PORTUGAL Law and Practice Contributed by: Pedro Cassiano Santos, Francisca César Machado, Chen Chen and Natalia Fedorova, VdA
exercise of functions with significant influence over the management of a credit institution (namely, those responsible for the functions of compliance, internal audit, control, and risk management) are also subject to the suitability assessment mentioned above. In this regard, the European Banking Author - ity and the European Securities and Markets Authority’s Guidelines on the assessment of the suitability of members of the management body and key function holders, of 2 July 2021, provide important information on the suitability assess - ment. Banco de Portugal adopted these Guide - lines on 29 November 2021, through its Circular Letter No CC/2021/00000058. 4.3 Remuneration Requirements Credit institutions define and implement remu - neration practices based on sound and prudent remuneration policies for all their employees, consistent with the institution’s risk profile and risk tolerance. The remuneration policy covers at least those employees whose professional activities have a significant impact on the credit institution’s risk profile, including: • members of the management and supervisory bodies; • senior management; • heads of significant business units; • individuals responsible for internal control functions; and • employees who work in a significant business unit and whose activities, due to their nature, have a significant impact on the risk profile of that business unit, who earned, in the previ - ous year, a remuneration equal to or greater than EUR500,000 and equal to or greater than the average remuneration given to the members of the management and supervisory
bodies and senior management of the institu - tion. Credit institutions’ remuneration policies must follow certain key principles. These policies should be proportional, taking into account the size and activities of the institution, and should clearly differentiate between fixed and variable remuneration, ensuring the variable part does not exceed the fixed amount. They must also be gender-neutral and uphold the independence of employees in internal control functions, linking their pay to the achievement of specific objec - tives. Additionally, at least half of the variable remu - neration, including deferred amounts, should consist of financial instruments (Banco de Por - tugal may impose restrictions on the types and characteristics of such instruments), and the entire variable component must be subject to malus and claw-back mechanisms. Guaranteed variable remuneration is only allowed in the first year for new hires, and only if there is a strong capital base. The remuneration policy should be published on the institution’s website to ensure transparency. Finally, the management body or remuneration committee should submit the remuneration policy for approval by the man - agement and supervisory bodies at the general meeting of each year. Credit institutions must also establish a remu- neration and performance evaluation policy for individuals who have direct contact with bank customers when marketing deposits and credit products. This policy will also apply to individu - als who are directly or indirectly involved in the management or supervision of those with direct customer contact.
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