Bankinter Director Remuneration Policy

Transcription

1 Bankinter Director Remuneration Policy 1

2 Table of Contents 1. General Principles of Bankinter Remuneration Policy 2. Bankinter Director Remuneration Policy 3. Remuneration Scheme for Bankinter Directors for Performing their Oversight and Collective Decision-Making Duties 4. Remuneration Scheme for the Non-Executive Chairman of the Board of Directors of Bankinter 5. Remuneration Scheme for Executive Directors for Performing their Executive Duties 6. Other Remuneration 7. Pension Commitments 8. Contract Conditions for the Non-Executive Chairman and the Executive Directors 9. Effective Period for the Policy 2

3 1. General Principles of Bankinter Remuneration Policy The primary purpose of the Remuneration Policy of the Bankinter Group is to establish a remuneration system compatible with Bankinter s business strategy, objectives, values and long-term interests, both in absolute terms and when compared to the industry. Specifically, this Policy is intended to define and control, clearly and concisely, the Bank s remuneration practices to avoid having them undermine the integrity of the Institution through the promotion of conduct of excessive risk assumption. The general principles governing the Bankinter Remuneration Policy are as follows: - Prudent and effective risk management: The Policy shall be consistent with sound and effective risk management, promoting this type of management and not offering incentives to assume risks that exceed the risk level tolerated by the Institution. - Alignment with long-term interests: The Policy shall be in line with the business strategy, objectives, values and long-term interests of the Institution and shall include measures to avoid conflicts of interest. - Suitable ratio of fixed and variable components: To avoid the excessive assumption of risk, variable remuneration shall not as a general rule be a significant portion of fixed remuneration. - Multiplicity of elements: The remuneration package shall be made up of a set of tools that allow for an adjustment of remuneration to the needs of both the Institution and its professionals as regards content (cash and noncash remuneration), time horizon (short-term, medium-term and long-term), security (fixed and variable) and target. - Internal and external equity: The Policy shall seek to reward the level of responsibility and the professional track record of the Bank directors, paying attention to internal equity and external competitiveness. - Oversight and effectiveness: The Institution's management decisionmaking body, in the performance of its supervisory duties, shall adopt and periodically review the general principles of the remuneration policy and shall be responsible for overseeing its implementation, ensuring that it is effectively and correctly applied. - Flexibility and transparency: The rules for managing director remuneration shall include mechanisms that allow for the handling of exceptional situations in accordance with the needs that might arise at any time. The rules for remuneration management shall be explicit and known 3

4 to the Institution s directors, with transparency always taking precedence in remuneration matters. - Simplicity and individualisation: The rules for remuneration management shall be written clearly and concisely, with maximum simplification of the description of the rules, the computation methods and the conditions applicable to their implementation. 2. Bankinter Director Remuneration Policy The Bankinter Remuneration Policy for members of the Board of Directors of Bankinter is based on a remuneration scheme that differentiates between (i) remuneration of directors for performing oversight and collective decisionmaking duties, i.e. duties performed by directors in their capacity as such, (ii) remuneration of the Chairman for performing institutional duties and nonexecutive representation duties other than those performed simply as a director and (iii) remuneration of executive directors for performing executive duties. i) Remuneration of Directors for Performance of their Oversight and Collective Decision-Making Duties The remuneration accrued by members of the Board of Directors for their oversight and collective decision-making duties is a fixed annual amount, not including any variable components, as the receipt thereof is not subject to achieving targets or linked to profits, thus complying with recommendations in the area of corporate governance. The total remuneration received individually may be paid using one of the following remuneration elements, or a combination of three of them, all of which are included in the Institution s By-Laws: i) fixed annual amount for membership on the Board of Directors and for performing duties as chairmen of its committees, ii) fees for attending the Board and committee meetings, and iii) delivery of shares, options on shares or remuneration indexed to the share price. ii) Remuneration of the Chairman of the Board of Directors 4

5 The Chairman of the Board receives fixed remuneration for performing non-executive institutional duties (detailed in section 4 of this Policy) in addition to those he performs as Chairman of the collective decision-making body, which duties are remunerated as indicated in the preceding point. The Chairman of the Board of Directors does not receive any variable remuneration, for the same reasons stated in the preceding point with regard to non-executive directors. iii) Remuneration of Executive Directors for Performing their Executive Duties The Executive Directors (currently the Executive Vice-Chairman and the Chief Executive Officer), in addition to the remuneration indicated in item i), receive annual remuneration for exercising their executive powers under the commercial administration agreements binding them to the Company, one part of which is fixed and one part variable, based on meeting previouslyestablished targets aligned with prudent risk management and conforming to the long-term interests of the Institution. In addition, the executive directors have the right to participate in any long-term variable remuneration schemes that the Institution may decide to implement from time to time. The Bankinter remuneration policy establishes a clear distinction between the criteria for establishing: Fixed remuneration, which primarily reflects professional experience and responsibility within the organisation, and Variable remuneration, which reflects sustainable performance adapted to risk. Set forth below are the various elements making up the remuneration scheme for Bankinter directors, applicable both to the current directors and to any others that may be appointed as such while this Policy is in effect. 3. Remuneration Scheme for Bankinter Directors for Performing their Oversight and Collective Decision-Making Duties 5

6 Under article 37 of the By-Laws of Bankinter, it is the purview of the shareholders at the General Shareholders Meeting to set the annual amount that the Bank may pay to all its directors as such, i.e. simply because they have been appointed members of the Board of Directors, and the Board of Directors shall determine the distribution of this amount, paying attention to the duties and responsibilities assigned to each director, the positions held by each of them in the collective decision-making body itself, the director s membership on various committees and attendance at the meetings thereof, with a higher weight being given to the function of Chairman of a Committee, and other objective circumstances considered relevant. In accordance with section 217 and section 529 septdecies of the Companies Act (Ley de Sociedades de Capital), the shareholders acting at the General Shareholders Meeting of 18 March 2015 decided to set the maximum amount of annual remuneration for directors in their capacity as such at 1,600,000 euros, an amount still in effect on the date this Policy was approved, which shall remain in effect for so long as the shareholders at a General Shareholders Meeting do not resolve to modify it, although the Board may reduce the amount in years it considers it justified. The members of the Board of Directors of Bankinter receive a fixed annual amount, which may be paid using one of the following items of remuneration, or a combination of three of them, all included in the Institution s By-Laws: i) a fixed annual amount for membership on the Board of Directors and for performing duties as chairmen of its committees, ii) fees for attending the Board and committee meetings, and iii) delivery of shares, options on shares or remuneration indexed to the share price. A previous favourable resolution adopted by the shareholders at the General Shareholders Meeting shall be required if remuneration methods are used consisting of the delivery of shares or the granting of options, as well as in other cases in which the law requires such resolution. The shareholders resolution shall indicate, as applicable, the number of shares to be delivered, the exercise price of options and other information set forth in the law, and it may be retroactive to the beginning of the financial year to which it refers. The Annual Director Remuneration Reports submitted to a consultative vote of the shareholders at the General Shareholders Meeting show the amounts received by the directors for these items during the previous financial year and a breakdown of the amounts set for the current financial year. This 6

7 Report also shows the adjustments of the amounts assigned to the directors for these items. If a director dies, it is provided that all the director s entitlements to amounts yet to be received but already accrued shall be transferred to his heirs or beneficiaries and the actions needed to carry out such transfer shall be performed. If a director suffers a disability rendering him unable to perform his duties, the same procedure shall be followed. If a director steps down for any reason other than those indicated in the preceding paragraph, it is provided that the director stepping down shall have the right to the proportional part of the fixed annual amount that corresponds to the days he was in office. Addition of New Members to the Board of Directors This remuneration scheme shall apply to any new director joining the Board of Directors while this Policy is in effect. 4. Remuneration Scheme for the Non-Executive Chairman of the Board of Directors of Bankinter Under article 26 of the By-Laws and article 24 of the Bank s Regulations of the Board of Directors, the Chairman of the Board of Directors is the person having overall responsibility for ensuring that the Board of Directors operates effectively. His duties include the following: 1. Duties in his Capacity as Chairman of the Board of Directors As Chairman of the collective decision-making body, his duties include the following, among others: a) Ensure the effective operation of the Board; b) Convene the Board and chair its meetings; c) Direct Board meetings and debates, ensuring the high quality of such debates; 7

8 d) Prepare the schedule of dates and items to be covered and submit it to the Board of Directors; e) Promote discussion on the Institution s strategic objectives; f) Maintain a relationship with the directors such that he facilitates the performance of their duties; g) Organise and coordinate the periodic evaluation of the Board as well as, if applicable, the evaluation of the Company s Chief Executive Officer; h) Approve and review knowledge refresher programmes for each director if the circumstances so advise. 2. Institutional Representation Duties for the Benefit of the Institution In addition to his duties as Chairman of the collective decision-making body and without prejudice to the legal representation of the Institution, which in each case is vested in the persons designated for such purpose, he performs specific duties in the area of institutional relations that in no event imply the exercise of management powers or any other powers of an executive nature, which powers are only vested in those directors appointed as executive directors by the Board. In this context, he performs the following activities, among others: a) Maintain institutional relationships with national and international oversight bodies and with industry organisations, establishing, if appropriate, periodic contact with them; b) Assist in relationships between the Institution and domestic and international investors, credit rating agencies and other third parties, maintaining contact with them for these purposes in coordination with the areas of the Institution responsible for institutional relationships; c) Assist in reinforcing institutional relationships with domestic and international bodies that represent industry interests; d) Maintain institutional relationships with market oversight bodies, clearing houses and other institutions of a similar nature; e) Assist the various business areas of the Institution and its subsidiaries, if they so request, in their institutional relationships with customers, suppliers or any other commercial partners. 8

9 3. Corporate Social Responsibility Duties In the area of Corporate Social Responsibility and in accordance with Bankinter s Policy, he has the following duties, among others: a) Ensure coordination of the activities of the Innovation Foundation (Fundación para la Innovación) with the various areas of the Bank, determining the targets and conducting the evaluation of the foundation director and proposing his remuneration to the Board of Trustees; b) Chair the Sustainability Committee; c) Propose, coordinate and oversee the activities of the Sustainability Committee in regard to: i) modifying the Sustainability Policy and the Plans, Guidelines and Programmes derived from it, ensuring that the Policy is disseminated and seeking the engagement of all stakeholders in BANKINTER, particularly strategic ones (employees, shareholders, customers, among others); ii) the Sustainability Strategy and its Master Plan, the design thereof and following up on the initiatives included in it; iii) effective integration of the principles included in the Sustainability Policy and Strategy in each of the Company areas, consistently and in accordance with the Bank s overall Strategy; iv) ensuring the availability of the resources and tools needed to implement and improve the management of Sustainability in the Institution, promoting innovation and the use of the best technologies available; v) managing the information needed to extend and maintain management systems, thus contributing to the improvement of the Institution s economic, social and environmental efficiency; vi) preparing the Sustainability Report and reviewing it prior to submission to the Board of Directors through the Appointments and Corporate Governance Committee; vii) analysing the repercussions of possible organisational changes on the management of Sustainability and establishing appropriate measures to ensure the continuity and effectiveness of the management system; viii) participating in the review of progress and performance in managing Sustainability to ensure its proper operation. d) Periodically inform the Board of Directors, through the Appointments and Corporate Governance Committee, about the Sustainability 9

10 Committee s monitoring of the Sustainability Strategy and its principal accomplishments; e) Any other duties that the Board may resolve to assign him. 4. Duties Related to the Internal Audit Division Under article 36 of the Regulations of the Board of Directors, the Bank s Audit Division, which is subordinate to the Audit and Regulatory Compliance Committee, is functionally assigned to the Chairman, so he has the following duties: a) Propose targets and remuneration for the Director of Internal Audit for approval by the Audit and Regulatory Compliance Committee; b) Carry out the day-to-day monitoring of the Division s activities, without prejudice to the powers that are within the exclusive purview of the Audit and Regulatory Compliance Committee of the Board, to which the Division is directly subordinate. For these reasons and in accordance with the provisions of article 37 of the By-Laws and article 23 of the Regulations of the Board, given the responsibilities assigned to him and other objective circumstances, and within the framework of the services agreement that binds him to the Company, the Chairman of the Board of Directors receives fixed annual remuneration for performing the non-executive institutional duties described above, in addition to those he performs as Chairman of the collective decisionmaking body, which duties are remunerated as indicated in the preceding point. The Chairman of the Board of Directors does not receive any variable remuneration, for the same reasons stated in the preceding point with regard to the non-executive directors. The Annual Director Remuneration Report that will be submitted to a consultative vote of the shareholders at the General Shareholders Meeting shows the amounts received by the Chairman of the Board for performing his non-executive institutional duties during the previous financial year that are in addition to those he performs in his capacity as Chairman of the collective decision-making body, along with a breakdown of such amounts set for the current financial year. The Annual Remuneration Reports also show adjustments of the amounts assigned to him for these duties. 10

11 5. Remuneration Scheme for Executive Directors for Performing their Executive Duties The Executive Directors (currently the Executive Vice-Chairman and the Chief Executive Officer), in addition to the remuneration indicated in section 3 of this Policy, receive annual remuneration for exercising their executive powers under the commercial administration agreements binding them to the Company, one part of which is fixed and one part variable based on meeting previously-established targets aligned with prudent risk management and conforming to the Institution s long-term interests. In addition, the executive directors have the right to participate in any long-term variable remuneration schemes that the institution may decide to implement from time to time. The Bankinter remuneration policy establishes a clear distinction between the criteria for establishing: Fixed remuneration, which primarily reflects professional experience and responsibility within the organisation, and Variable remuneration, which reflects sustainable performance adapted to risk. As concerns the executive directors, the fixed and variable components shall be duly balanced, the fixed component being a sufficiently large portion of total remuneration. The remuneration package shall be made up of a set of tools that allow for an adjustment of remuneration to the needs of both the Institution and its professionals, as regards content (cash and non-cash), time horizon (short-term, medium-term and long-term), security (fixed and variable) and target. Thus, remuneration shall be aligned with the best market practices, ensuring that overall remuneration and the structure thereof is competitive with that for positions with similar duties in comparable institutions in the financial industry. Strategically, in comparative terms, Bankinter shall set its fixed remuneration level at the median of remuneration being paid in the market in the financial industry. For these purposes, the market peer group used to evaluate strategic positioning shall be made up of banking institutions with a size and activities 11

12 comparable to Bankinter. For certain positions, and when considered necessary to obtain a significant sample, the peer group shall be expanded by including banking institutions that are larger in the market, but taking their activities in the domestic market as a reference. In this regard, Bankinter shall request an external consultant to carry out remuneration studies in the industry that will allow for a determination of market references to be used for comparison, as well as remuneration studies, both industry-specific and others broader in scope, that take into account other major listed companies. In this way, these references will supplement other internal criteria in determining remuneration for the executive directors Fixed Remuneration: Fixed remuneration for the executive directors primarily reflects the level of responsibility within the organisation and their professional experience, ensuring that it is competitive with the remuneration paid for equivalent duties in major financial institutions. Based on the criteria of level of responsibility assumed in the organisation, the market studies and analyses performed by external third parties and the average increases in remuneration for the Bank s Senior Management, the Board of Directors, acting upon a proposal from the Remuneration Committee, shall approve an adjustment of the fixed remuneration amounts, specifying these adjustments in the corresponding Annual Director Remuneration Report to be submitted to the shareholders for consideration at the General Shareholders Meeting Variable Remuneration: The primary goal of variable remuneration is to incentivise performance by directing it toward the targets defined by the Institution, while promoting solid and effective risk management that avoids having variable remuneration create incentives for individual conduct of excessive risk assumption. Variable remuneration also efficiently aligns the remuneration of executive directors with the long-term interests of the Company and its stakeholders. 12

13 According to Bankinter s general remuneration policy, which also applies to executive directors, the variable components of remuneration shall be set in accordance with the following principles: Where remuneration is tied to performance, the total amount of remuneration shall be based on an evaluation combining individual performance, assessed using financial and non-financial criteria, and the overall performance of the Institution. The total variable remuneration shall not limit the ability of the Institution to strengthen its capital base. Guaranteed variable remuneration is not consistent with sound risk management or the pay-for-performance principle and shall not be a part of prospective remuneration plans. Guaranteed variable remuneration shall be exceptional, shall occur only when hiring new staff and if the Institution has a sound and strong capital base, and shall be limited to the first year of employment. In total remuneration, the fixed and variable components shall be duly balanced. The fixed component shall represent a sufficiently high proportion of the total remuneration to allow for the operation of a fully flexible policy on variable remuneration components, to the point of having the option not to pay variable components. The variable component shall not exceed 100 per cent of the fixed component of the total remuneration for each individual. However, the shareholders acting at the Institution s General Shareholders Meeting may approve a higher level than that specified above provided that it does not exceed 200 per cent of the fixed component Annual Variable Remuneration: Bankinter has not defined a variable remuneration scheme for Executive Directors. Instead, the same annual variable incentive scheme applied to the rest of the workforce receiving this type of remuneration is applied to them. The annual incentive is aimed at ensuring proper correlation between the resulting levels of remuneration and performance over time. It is directly referenced to the Profit-Before-Tax target for the group s banking activity, 13

14 with an individual distribution system based on the duties and responsibilities assigned. In addition, in the indicators established as a target, the annual variable remuneration scheme includes, in addition to those indicators referring to the financial year, financial indicators needed to ensure proper correlation between the resulting remuneration levels and the medium-term and longterm changes in performance, avoiding the assumption of excessive risk. The Board of Directors, upon a proposal from the Remuneration Committee, shall analyse the structure of annual indicators every year. It may make adjustments to it based on the circumstances that may occur during the financial years affected by this Policy, with information being provided about the indicators applicable in each financial year in the Annual Director Remuneration Report submitted for a consultative vote of the shareholders at the General Shareholders Meeting Multi-Year Variable Remuneration: Following good governance recommendations, Bankinter may approve the implementation of multi-year remuneration schemes for the following purposes: Improve the value of the Institution and its shares. Place the evaluation of performance within a multi-year framework to ensure that the evaluation process is based on long-term performance and that the actual payment of the components of remuneration that are based on results is spread over a period that takes into account the underlying economic cycle of the Institution and its business risks. Retain certain key employees at the Bank. The purpose of the multi-year variable remuneration plans that the Institution implements shall be to permit the employees participating in them to receive an amount in cash and an amount in kind (Bankinter shares) tied to the fixed remuneration after a specified period has passed and after they have met the targets set for this purpose, about which they will have been informed. 14

15 The plans shall be extraordinary and shall be implemented solely at the discretion of the Institution; they shall be automatically terminated once the period for which they are implemented has passed. Whenever Bankinter decides to implement a new multi-year incentive for executive directors, the conditions for accruing and collecting it, as well as the procedure established for recognition, computation and delivery, shall be explained in the Director Remuneration Report submitted to the shareholders at the General Shareholders Meeting Periods, Method and Conditions for Payment of Variable Remuneration: - Periods and Method of Payment of Variable Remuneration: i) Payment of a substantial portion of the variable remuneration of the Executive Directors, specifically, 40 per cent thereof, shall be deferred over a three-year period. This deferred remuneration shall be paid over three years immediately after the accrual thereof or the receipt of the non-deferred portion in thirds (by means of three annual payments of the same amount). ii) In addition, a substantial portion of variable remuneration, specifically 50 per cent of any item of variable remuneration, shall be paid in Bankinter shares. This will be applied both to the variable component of deferred remuneration and to the variable component of non-deferred remuneration. In determining the number of shares to be delivered as part of variable remuneration, the price of the Institution s shares will be taken into account. Such price will be the average listing price for the share between those days that the Board of Directors sets on the date the variable remuneration is accrued, independently of the payment schedule established. The Board of Directors is given the power to modify and adjust the number of shares to be delivered on each of the stated dates if between the date of approval of the corresponding resolution and the date of effective delivery there has been an increase in capital in the form of a bonus share issue and/or with a charge to reserves, a split or 15

16 grouping (reverse split) of outstanding shares, or any other corporate transaction of a similar nature or that may have similar effects. In any event, the deliveries of shares to the Executive Directors are conditional upon their approval by the shareholders at the General Shareholders Meeting of Bankinter held the year after the associated variable remuneration is accrued, as required by section 219 of the Companies Act. iii) The resulting amounts in cash and in shares shall be paid net of tax (or withholding). - Conditions on collecting variable remuneration: The variable remuneration system for executive directors shall be subject to the following conditions: Holding period: These shares delivered to the executive directors shall be subject to a holding policy for one year after delivery, a policy that is considered a suitable practice so that the incentives are consistent with the long-term interests of the Institution. Thus, except for the shares that represent an amount needed to pay taxes and amounts on account of Individual Income Tax (Impuesto sobre la Renta de las Personas Físicas), all other shares delivered to the executive directors as part of their variable remuneration shall be blocked during the year immediately following the date of delivery. In this way, the executive directors may not sell the Bankinter shares received during the blocking period. After that period has passed, the shares shall be freely transferable. These blocking rules applicable to the shares shall also apply if the relationship with the Institution is terminated, but not in the event of death or declaration of permanent incapacity, in which case the shares shall be freely transferable. Compensation for deferral: Each time shares or cash amounts subject to deferral are delivered, Bankinter shall pay a cash amount equal to the dividends paid on such shares and the interest accrued on the deferred cash amount from the date of payment of the portion of variable remuneration that has not been deferred to the date that the deferred variable remuneration is paid. 16

17 Prohibition against hedging transactions: Personal hedging strategies or insurance relating to remuneration or liability that reduce alignment with the healthy management of risks promoted by the remuneration systems may not be used. The hedging of Bankinter shares already delivered that are subject to the holding period indicated above is also prohibited. Adjustment of remuneration after the fact: The variable remuneration, including the deferred portion, and the dividends tied to deliveries of shares, shall be paid or vested only if it is sustainable according to the financial situation of the Institution as a whole and if justified on the basis of the results of the Institution. Without prejudice to the application of general principles of contract law, total variable remuneration shall be substantially reduced if the financial results of the Institution are unsatisfactory or negative, taking into account both the current remuneration as well as any reduced payments of amounts previously accrued via clauses reducing remuneration ( bad actor or malus clauses) or clawback clauses, which may apply to up to 100 per cent of total variable remuneration. These clauses define specific standards that particularly cover situations in which the person in question has participated in or is responsible for conduct that has led to substantial losses for the Institution and that fails to meet the appropriate requirements of suitability and correctness. Below is a chart showing the method and conditions for delivery of variable remuneration in the variable remuneration scheme for executive directors at Bankinter: 17

18 Total variable remuneration January year n not deferred 50% shares 50% cash 2 years clawback January year n+1 1/3 of 40% deferred 50% shares + dividends 50% cash + interest 2 years clawback January year n+2 1/3 of 40% deferred 50% shares + dividends 50% cash + interest 2 years clawback January year n+3 1/3 of 40% deferred 50% shares + dividends 50% cash + interest 2 years clawback 5.3. Addition of New Executive Directors In principle, the remuneration scheme and the basic contract conditions described in this Policy shall also apply to any new executive director added to the Board of Directors while this Policy is in effect, particularly considering the duties assigned, the responsibilities assumed and the director s professional experience. The Board of Directors shall approve a resolution setting a fixed remuneration that meets these characteristics, in line with the fixed remuneration for the current executive directors and considering the competitive environment, also applying the variable remuneration scheme included in this Policy. 6. Other Remuneration The Chairman and the Chief Executive Officer of Bankinter are beneficiaries under medical insurance policies taken out by the Bank. The Bank pays the associated premiums, which are charged to the directors as remuneration in kind. In addition, the Bank pays these directors other remuneration in kind on a case-by-case basis, such as vehicle-renting and other corporate benefits applicable to the other employees. In addition, any Bankinter non-executive directors who are members of management decision-making bodies of other Group companies may receive 18

19 the remuneration under those companies By-Laws due to them for membership in those bodies. 7. Pension Commitments Bankinter has no pension commitments to its directors. Nor does Bankinter have any commitments to contribute to pensions for its directors. As an exception, in the case of the Chief Executive Officer, as was indicated in the published director remuneration reports, it must be noted that as the Chief Executive Officer of Bankinter s subsidiary, Línea Directa Aseguradora S.A., she was granted a defined-contribution pension plan in 2005 that the Board of Directors of Bankinter, at the proposal of its Appointments and Remuneration Committee (now, the Remuneration Committee), decided to maintain at the time she joined the Bank. The amount contributed to this plan came to 600,000 euros and covers the usual contingencies of retirement, death and disability. As this is a defined contribution plan, there is no commitment by Línea Directa or Bankinter to make new contributions. Thus, no contributions were made to this plan in 2015, nor is there any commitment to make any such contributions in future financial years. 8. Contract Conditions for the Non-Executive Chairman and the Executive Directors The Chairman, the Vice-Chairman and the Chief Executive Officer have signed commercial services agreements with the Company setting forth the principal and ancillary characteristics of and terms and conditions governing their respective relationship with the Company. The terms and conditions of such agreements are described below: Duty of exclusivity and non-compete agreement: Executive directors shall not enter into other commercial contracts or contracts to provide services with other companies or entities unless expressly authorised by the Board of Directors, and provision is made in all cases for the obligation not to compete by working at companies or engaging in activities of a nature similar to those of the Bank and its consolidated group. As the Chairman is not an executive director, this provision does not apply to him. 19

20 Duty to comply with the Bankinter Group s Code of Professional Ethics and Securities Market Code of Conduct: The agreements provide for the obligation to comply with the Bankinter Group s Code of Professional Ethics and Securities Market Code of Conduct. Obligation to maintain confidentiality and to return documents: A rigorous duty of confidentiality is established while the relationship is in effect and also after it has been terminated. At the time of termination, documents and items associated with the director s activity and in his possession must be returned to the Bank. Duration, advance notice periods and compensation for termination of the agreement: For executive directors, when they submit their resignation for any reason, advance notice thereof must be given in writing: 3 months in advance in the case of the Chief Executive Officer and 15 days in advance in the case of the Executive Vice-Chairman. The Company is authorised to withhold from the amount payable to the director the amount corresponding to the unfulfilled notice period unless the Board approves a waiver. In the case of the Chairman, there is no advance notice period in the event of resignation for any reason. For the Chairman, the Executive Vice-Chairman and the other directors, no compensation has been established for stepping down, regardless of the reason. For the Chief Executive Officer, the compensation established in the contract signed with the Company applies only to cases similar to those established for ordinary employment relations in the Workers Statute (Estatuto de los Trabajadores) and there is a limit on compensation that may in no event be above the limit set in the labour rules for all employees of the Institution. In no case, following best practices in corporate governance, may compensation exceed two times total annual remuneration. In no event is there a right to receive compensation associated with situations of change of control at the institution. Post-contractual obligations: Only in the case of the Chief Executive Officer s contract is there a post-contractual non-compete obligation for 18 months starting from the end of the commercial agreement. Under this obligation, she undertakes not to perform employment activities or provide professional services, for her own account or for the account of 20

21 third parties, that compete with those of the Bank or the entities in its Group. The compensation for this non-compete agreement is equal to 50 per cent of the most recent annual fixed remuneration approved by the Board of Directors, which shall be paid after the aforementioned 18-month period has passed. 9. Effective Period for the Policy This Policy shall be in effect for purposes of the remuneration of Bankinter directors during financial years 2016, 2017 and 2018, unless a new resolution is adopted by the shareholders at the General Shareholders Meeting. In any event, this Policy shall be understood to be without prejudice to any payments that should be made to the executive directors during these years as deferred amounts of variable remuneration accrued in previous financial years. 21