Citco Bank Nederland N.V. and Subsidiaries · directive is included in the Wft and secondary regulation. The new regulation is primarily designed to The new regulation is primarily

© Citco Bank Nederland, December 2015 Page 1 of 13

Citco Bank Nederland N.V. – Pillar 3: Market Disclosure

Citco Bank Nederland N.V. and

Subsidiaries

Amsterdam

Pillar 3 disclosure report 2015

© The Citco Group Limited, April 2016 Page 2 of 13

TABLE OF CONTENTS

1. INTRODUCTION ........................................................................................................................................................................... 2

2. INTENDED AUDIENCE ................................................................................................................................................................. 3

3. NEW REGULATORY STANDARDS ................................................................................................................................................ 3

4. RESPONSIBILITY FOR PILLAR 3 DISCLOSURE PRODUCTION ..................................................................................................... 3

5. CORPORATE STRUCTURE ............................................................................................................................................................ 4

6. RISK GOVERNANCE AT CBN GROUP ........................................................................................................................................ 4

7. MEDIUM TO BE USED .................................................................................................................................................................. 8

8. CAPITAL INFORMATION .............................................................................................................................................................. 8

9. REMUNERATION POLICY ........................................................................................................................................................... 10

10. FREQUENCY OF UPDATES ......................................................................................................................................................... 13

11. ANNUAL REVIEW ....................................................................................................................................................................... 13

1. Introduction

The Capital Adequacy and Risk Management (Pillar 3) Report of Citco Bank Nederland N.V. and its

subsidiaries (“CBN Group”) contains information that enables an assessment of the risk profile and capital

adequacy of CBN Group. This publication fulfils the requirements of the Basel III framework, as stipulated in

the Capital Requirements Regulation and Directive IV (“CRR/CRD IV”). The CRR/CRD IV is legally enforced by

Dutch law by the Financial Supervision Act (Wft, Wet Financieel Toezicht).

This report contains information about risk management, risk measurement and capital adequacy in

accordance with the requirements in Pillar 3 of the capital adequacy regulations. This report is updated

annually.

The Pillar 3 report is not subject to audit.

In December 2010, the Basel Committee on Banking Supervision published its final standards on the revised

capital adequacy framework known as ‘Basel III’. Basel III has been implemented in the EU through CRD IV

consisting of the CRD IV Directive and the CRR which include a number of transitional provisions. The CRR

entered into force on 1 January 2014, and has direct effect in the Netherlands. The CRD IV Directive was

implemented in Dutch law as per 1 August 2014.

The Basel framework is based on three pillars:

Pillar 1 defines the regulatory minimum capital requirements by providing rules and regulations

for measurement of credit risk, market risk and operational risk. The resulting capital

requirement must be covered by regulatory qualifying own funds.

Pillar 2 addresses CBN Group’s internal processes for assessing overall capital adequacy in

relation to risks (“ICAAP”), as well as the internal process for assessing liquidity adequacy

(“ILAAP”). Pillar 2 also introduced the Supervisory Review and Evaluation Process (“SREP”), by

which the supervisory authority assesses the internal capital adequacy of credit institutions.

Pillar 3 focuses on minimum disclosure requirements, covering the key elements of information

required to assess the capital adequacy of a credit institution.

The second pillar deals with the regulatory response to the first pillar. In the ICAAP, the Internal Capital

Adequacy Assessment Process, CBN Group reviews its own funds together with its risk profile (evaluating its

capital adequacy). Part of this review consists of stressing the CBN Group’s business model using severe, yet

plausible stress scenarios. These firm-wide stress tests consider all material risks and business activities of

CBN Group and cover a wide scope of scenarios. The results are discussed by senior management and the


outcome approved by the Management Board and Supervisory Board. The ICAAP is also discussed with the

De Nederlandsche Bank N.V. (“Dutch Central Bank” or “DNB”) in light of its annual SREP.

The third pillar of Basel II aims to promote greater market discipline by enhancing transparency of

information disclosure. It means that more information on risks, risk management practices and capital

adequacy will be made publicly available.

This Pillar 3 disclosure has been established and approved by the Management Board of CBN Group.

2. Intended Audience

This document is intended for all relevant stakeholders including, but not limited to:

The clients;

The employees;

CBN Group’s Management Board and Supervisory Board;

Its shareholder, Citco Banking Corporation N.V.;

Citco Group Finance, Risk Management and Compliance; and

Dutch Central Bank.

3. New regulatory standards

The European Council adopted capital requirements regulations on 20 June 2013. CRD IV/CRR introduces

European rules for banks and investment firms with respect to prudential requirements and also includes

implementation of the Basel III agreement in European legislation and regulation. In the Netherlands, the

directive is included in the Wft and secondary regulation. The new regulation is primarily designed to

increase the capital buffers of banks, and to improve the quality of these buffers. Moreover, new

requirements are introduced to safeguard the liquidity position of banks. CBN Group did not encounter any

challenges in meeting requirements of the CRD IV. CBN Group has a strong capital base that consists solely

of Core Tier 1 capital. CBN Group’s Tier 1 ratio and/or capital adequacy ratio at year end 2015 was well above

the minimum. Furthermore CBN Group does not expect that the implementation will lead to a large increase

in its risk weighted assets resulting in a lower capital adequacy ratio. CBN Group has selected the

standardized approach for credit risk and the Basic Indicator Approach for operational risk to calculate the

capital requirements under Basel III.

CRR and CRD IV also include a requirement for credit institutions to calculate, report and monitor their

leverage ratios, defined as tier 1 capital as a percentage of total exposure. The Management Board closely

monitors not only minimum capital requirement but also the progress of the leverage ratio. The minimum

requirement of 3% has been set by the DNB although the discussions on the minimum regulatory

requirement continue among regulatory authorities. CBN Group’s leverage ratio as per Dec 31, 2015 is 3.5%,

therefore within the limits.

CRD IV will also include the measure to bring the Basel III liquidity regime into force, including the Liquidity

Coverage Ratio (“LCR”) and the Net Stable Funding Ratio (“NSFR”). Please refer to Liquidity risk section of this

document. CBN Group has implemented systems and methods to regularly monitor its compliance with the

CRD IV and CRR, as well as for the Basel III capital and liquidity requirements.

4. Responsibility for Pillar 3 disclosure production

The following stakeholders are responsible for the delivery of the Pillar 3 disclosure production:


Stakeholder Responsibility

Management Board Overall responsibility

Risk Management Contributor

Financial Controller Overall owner of the report

Compliance Ensure that all applicable laws and regulations in

relation to Pillar 3 disclosures have been complied

with

5. Corporate Structure

The Citco Group of Companies (“Citco Group” or ”Citco”) is a global group of independent financial service

providers serving hedge funds, hedge fund investors, private equity and real estate firms, institutional banks,

listed companies and high net worth individuals. Citco companies service these clients around the world by

offering fund administration, banking, custody and order processing, financial products and corporate and

trust planning solutions.

CBN Group is established and incorporated in Amsterdam. CBN Group is a wholly-owned subsidiary of Citco

Bank Holding N.V., Curaçao, which is ultimately a wholly-owned subsidiary of Citco III Limited, Cayman

Islands (the ultimate parent company).

CBN Group consists of the following Branches and Subsidiaries:

Citco Bank Nederland N.V., Amsterdam, the Netherlands

o Branch Office, Dublin, Republic of Ireland

o Branch Office, Luxembourg, Luxembourg

Citco Bank Canada, Toronto, Canada

Citco Fund Services (Ireland) Ltd., Cork and Dublin, Republic of Ireland

6. Risk governance at CBN Group

Managing risk is considered a key element in running the business of the CBN Group. In order to facilitate

this process the CBN Group uses an Enterprise Risk Management framework (“ERM”). The critical elements of

this framework are the effective and efficient management of the CBN Group’s key risks and the capital

required to support them.

The ERM framework ensures a structured approach to the identification, assessment and mitigation of the

CBN Group’s key risks. An ERM dashboard highlighting the current status of the key risk categories and

related drivers is produced for the Management Board Risk Committee to provide oversight, assess the

capital requirements for each risk category and feed into strategic decision making.

To ensure effective and appropriate process for risk management, internal control and capital management,

The Management Board uses the following risk classifications to identify the material risks faced by CBN

Group:

Strategic Risk;

Credit Risk;

Market Risk;

Liquidity Risk;

Operational Risk; and

Reputation Risk.


The Management Board assesses on an ongoing basis whether these risks are appropriately managed. On a

regular basis, the Management Board reviews the potential impact of these risks on the development of the

business against the approved risk appetite and capital adequacy.

The CBN Group uses a matrix of probability versus impact to arrive at an assessment in one of the following

four Risk Assessment Grades (“RAG”):

RAG Minor Low Medium High

Strategic Risk

The Management Board risk appetite towards Strategic Risk can be classified as ‘Medium’. The Management

Board understands and accepts the fact that in order to realize its strategic objectives some Strategic Risk

exposure is necessary. The Strategic Risk appetite for CBN Group states that the organization does not accept

losses over 50% of the forecasted increase of ‘business as usual’ retained earnings on an annual basis.

The Management Board believes that the probability of a Strategic Risk occurring is unlikely as there is

sufficient mitigation in place for Strategic Risks. However, in the unlikely event that a Strategic Risk would

occur, the impact of that occurrence is deemed to be severe as strategic business objectives can be seriously

threatened. The results of the risk assessment and risk appetite process for Strategic Risk, is depicted in the

table below.

Strategic Risk

Main Risk Sub Category Probability Impact RAG Risk Appetite

Strategic Risk - Unlikely Severe Medium Medium

Credit Risk

CBN Group is very risk averse with respect to counterparty default risk. The Management Board has a ‘Low’

to ‘Minor’ appetite for credit risk. CBN Group must avoid default of counterparties at all times, but takes

some controlled credit risk in order to generate yield. Besides that, the Management Board believes a

conservative collateral management approach is prudent and must be adhered to by the various operational

departments at all times. Lastly, excessive concentration on any counterparty or client needs to be avoided at

all times. The credit risk appetite for CBN Group states that the organization does not accept any unexpected

credit losses.

The probability that credit risk events occur is deemed rare by the Management Board based on actual

historical credit risk occurrences. However, the possible impact of an occurrence of a credit risk event differs

significantly across the risk sub-categories. The impact of client default risk is deemed to be “Minor” as in the

event of a client default the direct lending to clients is collateralized by its assets under custody. The possible

impact of a counterparty default is deemed to be severe as a major counterparty default would have a severe

impact on CBN Group’s capital position. The possible impact related to Concentration Risk is deemed to be

severe as the loss could amount up to EUR 150mm due to the regulatory Large Exposure Rule.

Credit Risk is defined as the current or prospective risk arising from a counterparty’s failure to meet the terms

of any contract with the CBN Group or its failure to perform as agreed. Credit risk is monitored continuously

by reviewing outstanding loans, temporary overdrafts and trade receivables by the account managers. New

extensions of credit are subject to written credit memoranda that must be appropriate to the established

criteria of the credit risk policy approved by the appropriate level of management. CBN Group mitigates

credit risk by choosing only high quality counterparties for liquid funds and FX forwards.


CBN Group has implemented a monitoring methodology which uses the view of the rating agencies on a

counterparty’s probability of default through long term ratings, and the more reactive short-term view of the

credit markets using credit default swap spreads to ensure that CBN Group only deals with highly regarded

counterparties.

Loans to fund-of-funds clients are fully secured with a maximum loan to value ratio of 35% of eligible assets

via a pledge agreement covering the clients underlying securities portfolio held by CBN Group’s separate

custody affiliates. Valuations of these underlying securities are made on a regular basis against industry

norms and a legal entitlement to make margin calls on the client is in place. The loan portfolio is mainly

focused on Europe and the offshore jurisdictions which attract quality mutual and hedge funds providers that

are clients of CBN Group.

CBN Group manages exposure to concentration of credit risk through diversification across high quality

counterparties.

Credit Risk


Credit Risk Client Default Rare Minor Low Low

Credit Risk Counterparty Default Rare Severe Minor Minor

Credit Risk Concentration Risk Rare Severe Minor Minor

Market Risk

CBN Group has a very low appetite towards market risk.

Market Risk is defined as CBN Group’s current or prospective risk to earnings and capital arising from

adverse movements in market variables mainly interest rates and foreign exchange rates. This risk can arise

from dealing and position-taking in securities, currencies, or derivatives (on bonds, securities, currencies, or

commodities).

CBN Group fully hedges Traded Market Risk beyond the small open FX limits and seeks opportunities to

minimise Structural Market Risk on an ongoing basis. The Management Board is of the opinion that only

minor mismatches in interest rates terms are acceptable, as well as for open FX exposures.

Market Risk


Market Risk Traded Market Risk Rare Minor Low Low

Market Risk Structural Market Risk Rare Minor Low Low

Liquidity Risk

The Management Board has a ‘Minor’ risk appetite for Liquidity Risk. CBN Group’s funding and liquidity

position is comprised of own funds in the form of capital and deposits from its clients and clients of other

Citco affiliates which, although repayable on demand have traditionally, in aggregate, provided a stable

source of funding.

CBN Group manages liquidity risk by maintaining adequate reserves, by continuously monitoring forecast to

actual cash flows and matching the maturity profiles of financial assets and liabilities. In addition, CBN Group

manages any counterparty risk in respect of liquidity through its proprietary monitoring methodology.


The overarching measure used to set CBN Group’s liquidity risk appetite is the Liquidity Risk Tolerance

Statement which is based on the Liquidity Stress Test. The Liquidity Risk Tolerance Statement is set in terms

of survival period under three scenarios that are aligned to the regulatory prescribed scenarios; Idiosyncratic,

Market-Wide and Combined scenarios. Three levels of severity (mild, moderate and severe) are run for each

of the scenarios and the Liquidity Risk Tolerance Statement applies to all of them. The Liquidity Risk

Tolerance Statement describes a number of limits designed to ensure compliance at all times with the

minimum survival periods and regulatory requirements. This includes the required size of the liquidity buffer

and of overnight placements.

Liquidity Risk


Liquidity Risk Market Liquidity Rare Severe Minor Minor

Liquidity Risk Funding Liquidity Rare Severe Minor Minor

Operational Risk

CBN Group’s operational risk appetite states that it manages operational activities to avoid a combined

impact that exceeds 15% of gross revenue. This 15% of gross revenue is the combined impact of all

individual risks of the Basel II event types. The results within the 15% gross revenue targets of the risk

assessment and risk appetite process for Operational Risk, including its Basel II event types, is depicted in the

table below.

To ensure that operational risk is adequately controlled, an extensive internal control framework has been set

up. Also, an extensive training program for staff of CBN Group has been introduced to further embed the

Operational Risk Management responsibilities in the first line. In addition, key operational processes are

certified under International Standard on Assurance Engagements (ISAE) No. 3402, Assurance Reports on

Controls at a Service Organisation. An Enterprise Risk Management framework which includes operational

risk has been implemented across CBN Group.

Operational Risk

Main Risk Sub Category Probability Impact RAG Risk

Appetite

Operational Risk Internal Fraud Rare Major Minor Minor

Operational Risk External Fraud Unlikely Major Minor Minor

Operational Risk Employment Practices and

workplace safety Rare Moderate Low Low

Operational Risk Clients, Products & Business

practices Unlikely Severe Medium Minor

Operational Risk Damage to Physical Assets Rare Moderate Low Low

Operational Risk Business Disruption & System

Failure Likely Minor Minor Minor

Operational Risk Execution, Delivery and Process

Management Likely Minor Minor Minor


Reputational Risk

CBN Group has a ‘minor’ risk appetite towards reputational risk. Reputation Risk is the risk related to

perception of trustworthiness of CBN Group. Damage to CBN Group’s reputation can result in loss of revenue

or shareholder value due to adverse perception of CBN Group’s image by clients, counterparties,

shareholders, investors or regulators. Reputation Risk includes Image and Branding Risk, Stakeholder

Relations Risk and Contagion Risk.

The Management Board has assessed reputation risks to be ‘Minor’. The probability of the risk occurring is

assessed as ‘Rare’ with a ‘Severe’ impact.

The outcome of the risk assessment and risk appetite process for Reputation Risk is depicted in the table

below.

Reputation Risk


Reputation Risk Reputation Risk Rare Severe Minor Minor

7. Medium to be used

CBN Group will publish the Pillar 3 report on its website:

Pillar 3 disclosures

http://www.citco.com/divisions/banking-custody/banking-custody-policies

8. Capital information

CBN Group considers it appropriate to disclose information on the following capital aspects to its

stakeholders:

Capital structure and capital adequacy in general;

Credit risk exposure, monitoring and related capital levels;

Market risk exposure, monitoring and related capital levels; and

Operational risk exposure, monitoring and related capital levels.

The principal ratios for reviewing the capital adequacy of CBN Group are the Common Equity Tier-1 ratio and

the Tier-1 ratio. These ratios, which were implemented by the Bank for International Settlements (“BIS”), are

intended to promote comparability between institutions. They are based on the CRR/CRD IV legislation.

To monitor the adequacy of its capital, the regulated banks within CBN Group apply ratios established by the

relevant central banks. These ratios measure capital adequacy by comparing the entity’s eligible capital with

its balance sheet assets, off-balance sheet commitments, and market and other risk positions at weighted

amounts to reflect their relative risk.

Other key areas related to securitization exposures in the trading book, sponsorship of off-balance sheet

vehicles, re-securitization exposures, pipeline and warehousing risks with regard to securitization exposures,

incremental risk capital charge, comprehensive risk capital charge and the stressed value at risk (“VaR”)

requirements are not relevant to CBN Group. CBN Group does not engage in trading activities for its own

account and does not carry a trading book. The capital is tier 1 capital of common stock components only.

Information on other risks will be disclosed as deemed appropriate. This information will include both

qualitative and quantitative information where necessary.

http://www.citco.com/divisions/banking-custody/banking-custody-policies


CBN Group’s Asset & Liability Committee reviews the capital structure on a routine basis. As a part of this

review the committee considers the cost of capital and the risks associated with each business line. Based on

the recommendations of the committee, CBN Group will manage its overall capital structure. CBN Group’s

overall strategy remains unchanged from 2015.

The market risk approach covers the general market risk and the risk of open positions in currencies and debt

securities. Assets are weighted according to broad categories of notional risk, being assigned a risk weighting

in accordance with the amount of capital deemed to be necessary to support them. As of January 1, 2008, in

addition to the risk weighted assets calculation, CBN Group needs to take into account 15% of gross

revenues as an additional capital requirement under Basel-II for operational risk.

Off-balance sheet credit-related commitments and forward exchange contracts and options-based derivative

instruments are taken into account by applying different categories of conversion factors, designed to

convert these items into balance sheet equivalents. The resulting equivalent amounts are then weighted for

risk using the same percentages as for on-balance sheet assets.

CBN and Citco Bank Canada need approval from the regulator in order to be able to pay out dividends to the

parent company. The actual capital ratio of CBN Group for 2015 and prior years meets the minimum

standards in accordance with the supervisory requirements.

At year-end 2015, CBN Group holds a total capital for an amount of EUR 246 million. As at December 31,

2015, the total capital consists of the following elements:

EUR 000

Share capital 5,000

Additional paid-in capital 48,503

Translation reserve 36,589

Revaluation of AFS assets (59)

Retained earnings 155,824

Total 245,857

The total of EUR 245.9 million is classified as Tier 1 capital.

Capital requirements (Pillar 1)

Each month, capital requirements are calculated according to broad categories of notional risk, being

assigned a risk weighting in line with the amount of capital deemed to be necessary to support them as per

the guidelines of the DNB. Four categories of risk weightings (0%, 20%, 50%, 100%) are applied.

As at December 31, 2015, the capital requirements amounted to EUR 58 million (December 31, 2014: EUR 56

million) which consisted of EUR 42 million (December 31, 2014: EUR 43 million) for credit risk, EUR 15 million

(December 31, 2014: EUR 13 million) for operational risk and EUR 0.8 million (December 31, 2014: EUR 0.02

million) for foreign exchange risk.

The Pillar I minimum capital requirement for credit risk is based on the Basel II framework under the

Standardised Approach. CBN Group uses the Basic Indicator Approach to calculate the capital allocated to

Operational Risk.


Internal capital assessment (Pillar 2)

The following table details CBN Group’s management view on additional capital required to cover Pillar 2

risks:

EUR 000

Operational risk -

Strategic risk 11,333

Reputation risk -

Total 11,333

Operational risk

There is no additional Pillar II charge and the Management Board thinks it is sufficient with the Pillar I charge

as a result of the adequate management of operational risk through the internal control framework, which

includes the ERM framwork.

Strategic risk

Strategic Risk is defined as the risk to prospective earnings and capital arising from changes in the business

environment and from adverse business decisions, improper implementation of decisions or lack of

responsiveness to changes in the business environment.

Strategic Risk is identified by the Management Board as a key risk. The Management Board finds it prudent

to apply a capital charge for Strategic Risks under Pillar II.

A capital charge of EUR 11.3 million (USD 12.3 million) has been included for Strategic Risk under Pillar II. This

charge is based on the revenue loss that will occur should the Bank’s top five clients leave the Bank.

Reputation risk

Reputation Risk is the risk related to perception of trustworthiness of the Bank. Damage to the Bank’s

reputation can result in loss of revenue or shareholder value due to adverse perception of the image on the

part of clients, counterparties, shareholders, investors or regulators. Reputation Risk includes Image and

Branding Risk, Stakeholder Relations Risk and Contagion Risk.

There is no charge for reputation risk. CBN Group has a capital buffer of USD 47.2 million (as per 2015 ICAAP)

to cover for other potential risks.

9. Remuneration policy

Vision

The remuneration policy of CBN Group is in line with its strategy and risk appetite, objectives and core

values, complying with the rules and legislation in force, such as the Dutch Banking Code and the Regulation

on Sound Remuneration Policies (RBB Wft 2014 by its Dutch acronym).


The Remuneration Policy reflects the sustained and long-term interests for CBN Group. In addition, it ensures

that:

CBN Group is able to attract, develop and retain high-performing and motivated employees in a

competitive, international market;

employees are offered a competitive remuneration package;

employees act within the risk appetite of CBN Group by making any variable remuneration risk

neutral;

employees feel encouraged to create sustainable results; and

CBN Group’s strategy is supported.

CBN Group strives to reward the Management Board below the median level of the Dutch General Market

and Financial Services Market. For all other employees CBN Group strives to reward at the market level of the

local Financial Services Market.

Identified Staff

Identified Staff are employees whose work has a material impact on the risk profiles of CBN Group.

Identified Staff include CBN’s Management Board, its senior management, staff working in control functions

and other individuals who may have a material impact on CBN Group’s risk profile. The policy also governs

employees at the same or higher pay levels than the Management Board, senior management and/or other

Identified Staff.

Governance

The Supervisory Board has ultimate oversight and responsibility for the Remuneration Policy of CBN

including its branches and subsidiaries, and has appointed a Remuneration Committee to assist in this

regard. The Remuneration Committee shall meet as and when it deems necessary in order to fulfil its duties,

with a minimum of twice per year.

The Supervisory Board approves the general principles underpinning the overall remuneration and oversees

its implementation. Its duty is also to review and approve the remuneration policies governing Identified

Staff and all individual variable remuneration to Identified Staff.

The Management Board sets the Remuneration Policy and is responsible for its implementation. HR, Risk

Management, Compliance and Internal Audit are involved in designing, reviewing and adjusting, and

implementing the Remuneration Policy, and they regularly consult with the Management Board on the

subject.

Performance-based remuneration policy for identified staff: key elements

Variable remuneration: principles

The performance-based remuneration motivates and rewards dedicated performers who contribute

significantly to the realization of CBN Group’s strategic and business targets and long-term interests in their

respective function. The performance-based remuneration is a discretionary management tool and is based

on a combination of the assessment of the employee and the overall result of CBN Group. This remuneration

varies according to the type of position held and is never a “right” as it is not embedded in employment

agreements.


The performance-based remuneration is awarded in a manner which promotes sound risk management and

does not induce excessive risk-taking and respects the risk appetite of CBN Group.

Identified Staff in control functions mainly enjoy fixed remuneration like all other CBN Group employees. If

they receive variable remuneration, this will be linked to mainly job-specific performance criteria that do not

depend on how well CBN Group performs.

The overall CBN Group bonus pool in any year will never exceed 20% of CBN Group’s overall fixed

remuneration of that respective year.

Performance management

At CBN Group, variable remuneration rewards outperformance and performance management therefore has

a crucial role to play. At the start of the year, Identified Staff and their managers agree annual objectives,

reflecting a mix of performance criteria, financial and non-financial, qualitative and quantitative such as:

CBN Group financial performance;

CBN Group non-financial performance; and

Individual performance (including subsidiary performance, if applicable).

Performance criteria never encourage irresponsible risk-taking. A performance review at the end of the year

results in a final assessment, which will be the basis for any variable remuneration employees might receive.

The targets regarding CBN Group will be set annually and depend on the strategic goals. These targets are

set and assessed by the Management Board and approved by the Remuneration Committee. The individual

targets depend on the personal situation and are set and assessed by the hierarchic manager and approved

by the Remuneration Committee.

Payment

Variable remuneration for Identified Staff is subject to deferral. The deferral scheme parameters are applied

prescriptively to Identified Staff as a material portion of variable remuneration must be deferred to ensure

that it remains subject to risk adjustments.

The ratios between the upfront and deferred portion of the variable remuneration for Identified Staff are

linked to job position.

Chairman CBN Group Other Identified Staff

Deferral period 4 years 3 years

Deferred portion 50% 40%

Deferred variable remuneration is vested annually, with equal parts of cash vesting each year. The first

deferred portion of the variable remuneration does not vest sooner than 12 months after the start of the

deferral period. See the table below for an elaboration of such a scheme. No interests are paid during or after

the deferral period.


Year n

Upfront

payment

Year n+1

Deferred

payment

Year n+2

Deferred

payment

Year n+3

Deferred

payment

Year n+4

Deferred

payment

CEO 50% 12.5% 12.5% 12.5% 12.5%

Other Identified Staff 60% 13.33% 13.33% 13.33% N/A

CBN Group has the right to recoup variable remuneration if this is found to have been awarded and paid on

the basis of careless action, incorrect information and/or fraudulent behavior by the employee or former

employee (malus/clawback).

Guaranteed bonus

Only in exceptional cases and only in the first year of employment may CBN Group offer sign-in or

guaranteed minimum bonuses to new employees. CBN Group does not offer any form of guaranteed bonus

or retention bonus to existing employees.

Severance payments

Severance payments are payable in accordance with relevant employment laws and industry specific

regulations, including but not limited to the Dutch Banking Code and the Dutch Corporate Governance Code.

Payments related to early termination of a contract reflect performance achieved over time and do not

reward failure.

Disclosure

Article 25 of RBB Wft 2014 requires annual publication of selected aggregate quantitative remuneration data.

Please refer to the CBN annual report for more information.

10. Frequency of updates

CBN Group will provide quantitative disclosure information on a quarterly basis and the qualitative disclosure

information on an annual basis to its stakeholders. When information on risk exposure, monitoring or capital

levels is significantly changed after filing of the annual report and the Supervisory Board is of the opinion

that the changes need to be communicated to its stakeholders, appropriate disclosures will be made on an

ad hoc basis. It is up to the Supervisory Board to decide on the appropriate medium in such cases.

11. Annual review

This document will be reviewed at least on an annual basis, or in the event deemed necessary more

frequently.

Documents

Citco Bank Nederland N.V. and Subsidiaries · directive is included in the Wft and secondary regulation. The new regulation is primarily designed to The new regulation is primarily