40. Share-based payments

The Bank has adopted the “Remuneration policy for individuals with a material impact on the risk profile of BNP Paribas S.A.”.

The principles and assumptions contained in the Policy guarantee the existence of a rational, balanced and controllable remuneration policy, consistent with the accepted risk level, standards and values of BNP Paribas S.A. and relevant laws and regulations, in particular the Minister of Development and Finance Regulation dated 6 March 2017 on the risk management system and internal control system, remuneration policy and detailed method of estimating internal capital in banks and recommendations included in the CRD4 Directive.

Pursuant to the Remuneration policy for Individuals with a significant impact on the Bank’s risk profile as amended on 31 December 2019 and regulations adopted on its basis, i.e. the Rules of assigning and paying variable remuneration components to members of the Board of BNP Paribas Bank Polska S.A. and the Rules of assigning and paying variable remuneration components to individuals with a significant impact on the risk profile other than the members of the Board of BNP Paribas Bank Polska S.A., the form of a financial instrument in which a part of the variable remuneration is paid has been changed from phantom shares to ordinary shares (the change does not apply to persons who have terminated their cooperation with the Bank).

On 31 January 2020, the Extraordinary General Meeting of the Bank adopted a resolution on the introduction of the Incentive Scheme for persons significantly Impacting the Bank’s risk profile (MRT).

The 2019 variable remuneration convertible into a financial instrument was granted in actual shares of the Bank, excluding those employees who left the Bank (phantom shares granted).

As at 31 December 2019, there was a variable remuneration scheme in force, granted in the form of a financial instrument – phantom shares, which will be settled in subsequent periods.

The variable remuneration granted in form of phantom shares is paid as cash equivalent with a value corresponding to the number of shares granted. The payment shall be made after the expiry of the retention period.

Financial instruments (phantom shares) – programme amendments in 2020 and 2019.

In 2020, payments in the amount of PLN 5.101 thousand were made due to exercising rights to deferred phantom shares (under the programme for 2015, 2016 and 2017). In 2020, in connection with the award of variable remuneration for 2019, 13.586 phantom shares were awarded.

The table below presents the terms of the Stock Purchase Plan in 2020.

There is currently a new variable remuneration scheme in place for the Bank’s employees with a significant impact on risk profile. The variable remuneration is divided into a part granted in the form of a financial instrument (Bank shares) and the remaining part granted in cash.

The right to variable remuneration expressed in the form of the Bank’s shares is granted by issuing subscription warrants in a number corresponding to the number of shares granted, one warrant entitles to acquire one share. The payment of the variable remuneration expressed in the form of the Bank’s shares, i.e. taking up the Bank’s shares through the exercise of rights from subscription warrants, takes place after the expiry of the retention period.

The Bank will grant the participants of the Incentive Scheme subscription warrants, which will result in the right to acquire a new Series M shares issued by the Bank under the conditional share capital increase. The number of Series M shares shall not exceed 576.000. The rights to acquire Series M shares shall be granted taking into account the principles of dividing the variable remuneration into the non-deferred and deferred portions, as defined in the Remuneration Policy and the regulations adopted on its basis. Series M shares will constitute a component of variable remuneration for persons having a significant impact on the Bank’s risk profile within the meaning of the Regulation of the Minister of Finance dated 6 March 2017 on the risk management system and internal control system, remuneration policy and detailed method of estimating internal capital in banks (Journal of Laws 2017, item 637, as amended).

In order to implement the Incentive Programme, the Extraordinary General Meeting of the Bank also adopted resolutions on the issue of subscription warrants and conditional increase of the share capital through the issue of Series M shares, depriving the existing shareholders of the subscription right to warrants and to Series M shares, amending the Bank’s Articles of Association and dematerialising and applying for the admission of Series M shares to trading on a regulated market.

Warrants and shares will be issued to eligible persons in 2021-2026, on dates specified in the aforementioned resolutions. The first subscription warrants of Series A1 and A2 shall be issued by 31 March 2021, and the rights resulting from Series A1 warrants may be exercised from 1 April 2021 to 30 September 2021.

On 24 April 2020, the Bank obtained a decision of the Polish Financial Supervision Authority on the amendments to the Articles of Association resulting from this Resolution, and on 14 May 2020 the conditional share capital increase was registered by the Court.

The amount and the division into the non-deferred and deferred portions of variable remuneration for employees identified as MRT is determined in accordance with the Bank’s Remuneration Policy and regulations adopted on its basis. The regulations contain information on the annual bonus levels assigned to particular appraisals:

1. the part constituting at least 50% is assigned in the form of the Bank’s shares (which will be acquired by exercising rights from subscription warrants);
2. the part of variable remuneration not less than 40% of that remuneration is deferred. The deferral period is at least 3 years. In the case of assignment of variable remuneration in an amount higher than the amount considered as particularly high, the deferral period is a maximum of 5 years. The deferred portion of the variable remuneration shall be divided into equal portions according to the number of years of the deferral period.

In order to ensure uniform and lawful conditions for the acquisition of the right to remuneration and its payment, remuneration shall be paid to persons having a material impact on the risk profile of the Bank taking into account the principles of suitability, proportionality and non-discrimination.

The Bank’s rules include the possibility to withhold or limit the payment of variable remuneration where the Bank does not meet the combined buffer requirement:

1. The Bank shall be prohibited from paying assigned variable remuneration in excess of the maximum amount to be paid (the so-called MDA) in a situation where the Bank does not meet the combined buffer requirement within the meaning and under the rules set out in Articles 55 and 56 of the Act on macro-prudential supervision.
2. In the event when the Bank does not meet the combined buffer requirement, then before the MDA is calculated, the Bank:

• does not undertake commitments to pay variable remuneration or discretionary pension benefits;
• does not make variable remuneration payments if the obligation to pay them arose during the period in which the Bank did not meet the combined buffer requirement.

If the legal relationship between the Bank and a given person having a material impact on the Bank’s risk profile ceases to exist or if the position is excluded from the list, the remuneration is paid provided that the requirements specified in the Remuneration Policy for persons having a material impact on the risk profile of BNP Paribas Bank Polska S.A. are met.

A person is entitled to variable remuneration, provided that he/she has not been charged and is not subject to criminal or disciplinary sanctions.

The number of warrants granted for 2019 under the non-deferred portion of variable remuneration to be issued in 2021 is maximum 94.108 pieces.

In the period up to 31 December 2020, in connection with the variable remuneration granted for 2019 and estimated for 2020, the Bank recognised the amount of PLN 7.528 thousand in costs and equity, with the bonus for 2020 (the so-called grant date) to be granted in 2021.

Financial instruments (shares – deferred portion) as at 31 December 2020 determined in relation to the deferred part of the variable remuneration for 2019.

The table below presents the terms and conditions of the Share/Warrants Purchase Plan for 2020