BAWAG : Remuneration policy

CONTENTS

3 INTRODUCTION

1. GENERAL PRINCIPLES AND OBJECTIVES OF REMUNERATION
2. REMUNERATION GOVERNANCE
3. REMUNERATION STRUCTURE

1. VARIABLE REMUNERATION

1. MALUS AND CLAWBACK
2. REMUNERATION POLICY FOR SUPERVISORY BOARD MEMBERS
3. DEVIATION FROM THE REMUNERATION POLICY

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INTRODUCTION

PREAMBLE

BAWAG Group AG is the listed holding company of BAWAG, headquartered in Vienna, Austria, which operates in a highly regulated environment under direct supervision of the European Central Bank (ECB).

This Remuneration Policy contains the remuneration principles for the members of the Management Board as well as the Supervisory Board. While this Remuneration Policy seeks to ensure reasonable remuneration ex ante and provides for the applicable remuneration framework over a period of up to four years upon approval by the AGM, the Remuneration Report, which is submitted to the AGM on an annual basis, aims to ensure ex post transparency and to give a detailed and comprehensive overview of the remuneration awarded and paid to members of the Management Board and Supervisory Board, respectively, in the course of the previous year.

This Remuneration Policy has been approved by BAWAG's Supervisory Board - after having been prepared by the Remuneration Committee of the Supervisory Board. In accordance with the Austrian Stock Corporation Act, the Remuneration Policy will be presented to the shareholders at the AGM 2024 for voting and subsequently at least every fourth financial year or at an earlier AGM in case substantial changes to the Remuneration Policy are made.

DEVELOPMENTS SINCE LAST APPROVAL OF THE REMUNERATION POLICY IN 2020

At the AGM 2020, we submitted for the first time a Remuneration Policy to the AGM for approval. Since the AGM approval back then, we have continuously improved our remuneration design, by thoroughly reviewing and addressing topics that we identified either through the dialogue with our shareholders or as part of our routine benchmark assessment.

Institutionalized engagement and dialogue process with shareholders

We initiated a shareholder outreach program, which, over the past years, has translated into an institutionalized engagement and dialogue process with our shareholders in regard to management compensation. We value the input and perspective of our shareholders and are committed to continued meaningful engagement with our investors. We specifically sought feedback from shareholders on our executive remuneration program to consider ways to further evolve our program. Our Supervisory Board led these conversations, with our Chairperson and our Deputy Chairperson (who also heads the Remuneration Committee) personally participating in these meetings with shareholders. As we appreciate the dialogue with our shareholders, we will continue active engagement in the years ahead. For us, the aim of these meetings is to:

• Listen: solicit feedback from investors to understand remaining concerns of our shareholders;
• Redesign: work through changes based on such feedback with our external remuneration consultant who supported in redesigning the annual bonus plan for Management Board members;
• Communicate: ensure that proper and comprehensive disclosure in the Remuneration Report clarifies the key features and changes made following our extensive investor outreach.

Focus on quantifiable KPIs, formulaic approach & Bonus Entry Condition

Most recently, in 2023, we adopted a new remuneration design for the annual bonus of Management Board members, providing for a stricter formulaic approach which is to a large extent based on financial KPIs that correspond to externally communicated targets. Even with respect to non-financial KPIs, we seek to set targets which are mainly driven by quantifiable metrics and, with respect to any qualitative targets, an increased level of disclosure and explanation will be provided in the Remuneration Report to enable shareholders a thorough review of our remuneration governance and decision processes. Another feature of the new remuneration design was the introduction of an initial hurdle (Bonus Entry Condition) which ensures that rewards to the Management Board are only delivered if BAWAG's financial position is sound.

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Formalized and transparent target setting and assessment of actual performance relative to targets

The Remuneration Committee is responsible for setting the targets for the Annual Bonus of Management Board members and to assess them ex post. The assessment will be conducted based on a comprehensive set of assessment guidelines, with ratchets and caps for all financial and non-financial targets, which are set at the beginning of the bonus cycle and will be disclosed in the Remuneration Report of the following year. Our aim is to provide a level of transparency in this respect to allow shareholders to review and understand our remuneration design and to form a well-informed opinion on our remuneration design.

Market Benchmarks

The Remuneration Committee does not target a specific competitive position versus the market or peer companies in determining the compensation of Management Board members as it believes that strict adherence to a specific market positioning fails to appropriately reflect the unique nature of our business portfolio and the degree of difficulty in leading the company and key businesses and functions.

However, the Remuneration Committee believes it is important to understand the competitive marketplace for executive talent to inform its decision-making and ensure that our executive compensation program supports our recruitment and retention needs. As a result, the Remuneration Committee uses a multi-faceted approach including various peer sets for purposes of assessing competitive compensation practices and design, and periodically reviews compensation data for the peer group derived from publicly filed proxy statements. The Remuneration Committee will continue to review these peer sets on an annual basis to ensure they remain appropriate.

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GENERAL PRINCIPLES AND OBJECTIVES OF REMUNERATION

the Remuneration Committee considers the following principles closely when making remuneration decisions:

			The following main principles form the foundation of our Remuneration Policy: sustainability
	Main principles of the		by conducting a long-term, risk adjusted assessment of the performance; adequacy of
	remuneration scheme		remuneration with a focus on a balanced ratio between fixed and variable remuneration; and
			performance-driven variable remuneration linked to target achievement.
			Our Remuneration Policy priority is to attract and retain as well as to continuously motivate
	Attracting, motivation and		Management Board members to fulfill their duties in the best possible way for the success of
	retention of key personnel		BAWAG Group within the provisions of a sustainable and reasonable remuneration
			framework.
			Our Remuneration Policy is in line with any and all applicable statutory provisions, such as in
	Alignment with applicable		particular, the Austrian Stock Corporation Act (AktG), the Austrian Banking Act (BWG), the
		European banking Authority Guidelines on sound remuneration policies under Directive
	regulatory framework
		2013/36/EU as well as any and all other national and EU regulations, as applicable and
			amended from time to time.
	Alignment with BAWAG's		BAWAG's business strategy is based on the pillars of growth, efficiency and maintaining safe
		and secure risk profile. Our remuneration strategy is designed to incentivize management to
	strategy
		pursue these pillars to create a more valuable enterprise.
			As stewards of stakeholder interests, the remuneration policy is designed to align
			management's compensation with the experience of all stakeholders. Alignment with
	Alignment with all		financial shareholders is done largely through linkage of variable pay to financial performance
	stakeholders and ESG		as well as through delivering compensation in equity. Alignment with stakeholders beyond
	principles		just financial shareholders is accomplished through variable pay structures that incentivize
			management to pursue strategies tied to the interests of customers, the workforce, suppliers,
			community, and the environment (including common ESG principles).
			Our remuneration program is comprised of multiple components that cover different time
			horizons. This is done by basing variable pay on near-term performance but deferring a
	Use of multiple time		significant portion of pay over a multi-year time horizon, thus ensuring that management
		decisions are taking into account multiple perspectives.
	horizons
			Please see the relevant sections of this Remuneration Policy which include an illustration of
			the time-horizons of the STI/respective LTIP.
			The remuneration program is designed to encourage our Management Board members to
	Maintenance of proper risk		deliver strong results while discouraging them from taking unnecessary or excessive risk. This
	controls		is accomplished through the balance of metric-drivenpay-for-performance and safeguards,
			such as limits on variable pay components and other risk mitigating features.
	Adherence to corporate		The Remuneration Committee employs a portfolio of corporate governance best practices to
	governance best practices		ensure that remuneration is designed and delivered in an appropriate manner.

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	Cap of Variable		Variable remuneration is capped and may not exceed 200% of fixed remuneration. This
		applies to both combined, any STI as well as LTIP. If in any given year an STI and an LTIP are
	Remuneration
		awarded, the sum of both awards is considered in respect of the 200% cap calculation.
			Variable remuneration is tied to retention aspects as deferred parts of variable remuneration
	Variable remuneration tied		will only vest, if the respective Management Board member is in good standing employment
		in the year of vesting. Thus, deferred portions of granted awards may be forfeited and never
	to retention aspects
		be realized under certain circumstances if the respective Management Board member has
			exited prior to the end of the member's function period (currently until March 2026).

REMUNERATION GOVERNANCE

We established a Remuneration Committee which is key for determining, reviewing and approving remuneration-related topics. Members of the Remuneration Committee have proper knowledge, expertise and professional experience with respect to remuneration policies and practices, risk management and control activities. The Remuneration Committee has at least one remuneration and benefits expert. His/her expertise is assessed by BAWAG Group's Fit&Proper Office based on a personal interview, review of resume and other sources.

The Remuneration Committee is responsible for overseeing the design of the remuneration system as well as for setting individual remuneration amounts and procedures for awarding remuneration to the Management Board. The Remuneration Committee monitors the implementation of the remuneration system and, upon a periodic review, makes adjustments to the system, if required. In the case of significant changes, but at least every four years, the Remuneration Policy is submitted to the AGM for approval in accordance with Sections 78b and 98a of the Austrian Stock Corporation Act.

On the basis of the approved Remuneration Policy, the Remuneration Committee sets targets for each Management Board member for the respective financial year, while taking into account the scope and complexity of the respective Management Board member's functional responsibilities as well as BAWAG's financial situation. In the process, the Remuneration Committee also considers market compensation, based on a periodical review of a peer group.

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REMUNERATION STRUCTURE

Total remuneration consists of fixed and variable compensation components. Besides the short-term incentives, the achievement of the targets originally set for 2025 is tied to a long-term incentive program. The structure of the remuneration is set in a way that it gives the Management Board members motivation to achieve their targets both on a group level as well as on an individual level without incentivizing them to enter into any inappropriate risks.

Total remuneration of Management Board members consists of fixed and variable compensation components. While fixed remuneration is not linked to performance, variable remuneration is performance-related and designed to create suitable incentives for the achievement of key corporate targets. The fixed remuneration includes the base salary, pensions and fringe benefits ("Others") in form of insurance benefits as disclosed below. Variable compensations consists of short-term incentives (STI) and long-term incentive programs, at present an LTIP originally measuring a multi-year performance period from 2022 through 2025. The variable portion of remuneration is composed of cash payments and share-based awards.

Remuneration paid to Management Board members can be qualified as either fixed or variable remuneration. The following overviews provide guidance and further details on specific remuneration components as well as on specifics of the remuneration design at BAWAG.

COMPONENT	DETAILS
Fixed remuneration
	Base salary of Management Board members is fixed (non-discretionary) and paid
	in monthly installments. It reflects the individual level of professional experience,
	the specific board function and the responsibilities of the respective Management
	Board member. The compensation package is, with the assistance of external
Base salary	remuneration consultants, normally benchmarked at least on an annual basis
	against different peer groups and may be reviewed more frequently at the
	discretion of the Remuneration Committee, for example whenever changes in
	responsibilities, functions and/or roles of Management Board members occur. In
	addition, a peer group comparison will be conducted prior to entering into new
	Management Board contracts or contract extensions. The Remuneration

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	Committee reviews and approves changes to the base salary, taking into
	consideration factors such as the scope, role and responsibility of the respective
	Management Board member, developments of the size, value or complexity of
	BAWAG Group and increases within the employee base during a comparable
	timeframe.
	Management Board members do not receive any separate remuneration for their
	activities for board memberships in affiliated companies.
	Pension benefits are pre-defined and correspond to 15% of the base salary at
	present.
Pension	This component of our remuneration program rewards Management Board
	members for their loyalty to the company and ensures that appropriate funds are
	set aside to assist with income during retirement.
	We provide limited fringe benefits to remain competitive in the markets in which
	we compete for talents. Benefits-in-kind include the following insurance benefits:
	• private medical (health) insurance
	•	accident/disability insurance
	•	term life insurance
Fringe benefits	•	D&O insurance
("Others")
	As of the date of this Remuneration Policy, this list is exhaustive and Management
	Board members do not benefit from any other fringe benefits or benefits-in-kind
	that go beyond the insurance benefits listed above. Fringe benefits other than
	those listed above will only be added if this is in line with market practice and
	deemed necessary to remain competitive as employer and to retain and motivate
	Management Board members.

Variable remuneration (short-term)

Targets for STI

Any variable remuneration is paid based on performance. Targets for each Management Board member for the respective financial year are set by the Remuneration Committee, while considering the scope and complexity of the respective Management Board Member's functional responsibilities as well as BAWAG's financial situation.

From our outreach to shareholders, we understood that the previous STI metrics did not emphasize financial performance to the degree that shareholders prefer. We have thus dedicated a larger percentage to quantifiable financial metrics/KPIs (for 2023: 80%) and will continue to focus on such metrics by keeping the percentage at around such levels. Financial targets will be tied to externally communicated KPIs (e.g. PBT, RoTCE, CIR, net interest income, core revenues). Non-financial/ESG targets will include an individual leadership component and other non-financial/ESG targets will be set on an annual basis by the Remuneration Committee taking into consideration key focus topics of BAWAG Group within environmental/climate, social and governance-related areas for the specific year.

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	STI targets will be accompanied with a comprehensive set of assessment
	guidelines, ratches (sliding scale target approach) and caps for all financial and
	non-financial targets, which will be disclosed in greater detail in the Remuneration
	Report of the respective year.
	More than half of STI remains at risk, as it is tied to BAWAG's share performance.
Equity-linked pay	Any bonus will be composed of a cash payment and phantom shares which will
	make at least 50% of the entire bonus award.
	60% of any bonus granted to Management Board members will be deferred over a
	period of 5 years and therefore remains at risk. The part of the bonus which is not
Deferral of bonus over 5 years period	subject to deferral vests in the year in which the bonus is being granted, with at
& one year retention period re (equity	least 50% (phantom shares) remaining at risk as such part is subject to a one-year
& equity-linked) instruments	retention period. The deferred portions of any bonus then vest in five equal annual
	instalments. This approach provides appropriate risk-mitigating safeguards and
	retention aspects to our remuneration program.
	Variable remuneration is capped and may not exceed 200% of fixed remuneration.
Remuneration Cap on STI + LTI	This applies to both combined, any STI as well as LTIP. If in any given year an STI
(regulatory)	and an LTIP are awarded, the sum of both awards is considered in respect of the
	200% cap calculation.
	As an additional layer to the regulatory remuneration cap described above, we will
	set a cap below the 200% cap (for 2023: 125% cap) of the fixed remuneration for
Additional Remuneration Cap on STI	any annual bonus. This would, however, require that all (financial and non-
(self-imposed)	financial) targets have been overachieved. There is no set-off between the
	different targets (i.e. an overachievement in one target may not be used to
	compensate for underachievement in another target).
	Long-term incentive plans further align Management Board interests with the
	long-term strategy of BAWAG. At present, the BAWAG LTIP 2025 is in place which
	measures a multi-year performance period from 2022 through 2025. Future long-
	term incentive plans will span over a performance period of at least 3 years and
Long-term remuneration (LTIP)	will be paid out in equity or equity-linked instruments. They will be tied to
	externally communicated mid-term targets of BAWAG Group to ensure interest
	alignment with investors as well as BAWAG Group's strategy. As per regulatory
	requirements, the 200% cap will apply to LTI awards and any STI awarded in the
	same year is considered in respect of the 200% cap calculation.

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VARIABLE REMUNERATION

Annual Bonus Award

Until financial year 2022, our remuneration program rewarded management across equally weighted performance pillars of financial, individual, and ESG/leadership success. While this plan established rigorous objectives for management, ultimately it did not emphasize financial performance to the degree that our shareholders preferred. After such consultation, we have increased the focus on financial metrics, while still requiring high performance in individual and non-financial/ESG-related matters.

In addition, while in the previous plan the scorecard results were used by the Remuneration Committee to determine the annual bonus of Management Board members, there was no direct translation of the previous MbO scorecard results to how the individual Management Board annual bonus was calculated. With the increase of the weight of externally communicated financial targets and a direct translation of the new scorecard results into the individual annual bonus amount, the current remuneration design ensures that interests between the company's strategy and management are aligned.

This is further supported by introduction of a Bonus Entry Condition which is linked to certain KPIs and thresholds as defined in the applicable regulatory Recovery Plan of BAWAG. If any of the defined thresholds is breached for a period of more than three consecutive months within the specific calendar year, the Bonus Entry Condition is not fulfilled.

The following illustration shows the general structure of the Annual Bonus formula.

The below explanations provide further details on each of the variables. Exceptions currently apply to the Chief Risk Officer (CRO) and Chief Administrative Officer (CAO) who, due to their role and functions, do not have any financial targets set.

• Bonus Potential: The Bonus Potential will be determined by the Remuneration Committee at the beginning of each bonus cycle.
• Overall Adjustment Factor: The Overall Adjustment Factor takes into account the financial situation / performance of BAWAG Group as well as further ex ante adjustment factors. KPIs relevant for BAWAG Group's financial situation / performance are in line with the externally communicated targets. Ex-ante adjustment factors include quantitative and qualitative risk assessments (e.g. Risk Bearing Capacity, employee's risk behavior) as well as future developments (e.g. macro-economic risks and/or monetary outlook). The Overall Adjustment Factor is capped at 100%. Negative adjustments may be offset by positive ones resulting in an Overall Adjustment Factor between 0% to 100% (i.e. the Overall Adjustment Factor may be reduced to zero to the extent that an assessment of relevant adjustment factors demonstrates that such reduction is required (ex ante risk adjustment).
• Scorecard Results: The Scorecard Results correspond to results of the individual scorecards as illustrated below. Financial targets will always be tied to externally communicated targets of BAWAG Group. With respect to non-financial/ESG targets, each year a new set of non-financial/ESG targets will be defined by the Remuneration Committee, whereby 10% will be tied based on leadership targets. If the nature of the risk management and compliance roles of Management Board members

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