Bank of New York Mellon : BNY Mellon Investment Management Europe Holdings Limited 2019

Investment Management Europe Holdings Limited

Pillar 3 Disclosure

December 31, 2019

Contents

• 1 Introduction

  4

• 1.1. Purpose of Pillar 3 Disclosure ..................................................................................................................................... 4

• 2 Scope of Application

  4

• 2.1 Company Description ................................................................................................................................................. . 4

• 3 Risk Management Objectives and Policies

  6

• 3.1 Risk Management Framework .................................................................................................................................... 6

• 3.2 Scope and Nature of Risk Reporting Systems ............................................................................................................ 6

• 3.3 Risk Appetite Statement .............................................................................................................................................. 6

• 3.4 Risk and Control Self-Assessment ............................................................................................................................. 6

• 3.5 Key Risk Indicators ..................................................................................................................................................... 7

• 3.6 Operational Risk Events .............................................................................................................................................. 7

• 3.7 High Level Assessment ............................................................................................................................................... 7

• 3.8 Emerging and External Risks ...................................................................................................................................... 7

• 3.9 Stress Testing ............................................................................................................................................................. 7

• 4 Key Risk Areas

  8

• 4.1 Operational Risk .......................................................................................................................................................... 8

• 4.2 Market Risk ................................................................................................................................................................. 8

• 4.3 Interest Rate Risk in Non-Trading Book ..................................................................................................................... 8

• 4.4 Credit Risk ................................................................................................................................................................... 8

• 4.5 Counterparty Credit Risk ........................................................................................................................................... 10

• 4.6 Liquidity Risk ............................................................................................................................................................. 11

• 4.7 Third Party Risk ......................................................................................................................................................... 11

• 4.8 Reputational Risk ...................................................................................................................................................... 11

• 5 Capital Resources and Requirements

  11

• 5.1 Available Capital Resources ..................................................................................................................................... 11

• 5.2 Pillar 1 Capital Requirements .................................................................................................................................... 12

• 5.3 Pillar 2 Capital Requirements .................................................................................................................................... 12

• 6 Remuneration Disclosure

  13

• 6.1 Governance ............................................................................................................................................................... 13

• 6.2 Aligning Pay with Performance ................................................................................................................................. 13

• 6.3 Fixed Remuneration .................................................................................................................................................. 14

• 6.4 Ratio between Fixed and Variable Pay ..................................................................................................................... 14

• 6.5 Variable Compensation Funding and Risk Adjustment ............................................................................................ 14

• 6.6 Deferral Policy and Vesting Criteria .......................................................................................................................... 15

• 6.7 Variable Remuneration of Control Function Staff ..................................................................................................... 15

• 6.8 Quantitative Disclosures ........................................................................................................................................... 15

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Index of Tables

TABLE 1: STANDARDISED GROSS CREDIT EXPOSURE BY EXPOSURE CLASS .......................................................................... 9

TABLE 2: STANDARDISED GROSS CREDIT EXPOSURE BY GEOGRAPHIC AREA ....................................................................... 9

TABLE 3: STANDARDISED GROSS CREDIT EXPOSURE BY RESIDUAL MATURITY ................................................................... 10

TABLE 4: COUNTERPARTY CREDIT RISK ....................................................................................................................................... 10

TABLE 5: CAPITAL RESOURCES ..................................................................................................................................................... 12

TABLE 6: PILLAR 1 CAPITAL REQUIREMENTS BY RISK TYPE ...................................................................................................... 12

TABLE 7: AGGREGATE REMUNERATION EXPENDITURE FOR CODE STAFF IN 2019 BY BUSINESS ....................................... 15

TABLE 8: AGGREGATE REMUNERATION EXPENDITURE FOR CODE STAFF BY REMUNERATION TYPE ............................... 16

TABLE 9: TOTAL DEFERRED VARIABLE REMUNERATION FOR CODE STAFFOUTSTANDING FROM PREVIOUS YEARS ..... 16

TABLE 10: NEW SIGN-ON AND SEVERANCE PAYMENTS ............................................................................................................. 16

TABLE 11: NUMBER OF INDIVIDUALS BEING REMUNERATED EUR 1 MILLION OR MORE ........................................................ 16

1 Introduction

The Bank of New York Mellon (BNY Mellon) is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries and more than 100 markets. As at December 31 2019, BNY Mellon had $37.1 trillion in assets under custody and/or administration, and $1.9 trillion in assets under management.

This Pillar 3 disclosure relates to BNY Mellon Investment Management Europe Holdings Limited ('IMEH') - a holding company for BNY Mellon EMEA-based investment management firms - and is published in accordance with the requirements of the Financial Conduct Authority ('FCA') Prudential Sourcebook for Banks, Building Societies and Investment Firms, BIPRU 11 (Pillar 3).Financial Conduct Authority ('FCA') Prudential Sourcebook for Banks, Building Societies and Investment Firms, BIPRU 11 (Pillar 3). Pillar 3 disclosures are made in respect of the consolidation group headed by IMEH. This disclosure is made annually. The company will reassess the need to publish some or all of the disclosures more frequently than annually in light of any significant change to the relevant characteristics of its business including disclosure about capital resources and adequacy, and information about risk exposure and other items prone to rapid change.

This disclosure was approved for publication by the Board of Directors (hereafter the 'Board') on 26 June 2020 and published on The Bank of New York Mellon Corporation group website(www.bnymellon.com), in the section Investor Relations, Financial Reports, Other Regulatory.

1.1.

Purpose of Pillar 3 Disclosure

The EU Capital Requirements Directive (CRD) is the genus of the FCA's prudential rules and establishes a risk sensitive approach to capital management, which is comprised of three pillars:

Pillar 1 - Minimum capital requirement: Establishes rules for the calculation of minimum capital for credit risk, counterparty credit risk, market risk and operational risk and capital resources requirements

Pillar 2 - Supervisory review process: An internal discipline to evaluate the adequacy of the regulatory capital requirement under Pillar 1 and other non-Pillar 1 risks. This pillar requires the FCA to undertake a supervisory review to assess the robustness of IMEH's internal assessment and its capital requirements.

Pillar 3 - Market discipline: complements the other pillars and effects market discipline through public disclosure. Expanded disclosure about capital and risk enables interested parties to gauge the capital adequacy of individual financial institutions.

Wherever possible and relevant, the Board will ensure consistency between Pillar 3 disclosures, Pillar 1 reporting and Pillar 2 ICAAP content e.g., disclosure about risk management practices and capital resources at year-end.

2 Scope of Application

2.1

Company Description

The IMEH group forms the EMEA arm of BNY Mellon's global asset management business. In common with the global strategy, each of the Investment Firms acquired or established operates with a significant degree of operational autonomy. The strategy of the various subsidiaries is decided by the individual Boards. Through the appointment of senior management to the individual Boards, the Group have input into and oversight of the on-going development and assessment of that strategy.

The following regulated entities ('Investment Businesses') are fully consolidated subsidiaries:

• • BNY Mellon Investment Management EMEA Limited ('IM EMEA')

• • BNY Mellon Fund Management Limited

• • BNY Mellon Investments Switzerland GmbH

• • BNY Mellon Fund Management (Luxembourg) S.A.

• • Insight Investment Management Limited, comprising Insight Investment Management (Global) Limited, Insight Investment Funds Management Limited, Insight Investment Management (Europe) Limited and Insight Investment International Limited

• • Newton Management Limited, comprising Newton Investment Management Limited and Newton Investment Management (North America) Limited

• • Walter Scott & Partners Limited

Figure 1: BNYM IMEH Corporate Structure at 31 December 2019

• - Head of Consolidation Group

• - Holding Companies

• - BIPRU Investment Firms

• - CPM Firms

• - CPMI Firm (Non UK)

• - Dormant/Considered for Dissolution/Dissolved

• - Unregulated Entity

Swiss Regulated Entity

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Not Conducting Regulated Activity

• 1 Mellon Investments (UK) Limited had its FCA 4A permissions removed on 17 October 2019.

• 2 Newton Investment Management (NA) Ltd transferred all regulated activities and associated risks to Newton Investment Management (NIM) in early 2020. FCA 4A permission removal was completed on 9 June 2020.