Patria Bank : Remuneration Policy for Management April 2024 edition

REMUNERATION POLICY OF THE MANAGEMENT BODY IN PATRIA BANK

S.A

Edition. Revision

April 2021 edition R0

April 2023 edition. R0

April 2024 edition. R0

Date of approval:

26.04.2021

Date of entry into force:Date of approval of the last revision:

26.04.2021

-

27.04.2023

Date of entry into force of the last revision:

-

05.05.2023

Responsible structure: Human Resources

Level of approval: General meeting of the shareholders of the Bank

Table of contents

CHAPTER I. : GENERAL PROVISIONS ........................................................................... 3

I.1. REFERENCE DOCUMENTS: ...................................................................................... 3

I.2. OBJECTIVES ................................................................................................................ 3

I.3. PURPOSE AND SCOPE ............................................................................................... 4

I.4. DEFINITIONS, CLASSIFICATIONS, ABBREVIATIONS, TERMINOLOGY ......... 4

CHAPTER. II: CONTENT PROVISIONS ........................................................................... 7

II.1. GENERAL PRINCIPLES ............................................................................................ 7

II.1.1. GENERAL RULES AND ROLE .............................................................................. 8

II.1.2. GENERAL PRINCIPLES AND MAIN OBLIGATIONS RELATING TO THE

AVOIDANCE OF CONFLICTS OF INTEREST .............................................................. 9

II.1.3. COMPONENTS OF TOTAL REMUNERATION AND APPROVAL POWERS 10

II.2. TRANSPARENCY REQUIREMENTS .................................................................... 14

CHAPTER. I. : GENERAL PROVISIONS

I.1. REFERENCE DOCUMENTS:

External

• - Regulation of the National Bank of Romania no. 5/20.12.2013 on prudential requirements for credit institutions, as amended and supplemented;

• - Regulation No 575/2013 on prudential requirements for credit institutions and investment firms, as amended and supplemented;

• - Government Emergency Ordinance No 99/2006 on credit institutions and capital adequacy, as amended and supplemented;

• - Tax Code adopted by Law No 227/ 2015, as amended and supplemented;

• - EU Regulation 565/2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive;

• - Law 24/2017 on issuers of financial instruments and market operations, with subsequent modifications and additions;

• - Guidance on sound remuneration policies (EBA/GL/2021/04);

• - Guidelines on internal governance (EBA/GL/2021/05);

• - Rules of Organisation and Functioning of Patria Bank S.A.;

I.2. OBJECTIVES

• - Regulation of the framework for granting total remuneration (fixed remuneration and variable remuneration) of the management body (executive directors and directors of Patria Bank S.A.);

• - Establishing the principles underlying the remuneration policy and practice applicable to the members of the Board of Directors and the Committee of Directors in accordance with legal requirements and internal regulations;

• - Development of a performance-based remuneration culture;

• - Linking remuneration with long-term performance;

• - Avoiding excessive risk-taking.

I.3. PURPOSE AND SCOPE

Regulating the framework for granting total remuneration (fixed and variable remuneration) aims to define the regulatory framework, the principles underlying the granting of remuneration, the rules, roles, responsibilities and internal control environment.

The present remuneration policy is harmonised with the relevant legislation and with the Bank's business and risk management strategies in order to stimulate increased economicefficiency through the achievement of individual and collective performance in the medium and long term, thus contributing to effective risk management.

The main purpose of the remuneration policy is to create a system of fixed and variable remuneration for the members of the management body, in which long-term objectives are given priority rather than short-term interests. The policy also provides for the possibility of subsequent adjustments regarding variable remuneration based on risks.

The provisions of this policy apply to members of the management body in a supervisory capacity (members of the Board of Directors), members of senior management (members of the Management Committee).

I.4. DEFINITIONS, CLASSIFICATIONS, ABBREVIATIONS, TERMINOLOGY

TERMS	SIGNIFICATION
DRU	Human Resources Department
CD	Committee of Directors
Director	Member of senior management
CAR	Risk Management Committee
CA	Board of Directors
AGA	General Meeting of Shareholders
BNR	National Bank of Romania
Total annual remuneration	The total annual income, consisting of fixed and variable remuneration, that a member of the governing body receives.
Fixed remuneration	Income received by the member of the governing body for work performed on the basis of a mandate contract as well as on the basis of internal regulations and special legislation, provided that its award/payment is not conditional on a specific individual and collective performance appraisal result, primarily reflecting relevant professional experience and organisational responsibility.
Variable remuneration	Income received (in cash or instruments) as a reward for achieving superior performance. The granting of this type of income is conditional on the combined result of individual performance and collective performance, as well as the Bank's overall result. It can be expressed as a percentage of the fixed remuneration or as a gross total amount in addition to the fixed remuneration.
The annual bonus	The component of variable remuneration that canbe granted for performance achieved during a defined calendar year, payable annually, the award being conditional on the

following interrelated elements: the degree of achievement of individual performance objectives and the degree of collective achievement of objectives. The performance assessment is based on the applicable Internal Rules.
Project bonus	Remuneration component that may be awarded to DC members for the successful completion of a high difficulty project with immediate results, subject to the approval of the payment by the BoD. It may be fixed or variable remuneration depending on the fulfillment of the criteria set for fixed and variable remuneration.
Retention bonus	Variable remuneration granted on condition that members of senior management remain in the institution for a predetermined period of time
Equity-related instruments	Those instruments whose value is based on the value of the share package and which have the share price as a reference point, e.g., stock appreciation rights, synthetic share types.
Payments on early termination of the Mandate Contract/	These are components of total remuneration. They can be variable remuneration if they reward performance or they are fixed remuneration if they represent compensation for early termination under the conditions stipulated in the Mandate Contracts for members of the governing body. The maximum amount of payments that may be granted on early termination of the Mandate Contract is set out in this Remuneration Policy.
Upper limit of total annual remuneration	The maximum amount of total remuneration available in a given year.
Bank	PATRIA BANK S.A.
The management body	The management body in the supervisory function (Board of Directors) and the senior management (Committee of Directors), which ensures the fulfilment of the supervisory and monitoring function of the management decision-making process (BoD) and the management function within the Bank (DC).
Effectiveness	Maximising the results of an activity in relation to the resources used.
Efficiency	Achieving the results of an activity optimally and with adequate resources.
Significant risks	Risks with a significant impact on the Bank's financial and/or reputational situation
Reevaluation of performance based on risk	Reevaluation of performance assessed in relation to the performance measurement period prior to the approval and payment of the portion of performance-related remuneration payable in the form of a deferred payment, taking into account,

on the one hand, any subsequently discovered negative impact or risk in relation to the conduct of the individual concerned and, on the other hand, the financial situation of the financial institution and reduce accordingly the amount of performance-related remuneration deferred and due in justified cases.
Agreement to defer payment of variable remuneration	The practice of deferring the payment of part of the variable remuneration for a period of 5 years from the time of the communication of the bonus/
Malus-type agreement	The practice of adjusting the bonus of a member of the governing body according to performance, which allows the part of the bonus for which entitlement has not yet accrued, but which had already been disclosed, to be adjusted to take account of events subsequent to the disclosure of the bonus.
Clawback agreement	The practice of adjusting the bonus/commission of a member of the governing body according to performance, which allows for the full or partial withdrawal of the bonus for which entitlement has already accrued in order to take into account post-entitlement events (e.g. fraud, misinformation underlying the performance assessment, etc.).
Instruments	Shares or securities giving rise to equivalent ownership rights depending on the legal form of the credit institution in question and, where possible, additional tier 1 or tier 2 own funds instruments as defined in Reg. EU 575/2013 or other instruments that can be fully converted into instruments of the type included in the original or cancelled Tier 1 own funds, which in each case adequately reflect, on an ongoing basis, the credit quality of the credit institution and which are suitable to be used for variable remuneration purposes

CHAPTER II: PROVISIONS OF CONTENT

II.1. GENERAL PRINCIPLES

• • The Bank complies with the legal requirements regarding compliance with and fulfilment of the legal transparency criteria for the remuneration of the management body in order to enable stakeholders to make a credible and reliable assessment of the organisation and its remuneration policy/practice;

• • The remuneration policy is in line with the Bank's business strategy, objectives, values and long-term interests and includes measures to avoid conflicts of interest;

• • In order to establish sound remuneration policies and practices the Risk Management Committee verifies that the incentives provided by the remuneration system take into account risk, capital, liquidity, and the probability and timing of returns;

• • Remuneration is linked to performance, the amount of total remuneration should be based on a combination of individual and collective performance assessment, and both financial criteria (profit and loss account, e.g. expected profit at year end, ROE/ROA), balance sheet structure, for example, should be taken into account when assessing individual performance: total assets; expected loan portfolio balance and prudential criteria, e.g. total solvency/CET1 level, NPE ratio, LCR level, immediate liquidity ratio), as well as non-financial criteria (personal development, compliance with the Bank's systems and controls, involvement in the Bank's business strategies, etc);

• • The remuneration policy for the governing body is gender-neutral, meaning that members of the governing body, regardless of gender, are remunerated equally for the same work or work of equal value;

• • The annual performance bonus should be awarded on the basis of performance appraisal, which performance will be assessed annually in accordance with specific internal regulations to ensure that the appraisal process is based on long-term performance and that the actual payment of the performance-based remuneration components is spread over a period that takes into account the Bank's business cycle and the specific risks of the Bank's business;

• • The payments related to the early termination of a contract reflect performance over time and are designed in a manner that does not reward failure or unprofessional conduct;Total variable remuneration must not limit the Bank's ability to strengthen its capital base or jeopardise compliance with the risk limits established under the risk strategy;

• • Guaranteed variable remuneration must be exceptional and occur only when staff are hired, limited to the first year of their employment, and only when the Bank has a healthy and strong capital base.The Board of Directors is responsible for approving the guaranteed variable remuneration;

• • The variable component of the total (annual) remuneration shall not exceed 100% of the fixed component of the total (annual) remuneration or the maximum level allowed by the National Bank of Romania through orders/measures imposed on the Bank.

• • The performance measurement used to calculate the variable remuneration components must include an adjustment for current and potential risks and take into account the cost of capital and liquidity requirements;

• • Considering that Patria Bank is not a large credit institution as defined in Art. 4 para. (1) item 146 of Regulation (EU) No 575/2013, the variable remuneration may be granted in the form of the immediate component, unless the approval decision provides otherwise;Members of the governing body undertake not to use personal risk hedging strategies or insurance policies related to remuneration and liability to counteract the risk alignment effects set out in this policy and its remuneration arrangements.

• • Members of the management body undertake not to use personal hedging strategies or insurance policies related to remuneration and liability to counteract the risk alignment effects provided for in this policy and its remuneration arrangements.

• • Reward according to quantity and quality of work (principle of annual bonuses based on performance appraisal, financial and non-financial criteria);

• • Rewarding superior performance - superior performance should be rewarded with a significant amount that makes a difference to normal pay, but sufficiently prudent so as not to encourage risk-taking that exceeds the Bank's risk tolerance;

• • Considering the Bank's performance, as well as the legal provisions referring to the fact that credit institutions must have a fully flexible policy on variable remuneration, which allows the variable remuneration to decrease as a result of negative performance, even down to 0, the general remuneration policy applicable to the management body will be established for each year. Thus, this remuneration policy regulates both fixed remuneration and performance-related variable remuneration, in which context specific Procedures will be developed;

• • Up to 100% of the variable remuneration is subject to malus and clawback arrangements indifferent to the type of variable remuneration (with the exception of guaranteed variable remuneration);

• • Malus-type agreements apply to both cash and instrument portions of deferred remuneration. Malus arrangements operate by affecting the vesting process and cannot operate after the end of the deferral period. The arrangement takes into account the underlying performance risk outcomes of the bank as a whole, the organisational structure and where possible the employee;

• • The clawback agreement usually applies only in case of discovery of fraud or misleading information, serious breach of internal regulations and/or damage to the bank and applies to both immediate and deferred variable remuneration. The maximum period up to which the clawback agreement can be implemented is 3 years from the date the variable remuneration (cash and/or non-cash) becomes payable; Variable remuneration is not paid through instruments or methods that facilitate the avoidance of the requirements of this policy;

• • Any form of variable remuneration is suspended when the Bank no longer meets the minimum levels of prudential indicators set by the NBR. BUT will inform the DRU when such a situation exists so that the bonus payments are not submitted for approval.

In the situation where members of the management body are eligible for performance-related remuneration, the level of their remuneration must be subject to relevant and objective conditions and must not be excessively correlated with the short-term performance of the credit institution. The Board of Directors will finalise the framework for setting and assessing annual performance targets;

Deferred sums may not be paid through an accelerated procedure at the same time as the termination of the mandate contract, unless this contract is terminated due to death.

Regarding the Remuneration Policy applicable to non-executive members of the Board of Directors, the most important remuneration principles are:

• - To provide competitive remuneration commensurate with the commitment and responsibilities required;

• - The amount of remuneration is calculated in such a way as to reward their commitment, but at the same time not to constitute an impediment to their independence;

• - In case new members are appointe to the Board of Directors, as long as this Remuneration Policy is in force, they will benefit from the same principles in calculating and granting remuneration as described above;

• - If non-executive members are granted variable remuneration, in order to guarantee total independence in the fulfilment of their mandate, the non-executive members of the Board of Directors will only benefit from the stock option plan, calculated according to the indicators established in this policy.

II.2. Governance and decision-making process

The Management Body Remuneration Policy and any significant changes to this Policy shall be subject to approval by the Ordinary General Meeting of Shareholders, and shall be updated at least every 4 years. Considering that the legal provisions on remuneration emphasize that remuneration policies and practices must take into account the risk perspective, it is very important to actively involve the control functions in the design, supervision and review of remuneration policies in accordance with specific internal regulations and applicable legislation;

The control functions and the Human Resources Directorate are involved in the design of the Bank's remuneration policy. The coordinators of the control functions will forward to the Human Resources Directorate the evaluation of the present remuneration policy and the proposals for its modification (if necessary), thus contributing to the determination of the general remuneration strategy applicable to the Bank. Specific responsibilities are detailed in the internal regulatory framework of Patria Bank S.A;

• - The remuneration policy of the management body promotes and is consistent with sound and effective risk management without encouraging risk-taking that exceeds the Bank's risk tolerance;

• - Remuneration policy and practices should be clear, well documented and transparent.

The role of the Human Resources function includes:

• - Developing the remuneration policy for the management body and presenting it to the AGM for approval;

• - Monitoring the consistent application and implementation of the remuneration policy;

• - Verifying, before the payment of variable remuneration, that the eligibility criteria, outlined in this policy are met.

The role of independent control functions:

• - the risk management function must assess how the variable remuneration structure (if to be awarded under external/internal regulations) takes into account risk, capital, liquidity, and the likelihood and timing of returns and report annually to the Risk Management Committee. Also to review annually the impact of variable payments on the capital base (at the time of review), as well as the projected impact of variable payments on solvency ratios, based on information received from DRU and Accounting and make recommendations (to the DC, RAC and AC);

• - prior assessment of the compensation paymentsfalling under the category of variable remuneration, in the context of early termination of mandate contracts, by the risk management function, to be paid by the Bank, to ensure compliance with risk, capital and liquidity indicators;

• - the compliance function should analyse whether the remuneration policy complies with the requirements of legal rules and internal regulatory documents;

• - the internal audit function must periodically conduct an independent audit of the design, implementation and effects of the Bank's remuneration policies as per chapter 2.5 of EBA/GL/2015/22;

• - the independent control functions shall endorse this policy before sending it to the competent bodies for endorsement and approval.

The role of the Risk Management Committee:

• - reviews whether the incentives provided by remuneration policies and practices take into account risk, capital, liquidity, and the likelihood and timing ofprofits;

• - reviews the remuneration report of the members of the governing body on a semi-annual and annual basis;

• - evaluates the remuneration policy and practices prior to the implementation of this remuneration policy (endorses the remuneration policy before it is submitted to the AGM for approval).

The role of the Board of Directors:

• - approve fixed and variable remuneration (if there is no prohibition to grant variable remuneration) of DC members depending on the outcome of the annual periodic evaluations according to internal regulations ( knowledge, skills and experience of each member of the governing body).

• - endorses the remuneration policy of the management body;

• - reviews the annual report on the remuneration of the members of the Governing Body.

The role of the General Meeting of Shareholders:

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approves the annual budget for the remuneration of the members of the governing body;

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