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  • Variable Remuneration

    • HC-5.4.19

      Remuneration systems must link the size of the bonus pool to the overall performance of the bank.

      Added: January 2014

    • HC-5.4.20

      Employees' incentive payments must be linked to the contribution of the individual and business to such performance.

      Added: January 2014

    • HC-5.4.21

      As profits and losses of different activities of a bank are realised over different periods of time, remuneration payout schedules must be sensitive to the time horizon of risks and variable remuneration must therefore be deferred accordingly. Variable remuneration must not be finalised over short periods where risks are realised over long periods.

      Added: January 2014

    • HC-5.4.22

      The remuneration committee of the bank must question payouts for income that cannot be realised or whose likelihood of realisation remains uncertain at the time of payout.

      Amended: July 2014
      Added: January 2014

    • HC-5.4.23

      Banks must ensure that total variable remuneration does not limit their ability to strengthen their capital base. The extent to which capital needs to be built up must be a function of a bank's current capital position and its ICAAP.

      Added: January 2014

    • HC-5.4.24

      The size of the variable remuneration pool and its allocation within the bank must take into account the full range of current and potential risks, including:

      (a) The cost and quantity of capital required to support the risks taken;
      (b) The cost and quantity of the liquidity risk assumed in the conduct of business; and
      (c) Consistency with the timing and likelihood of potential future revenues incorporated into current earnings.
      Amended: July 2014
      Added: January 2014

    • HC-5.4.25

      Paragraph HC-5.4.24 focuses on the overall size of the variable remuneration, at the overall bank level, in order to ensure that the recognition and accrual of variable remuneration will not compromise the financial soundness of the bank.

      Added: January 2014

    • HC-5.4.26

      Bonuses must diminish or be deferred in the event of poor bank, divisional or business unit performance.

      Added: January 2014

    • HC-5.4.27

      Subdued or negative financial performance of the bank should generally lead to a considerable contraction of the bank's total variable remuneration, taking into account both current remuneration and reductions in payouts of amounts previously earned, including through malus and clawback arrangements. Recognition of staff who have achieved their targets or better, may take place by way of deferred compensation, which may be paid once the bank's performance improves.

      Added: January 2014

    • HC-5.4.28

      If the bank and/or relevant line of business is incurring losses in any year during the vesting period, any unvested portions must be subject to malus.

      Amended: July 2014
      Added: January 2014

    • HC-5.4.29

      Accrual and deferral of variable remuneration does not oblige the bank to pay the variable remuneration, particularly when the anticipated outcome has not materialised or the bank's financial position does not support such payments.

      Added: January 2014

    • HC-5.4.30

      For approved persons and material risk-takers, other than those covered under Paragraphs HC-5.4.9 and Section HC-5.5, as their actions have a material impact on the risk exposure of the bank:

      (a) An appropriate ratio between the fixed and variable components of total remuneration must be set to ensure that fixed and variable components of total remuneration are appropriately balanced and paid on the basis of individual, business-unit and bank-wide measures that adequately measure performance; and
      (b) The variable proportion of remuneration must increase significantly along with the level of seniority and/or responsibility.
      Amended: October 2016
      Amended: July 2014
      Added: January 2014

    • HC-5.4.30A

      The level of the fixed component referred to in Subparagraph HC-5.4.30(a) should represent a sufficiently high proportion of the total remuneration to allow the operation of a fully flexible policy on variable remuneration components, including the possibility to pay no variable component.

      Amended: October 2016
      Added: July 2014

    • HC-5.4.31

      For purposes of Paragraph HC-5.4.30:

      (a) At least 40% of the variable remuneration must be payable under deferral arrangements over a period of at least 3 years; and
      (b) For the CEO, his deputies and the other 5 most highly paid business line employees, at least 60% of the variable remuneration must be payable under deferral arrangements over a period of at least 3 years.
      Amended: July 2014
      Added: January 2014

    • HC-5.4.32

      The deferral period referred to under Subparagraph HC-5.4.31(a) must be aligned with the nature of the business, its risks and the activities of the employee in question. Remuneration payable under deferral arrangements should generally vest no faster than on a pro rata basis.

      Added: January 2014

    • HC-5.4.33

      As a minimum, 50% of variable remuneration (including both the deferred and undeferred portions of the variable remuneration) must be awarded in shares or share-linked instruments or where appropriate, other non-cash instruments.

      Added: January 2014

    • HC-5.4.34

      The remaining portion (other than that mentioned under Paragraph HC-5.4.33) of the deferred remuneration can be paid as cash remuneration vested over a minimum 3-year period.

      Added: January 2014

    • HC-5.4.34A

      The only instance where deferred remuneration can be paid out before the end of the vesting period is in the case of the death of the employee where the beneficiaries would receive any unpaid deferred remuneration.

      Added: July 2014

    • HC-5.4.35

      Banks must not provide any form of guaranteed variable remuneration as part of the overall remuneration package. Exceptional minimum variable remuneration must only occur in the context of hiring new staff and limited to the first year.

      Amended: July 2014
      Added: January 2014