2009-12-10
1. On Minimum Remuneration Policy Requirements for Employees of Credit Institutions
In its support of the European Union initiatives regarding a more stringent regulation of remunerations for the financial services sector, the Board of the Bank of Lithuania approved Minimum Remuneration Policy Requirements for Employees of Credit Institutions.
They have to be observed by banks and foreign bank branches obtaining the licence issued by the Bank of Lithuania, by the Lithuanian Central Credit Union when they set and payout bonuses and other benefits (variable pays) assigned on the basis of performance results to employees whose activity may have a material impact on the risk assumed by a credit institution.It has been established that up to 25 March 2010 each bank is obliged to prepare and approve the policy for setting a variable pay to employees, applicable to the bank and its financial group, and up to 1 April 2010 every bank has to present this document to the Bank of Lithuania.
Responsibility for implementing this policy rests with the board of each bank.On the basis of the Minimum Remuneration Policy Requirements for Employees of Credit Institutions, the banks are obliged to set an appropriate proportion of the variable and fixed pay (of the monthly wages set in the labour contract).
The fixed part of the salary must be a sufficiently large portion of the total wage (of the annual wage composed of the fixed and variable components).Is has been established that the assigned material variable pay component vis -ą- vis the total wage should not be paid in cash immediately - a certain portion of this wage should be allotted to the provisioning period. Such a portion allotted as a provision may be in the form of the right to bank shares, share-related financial instruments or other non-monetary tools. When assigning the variable pay to provisions, current and future risks associated with estimated performance results of the employee are proposed to be taken into account.A possibility of depriving employees of the variable pay component when the activity of a certain person, business unit or bank entails a loss has to be envisaged.The banks have been required to pay much attention to the assessment of performance results and, in particular, to the establishment of the variable pay fund the calculation of which requires the assessment of the performance result, taking into account current and future risks, costs of the used capital and liquidity support.
When assessing a personal contribution of each employee, not only the financial contribution but also non-financial criteria (adherence to internal rules and procedures, standards of relations with customers and investors, etc.) are proposed to be taken into regard. It has been pointed out that performance results of the bank employees have to be assessed on an annual basis. However, when estimating the variable pay grounded on performance results, longer period performance results of employees should be taken into consideration, also possible risks associated with those results have to be taken into account.The banks are obliged to disclose in a clear and understandable way the information important to the public about the implementation of the variable pay setting policy.
Such information may be published as a separate statement or together with annual financial statements.In 2009 the European Commission has approved a recommendation on the remuneration setting policy for the financial services sector. The European Union Member States have been recommended to ensure that the financial institutions operating on their territory would have the remuneration policy for employees making business risk conscious decisions, in compliance with sound and effective risk management principles and encouraging their observance.
The Committee of European Banking Supervisors has approved High-level Principles for Remuneration Policies wherein it laid out the main aspects for the shaping of remuneration policies in banks.Moreover, the draft of amendments and supplements to Directive 2006/48/EC of the European Parliament and of the Council relating to the taking up and pursuit of the business of credit institutions, including provisions for the development and implementation of the remuneration policy in credit institutions, has been elaborated.It is stressed that an appropriate development and implementation of the remuneration policy for employees of credit institutions is the bank management element and the object of the Supervisory Review and Evaluation Process.
2. On the Permission to Register the Amendment to the Articles of Association of the PAREX bankas
The Board of the Bank of Lithuania permitted the Joint-Stock Company PAREX bankas to register an amendment to the latter’s Articles of Association in relation to the increase of its authorised capital to LTL 286 207000 as approved by the bank sole shareholder’s - the Joint-Stock Company of the Republic of Latvia Parex banka - decision on 17 November 2009.
Currently, the authorised capital registered in the Articles of Association of PAREX bankas amounts to LTL 222 677 000 and makes up 2 226 770 ordinary shares with nominal value of LTL 100 each.
The price of the issue of one newly issued share is LTL 100 (total price of the issue of newly issued shares is LTL 63 530 000).
According to documents presented, all newly issued shares of the Joint -Stock Company PAREX bankas were bought by the bank sole shareholder.The bank request indicates that the increase of the authorised capital of the bank will provide a possibility for the bank to further ensure the implementation of the capital adequacy of the bank and the bank group in line with the capital adequacy calculation requirements.
Also, the bank states that the increase of its authorised capital will have a positive impact for meeting prudential requirements and increase the efficiency of its risk management system.