HNB Addresses Employee Compensation in Credit Institutions

The Governor of the Croatian National Bank (HNB), Boris Vujčić, has issued a Decision on Employee Compensation in Credit Institutions, which details the manner of adoption, application, and implementation of the compensation policy.

The Decision on Employee Compensation must be applied by all credit institutions based in Croatia that have received a license to operate from the HNB, as well as branches of credit institutions from third countries that have been granted approval by the HNB to provide services.

The Supervisory Board of the credit institution is responsible for the compensation policy, which must make decisions regarding the total amount of variable compensation that the credit institution will determine for all employees in the business year for a specified period, as well as individual compensation for members of the management board and persons responsible for the operation of control functions, and regarding the reduction or elimination of variable compensation for employees, including the activation of the provision for the return of compensation if there is a significant deterioration in performance or losses of the credit institution.

The HNB also stipulates that the statute of the credit institution may determine that the general assembly approves the compensation policy and makes decisions related to the compensation of management board members.

In addition to the detailed manner of adopting and implementing the compensation policy, the HNB has prescribed what should be taken into account when determining the ratio of fixed and variable components of compensation, and has also prescribed their amounts.

Thus, among other things, it stipulates that the amount of the variable component of employee compensation does not exceed the amount of the fixed component of total compensation. Exceptionally, the credit institution may determine the amount of the variable component of total compensation up to twice the amount of the fixed component of total compensation for an individual employee, but under strictly prescribed conditions.

For an employee performing control functions, the credit institution is required to structure compensation so that fixed compensation cannot be less than two-thirds of the total compensation of that employee, while the total annual fixed compensation cannot be less than the two-year average of total annual fixed compensation for employees in the corresponding position with the corresponding responsibilities in the credit institution.

Among other things, this decision stipulates that in the case of extraordinary state aid, the credit institution may not pay variable compensation to members of the management board and supervisory board, unless it is proven that their payment is justified.

At the same time, the governor of the HNB has made a decision regarding the assessment of the suitability of the CEO, management board member, supervisory board member, and holders of key functions in the credit institution.

This decision details the conditions for membership in the management and supervisory boards of the credit institution, the procedure for issuing prior consent for appointments, and the conditions that the credit institution must evaluate when assessing the suitability of holders of key functions.