4.2 Remuneration Structure

Effective from Jan 05 2023 - May 31 2023
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35.	The remuneration structures for various levels of employees should be designed to promote effective risk management and achieve remuneration objectives.
36.	The mix of forms of remuneration should vary depending on the employee’s position and role, it should take into account the full range of financial and non-financial incentives in an employment relationship, and may include cash, equity and other forms of remuneration.
37.	The proportion of fixed and variable components of remuneration for different business lines should be determined taking into account the nature and level of responsibilities of an employee, business area in which they work, and the Remuneration Policy of the bank. Banks should, however, ensure that total variable remuneration does not limit their ability to strengthen their capital base.
38.	The remuneration structure of employees working in control functions should be designed to ensure objectivity and independence of these functions. In this regard, it should be ensured that performance measurement and determination of remuneration of such employees are not dealt with by any person working in/associated with the business areas monitored by the control functions.
39.	The determination of bonus pool should take into account the overall performance of the bank whereas its distribution to individual employees should be based on performance of the employee as well as that of the business unit or division in which they work. There should, however, be no guaranteed minimum bonuses and similar other payments, other than an employee’s salary, that are not based on performance.
40.	Current and potential risks should be taken into account when determining the size and distribution of the variable remuneration. The variable remuneration of senior management as well as other employees whose actions have a material impact on the risk exposure of the bank should, therefore, be determined in line with the following:
	a.	A substantial proportion of remuneration should be variable and paid on the basis of individual, business-unit and bank-wide measures that adequately measure performance.
	b.	A substantial proportion of variable remuneration, of at least 40 percent, should be awarded in shares or share-linked instruments (or, where appropriate, other non-cash instruments) and should be subject to an appropriate share retention policy.
	c.	A substantial portion of variable remuneration, of at least 40 percent, should be payable under deferral arrangements over a period of years.
	d.	These proportions should increase significantly along with the level of seniority and/or responsibility. For the most senior managers and the most highly paid employees, the percentage of variable remuneration that is deferred should be substantially higher of at least above 60 percent.
41.	The deferral period for remuneration should not be less than three years based on the nature of the business, its risks and the activities of the concerned employee.
42.	The remaining portion of the deferred remuneration can be paid as cash remuneration vesting gradually. In the event of negative contributions of the bank and/or the relevant line of business in any year during the vesting period, any unvested portions are to be clawed back, subject to the realized performance of the bank and the business line.

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