration Committee.
The Board of Directors of FinecoBank on February 5th, 2019, has approved the allocation of a total number of shares equal to 168,897 to be assigned in 2021, 2022, 2023 and 2024.
On the same date, the Board of Directors also approved the implementation - in 2019 - of the Incentive Systems 2014, 2015, 2016, 2017 and the "2014-2017 Multi-year Plan Top Management Plan"39 .
37 Calculated applying the funding rate percentage to the profitability results
38 The CRO Dashboard 2018 is a set of indicators selected among the Risk Appetite Framework KPIs, plus a single indicator on operational risks; the threshold values have been approved by the Board of Directors at the beginning of the year (January 2018).
39 The data relating to the assignments are included in the information reported in chapter 6 of the Annual Compensation Report and in the Annexes
The Board of Directors, upon positive opinion of Remuneration Committee, assessed the 2018 performance of FinecoBank CEO and General Manager as Exceeds Expectations. Below the details of the individual scorecard assessment
| ASSESSMENT | ||||||
|---|---|---|---|---|---|---|
| GOAL | RESULT | Below Greatly |
||||
| ROAC vs. budget |
Bdg 40% - Result 41,59% | |||||
| EVA vs. budget |
Bdg 189.078 k€ - Result 194.309 k€ | |||||
| Operating Costs vs. budget |
Bdg -247.190 k€ - Result -245.763 k€ | |||||
| Net New Clients vs target |
Target NET 73.397 - Result NET 77.959 | |||||
| Net Sales of Guided Products vs. budget |
Bdg 5.069.004 k€ - Result 2.755.242 K€ | |||||
| New business EL vs. budget |
Target 0,35% - Result 0,30% | |||||
| Sustain value through people Qualitative assessment based on: - Y/Y delta on Pay for Performance metrics on variable and fix pay Y/Y delta on Gender Pay Gap / Gender Balance dashboard/Gender Diversity Initiatives/Succession Planning / Building up a sustainable Talent Management Support Retention rate or voluntary turnover |
Outstanding results in terms of: pay for performance: fully consistent in 2018 (2017 payout) vs actual business results and individual performance; gender pay gap: no significant gap in 2018. Furthermore, Succession Plan presented to FinecoBank Board on 11/12/2018, shows full coverage of managerial positions. In addition several initiatives have been put in place in order to foster gender diversity, inclusion and work-life balance within the organization. As regards work-life balance, the "Maggiortempo" project launch has to be highlighted, supporting all the colleagues in the everyday tasks, giving back time to people. Voluntary turnover shows a very low rate of 3% ca, proving that Fineco confirms to be considered a "great place to work" |
|||||
| Tone from the top on Compliance Culture vs. qualitative assessment based on: Scope, kind and numbers of documented initiatives - pre-committed with EMC, aimed at promoting staffintegrity / customer protection, trustworthiness. The overall status of findings or proceedings in place (internal or external) considering the trend, type, severity and the timely completion of the related remediation actions |
Tone from the top activities have been all well carried out and ad hoc communication on compliance culture within the Bank as well as on staff integrity and behavioral expectations Overall findings as at 4Q 2018 show no critical aspects. |
Considering the performance assessment and the results of the KPIs in the Entry Conditions, the Board of Directors approved for the CEO and General Manager a bonus amounting to Euro 850,00040 .
40 For the picture presenting the total remuneration package of CEO and General Manager, see the Executive Summary section.
The 2018 Incentive System PFA, approved by FinecoBank Board of Directors on January 10h 2018, takes into consideration all the national and international regulatory requirements for the sales networks incentives and directly links bonuses with the objectives of growth in the medium and long term, in a general framework of overall sustainability. In the same way as for the Employees, the 2018 PFA System is based on a Bonus Pool approach which directly links bonuses with Company results at Group and local level, ensuring the link between profitability, risk and reward. The System, implemented within the framework of our policy and governance, provides for the allocation of a performance related bonus in cash and/or shares over 5 years.
The bonus pool dimension is related to the actual profitability measure multiplied for the percentage of the bonus pool funding rate defined in the budgeting phase.
This calculation determines the so called "theoretical bonus pool", that, during the year of performance, has been adjusted based on the effective performance trend.
In order to align to regulatory requirements, specific indicators measuring annual profitability, solidity and liquidity results had been set both local and Group level as Entry Conditions. In particular, metrics41 and thresholds for 2018 PFA Incentive System as defined within the Entry Conditions that confirm, reduce or cancel upfront and deferred pay-outs are:
| Group Level | Local Level |
|---|---|
| Net Operating Profit adjusted ≥ 0 and | |
| Net Profit ≥ 0 and | |
| Common Equity Tier 1 ratio transitional > 10.43% and | Common Equity Tier 1 ratio transitional > 10.43% and |
| Liquidity Coverage Ratio > 101% and | Liquidity Coverage Ratio > 101% and |
| Net Stable Funding Ratio > 101% | Net Stable Funding Ratio >101% |
According to the actual results, verified and approved by the Board of Directors of FinecoBank on February 5th 2019, the relevant entry conditions have been achieved both at local and Group level, confirming the theoretical42 FinecoBank PFA bonus pool
Once the entry conditions have been verified, the effective bonus pool for FinecoBank's Financial Advisors was confirmed, also in light of the overall assessment of the performance of the s.c. "CRO dashboard"43, carried out by the Fineco CRO on the basis of a specific methodology defined at Group level.
41 For the KPIs definition see chapter 5.2.1
43 The CRO Dashboard is a set of indicators selected among the Risk Appetite Framework KPIs, plus a single indicator on operational risks; the threshold values have been approved by the Board of Directors at the beginning of the year (January 2018). The assessment methodology is the one used for Employees
42 Calculated applying the funding rate percentage to the profitability results
In line with FinecoBank governance, 2018 evaluations and pay-outs for PFA Identified Staff have been approved by the Board of Directors, based on the positive opinion of Remuneration Committee.
On the basis of the resolutions of the Board of Directors of 5 February 2019, the total number of shares serving the 2018 Incentive System for Financial Advisors is 17,300 to be assigned in 2021, 2022, 2023.
On the same date, the Board of Directors also approved the implementation - in 2019 - of the Incentive Systems 2015, 2016 and 201744 .
As in the past years, the 2019 Incentive System, as approved by the Board of Directors of FinecoBank on January 10th, 2019, is based on a "bonus pool" approach which takes into consideration the national and international regulatory requirements and directly links bonuses with Company results at Group and local level, ensuring the link between profitability, risk and reward.
In particular, the system provides for:
The bonus pool process includes the following steps
* Risk Appetite Framework
45 In compliance with sector regulations, the Chief Executive Officer of Fineco Asset Management DAC - Identified Staff of the Company, the Bank and the Group - is the beneficiary of the FAM Incentive System 2019, for which the use UCITS compliant instruments is envisaged.
44 The data relating to the assignments are included in the information reported in chapter 6 of the Annual Compensation Report and in the Annexes.
Bonus pool process starts with the definition of the "funding rate" during budgeting phase. The funding rate for FinecoBank is a percentage of the Net Operating Profit (net of Provisions for Risk and Charges, corresponding to Profit Before Tax) considering: historical data analysis, expected profitability, business strategy and previous year pool. The bonus pool is submitted for approval to the Board of Directors of FinecoBank.
The Entry Conditions are the mechanism that determines the possible application of Zero Factor on the basis of performance indicators in terms of profitability, capital and liquidity defined at both Group and local level. The entry conditions defined for 2019 – working also as malus conditions for the previous incentive systems deferrals - are reported in the following table
| Group Level | Local Level |
|---|---|
| Net Operating Profit adjusted ≥ 0 and | Net Operating Profit adjusted ≥ 0 and |
| Net Profit ≥ 0 and | Net Profit ≥ 0 and |
| Common Equity Tier 1 Fully Loaded > 11.1% and | Common Equity Tier 1 Fully Loaded > 11.1% and |
| Liquidity Coverage Ratio > 101% (2019 RAF limit) and | Liquidity Coverage Ratio > 101% (2019 RAF limit) and |
| Net Stable Funding Ratio > 101% (2019 RAF limit) | Net Stable Funding Ratio >101% (2019 RAF limit) |
Compared to the 2018 system, the Capital indicator is changed in a more conservative sense, moving from the CET1 Ratio Transitional to the CET1 Fully Loaded Ratio, in line with the recommendations of the European Central Bank.
The matrix of access conditions and the related effects on the Fineco Bonus Pool follow the same logic as 2018, as shown below.
In the "matrix" logic, in the hypotheses described in the boxes A and B (Entry Conditions not met at Group Level) the bonus for the CEO and General Manager of FinecoBank is zeroed.
To activate the "multiplier" the CRO dashboard assessment is confirmed, pursuant to the defined methodology.
The CRO dashboard (defined in coherence with the FinecoBank and Group Risk Appetite Framework) includes KPIs taken from FinecoBank Risk Appetite Framework, measured with reference to the respective relevant thresholds (limit, trigger and target). Here below a sample of the content of the dashboard
| DIMENSION | 2019 | |||||
|---|---|---|---|---|---|---|
| INDICATORS Trigger Target |
||||||
| Capital | CET1 Ratio (%) | -- | ||||
| Pillar 1 KPIs | LCR(%) | |||||
| Liquidity | NSFR (%) | -- | ||||
| Risk & Return | ROAC Return on Allocated Capital (%) | -- | ||||
| $EL$ stock $(\%)$ | -- | |||||
| Managerial KPIs | Credit | EL new business (%) | ||||
| Coverage on Impaired (%) | $-$ | -- | ||||
| Specific Risk | Interest Rate Risk on Banking Book |
EV Sensitivity (%) | -- | |||
| KPIs | Operational | ELOR | -- |
The "multiplier" effect deriving from the evaluation of overall CRO dashboard outcome made by the FinecoBank CRO – and verified by the FinecoBank Remuneration Committee and by the FinecoBank Board – applies to the bonus pool in the cases described in the boxes D and B. The dashboard evaluation is carried out pursuant to a methodology defined at Group level by the Risk Management function and approved by the FinecoBank Board of Directors
The bonus pool corrections ranges deriving from the CRO Dashboard assessment are not modified compared to the 2018 Incentive System, as follows.
The fully positive "++" rating can only be granted in the case of positive EVA at the end of the financial year (or EVA> 0 if the budget is equal to 0). As provided in the 2018 System, a further range of discretion up to +20% is in the faculty of Remuneration Committee and Board of Directors, while no limits to downward discretionally the bonus pool with respect to theoretical value is foreseen.
In any case, as requested by regulations as per Bank of Italy provisions, the final evaluation of sustainable performance parameters and the alignment between risk and remuneration will be assessed by Remuneration Committee and defined under the governance and accountability of the Board of Directors.
The Board of Directors does not take into account, when deciding bonus, balance sheet extraordinary items which do not impact operational performance, regulatory capital and liquidity (e.g. goodwill impairment, extraordinary contributions to deposit guarantee schemes, etc.).
Moreover, following potential changes in current regulations and/or in relation to potential extraordinary and/or unpredictable contingencies which can impact the Group, the Company or the market in which it operates, the Board of Directors, having heard the opinion of Remuneration Committee, maintains the right to amend the system and relevant rules.
Further details in chapter 5.3.1.
the goals appraisal system is based on a 5 values scale with a descriptive outcome (from "Below Expectations" to "Greatly Exceeds Expectations").
Sample of 2019 Scorecard Sample of 2019 evaluation
| GOAL NAME PERIMETER REFERENCE TARGET FUNDAMENTA | LINK TO 5 LS. |
KPIBB/ CUSTOM |
RISK CORRELATION SUSTAINABILITY GOAL |
||||||
|---|---|---|---|---|---|---|---|---|---|
| GOAL 1 | FinecoBank | vs budget | Execution & Discipline |
KPI BB | ❸ | ||||
| GOAL 2 | FinecoBank | vs budget | Risk Management |
KPI BB | ❸ | ||||
| GOAL 3 | FinecoBank | vs budget | People Development |
KPI BB | ❸ | Below Exp. |
Almost Meets Exp. |
Meets Exp. |
Ex Ex |
| GOAL 4 | FinecoBank | vs qualitative assessment |
Customers First |
KPI BB | ❸ | ||||
| GOAL 5 | FinecoBank | vs previous years | Cooperation and Synergies |
Custom | |||||
| GOAL 6 | FinecoBank | vs target | Risk Management |
Custom |
For the individual bonus allocation the 2019 Incentive System provides a prior verification of the completion -by the beneficiaries- of the mandatory Compliance training.
46 See also chapter 5.3.1
47 Group Competency Model represents the framework in which the Executives are assessed within the Executive Development Plan process. The 5 Fundamental are: Customers First, Execution & Discipline, Cooperation and Synergies, Risk management, People Development.
48 Considering also the seriousness of possible internal / external inspections (ie Audit, Bank of Italy, Consob and / or similar authorities), and in general, according to the paragraph "Focus on violation for non-compliance, individual Malus and Claw- back "
| 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|---|---|
| Cash | 20% upfront |
12% deferred |
12% deferred |
|||
| Shares | 20% upfront |
12% deferred |
12% deferred |
12% deferred |
o For the other roles provided by law51 with not significant amount of total variable remuneration (≤ 430,000€) a 5 years payout scheme applies with an overall payout structure of 6 years, with 50% of bonus deferred
| 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|---|---|
| Cash | 25% upfront |
10% deferred |
10% deferred |
|||
| Shares | 25% upfront |
10% deferred |
10% deferred |
10% deferred |
o For other identified staff with significant amount of total variable remuneration a 3 years payout scheme applies with an overall payout structure of 4 years, with 60% of bonus deferred;
| 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|
| Cash | 20% upfront |
5% deferred |
5% deferred |
20% deferred |
| Shares | 20% upfront |
15% deferred |
15% deferred |
o At last, for other identified staff with non significant amount of total variable remuneration a 3 years payout scheme applies with an overall payout structure of 4 years, with 40% of bonus deferred.
| 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|
| Cash | 30% upfront |
20% deferred |
||
| Shares | 30% upfront |
10% deferred |
10% deferred |
Every tranche will be subject to the Zero Factor related to the year of competence and to the verification of the compliance of individual behaviours.
49 For instance the first reporting line of Management Body (CEO) and responsible of main business areas.
50 Threshold of € 430,000 defined at Group level according to the provisions of the law, equal to 25% of the total remuneration of the Italian High Earners according to the latest EBA report available (Benchmarking and High Eaners Report).
51 See note 48.
52 Equal to Euro 75,000 that will be paid in cash.
The 2019 Incentive System, described in the chapter 5.3, is supported by an annual performance measurement framework assuring coherence, consistency and clarity of performance objectives with business strategy, and encouraging and rewarding desired behaviours and risk orientation. Our performance management process ensures that to all Identified Staff are assigned at the beginning of the year their own individuals goals and includes a rigorous review of their goals achievements.
A specific process is performed annually at Group level with the involvement of key relevant functions (Human Capital, Finance, Risk Management, Compliance, Group Sustainability, Audit, Group Stakeholder Insight) to review the so-called KPI Bluebook.
The KPI Bluebook serves as the framework for the definition of performance goals coherent, high quality based, aligned to business strategy, compliant with regulatory requirements and consistent with our corporate values and Group Competency model. Therefore it supports the employees and their managers in the definition of individual Performance Screen.
KPI Bluebook includes a list of indicators certified at Group level, as well as specific guidelines related to:
The KPI Bluebook maps 11 categories of drivers that include a list of goals (KPI Dashboard):
The 11 categories represent financial and non-financial performance and are mapped into the different clusters of business of the Group (Asset Gathering included) to help identifying the most relevant standardized KPIs (all certified by relevant Group functions) for each role assigned, with specific focus on risk-adjusted, sustainability-driven metrics and economic measures. For each KPI included in the catalogue a link to one of the "5 fundamentals" of the Group Competency Model (as shown above) is pre-set, conferring a specific qualitative connotation to the goal itself.
2019 KPIs defined and approved by FinecoBank Board of Directors as the core drivers of performance for FinecoBank Chief Executive Officer and General Manager include goals related to Bank profitability, with particular focus on risk, consistency with Risk Appetite Framework and sustainability. In continuity with 2018, also for 2019, a specific KPI has been provided, with reference to "Tone from the top" related to integrity towards conduct principles and spread of compliance culture among the organization.
| # | GOAL NAME | PERIMETER | REFERENCE TARGET | LINK TO 5 FUNDAMENTALS |
RISK CORRELATION SUSTAINABILITY GOAL |
|---|---|---|---|---|---|
| $\mathbf{1}$ | ROAC / EVA | FinecoBank | vs. budget | Execution & Discipline |
Θ |
| $\overline{2}$ | New Business FI % | FinecoBank | vs. target | Risk Management | ❸ |
| З | OPEX | FinecoBank | vs. budget Operating costs as reported in reclassified P&L, i.e.: Staff expenses + Other Administrative Expenses (direct + indirect) - Expenses Recovery + Depreciations. |
Execution & Discipline |
|
| 4 | Net new clients | FinecoBank | vs. target | Customers First | ❸ |
| 5 | Net sales of Guided Products | FinecoBank | vs. budget | Execution & Discipline |
|
| 6 | New Strategic Plan preparation | FinecoBank | vs. qualitative assessment based on: • contribution to the preparation of the new MYP • development of Proof of Concepts on the effective implementation of new technologies (e.g.: Artificial Intelligence, big data, etc.) in own domain |
Execution & Discipline |
ణ |
| 7 | Gender balance and pay gap | FinecoBank | vs. qualitative assessment based on: • Group-wide % of women in EVP roles vs. 2019 target • Y/Y delta on % of women in VP, FVP, SVP roles • Y/Y delta on gender pay-gap |
People Development | |
| 8 | Tone from the top on conduct and compliance culture |
FinecoBank | vs. qualitative assessment based on: .Scope, kind and numbers of documented initiatives - pre-committed with EMC, aimed at promoting staff integrity / customer protection / trustworthiness . The overall status of findings or proceedings in place (internal or external) considering the trend, type, severity and the timely completion of the related remediation actions |
Risk Management |
For the other Identified Staff of FinecoBank KPIs that include profitability and risk management are reflected also in their Performance Screens, with differences given by the relevant activities. It is understood in any case the rule pursuant to which no economic goals must be provided for the Control Functions, HR and Manager in charge for preparing financial statements.
With the aim of rewarding, motivating and retaining selected Bank Employees, in line with the 2020 objectives of Fineco in terms of value creation, sustainability and risk, a long-term equity plan has been defined, also in order to align the long-term interests of the Bank's Management with the long-term value creation for shareholders.
The beneficiaries of the Plan are selected Employees with "key roles" within the organization (about 65 resources, including Managers with Strategic Responsibilities).
The Heads of the Company Control Functions (CRO, Head of Compliance) and the Head of Human Resources are excluded from the Beneficiaries of the Plan.
The structure of the Plan, described below in detail, provides for:
entry and malus conditions of profitability, capital and liquidity defined at FinecoBank and Group level;
specific individual compliance and claw-back conditions;
The performance targets, as defined above, will be assessed in relation to specific targets and will have a specific percentage weight on the total bonus and their valuation (with the exception of the Cost of Risk for which an "on-off" threshold is envisaged) will be based on progressive thresholds, which will correspond to increasing percentages of bonuses from 0 to 100% with a linear progression53, as shown below.
| KPI | PERIMETER | WEIGHT | TARGET | ASSESSMENT CRITERIA | ||
|---|---|---|---|---|---|---|
| Threshold | Payout | |||||
| $\geq$ 200 ME | 100% | |||||
| VALUE CREATION | EVA | FINECO | 50% | 2020 | $180 M - 200 M€$ | $0 - 100%$ |
| ≤ 180 M€ | 0% | |||||
| . | ||||||
| INDUSTRIAL | COST/ INCOME |
FINECO | 35% | 2020 | $\leq 39\%$ | 100% |
| SUSTAINABILITY | RATIO | 42% - 39% | $0 - 100%$ | |||
| $\geq 42%$ | 0% | |||||
| RISK | $CoR*$ | FINECO | 15% | 2020 | $\leq 40$ bps | 100% |
In order to comply with current regulations, are defined
In full compliance with the regulations in force, and for the purposes set out above, specific Group and Fineco indicators have been identified to measure profitability, capital strength and liquidity.
The indicators of capital and liquidity (Common Equity Tier 1 Ratio Fully Loaded54, Liquidity Coverage Ratio and Net Stable Funding Ratio) will be calculated annually, while a "cumulative" assessment of profitability indicators is envisaged.
In 2019 - in line with the provisions for the short-term Incentive System and in accordance with the provisions of the Plan Regulations - the Capital and Liquidity Conditions CET1 Ratio Fully Loaded, LCR and NSFR have been changed for the year of performance.
53 For example, with EVA at 12/31/2020 equal to 190 million, the payment of the corresponding bonus portion would be equal to 50% of what is expected in case of EVA equal to 200 million.
54 It's the Class 1 Capital of the Institution expressed in percentage of the overall amount of the risk exposure. It's the CET1 requirement recommended by ECB in its communication on variable remuneration.
| Performance | Deferral | ||||||
|---|---|---|---|---|---|---|---|
| Entry Conditions | Malus | ||||||
| Group | Fineco | Group | Fineco | ||||
| Σ 2018-2020 NOP Adj > 0 | Σ 2018-2020 NOP Adj > 0 | $Σ$ NOP Adj > 0 | $Σ$ NOP Adj >0 | ||||
| Σ 2018-2020 Net Profit > 0 | Σ 2018-2020 Net Profit > 0 | $\Sigma$ Net Profit >0 | $\Sigma$ Net Profit >0 | ||||
| CET 1 Fully loaded > $11.1\%$ * |
CET 1 Fully loaded > $11.1\%$ ** |
CET 1 Fully loaded > $11.1\%$ * |
CET 1 Fully loaded > $11.1\%$ ** |
||||
| LCR > RAF Limit $(101\%)^*$ | LCR > RAF Limit $(101\%)^{\star\star}$ | LCR > RAF Limit $(101\%)^*$ | $LCR > RAF Limit (101%)**$ | ||||
| NSFR > RAF Limit $(101\%)^*$ | NSFR > RAF Limit (101%)** | NSFR > RAF Limit $(101\%)^*$ | NSFR > RAF Limit $(101\%)^{\star\star}$ |
Each payment related to the Plan is subject to the preliminary compliance check of individual behaviors.
The bonus payment is subject to claw-back55 .
For the purposes of the appropriate Plan correction for the Bank's Risk, the results of the annual CRO Dashboard assessments for the purposes of short-term incentive systems will be taken into consideration for each year of the Plan's performance. The presence of several 'neutral' annual assessments56 or negative assessments will result in a proportional reduction of individual bonuses, as shown below
Maximum bonuses have been defined on the basis of the categories of beneficiaries of the Plan. The amounts were established in line with the applicable regulatory provisions and the FinecoBank Compensation Policy.
Individual bonuses - in particular - confirm compliance with the maximum limits for the variable remuneration envisaged for the Plan Beneficiaries, also taking into account the short-term variable remuneration attributable in each year of performance. Within the aforementioned limits, it is planned, in detail:
55 See par. 3.2, section II 56 See paragraphs 5.3 and 5.5
56 Politica Retributiva 2019· FinecoBank
For the other Beneficiaries the target bonus is defined individually, always in compliance with the maximum limits set by the regulations and FinecoBank Compensation Policy.
As mentioned, the bonuses will be paid entirely in Fineco free ordinary shares57, according to the payment schemes shown below.
For the Beneficiaries of the Plan included in Identified Staff holding periods on the shares are provided, equal to two years for the upfront shares, assigned after the end of the performance period, and one year for deferred shares.
For the other Beneficiaries the assignments of the shares and their availability are concomitant during the deferral period.
The evaluation of the results and the conditions for the individual assignment of the shares will be carried out by the Board of Directors, upon the proposal of the Remuneration Committee, according to the established governance58 .
The Board of Directors does not take into account, when deciding bonus, balance sheet extraordinary items which do not impact operational performance, regulatory capital and liquidity (e.g. goodwill impairment, extraordinary contributions to deposit guarantee schemes, etc.).
The maximum number (905,066) of shares to be allocated in the respective instalments – at the conditions stated above - has been defined in 2018, on the basis of the arithmetic mean of the official closing market price of Fineco ordinary shares during the month preceding the Board resolution that executed the Shareholders Meeting resolution related to the Plan.
The Plan provides for an impact on FinecoBank share capital of approximately 0.1%, assuming that all free shares for employees have been distributed. The current overall dilution for all other outstanding FinecoBank equity-based plans both for Employees and Financial Advisors equals to 0.8% ca.; the beneficiaries cannot activate programs or agreements that specifically protect the value of unavailable financial instruments assigned within the incentive plans. Any form of coverage will be considered a violation of compliance rules and imply the consequences set out in the regulations, rules and procedures.
57 The Bank reserves the possibility to assign different instruments from the FinecoBank ordinary shares, where requested by law.
58 It is provided the possibility for the Remuneration Committee and the Board of Directors to increase bonuses up to 20% (within the maximum bonuses provided by the Plan) or to reduce the bonuses without limits, considering indicators as the Total Shareholders Return (absolute and relative) or other indicators, as the market context and trends on remuneration, or events with reputational impacts. The correction "in positive" does not apply in case of non-achievement of Group entry conditions, as described in this paragraph.
Moreover, following potential changes in current regulations and/or in relation to potential extraordinary and/or unpredictable contingencies which can impact the Group, the Company or the market in which it operates, the Board of Directors, having heard the opinion of Remuneration Committee, maintains the right to amend the Plan and relevant rules.
Given the differences in the forms of remuneration and in the modalities of its generation (see paragraph 4.2, Section II), also for the PFA population in FinecoBank, mirroring what is designed for the Employees, is provided a specific Incentive System based on a bonus pool approach, which takes into account the national and international regulatory requirements and directly links bonuses with Company results at Group and local level, ensuring the link between profitability, risk and reward.
In particular, the 2019 System for PFA Identified Staff – as approved by the Board on January 10th 2019 - provides for:
In coherence with what previously described for the Employees, also for the PFA the process of bonus pool definition includes the following steps:
59 Unlike what happens in the Incentive System for Employees, the FinecoBank shares used for the purposes of payments to the PFA, are not generated by a free capital increase, but are purchased directly on the market, pursuant to section 2357 of Italian Civil Code.
Bonus pool process starts with the definition of the "funding rate" during budgeting phase. The funding rate for FinecoBank is a percentage of the Net Operating Profit (net of Provisions for Risk and Charges, corresponding to Profit Before Tax) considering: historical data analysis, expected profitability, business strategy and previous year pool. The bonus pool is submitted for approval to the Board of Directors of FinecoBank.
.
The Entry Conditions are the mechanism that determines the possible application of the Zero Factor on the basis of performance indicators in terms of capital and liquidity defined at both Group and local level (at local level is considered also the profitability). The entry conditions provided for 2019 – working also as malus conditions for the deferrals of previous years incentive systems - are reported in the following table
| Group Level | Local Level |
|---|---|
| Net Operating Profit adjusted ≥ 0 e | |
| Net Profit ≥ 0 e | |
| Common Equity Tier 1 Fully Loaded > 11.1% e | Common Equity Tier 1 Fully Loaded > 11.1% e |
| Liquidity Coverage Ratio > 101% (2019 RAF limit) e | Liquidity Coverage Ratio > 101% (2019 RAF limit) e |
| Net Stable Funding Ratio > 101% (2019 RAF limit) | Net Stable Funding Ratio >101% (2019 RAF limit) |
Compared to the 2018 system, the Capital indicator is changed in a more conservative sense, moving from the CET1 Ratio Transitional to the CET1 Fully Loaded Ratio, in line with the recommendations of the European Central Bank.
The Entry Conditions matrix and related effects on Fineco Bonus Pool follows the same logics provided in 2018, as shown below.
In continuity with the 2018 System, in case the pool is in the box "B" the starting percentage of bonus pool is higher than the one provided for the Employee's System60 .
To activate the "multiplier" the CRO dashboard assessment is confirmed, pursuant to the defined methodology.
The CRO dashboard (defined in coherence with the FinecoBank and Group Risk Appetite Framework) includes KPIs taken from FinecoBank Risk Appetite Framework (plus one indicator related to operational risk), measured with reference to the respective relevant thresholds (limit, trigger and target) 61 .
The "multiplier" effect deriving from the evaluation of overall CRO dashboard outcome made by the FinecoBank CRO – and verified by the FinecoBank Remuneration Committee and by the FinecoBank Board – applies to the bonus pool in the cases described in the boxes D and B. The dashboard evaluation is carried out pursuant to a methodology defined at Group level by the Risk Management function and approved by the FinecoBank Board of Directors, as for the Employees System.
The bonus pool corrections ranges deriving from the CRO Dashboard assessment are not modified compared to the 2018 Incentive System, as follows:
The fully positive "++" rating can only be granted in the case of positive EVA at the end of the financial year (or EVA> 0 if the budget is equal to 0). As provided in the 2018 System, a further range of discretion up to +20% is in the faculty of Remuneration Committee and Board of Directors, while no limits to downward discretionally the bonus pool with respect to theoretical value is foreseen.
In any case, as requested by regulations as per Bank of Italy provisions, the final evaluation of sustainable performance parameters and the alignment between risk and remuneration will be assessed by Remuneration Committee and defined under the governance and accountability of the Board of Directors.
The Board of Directors does not take into account, when deciding bonus, balance sheet extraordinary items which do not impact operational performance, regulatory capital and liquidity (e.g. goodwill impairment, extraordinary contributions to deposit guarantee schemes, etc.).
Moreover, following potential changes in current regulations and/or in relation to potential extraordinary and/or unpredictable contingencies which can impact the Group, the Company or the market in which it operates, the Board of Directors, having heard the opinion of Remuneration Committee, maintains the right to amend the system and relevant rules.
For the Financial Advisors belonging to the Identified Staff, the payment mechanism provides for a 3 year deferral. The payment of the potential bonus 2019 will therefore take place over a maximum period of 4 years. In particular:
60 The choice is due to the necessity of retention for Financial Advisors (tied to FinecoBank by an agency agreement) and consequently to safeguard a Company asset.
61 See paragraph 5.3.
62 Considering also the seriousness of possible internal / external inspections (i.e. Audit, Bank of Italy, Consob and / or similar local authorities).
The payment systems, in particular, are differentiated on the basis of the total amount of variable remuneration63 received in the performance year, according to the schemes described below:
o For roles with significant amount of total variable remuneration, a 3 years payout scheme applies with an overall payout structure of 4 years, with 60% of bonus deferred;
| 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|
| Cash | 20% upfront |
5% deferred |
5% deferred |
20% deferred |
| Shares | 20% unfront |
15% deferred |
15% deferred |
o For roles with non significant amount of total variable remuneration, a 3 years payout scheme applies with an overall payout structure of 4 years, with 40% of bonus deferred
| 2020 | 2021 | 2022 | 2023' | |
|---|---|---|---|---|
| Cash | 30% upfront |
20% deferred |
||
| Shares | 30% upfront |
10% deferred |
10% deferred |
The beneficiaries cannot activate programs or agreements that specifically protect the value of unavailable financial instruments assigned within the incentive plans. Any form of coverage will be considered a violation of compliance rules and imply the consequences set out in the regulations, rules and procedures.
Taking into account the specificities of the PFA business, and in continuity with the previous years Incentive Plans in terms of business objectives, for the purposes of the 2019 Incentive System for PFA65 the performance assessment of Financial Advisors included in the Identified Staff will be based on the following indicators:
For the purpose of evaluating individual performance, the Scorecard provides a specific indicator to reflect the quality of the work of the Financial Advisor.
Finally, the payment of the bonus is subject to the preliminary verification of compliance with anti-money laundering regulation.
63 The definition of the overall variable remuneration threshold (> € 430,000) follows the same logic described in the 2019 Incentive System for Employees Identified Staff.
64 Equal to Euro 75,000 that will be paid in cash.
65 Always taking into account the individual compliance condition, as described above. 66 Guided products refer to high added value products and developed services, considering the different customers risk profiles.
67 For the Financial Advisors with managerial positions with more than 5 PFA coordinated.
68 For PFAs and Financial Advisors with managerial position and less than 5 PFA coordinated.
With the aim of rewarding, motivating and retaining selected Financial Advisors and Network Managers69, in line with the commercial goals of the three-year period 2018 - 2020 and with the aim of creating value for Shareholders, a long-term plan has been defined. in cash and Fineco shares.
The Plan is dedicated to Financial Advisors who will be qualified as Identified Staff in the year 2020. At the moment, 15 beneficiaries are estimated70 .
The Plan - whose characteristics are described below in detail - provides:
Performance goals are defined on the basis of increasing targets as a percentage of the cumulative budget for the three-year period of the Plan, in terms of Total Net Sales (NS) and Net Sales of Guided Products (NSGP). Through the evaluation system, as described below, the Plan aims at rewarding the extra performance towards the defined goals.
Performance indicators work in a general "matrix" logic with different specificities, depending on the target population (PFA / Group Manager and Area Manager) as shown below.
For Group Manager and PFA population, increasing bonuses are expected up to a theoretical maximum when 250% of the cumulated budgets in terms of Total Net Sales and Net Sales of Guided Products are reached71 .
69 Group Managers and Area Managers (Financial Advisors with accessory assignment of other PFAs coordination)
70 Identified pursuant to the regulation in place at the time
71 Group Manager that at December 31st 2020 have reached the personal targets as described in the matrix, in order to access the bonus shall have also achieved the goal of 100% of Total Net Sales and Net Sales of Guide Products in the period of the coordinated PFAs.
For the purposes of determining the final maximum bonus a "multiplier" is also provided based on the ratio between Guided Products and Total Financial Asset, as shown below
| Final Bonus | |||||||
|---|---|---|---|---|---|---|---|
| GP/TFA | |||||||
| $\geq 65\%$ | |||||||
| <65% ≥60%i | 1,25x | ||||||
| <60% | 1x |
For the Area Managers the performance evaluation follows the same logics with targets "vs budget" measured in a different way, as shown below. Differently from Group Manager and PFAs, in facts, the further multiplier is not provided72
For the purposes of the Plan, specific entry conditions are defined at individual, Bank and Group level as detailed below.
In order to access the bonus, is provided at individual level the achievement of specific thresholds in terms of Net Sales of Asset under Management73, namely:
In addition to the above individual conditions, in order to access the bonus, it is provided at Bank level the achievement of a EVA threshold equal or higher than € 180 Mio.
In order to comply with regulatory provisions, are defined:
72 The multiplier is not provided for Area Manager in consideration of the scope of the role and considering challenging the achievement of the over-performance in terms of Total Net Sales and Net Sales of Guided Products.
73 Measured at 31/12/2020 as "cumulated" within the Plan performance years
For these purposes, specific Group and Fineco capital and liquidity indicators and Fineco profitability indicators have been defined. Capital and liquidity indicators (Common Equity Tier 1 Ratio Fully Loaded, Liquidity Coverage Ratio and Net Stable Funding Ratio) will be assessed yearly, while is provided a "cumulated" assessment of the profitability indicators (Net Operating Profit Adjusted and Net Profit). Below is shown the functioning mechanism of entry and malus conditions provided by the Plan:
In 2019 - in line with the provisions for the short-term Incentive System and in accordance with the Plan Regulations - the Capital and Liquidity conditions CET1 Fully Loaded Ratio, LCR and NSFR were changed for the year of performance.
The conditions must all be met for the purpose of awarding the maximum bonus (including deferrals). The verification - in every year of performance of the Plan and in each year of bonus assignment - of the persistence of the agency relationship remains valid.
Each payment related to the Plan is subject to prior verification of the compliance of the behavior at individual level. The bonus payment is subject to claw - back74 .
For the purposes of the appropriate Plan correction for the Bank's Risk, the results of the annual CRO Dashboard assessments for the purposes of short-term incentive systems75 will be taken into consideration for each year of the Plan's performance. The presence of several 'neutral' annual assessments or negative assessments will result in a proportional reduction of individual bonuses, as shown below:
| % BONUS |
100% | 75% | 50% | 25% | 0% |
|---|---|---|---|---|---|
| CRO DB ASSESSMENT |
1 'neutral' assessment and 2 positive assessments assessments (or 3 positive assessments) |
$\geq$ 'neutral' |
negative assessment |
negative assessments |
negative assessments |
74 See paragraph 3.2.
75 See paragraphs 5.3 and 5.5
A maximum bonus target of equal amount has been defined for all the participants of the plan, in line with the provisions of the applicable regulatory provisions and the FinecoBank Compensation Policy.
Individual bonuses - in particular - confirm compliance with the maximum limits for the variable remuneration envisaged for the Plan Beneficiaries, also taking into account the short-term variable remuneration attributable to each year of performance.
The bonuses will be paid 40% in cash and 60% in Fineco shares, according to the payment scheme shown below:
| 2018 - 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| PERFORMANCE | 20% | 20% | 20% | 20% | 20% |
| UPFRONT | DEFERRED | UPFRONT | DEFERRED | DEFERRED | |
| CASH | CASH | SHARES | SHARES | SHARES |
As per regulations, there are periods of unavailability on the shares assigned equal to two years for the shares allocated upfront and one year for deferred shares.
The evaluation of the results and the conditions for the individual awarding of bonuses will be carried out by the Board of Directors, upon the proposal of the Remuneration Committee, according to the established governance76 .
The Board of Directors does not take into account, when deciding bonus, balance sheet extraordinary items which do not impact operational performance, regulatory capital and liquidity (e.g. goodwill impairment, extraordinary contributions to deposit guarantee schemes, etc.).
The maximum number of shares to be assigned with the third, fourth and fifth tranches of the bonus shall be defined in 2021, on the basis of the arithmetic mean of the official closing market price of Fineco ordinary shares during the month after the Board resolution that verifies the performance achievements in 2020.
The Plan provides for an expected impact on FinecoBank share capital of approximately 0.08%, assuming that all free shares for Financial Advisors have been assigned. The current overall dilution for all other outstanding FinecoBank equity-based plans both for Employees and Financial Advisors equals 0.8% ca. However, the Plan does not have a proper dilution impact as the FinecoBank shares awarded are purchased on the market and are not generated through a free capital increase.
The beneficiaries cannot activate programs or agreements that specifically protect the value of unavailable financial instruments assigned within the incentive plans. Any form of coverage will be considered a violation of compliance rules and imply the consequences set out in the regulations, rules and procedures.
Moreover, following potential changes in current regulations and/or in relation to potential extraordinary and/or unpredictable contingencies which can impact the Group, the Company or the market in which it operates, the Board of Directors, having heard the opinion of Remuneration Committee, maintains the right to amend the system and relevant rules
76 It is possible for the Remuneration Committee and the Board of Directors to increase bonuses up to 20% (within the maximum bonus provided by the Plan) or to correct them in negative without limits, in the presence of extraordinary conditions and taking into account elements such as for example behaviors with significant reputational impact. The 'positive' correction does not apply if the Group entry conditions are not reached, as described in this paragraph.
Employees
| 2018 Variable | Deferred variable from previous exercises* |
Variable paid in 2018 | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Population | No. | Fix | Upfront Deferred |
Vested in 2018 | Unvested | from previous exercises * |
|||||||||||||
| € | Shares | € | Shares**** | € | Shares | € | Shares | € | Shares | ||||||||||
| Chief Executive Officer and General Manager (CEO) * | 1 | 850 | 170 | - | 255 | 425 | 8 | 5 1.737 | 452 2.674 | 226 | 2.394 | ||||||||
| Non-executives Directors** | 8 | 753 | - | - | - | - | - | - | - | - | - | - | |||||||
| Executives with strategic responsibilities*** | 5 | 1.622 | 363 | - | 544 | 906 | 149 3.006 | 791 4.646 | 396 | 4.167 | |||||||||
| Other Identified staff | 1 0 |
1.710 | 421 | - | 159 | 285 | 4 2 |
134 | 221 | 447 | 478 | 279 |
* 10 % of the amount has been paid by UniCredit S.p.A.
** Included member employee of Unicredit Group. The fix amount of member employee of Unicredit Group has been defined In compliance with the in force policy "Policy in materia di struttura, composizione e remunerazione degli Organi Sociali delle Società di Gruppo".
**** 2018-2020 LTI Plan is not included since it is long-term performance and it has not been evaluated
***** The shares amounts related to UniCredit Group Incentive System Plans are expressed with convertion rate and after Capital increase resolved on March, 13th 2017
| Euro/ 000 Population |
2018 Variable | Deferred variable from previous exercises** |
Variable paid in 2018 from |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Fix | Upfront | Deferred | Vested in 2018 | Unvested | previous exercises ** |
|||||||
| € | Shares | € | Shares*** | € | Shares | € | Shares | € | Shares | |||
| Identified Staff belonging to business functions * | 6 | 2.357 | 520 | - | 780 | 1.299 | 218 | 4.421 | 1.158 | 6.821 | 629 | 6.125 |
| Identified Staff belonging to support functions | 7 | 1.223 | 234 | - | 178 | 317 | 5 8 |
395 | 224 | 829 | 270 | 528 |
| Identified Staff belonging to control functions | 3 | 601 | 200 | - | - | - | - | 6 1 |
8 2 |
117 | 200 | 188 |
* 10 % of the amount of the CEO has been paid by UniCredit S.p.A.. Included also an Executive with strategic responsibilities whose the employment relationship termination occurred during the year
** The shares amounts related to UniCredit Group Incentive System Plans are expressed with convertion rate and after Capital increase resolved on March, 13th 2017
*** 2018-2020 LTI Plan is not included since it is long-term performance and it has not been evaluated
The vested component refers to cash and equity awards to which the right matured in 2018 as the performance conditions were achieved: -vested cash payments refer to 2017 Group Incentive System;
-vested equity payments refer to 2014, 2015, 2016 Group Incentive System and to "2014-2017 Multi-year Plan Top Management".
The unvested component refer to cash and equity awards for which the right did not matured in 2018 and for which any potential future gain has not been yet realized and remains subject to future performance:
-unvested cash payments refer to 2015, 2016 and 2017 Group Incentive System;
-unvested equity payments refer to 2014, 2015, 2016, 2017 Group Incentive System and "2014-2017 Multi-year Plan Top Management".
The value of the shares shown as 2018 variable and deferred variable from previous exercises is calculated considering:
-for 2014, 2015, 2016, 2017, 2018 Group Incentive System and for "2014-2017 Multi-year Plan Top Management", the arithmetic mean of the official closing prices of Fineco ordinary shares from January 4th to February 4th, 2019;
-for 2014 Group Incentive System based on UniCredit shares, the arithmetic mean of the official closing prices of UniCredit ordinary shares from January 22nd to February 22nd, 2019.
Variable paid in 2018 from previous exercises includes pay-outs based on demonstrated multi-year performance achievements related to Group Incentive Systems plans based on Fineco and UniCredit shares and to the "2014-2017 Multi-year Plan Top Management".
All stock options granted under existing Group LTI plans represent zero gain for the beneficiaries as long as the entry conditions will not allow the exercise.
The Chief Executive Officer and General Manager and 4 Executives with strategic responsibilities (included an Executive with strategic responsibilities whose the employment relationship termination occurred during the year) for 2018 have been rewarded with more than 1 mln Euros.
In the end, it is underlined that in 2018 any non standard remuneration has been paid for the Identified Staff.
Severance defined in 2018 for an Identified Staff amounted to € 1.623.194.
Euro/ 000
| 2018 Variable ** | Deferred variable from previous exercises ** |
Variable paid in 2018 from previous |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Population | No. | Fix* | Upfront | Deferred | Vested in 2018 | Unvested | exercises ** | |||||
| € | Shares € Shares |
€ | Shares* € Shares* | € | Shares**** | |||||||
| Personal Financial Advisors belonging to Identified Staff | 7 | 4.503 | 186 | 0 7 1 |
178 | 117 | 350 8 | 7 556 |
345 | 355 | ||
| * Recurring remuneration (benefits and other compensations in kind included) |
** Non-recurring remuneration
*** 2018-2020 LTI Plan is not included since it is long-term performance and it has not been evaluated
****Equity and Phantom share
The vested component refers to cash, equity and phantom shares awards to which the right matured in 2018 as the performance conditions were achieved. In particular:
vested cash payments refer to 2015 Group Incentive System PFA and 2017 Group Incentive System PFA for Financial Advisors and Managers of the Network Identified Staff;
vested equity and phantom share payments refer to 2015 Group Incentive System PFA, 2016 Group Incentive System PFA and "2015-2017 Plan PFA" for Financial Advisors and Managers of the Network Identified Staff.
The unvested component refer to cash, equity and to Phantom shares to which the right did not matured in 2018 and for which any potential future gain has not been yet realized and remains subject to future performance. In particular:
-the unvested cash payment refer to 2016 Group Incentive System PFA and to 2017 Group Incentive System PFA for Financial Advisors and Managers of the Network Identified Staff;
-the unvested phantom shares refer to 2015 Group Incentive System PFA for Financial Advisors and Managers of the Network Identified Staff; -the unvested equity refer to 2016 Group Incentive System PFA, 2017 Group Incentive System PFA and to "2015-2017 Plan PFA" for Financial Advisors and Managers of the Network Identified Staff.
The value of the shares shows as 2018 variable is calculated considering the arithmetic mean of the official closing prices of Fineco ordinary shares from February 6th to March 6th 2019 The value of the shares / Phantom shares shown as deferred variable from previous exercises is calculated considering the arithmetic mean of the official closing prices of Fineco ordinary shares from January 4th to February 4th, 2019.
Variable paid in 2018 from previous exercises includes pay-outs based on actual performance achievements related to 2015 Group Incentive System PFA, to 2016 Group Incentive System PFA, 2017 Group Incentive System PFA and to "2015-2017 Plan PFA" for Financial Advisors and Managers of the Network Identified Staff.
Total compensation policy for non-Executive Directors, Identified Staff and for the overall employee population demonstrates in particular how:
| COMPENSATION PAY-MIX | ||||||||
|---|---|---|---|---|---|---|---|---|
| FIX AND OTHER NON - PERFORMANCE RELATED PAY |
VARIABLE PERFORMANCE - RELATED PAY |
|||||||
| NON-EXECUTIVE DIRECTORS | ||||||||
| Chairman and Vice Chairman | 100% | 0% | ||||||
| Directors | 100% | 0% | ||||||
| Statutory Auditors | 100% | 0% | ||||||
| OVERALL EMPLOYEE POPULATION | ||||||||
| Business areas | 75% | 25% | ||||||
| Support function | 91% | 9% | ||||||
| Overall Company | 88% | 12% |
Our employees enjoy welfare, healthcare and life balance benefits that supplement social security plans and minimum contractual requirements. These benefits are intended to provide substantial guarantees for the well-being of staff and their family members during their active careers as well as in retirement.
In Italy, among the complementary pension plans, there are defined benefit plans and defined contribution plans. In most cases, benefits are paied out once retirement requirements are satisfied: in the first ones the benefit's calculation is known in advance, while in defined contribution plans the benefit depends on allocated asset management results.
Complementary pension plans are external pension funds, legally autonomous from the Group. These plans are closed and do not allow new subscriptions, the only exception is represented by the defined contribution plan section of the "Fondo Pensione per il Personale delle Aziende del Gruppo UniCredit".
Within this section subscribers can distribute contribution, depending on their own risk appetite, among four investment lines (Insurance, Short, Medium and Long Term) characterized by different risk / yield ratios. In addition, always in this section, the enrolled employees may open complementary pension plan positions in favour of their family members dependent for tax purposes.
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