Islandsbanki — AGM Information 2017

Mar 23, 2017

COMPENSATION POLICY

Annual General Meeting
23 March 2017

Íslandsbanki

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Íslandsbanki

Proposal from the Board of Directors to the 2017 Annual General Meeting of Íslandsbanki hf. to approve the following compensation policy for Íslandsbanki hf.:

Compensation Policy

Article 1. Objectives

This compensation policy is set forth in accordance with the provisions of article 79(a) of Act. 2/1995 on Limited Liability Companies. The policy is founded on the principles of good corporate governance and is meant to support the bank's policy of providing exceptional services while laying the foundation for a good return on equity taking into consideration the long-term interests of the company, its shareholders, customers and employees.

In accordance with these objectives the bank's policy is to offer competitive, but not leading, compensation in line with its competitive environment taking into account the size of the company, the responsibilities in question and success. This way Íslandsbanki intends to become a sought after place of work for outstanding employees.

The compensation policy covers all main aspects of salary and benefits for the Board of Directors, Chief Executive Officer (CEO), Managing Directors and other senior management of the bank.

A Corporate Governance, Compensation and Human Resources Committee operates within the bank comprised of at least three Board members.

Article 2. Compensation of Board members

Board members shall receive a monthly payment in accordance with the decision of the annual general meeting of the bank, as stipulated in article 79 a of Act No. 2/1995 on Public Limited Companies. Alternate Board members shall receive remuneration in accordance with the decision of the annual general meeting of the bank.

The Board of Directors shall submit a proposal to the annual general meeting on remuneration for the upcoming operating year for Board membership, Board subcommittee membership as well as remuneration for alternate members of the Board taking into account the time Board members spend on their duties and the responsibility involved.

The bank bears the cost of travel incurred by Board members domiciled outside Reykjavík as well as additional compensation for the added time spent by those members of the Board in the carrying out of their duties. Account shall be given of such payments at the Annual General Meeting in relation to the compensation of Board members.

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Islandsbanki

No remuneration, other than what is decided by the annual general meeting of the bank, shall be paid to members of the Board of Directors.

No agreements for settlement upon termination can be made with members of the Board of Directors.

Article 3. Compensation of the CEO

The CEOs terms of employment shall be decided by the Board and laid out in a written employment agreement. The CEOs terms of employment shall be competitive, but not leading, taking into account i.a. CEO's qualifications, responsibilities and the scope of his duties.

The employment agreement shall include provisions on other forms of remuneration customary in comparable jobs. The agreement shall contain provisions on pension contributions, vacation, fringe benefits and terms of notice.

The terms of the CEO's employment agreement shall be reviewed annually. In the review notice shall be taken of the CEO's performance, development of market salaries and the bank's performance.

The employment agreement is made under the conditions that no payments shall be made to the CEO upon termination of his employment other than contained in the employment agreement.

Should the Official Remuneration Council make a decision on the compensation of the CEO, the Board of Directors shall ensure that the compensation of the CEO is in accordance with the decision of the Official Remuneration Council.

Article 4. Compensation of Senior Management

The CEO hires managing directors and other employees directly under the CEO. Their compensation shall be determined in accordance with the principles laid out Articles 1 and 3 above.

The Board of Directors hires the Chief Audit Executive and determines his/hers remuneration, taking into account the principles laid out in Articles 1 and 3 above.

Article 5. Variable compensation

The Board of Directors shall not make or authorize agreements for variable compensation without the shareholders consent and on terms agreed by shareholders at a shareholders meeting.

Article 6. Disclosure of information

At the Annual General Meeting, the Board of Directors shall present information on the compensation of the CEO, managing directors and Board members. Information shall be presented on the total amount of salaries and salary related expenses in the past year and the year past that. Furthermore the Board of Directors shall give the Annual General Meeting a report on the performance of the compensation policy in the preceding year.

The bank's compensation policy shall be published on the bank's website.

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Islandsbanki

Article 7. Other employees

When deciding the compensation of other employees, the relevant Managing Directors and other managers within the bank shall adhere to this policy as applicable.

Article 8. Approval of the Compensation Policy and other matters

The bank's compensation policy shall be presented to the shareholders in each the Annual General Meeting for their approval or rejection.

The Compensation Policy can be reviewed between Annual General Meetings and proposed changes presented to a shareholders meeting for approval.

This policy shall serve as guidelines for the bank and its Board of Directors. The Board of Directors shall record in their minutes any major deviations from the compensation policy. Such deviations shall be well founded and documented. The Board of Directors shall present deviations from the policy and reasons for them at the next Annual General Meeting.

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