Banks Remuneration Rules

Remuneration Policy 17. Banks shall have a written Remuneration Policy for Senior Management approved by General Assembly, and a Remuneration Policy for all other employees approved by the Board of Directors. The Remuneration Policy shall ensures the achievement of prudent management of the risks associated with remuneration. 18. The Remuneration Policy should be designed to attract and retain quality staff with sufficient knowledge, skills and expertise to effectively conduct the business of the bank. 19. The Remuneration Policy should, inter-alia, cover the following areas: a. The objectives of the Remuneration system (with focus on promoting effective risk management and achieving financial soundness and stability of the bank). b. Scope of policy should cover all levels and categories of employees whether regular or contractual as well as outsourcing arrangements with third-party service providers. c. Broad structure of the Remuneration system (including but not limited to linking remuneration with performance and alignment of remuneration with risk taking). d. Determinants of the mix of remuneration components (including but not limited to fixed and variable components; cash, equity and other non-cash benefits). e. Description and details of major perquisites to be made part of the remuneration. f. Authority matrix clarifying management’s approval limits for remunerations and any constraints that require approval from Nomination and Remuneration Committee. g. A clear description of the responsibilities of the control functions, as well as human resources, related to participating in designing appropriate remuneration policies, developing performance indicators related to risk and behavior, and identifying, monitoring and reporting misconduct. h. Criteria to be used for determining the value for allocation of the shares in relation to remuneration. 20. The Remuneration Policy should not be solely based on industry practices but should also take into account the business model, financial condition, operating performance and business prospects of the bank. 21. The review of Remuneration Policy to assess its adequacy and effectiveness should be made an integral part of the bank’s risk management framework. 3. Performance Measurement 22. Banks shall have a performance measurement system in place to evaluate and measure the performance of its employees at various levels in an objective manner. 23. Procedures and processes for performance appraisal and measurement should be clearly stated and documented. Such procedures and processes should provide for avoidance of undue influence and conflict of interest situations, and be transparent to the employees concerned. 24. Performance measurement procedures and processes should provide for measuring individual contribution, to the extent practicable, to the overall performance of the bank. The individual contributions measured should, however, be supplemented with managerial judgment in determining the performance based remuneration of an employee. Conduct goals and performance targets should work together as a part of employees’ remuneration to drive good behavior and address potential conflicts of interest. 25. Performance assessments and remuneration outcomes should consider all risks, including those associated with the bank main activities and those stemming from conduct that may not be consistent with laws and regulatory requirements, internal policies and procedures or the bank’s risk management framework. These factors should be given due weightage in performance measurement. 26. Gross revenue or profit earned should not be the sole factor when setting performance objectives and when measuring performance. Other factors including, at a minimum, risks associated with the underlying transactions, ethical behavior, quality of business transacted, customer satisfaction and risk adjusted return on capital should also be taken into account, wherever practicable, in performance management. 27. The performance measurement of senior management should be based on longer-term performance of the bank and accordingly the performance-based component of their remuneration should not be based solely on the current year’s performance. The performance assessments of senior management and other employees who have an oversight responsibility within the bank should also include considerations regarding their relevant oversight responsibility in relation to the risk of misconduct within their business line. 4. Determining Remuneration