Additional disclosures according to Article 104 of the ZBan-3
Pursuant to the provisions of Article 104 of the ZBan-3 (Paragraph 3), the Bank shall explain on its public website how it meets the requirements set out in the regulations stated in the second paragraph of Article 9 of the ZBan-3 regarding:
1. the bank’s internal governance arrangements and organisational structure;
2. the policy for selecting members of the governing body set out in Article 35 of the ZBan-3; and
3. the Remuneration Policy from Articles 189 to 191 of the ZBan-3.
1.The bank’s internal governance arrangements and organisational structure
The NLB must follow the provisions of the Banking Act and the Regulation on Internal Management Arrangements, Management Body and Internal Capital Adequacy Assessment Process for Banks and Savings Banks and the EBA Guidelines on internal governance. Due to the above, the NLB has developed a steady and reliable corporate governance system encompassing the following:
- a well-defined organisation with clear-cut, transparent and consistent internal relations in the area of responsibility;
- efficient procedures to determine, measure or assess, control and monitor risks, including risk appetite, risk management strategy, ICAAP, ILAAP, and risk resolving and reporting plan, to which the Group is exposed or could be exposed in its operations;
- inclusion of the main guidelines in the area of strategic risks in the annual review of the business plan, budget preparation procedure and adoption of other important decisions;
- suitable internal control mechanisms that also include appropriate administrative and accounting procedures;
- appropriate remuneration practices and policies that are in line with prudent and effective risk management, and thus also promote risk management.
The appropriateness of the internal control mechanisms is defined based on the independence, quality and applicability of:
- the rules and controls of performance of organisational, business and work processes of the Bank (internal controls), and
- the internal control functions and departments (internal control functions).
The internal control system is detailed in the Corporate Governance Statement of NLB d.d. which is published on the Bank’s website (www.nlb.si/corporate -governance) and in the Business Report of the NLB Group Annual Report and on the website of the Ljubljana Stock Exchange (seonet.ljse.si).
ORGANISATIONAL STRUCTURE OF NLB D.D.
2. Method of meeting the requirements regarding the policy of selecting the members of the management body from Article 35 of the ZBan-3
a) Policy on the selection of suitable candidates for members of the Management Board of NLB d.d.
The Amendments to the Policy on the selection of suitable candidates for members of the Management Board of NLB d.d. were adopted at the meeting of the Supervisory Board of NLB d.d. held on 08/03/2019. The existing criteria (adequately wide range of knowledge, skills and experience) based on which the Management Board of NLB d.d. must be composed were supplemented with the following criteria: reputation, management of any conflicts of interest, independence, available time and collective suitability of the Management Board of NLB d.d. as a whole.
When selecting members of the Management Board of NLB d.d., it is necessary to ensure collective suitability. The criterion of representation of both genders was added to the existing criteria. It is essential in the process of searching and selecting a Fit&Proper candidate to ensure a wide range of potential candidates with the aim of ensuring collective suitability and efficiency of the Management Board of NLB d.d. as a whole; the procedure of potential selection of external headhunting agencies is managed in accordance with the internal procurement rules.
The said policy is explained in further detail in the disclosures in accordance with Pillar 3 of the Basel standards for the NLB Group (in line with Article 435(2)(c) of the CRR), which is a separate document published annually by the Bank in addition to the NLB Group Annual Report on the Bank’s website (https://www.nlb.si/financial-reports).
b) Policy on the selection of suitable candidates for members of the Supervisory Board of NLB d.d.
The Amendments to the Policy on the selection of suitable candidates for members of the Supervisory Board of NLB d.d. were adopted at the General Meeting of NLB d.d. held on 10/06/2019. The existing criteria (adequately wide range of knowledge, skills and experience) based on which the Supervisory Board of NLB d.d. must be composed were supplemented with the following criteria: reputation, management of any conflicts of interest, independence, available time and collective suitability of the Supervisory Board of NLB d.d. as a whole.
When selecting members of the Supervisory Board of NLB d.d. it is necessary to ensure collective suitability. The criterion of representation of both genders was added to the existing criteria. It is essential in the process of searching and selecting a Fit&proper candidate to ensure a wide range of potential candidates with the aim of ensuring collective suitability and efficiency of the Supervisory Board of NLB d.d. as a whole; the procedure of potential selection of external headhunting agencies is managed in accordance with the internal procurement rules.
The said policy is explained in further detail in the disclosures in accordance with Pillar 3 of the Basel standards for the NLB Group (in line with Article 435(2)(c) of the CRR), which is a separate document published annually by the Bank in addition to the NLB Group Annual Report on the Bank’s website (https://www.nlb.si/financial-reports).
c) Policy on the provision of diversity of the management body and senior management
The Policy on the provision of diversity of the management body and senior management was adopted at the General Meeting of NLB d.d. held on 10/06/2019. The amendments to this policy expanded the group of persons bound by it, set the starting points and the goals of the policy and their pursuit.
The Policy on the provision of diversity of the management body and senior management sets the framework in diversity and gender representation in the management and supervision bodies (Supervisory Board and Management Board) and senior management. It also defines the process of candidate selection and appointment (defined in more detail in the Policy on the selection of suitable candidates for members of the Supervisory Board and the Policy on the selection of suitable candidates for members of the Management Board), which enables the management body to be composed in such a way that, as a whole, it has the appropriate knowledge, skills and experience required for an in-depth understanding of the Bank's strategy and challenges, and the risks to which it is exposed. With this Policy, NLB d.d. also sets the framework for diversity regarding education, range of knowledge, skills and experience, age, gender and international experience.
The Nomination Committee of the Supervisory Board shall review the Diversity Policy and its implementation once annually, set the goals for the next year and prepare possible proposals for improvement, which shall be approved by the Supervisory Board. The Management Board shall do the same in order to ensure diversity of the senior management.
The specific goals of the diversity policy and the level of their achievement are disclosed in further detail in the Statement on Corporate Governance of NLB d.d. (published on this website), the section on Human resource management (in the NLB Group Annual Report) and in the Disclosures in accordance with Pillar 3 of the Basel standards, which is a separate document published annually by the Bank in addition to the NLB Group Annual Report https://www.nlb.si/financna-porocila).
Policy on the provision of diversity of the management body and senior management in NLB d.d.
3. Method of meeting the requirements of the remuneration policy in accordance with Article 104, third paragraph of the ZBan-3
a) Remuneration Policy for the Members of the Supervisory Board of NLB d.d. and the Members of the Management Board of NLB d.d.
In accordance with ZGD-1 regulations, the bank is required to submit the revised RP for voting at the upcoming General Assembly of NLB d.d., which will be held 17.6.2024, due to the third version of the Remuneration Policy of members of the Supervisory Board of NLB d.d. and members of the Management Board of NLB d.d. (hereinafter: RP) were submitted to the General Assembly of NLB d.d. on its session in December 2023, where was voted against.
Changes of RP were prepared based on the comments of the stakeholders (ISS, Glass Lewis) and additional proposals of the members of the management body. Based on these guidelines the significant changes of the fourth version of the Remuneration Policy are as follows:
- clearer wording was introduced in the definitions and elsewhere in the Remuneration Policy;
- the definitions are used more consistently throughout the Remuneration Policy;
- the maximum total rental cost for company car provided to the Management Board member was increased to EUR 2,100.00 per month;
- in relation to guaranteed variable remuneration a stipulation was added that there will be no obligation on the Bank to pay any guaranteed variable remuneration in circumstances when the Supervisory Board has decided to not pay any Variable Remuneration to the Management Board members due to Bank capital and liquidity considerations;
- the stipulations on retention bonus have been removed;
- the properties of the Instrument that is usually used for Variable Remuneration were supplemented with yields equal to the dividends of the NLB d.d.’s share; the yields are however limited to the limits, stipulated by applicable regulations; further, any yields payable under an individual Instrument prior to the handing over of such individual Instrument to the member of the Management Board shall be treated as received and owned by the Bank and shall not be paid to the member of the Management Board (or to any later holder of the Instrument);
- more detailed indicators for measuring performance in relation to LTI were introduced;
- the possibility of awarding compensation for early termination of the term of office in case of resignation of a Management Board member has been removed.
The Supervisory Board of NLB d.d. adopted the Fourth Version of the Remuneration Policy on 22/04/2024. The General Meeting of Shareholders of NLB d.d. on 17/06/2024 voted for the Remuneration Policy for the Members of the Supervisory Board of NLB d.d. and the Members of the Management Board of NLB d.d., whereby the vote on this resolution is of a consultative nature.
Report on the remunerations for the business year 2023 (adopted on the General Meeting on 17 June 2024)
Additional information to the Report on remuneration in the business year 2023 on the basis of SSH's Baselines (adopted on the General Meeting on 17 June 2024)
Independent Auditor´s Limited Assurance Report (adopted on the General Meeting on 17 June 2024)
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b) Employee Remuneration Policy of NLB d.d. and the NLB Group
The Employee Remuneration Policy of NLB d.d. and the NLB Group was adopted at the meeting of the Supervisory Board of the Bank on 26/11/2021. It has been aligned with the amended provisions of the ZGD-1, ZBan-3 and the Guidelines on sound remuneration policies.
In accordance with the provisions of the third paragraph of Article 104 of the ZBan-3, the Employee Remuneration Policy of NLB d.d. and the NLB Group is disclosed in more detail in the section on Human Resources Management (in the NLB Group Annual Report) as well as in the Disclosures under the third pillar of the Basel standards for the NLB Group (in accordance with Article 435(3)(c) of the CRR) which is a special document that the Bank publishes annually in addition to the Annual Report of the NLB Group (https://www.nlb.si/financial-reports).
In accordance with the Article 104, Para.4 of the Banking act (ZBan-3) the bank published the description of the legal and organizational structure of the banking group, the regulations regarding the relationship of close connection and the management of the NLB Group on the NLB Group's website.