CREDIT INSTITUTION REMUNERATION POLICIES

In accordance with the transposition of Directive 2010/76/EU of the European Parliament and of the Council of  24 November 2010, credit institutions have to apply certain requirements for those categories of staff whose professional activities have a material impact on their risk profile at group, parent and subsidiary levels.
Most notable among other requirements are the following:
a) a list indicating the categories of the aforementioned staff must be submitted to the Banco de España ;
b) the remuneration policy is consistent with sound and effective risk management, does not encourage risk-taking that exceeds the level of tolerated risk of the credit institution and incorporates measures to avoid conflicts of interest;
c) the management body adopts and periodically reviews the general principles of the remuneration policy at least annually, and the implementation of the remuneration policy is subject to central and independent internal review for compliance with the remuneration policies and procedures in place;
d) staff engaged in control functions are independent from the business units they oversee, and are remunerated in accordance with the achievement of the objectives linked to their functions; and
e) the remuneration of the senior officers in the risk management and compliance functions is directly overseen by a remuneration committee or, if such a committee has not been established, by the relevant management body.
The new legislation regulates the design of remuneration schemes, in which the fixed and variable components should be appropriately and efficiently balanced. The variable remuneration components should be sufficiently flexible such that their adjustment includes the possibility to pay no variable remuneration component.
For these purposes, the Banco de España may establish specific criteria for determining the appropriate proportion between fixed and variable components. The variable remuneration components should create incentives aligned with the long-term interests of the institution and meet certain requirements set out in Royal Decree 771/2011.
The remuneration schemes of credit institutions which receive government financial support
for restructuring purposes have to meet, in addition to the foregoing requirements, the following ones:
a) where variable remuneration is incompatible with a sound capital base and with an appropriate waiver of government support, it shall be strictly limited to a percentage of net income and
b) the directors and managers who effectively direct the activity of the institution may not receive variable remuneration unless it is duly justified in the opinion of the Banco de España, which may, moreover, set limits on their total remuneration.

Most of the remuneration policy is extended to investment firms, such that the references
to the Banco de España and to credit institutions shall be deemed to be to the CNMV and
to investment firms, respectively.