Region

Jurisdiction

Regulator

2026-01-01

Decision on Remuneration in Credit Institutions

The Council of the Central Bank of Montenegro issued this Decision to establish binding principles for remuneration policies in credit institutions, specifically targeting employees with a material impact on the institution's risk profile. The regulation mandates the implementation of deferral and retention mechanisms for variable remuneration, alongside strict requirements for gender-neutral policies and the alignment of incentives with long-term risk management. It further delineates the supervisory board's approval powers and the specific roles of control functions in ensuring that remuneration practices support the institution's risk appetite and corporate governance framework.

Montenegro

Central Bank of Montenegro

[unofficial translation] Pursuant to Article 44 paragraph 2 item 3) of the Central Bank of Montenegro Law (OGM 40/10, 6/13, 70/17, 125/23) and Article 124 paragraph (5) of the Law on Credit Institutions (OGM 72/19, 8/21, 24/25), the Council of the Central Bank of Montenegro, at its meeting held on 25 July 2025, passed the following DECISION ON REMUNERATION IN CREDIT INSTITUTIONS I. GENERAL PROVISIONS Subject matter Article 1 This Decision governs the basic principles for establishing the remuneration policies, the rules, procedures and criteria related to remuneration policies in credit institutions, including the criteria for determining significant business unit and the criteria and categories of employees who have a material impact on the risk profile of the credit institution, and the manner of reporting to the Central Bank of Montenegro (hereinafter: the Central Bank) on the remuneration. Employees who have a material impact on the risk profile of the credit institution Article 2 (1) An employee who has a material impact on the risk profile of the credit institution (hereinafter: the identified employee) shall be an employee whose professional activities have a material impact on the risk profile of a credit institution on an individual or group basis, in accordance with the criteria prescribed by this decision or additional criteria defined by the credit institution. (2) An employee, within the meaning of this Decision, shall be any natural person who, based on an employment contract or other contract concluded with the credit institution, performs certain activities for the credit institution, including a member of the supervisory board of the credit institution. (3) The provisions of this Decision shall also apply to persons who are, based on the employment contract or other contract concluded with the outsourcing provider that is a member of the group of credit institutions, directly involved in the provision of such services, and who may have material impact on the risk profile of that credit institution. (4) A credit institution may apply to all employees the provisions of this decision that refer to identified employees, on individual, consolidated and sub-consolidated basis.

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Decision on Remuneration in Credit Institutions (OGM 94/25) 2 Remuneration Article 3 (1) Remuneration, within the meaning of this Decision, means all forms of remuneration, payments and benefits on gross basis, monetary or non-monetary, awarded directly to an identified employee by the credit institution, and they shall also include indirect payments and benefits provided to an identified employee of the credit institution by the parent undertaking of the credit institution or other related undertakings of the credit institution for professional services rendered by that employee for the credit institution. (2) Dividends paid to an identified employee as a shareholder of a credit institution or interests paid to an employee on the basis of other vested instrument or investments shall not be regarded the remuneration within the meaning of paragraph (1) of this Article and may not be used as a payment method for variable remuneration which would circumvent the provision of Article 27 of this Decision. (3) Remuneration shall consist of fixed and variable remuneration. Deferral and retention of remuneration Article 4 (1) Remuneration deferral, within the meaning of this Decision, means a contractual clause under which variable remuneration is not paid immediately after the accrual period. (2) Remuneration deferral, within the meaning of paragraph (1) of this Article, shall be performed if:

remuneration is not paid out or instruments are not vested to the identified employee, and
a malus clause has been contracted. (3) Deferral period shall mean the period of time between the award and the vesting of the variable remuneration during which an identified employee is not the legal owner of the remuneration awarded. (4) A deferral period shall start with the payment of the portion of the variable remuneration component that is not deferred or the vesting of instruments that are not subject to deferral, if the total payment of variable remuneration is deferred, a deferral period shall start on the date of the award of variable remuneration, and it shall end with the payment of the last portion of the deferred variable remuneration component or the last vesting of instruments that are subject to deferral. (5) Remuneration retention, within the meaning of this Decision, means a contractual clause under which an identified employee agrees not to sell or otherwise access variable remuneration that has been already vested and paid out in the form of instruments during a prearranged retention period.

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Decision on Remuneration in Credit Institutions (OGM 94/25) 3 (6) Retention period, within the meaning of this Decision, means a period of time during which an employee shall retain variable remuneration paid out in the form of instruments. (7) Retention period referred to in paragraph (6) of this Article shall start with the vesting of instruments, and if instruments are subject to deferral, a retention period shall start with the vesting of these instruments for each deferred portion of remuneration, and during the retention period, an identified employee may not sell or otherwise access those instruments. Meaning of terms Article 5 The terms used in this Decision shall have the following meaning:

bonus pool means the highest amount of variable remuneration that may be awarded in the remuneration award process set at the level of the credit institution or a credit institution's organisational unit;
accrual period means a period for which the performance of an identified employee, an organisational unit and a credit institution is assessed and measured for the purpose of determining the variable remuneration of employees;
award means the granting of variable remuneration for a specific performance accrual period independently of the actual point in time when the awarded amount is paid;
vesting of variable remuneration is the action by which an identified employee becomes the owner of the allocated variable remuneration, regardless of the means used for payment or in the case where the payment is subject to additional deferral periods or clawback mechanisms;
instruments mean financial instruments or other instruments referred to in Article 41 paragraph (3) of this Decision;
share-linked instruments mean instruments whose value is based on the market price of shares or, where market price of shares is unavailable, on their fair value;
malus means a contractual clause under which an identified employee agrees that a credit institution is not obliged to pay out or vest a part of the deferred unpaid variable remuneration or the whole of the deferred unpaid variable remuneration if the previously assumed risks lead to a downturn in performance or subdued financial performance of the credit institution;
clawback means a contractual clause under which an employee is obliged to return ownership of an amount of variable remuneration, either paid out or vested, to the credit institution if the previously assumed risks lead to a downturn in performance or subdued financial performance, and such provision may be contracted for deferred and non-deferred variable remuneration;
vesting means the effect by which the identified employee becomes the legal owner of the variable remuneration awarded, independent of the instrument which is used for the payment or if the payment is subject to additional retention periods or clawback arrangements; 10)risk profile means the measure or assessment of all risks a credit institution is or

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Decision on Remuneration in Credit Institutions (OGM 94/25) 4 might be exposed to in its operation; 11)risk culture means norms, attitudes, competencies and behaviour related to risk awareness, risk taking and risk management as well as controls based on which risk related decisions are adopted; 12)risk appetite means the level and type of risk a credit institution is willing to take within its ability of risk taking to accomplish its strategic objectives; 13)extraordinary public financial support means a state aid, granted in accordance with the law governing the control of state aid provision, provided with the aim to preserve or restore sustainability, liquidity or solvency of a credit institution or a group that the credit institution is a part. 14)prudential consolidation means the application of the prudential requirements set out in the Law on Credit Institutions (hereinafter: the Law) and the regulation governing the capital adequacy of credit institutions on a consolidated or subconsolidated basis; 15)fixed remuneration means remuneration to be paid to employees which comply with the conditions for its award referred to in Article 15 of this Decision; 16)upfront payments mean payments which are made immediately after the accrual period and which are not deferred in accordance with this decision; 17)gender-neutral remuneration policy is a remuneration policy based on the principle of equal pay for equal work or work of equal value for male and female employees; 18)routine employment packages mean ancillary components of remuneration that are obtainable for a wide population of employees or employees in specified functions based on predetermined selection criteria, including, for example, healthcare, child care facilities or proportionate regular pension contributions on top of the mandatory regime and travel allowance; 19)variable remuneration means all remuneration which is not fixed in accordance with this decision; 20)non-revolving multi-year accrual period means a multi-year accrual period that does not overlap with other multi-year accrual periods; 21)significant business unit means a separate organisational or legal entity, business line or business unit in a geographical location, which meets one of the following conditions:

the business unit in the internal capital allocation of the credit institution is allocated at least 2% of that capital, or the credit institution has otherwise assessed the business unit as having a significant impact on the internal capital of the credit institution;
it is a core business line determined in accordance with the law governing the resolution of credit institutions.

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Decision on Remuneration in Credit Institutions (OGM 94/25) 5 II. ESTABLISHMENT, IMPLEMENTATION AND REVIEW OF REMUNERATION POLICY Principle of proportionality Article 6 (1) A credit institution shall, when establishing the remuneration policy, apply the principle of proportionality when meeting the obligations set out in Articles 7 to 44 and Article 47 of this Decision, taking into account its size, internal organisation, nature, scale and complexity of its business activities. (2) For the purpose of applying the principle of proportionality referred to in paragraph (1) of this Article, a credit institution shall take into consideration the following criteria:

balance sheet and the structure of profit and loss account;
available equity and debt instruments;
the authorisation to use internal methods for the calculation of capital requirements;
the proportionality assessment done for the group, if the credit institution is part of a group of credit institutions in Montenegro;
the type of services offered to clients and type of clients (e.g., households, legal persons, public sector entities);
the business strategy, the structure of the business activities and the time horizon, measurability and predictability of the risks of the business activities;
the funding structure;
the internal organisation, including the level of variable remuneration that can be paid to identified employees;
the complexity of the products or contracts. 10)the geographical presence and the size of the operations in each jurisdiction; and 11)the fulfilment of the criteria for small and non-complex credit institution. (3) When applying the principle of proportionality, a credit institution shall establish remuneration policy which is aligned to its business strategy, objectives, values and longterm interest of the credit institution considering its risk profile, risk appetite and financial position of the credit institution. (4) Before remuneration policy is established in accordance with paragraphs (1) and (2) of this Article, a credit institution shall determine identified employees that have a material impact on the risk profile of the credit institution, the limitation of the maximum ratio between the variable and fixed components of total remuneration in accordance with Article 22 of this Decision and employees in the subsidiary undertakings of the credit institution having its head office in Montenegro which are in the scope of prudential consolidation, including employees in the subsidiary undertakings that are not subject to the application of this Decision, provided that these employees have a material impact on the group's risk profile. (5) A credit institution shall, at the request of the Central Bank, explain the manner in which carried out the analysis of the criteria referred to in paragraphs (2) and (3) of this

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Decision on Remuneration in Credit Institutions (OGM 94/25) 6 Article and submit all relevant documentation. Powers in the implementation of remuneration policy Article 7 (1) The supervisory board of the credit institution (hereinafter: the supervisory board), in respect of the remuneration policy, shall:

approve exemptions from the established remuneration policy rules made for individual employee;
adopt the decision on the maximum amount of variable remuneration which is determined for all employees in the business year for a certain accrual period,
adopt the decision on the remuneration, on individual basis, for the members of the management board of the credit institution (hereinafter: the management board) and, in the cases where the remuneration committee was not established, adopt the decisions and oversee the implementation of the decisions on remuneration for senior management in the independent control functions, including the risk management and compliance functions;
adopt the decision on the reduction or termination of variable remuneration to employees, including the application of malus or clawback clauses in case of a significant downturn in performance or losses of the credit institution in accordance with Article 39 of this Decision; and
adopt the decision on awarding the severance payments, including the maximum amount or criteria for the determination of such amounts that may be awarded as severance payments to employees. (2) The exemption referred to in paragraph (1) item 1) of this Article must take into consideration gender neutral remuneration policy and should be well reasoned. (3) The supervisory board shall ensure that the credit institution’s remuneration policies and practices are appropriately implemented and aligned with the credit institution’s overall corporate governance framework, corporate and risk culture, risk appetite and the related governance processes. (4) The management board may, in accordance with the remuneration policy establish remuneration for the employees on group basis. (5) The supervisory and management boards and, where established, the remuneration and the risk committees shall work closely together and ensure the consistency of the remuneration policy that provides for an effective framework for performance measurement, linkages of performance to reward, risk adjustment and effective risk management.

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Decision on Remuneration in Credit Institutions (OGM 94/25) 7 Information for the general shareholders assembly of credit institution Article 8 (1) By way of derogation from Article 7 this Decision, where a credit institution's articles of association established that the general shareholders assembly of a credit institution approves the remuneration policy and that it adopts the decisions related to the remuneration of management board members, including the amounts of severance payments which may be awarded to management board members or the criteria for the determination of such amounts, the supervisory board shall provide the general shareholders assembly of the credit institution with the decision proposals and information necessary for the adoption of that decision. (2) In case referred to in paragraph (1) of this Article, for the purposes of determining the maximum amount of variable remuneration, the supervisory board shall submit to the general shareholders assembly in timely fashion a detailed information regarding remuneration policies and decision-making processes, particularly regarding the types, main characteristics and objectives of remuneration and their alignment with the business strategy and risk management strategy. (3) The information referred to in paragraph (2) of this Article shall in particular contain data on the following:

individual remuneration components;
main characteristics and objectives of the remuneration packages and their alignment with the business and risk strategies, including the risk profile and corporate values of the credit institution;
the manner of ensuring gender neutrality of the remuneration policy;
the method of rendering decision on components referred to i item 2) of this paragraph in ex ante/ex post adjustments, in particular for identified employees. Roles of credit institution’s control functions and other organisational units in the drawing up and implementation of remuneration policy Article 9 (1) When carrying out activities referred to in Article 7 paragraph (2) of this Decision, the supervisory board shall include in an appropriate manner the control functions, relevant business units and internal functions of the credit institutions responsible for human resources, legal, strategic planning, and budget function. (2) Organisational unit responsible for the human resources shall participate in the drawing up and the evaluation of the remuneration policy including the remuneration structure, the aspect of gender neutrality, remuneration levels and incentive schemes, in order to ensure adequate structure of employees of the credit institution and alignment of the remuneration policy with the risk profile of the credit institution, and give adequate proposals and reports thereof to the credit institution's management bodies and relevant functions for the decision-making purposes.

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Decision on Remuneration in Credit Institutions (OGM 94/25) 8 (3) The risk management function shall participate in the following:

the determination of appropriate criteria for the adjustment of variable remuneration depending on the performance of the credit institution and risks to which it is exposed, including malus and clawback;
the assessment of the manner in which the variable remuneration structure affects the credit institution's risk profile and culture; and
the assessment and validation of risk adjustment data together with the members of the remuneration committee. (4) The compliance function shall analyse the effects of the remuneration policy on the credit institution’s compliance with regulations, internal policies and risk culture and report all identified risks of non-compliance to the management body. (5) The risk management and compliance functions shall provide effective input in accordance with their roles into the setting of bonus pools, performance criteria and remuneration awards. (6) The supervisory board shall take into account the reports of the compliance function referred to in paragraph (4) of this Article during the procedures of granting authorisation for the remuneration policy, and the oversight of that policy. (7) The internal audit function shall carry out an independent review of the development, implementation and effects of the credit institution’s remuneration policy on risk profile of the credit institution and the manner the remuneration policy is implemented. (8) Within a group context, the competent control functions within the parent credit institution and subsidiary undertakings shall interact and exchange information as appropriate. Remuneration policies in group Article 10 (1) A parent credit institution with head of credit institutions in Montenegro which is a parent undertaking in a group of credit institutions in Montenegro shall establish for that group a remuneration policy at group level and ensure its implementation in subsidiary undertakings that are covered by prudential consolidation in accordance with the provisions of the Law governing meeting of requirements and supervision on consolidated basis. (2) A credit institution that is a member of the group referred to in paragraph (1) of this Article shall establish a remuneration policy in line with the remuneration policy at a group level. (3) When establishing a remuneration policy referred to in paragraph (1) of this Article, a parent credit institution in Montenegro shall take account of the following:

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Decision on Remuneration in Credit Institutions (OGM 94/25) 9

the size, internal organisation and the nature, scale and complexity of activities of subsidiary undertakings, taking account of the level of risk that an individual subsidiary undertaking poses for that group of credit institutions;
possible differences between business models of the parent credit institution and its subsidiary undertakings;
possible differences between management systems of the parent credit institution and its subsidiary undertakings;
business activities in other financial sectors, where members of the group of credit institutions in Montenegro carry out activities that are not covered, and
gender neutrality and other circumstances which the credit institution deems relevant. (4) Where the provisions of other regulations, the application of which is required by a subsidiary undertaking included in prudential consolidation, regulate the remuneration policy requirements in a manner other than provided for in this Decision, the provisions of this Decision shall apply to that subsidiary undertaking only in the part governing the ratio between the variable and fixed components of total remuneration. (5) A parent credit institution referred to in paragraph (1) of this Article shall provide the following to a subsidiary undertaking with head office in a third country, if that subsidiary undertaking, if it were in the European Union, would not be subject to the application of specific regulations on remuneration in accordance with other laws of the European Union, and which is included in the prudential consolidation:
set the maximum level of the ratio between the variable component of remuneration and the fixed component in the group-wide remuneration policy and ensure the use of instruments referred to in Article 41 of this Decision for the purpose of variable remuneration pay-out, unless this would be contrary to the regulations of the third-country in which subsidiary undertaking is established, and
ensure that the remuneration policy of that subsidiary undertaking is consistent with the group-wide remuneration policy applied to:

all employees,
identified employees in a subsidiary undertaking whose professional activities have material impact on risk profile of the group. (6) The provisions of this Decision shall also apply to short-term contracts, or posting of workers abroad, and secondments in credit institution with head office in Montenegro. (7) Competent authorities in parent credit institution and subsidiary undertakings shall exchange information as needed related to the drawing up, adoption, implementation, review and validation of the remuneration policy. Remuneration policy review and implementation monitoring Article 11 (1) Supervisory board, or the remuneration committee is established, shall review at least on an annual basis the compliance of the remuneration policy with the credit institution's

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Decision on Remuneration in Credit Institutions (OGM 94/25) 10 policies and procedures for remuneration, and monitor its implementation. (2) When reviewing and monitoring the remuneration policy referred to in paragraph (1) of this Article, the following shall be in particular considered:

whether remuneration pay-outs are aligned with the remuneration policy and whether they adequately reflect the credit institution's risk profile, long-term interests and other objectives;
whether they are in line with Article 167 paragraph (2) item 2) of the Law and whether they limit the credit institution's ability to maintain or increase its capital;
whether employees continue to meet the criteria based on which they have been identified as identified employees in line with the provisions of this Decision. (3) In addition to the activities referred to in paragraph (2) of this Article, the supervisory board or remuneration committee of parent credit institution in group of credit institution in Montenegro shall at least on annual basis review whether the established group-wide remuneration policy is consistently applied across the group. (4) When carrying out the procedure referred to in paragraph (2) item 1) of this Article, the supervisory board or remuneration committee, other relevant internal organisational units of the credit institution (responsible for human resources, legal, strategic planning activities, etc.), as well as other key working bodies supervisory board. (5) If deficiencies in the remuneration policy or its implementation are identified in the course of the review of the remuneration policy, the supervisory board or remuneration committee shall adopt a remedial plan without delay, and the management board shall implement such plan. (6) By way of derogation from paragraph (1) of this Article, a supervisory board of the credit institution that is not deemed to be significant may entrust the activities referred to in paragraph (1) of this Article partially or in full to an outsourcing provider based on the outsourcing agreement in accordance with the Law and the regulation governing the outsourcing. (7) A report shall be prepared on the verification procedure referred to in paragraph 1 of this Article, containing the findings of the verification and the measures taken to eliminate the identified non-compliances, and shall be submitted to the supervisory board and the management board, the working bodies of the supervisory board and the control functions. (8) The internal audit function of the parent credit institution in Montenegro shall review the compliance of the remuneration policy with regulations, policies of the group, procedures and internal rules, and assess the compliance of its implementation for a group of credit institutions in Montenegro. (9) A credit institution that is not significant, but is a subsidiary undertaking in a group of credit institutions in Montenegro may entrust the review referred to in paragraph (8) of

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Decision on Remuneration in Credit Institutions (OGM 94/25) 11 this Article to the internal audit function of the parent credit institution in Montenegro, provided that the following conditions are met:

the subsidiary undertaking is included in the review on a consolidated basis; and
review results are available to the supervisory board of that subsidiary undertaking. (10) A significant credit institution means a significant credit institution specified in a separate regulation of the Central Bank. (11) A credit institution shall monitor the development of the gender-neutral remuneration policy in remuneration separately for:
identified employees, excluding members of the management and supervisory boards;
members of the management board,
members of the supervisory board; and
other employees. (12) In the event that a credit institution, in the procedure referred to in paragraph (11) of this Article, determines the existence of a material difference between average earnings based on gender, it shall:
document the main reasons and take appropriate action, or
demonstrate that the difference does not result from a remuneration policy that is not gender neutral. Internal transparency Article 12 (1) The remuneration policy and procedures for the implementation of remuneration policy must be clear, well documented and accessible for all employees. (2) A credit institution shall inform each employee of the provisions of the remuneration policy and the procedures for its implementation, and in particular of the provisions applicable to that employee, the criteria used to assess the impact of the tasks within their competence on the credit institution's risk profile and their variable remuneration. III. REMUNERATION POLICY PRINCIPLES AND RULES Remuneration policy rules Article 13 (1) The remuneration policy in a credit institution should:
be consistent with and promote sound and effective risk management or it should not encourage risk-taking that exceeds the level of its tolerated risk;
be consistent with the objectives of the credit institution's business and risk strategies, including environmental, social and governance risk-related objectives, values and long-term interests of the credit institution and measures to prevent conflicts of interest;

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Decision on Remuneration in Credit Institutions (OGM 94/25) 12 3) encourage the credit institution's ability to maintain or increase the amount of its capital; 4) provide for an effective framework for performance measurement, risk adjustment and the linkages of performance to reward of employees; 5) be in line with long-term interests of credit institution’s shareholders; and 6) be in line with their overall risk appetite, taking into account all risks, including reputational risk and risks resulting from the mis-selling of products. (2) It shall be deemed that the remuneration policy encourages risk-taking that exceeds the level of tolerated risk of the credit institution referred to in paragraph (1) item 1) of this Article, where:

there is an inappropriate ratio between variable and fixed components of total remuneration; or
payments related to the early termination of an employment contract do not reflect overall performance results of the employees or do not take account of the behaviour of the employees contrary to regulations or internal acts of the credit institution. (3) A credit institution's remuneration policy shall contain the following:
the performance objectives for the credit institution, business areas and employees;
the methods for the measurement of performance, including the performance criteria for control functions, organisational units and employees;
all types of remuneration, including the structure of variable remuneration;
instruments in which variable remuneration is awarded, including the potential conflicts of interest that might be caused by the pay-out of instruments as part of the variable remuneration;
measures to reduce variable remuneration; and
remuneration framework for persons in charge of concluding contracts and performing legal acts in the name and for the account of the credit institution to ensure that remuneration pay-outs do not encourage excessive risk taking or misselling of products of that credit institution in any manner whatsoever. (4) A credit institution shall identify circumstances and situations that may lead to potential conflicts of interest with regard to the remuneration policy in the case of employees, including employees in control functions, particularly with regard to the pay-out of fixed and variable remuneration in instruments, and take measures to prevent such conflicts of interest, including in particular:
establishing of objective award criteria based on the internal reporting system and appropriate control and the four eyes principle; and
acting in line with regulations governing the capital market, particularly the provisions prohibiting insider dealing and market manipulation. (5) Upon request by the Central Bank, a credit institution shall demonstrate that its remuneration policy and practices are in line with sound and effective risk management.

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Decision on Remuneration in Credit Institutions (OGM 94/25) 13 (6) Where an employee of a credit institution is also a majority owner of a credit institution or a subsidiary undertaking of that credit institution, the remuneration policies of the credit institution, on an individual and/or group basis, including in subsidiaries, shall be adapted to the specific situation of those credit institutions or subsidiary undertakings. (7) The remuneration policy and all related working conditions that affect remuneration, whether per unit of measurement or time, shall be gender neutral and shall cover all aspects of the remuneration policy, including the conditions for awarding and paying remuneration, and shall be demonstrable. (8) When determining remuneration in accordance with paragraph (7) of this Article, the credit institution shall take into account the remuneration granted, working hours, the duration of annual leave and other financial and non-financial benefits of employees, and shall take into account the annual gross remuneration of employees calculated on a fulltime equivalent basis as the unit of measurement. (9) For the purpose of monitoring the implementation of a gender-neutral remuneration policy, the credit institution shall appropriately document the classification of employees according to employee categories. (10) The employee categories referred to in paragraph (9) of this Article may be determined in relation to job descriptions, by defining salary categories for all employees or a specific group of employees or according to positions considered to be of equal value (by implementing a job classification system, taking into account, as a minimum, the type of job and the duties assigned to that job or employee), and must be based on gender neutrality. (11) A credit institution may consider also additional aspects when determining the remuneration of employees, taking into consideration on gender neutral remuneration policy:

educational, professional and training requirements, skills, effort and responsibility, work undertaken and the nature of tasks involved;
the place of employment and its costs of living;
the hierarchical level of employees and if employees have managerial responsibilities;
the level of education of employees;
the scarcity of employees available in the labour market for specialised positions;
the type of the employment contract;
the length of professional experience of employee;
professional certifications of employees;
appropriate benefits, including the payment of additional household and child allowances to employees with spouses and dependent family members.

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Decision on Remuneration in Credit Institutions (OGM 94/25) 14 Criteria for determining fixed and variable remuneration Article 14 In its remuneration policy, a credit institution shall establish the criteria for determining fixed and variable remuneration components whereby:

fixed remuneration primarily reflects adequate experience and responsibilities arising from a description of an employee's job position,
variable remuneration reflects employee’ performance that is within the level of risk acceptable to the credit institution and which exceeds the standard expected in performing that job position. Fixed remuneration Article 15 (1) Fixed remuneration shall be considered remuneration which:
is based on predetermined criteria;
reflects the level of adequate experience, seniority of employees in accordance with the Law and other criteria set out in the credit institution's internal acts;
is transparent in case of the award of each individual amount to each employee;
is paid out on an ongoing basis over a period tied to the position of employees in the organisational structure, the powers and responsibilities arising from that position;
is permanent, and changed due to the changes of regulations governing the employment relationships or the employment contract;
cannot be reduced, temporarily suspended in full or partially except in accordance with regulations governing the employment relationships and other regulations;
does do not provide incentives for risk assumption;
does not depend solely on performance; and
does not depend on a discretionary decision. (2) The following types of remuneration shall also be considered fixed remuneration:
additional remuneration that most employees may receive on the basis of predetermined criteria, including employees’ insurance policies, travel allowances and similar remuneration;
remuneration paid to expatriate employees considering the cost of living and tax rates in a different country;
allowances used to increase fixed remuneration of the employee in situations where employees are posted abroad on account of the differences in the amount of remuneration that they would receive for a comparable position in Montenegro, provided that:

the allowance is paid to other employees in a similar situation,
the allowance is awarded for the purpose of its adjustment to the amount of remuneration the relevant market,
it is based on predetermined criteria, and
it is paid during the employment of that employee abroad.

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Decision on Remuneration in Credit Institutions (OGM 94/25) 15 Allowances Article 16 (1) Allowances, within the meaning of this Decision, shall mean additional and ancillary payments or other benefits which may be a component of fixed or variable remuneration. (2) Where a credit institution allocates allowances to the fixed remuneration, it shall duly document the reasons for establishing allowances as fixed remuneration if:

they are paid only to identified employee;
the ratio between the variable and fixed components of total remuneration would exceed the allowed ratio referred to in Article 22 of this Decision; and
they are not paid based on the criteria which are proxies for performance assessment criteria. (3) Allowances, which are paid to an employee based on its position in the credit institution and its powers and responsibilities, may be allocated to the fixed remuneration, provided that they also meet, in addition to the requirements referred to in Article 15 of this Decision, the following requirements:
they are awarded as long as there are no of material changes regarding the role or job position of the employee and its powers and responsibilities,
the amount of allowances depends solely on powers and responsibilities; and
employee having the same role, job position, powers and responsibilities are entitled to the same allowance. Variable remuneration Article 17 (1) Variable remuneration means remuneration depending on the performance of employees, an organisational unit, a credit institution or on other contractual criteria. (2) Variable remuneration referred to in paragraph (1) of this Article shall include severance payments exceeding the amount prescribed by the law, discretionary pension benefits referred to in Article 43 of this Decision, retention bonuses, compensation or buyout from a contractual obligation based on the termination of contractual relationship with the previous employer in accordance with the law, long-term incentive schemes and all other forms of remuneration which are not fixed. (3) The award of variable remuneration, including long-term incentive schemes, which are based on a past accrual period of at least one year, but also depends on future performance conditions, a credit institution shall:
set additional performance conditions that have to be met after the award for the variable remuneration to be vested;
assess whether the conditions for the vesting of variable remuneration have been met;
apply provisions regarding malus, including the reduction of variable remuneration up to 100% if the additional performance criteria referred to in item 1) of this

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Decision on Remuneration in Credit Institutions (OGM 94/25) 16 paragraph have not been met; 4) set the end of the deferral period at the earliest one year after the end of the last accrual period; 5) for the calculation of the ratio between the variable and fixed components of total remuneration, take into account the total amount of the variable remuneration awarded in the business year for which the variable remuneration, including longterm incentive schemes, was awarded. (4) Where a remuneration plan, including long-term incentive schemes, is exclusively based on future performance conditions, variable remuneration shall be awarded after the conditions referred to in paragraph (3) items 1) and 2) of this Article have been met. (5) When determining the ratio between the variable and fixed components of total remuneration, remuneration referred to in paragraph (4) of this Article shall be included in the business year prior to their award, and the value of variable remuneration awarded in instruments shall be determined according to their market price or the fair value identified at the time of the adoption of potential variable remuneration payment. Severance payments Article 18 (1) Severance payments mean payments related to the termination of the employment contract in accordance with the law governing the labour and employment relationships, the collective agreement and other regulations governing the employment relationships. (2) Severance payments, within the meaning of this Decision, shall also refer to payments made by the credit institution in cases when the credit institution:

terminates the employment contract with an employee due to significant difficulties in the operations of the credit institution;
terminates the employment contract with an employee following a material reduction of the credit institution’s activities or where a credit institution transfers certain activities to other undertaking without taking over such employee; and
agrees with an employee on an out-of-court settlement, including an agreement between the employee and the credit institution on the termination of employment relationship. (3) Significant difficulties in the operations of the credit institution referred to in paragraph (2) item 1) of this Article occur when:
the credit institution has benefited from extraordinary public financial support or is subject to an early intervention or resolution measures;
voluntary winding-up proceedings have been opened in the credit institution; and
due to significant losses the credit institution no longer has a sound capital base which results in the sale of a specific business area or the reduction of the business activity. (4) When determining the amount of severance payment, a credit institution shall take

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Decision on Remuneration in Credit Institutions (OGM 94/25) 17 into account the performance of the employee during a specific period and appropriately apply provisions on the reduction of variable remuneration referred to in Article 39 of this Decision. (5) A credit institution shall not award severance payment in the case of violation of the obligations from the employment relationship or duty of the identified employee. (6) Within the meaning of this Decision, the violation of the obligations from the employment relationship of identified employee shall be assessed on a case-by-case basis and, in particular, include the following situations when:

as member of a management or supervisory board of a credit institution no longer meets the requirements for membership in these bodies prescribed by the Law;
has participated in activities or is responsible for conduct for such activities which resulted in significant losses for the credit institution; and
acted deliberately or by gross negligence contrary to internal rules, policies or procedures. (7) The following types of severance payments shall not be considered to be variable remuneration of employees, within the meaning of this Decision:
severance payments in the amount not exceeding the amount mandatory under the law governing employment relationships,
severance payments in the amount which is determined in the collective agreement or an internal act, and that is not granted on a discretionary basis;
indemnity arising from the unpaid severance payments paid out on the basis of a final judgement;
remuneration paid out in the case of termination of employment on the basis of contractual provision on the prohibition of competition, during the period of the prohibition, in the amount which does not exceed the amount of fixed remuneration that would be paid out during that time if the employee was employed in the credit institution; and
indemnity in case of judicial cancellation of employment contract on the basis of a final judgement. (8) Severance pay, within the meaning of this Decision, does not include additional income paid upon the expiration of the employment contract or mandate of a member of the management body, such as discretionary pension benefits. (9) Where payments referred to in paragraph (8) of this Article are variable remuneration and are paid to identified employees, they are subject to all specific requirements for variable remuneration in accordance with this Decision. Retention bonuses Article 19 (1) Retention bonuses mean variable non-performance-based remuneration awarded under the condition that employee remains employed with the credit institution for a

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Decision on Remuneration in Credit Institutions (OGM 94/25) 18 predetermined period of time or period that could be determined by the occurrence of established circumstances. (2) A credit institution may also use retention bonuses referred to in paragraph (1) of this Article during restructuring and resolution of a credit institution. (3) Where a credit institution awards retention bonuses to retain employees, it must comply with the provisions of this Decision on variable remuneration, including pay-out, deferral, award of variable remuneration in instruments and variable remuneration retention and reduction (malus and clawback), except in the part referring to the adjustment of variable remuneration to risk profile of the credit institution when measuring performance prior to award. (4) Retention bonuses may not be awarded to compensate for performance-related remuneration. (5) A credit institution shall:

define the retention conditions and applicable performance conditions;
set the duration of the retention period, or, if the exact duration of the retention period is not available in advance, set a condition that is to be met in order for the retention period to end;
set the date or define an event after which it is determined whether the retention conditions and applicable performance conditions have been met. (6) The retention conditions referred to in paragraph (5) item 1) of this Article shall include the conditions in respect of:
the legitimate interest of the credit institution in awarding retention bonuses to retain an identified employee;
behaviour of the employee; and
provisions of paragraph (2) of this Article. (7) Retention bonuses shall be awarded after the expiry of the period referred to in paragraph (1) of this Article. (8) For the purposes of calculating the ratio between the variable and fixed components of remuneration, the following shall be taken into account:
annual amount of the retention bonus for each year of the retention period calculated on a linear pro rata basis, irrespective of the fact that the total amount of retention bonus is awarded after the retention period ends; or
the full amount of the retention bonus is considered in the year when the retention condition is met. (9) When assessing the appropriateness of the award of a retention bonus to identified employee, a credit institution shall take into account in particular the following:
the concerns that lead to the risk that certain identified employee may choose to leave the credit institution;

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Decision on Remuneration in Credit Institutions (OGM 94/25) 19 2) the reasons why the retention of that identified employee is crucial for the credit institution; 3) the consequence if the identified employee concerned leaves the credit institution; and 4) whether the amount of the awarded retention bonus is necessary and proportionate to retain the targeted identified employee. (10) A credit institution shall not award multiple retention bonuses to the same employee, except where it is duly justified. (11) In exceptional cases referred to in paragraph (10) of this Article, multiple retention bonuses may not be awarded in the same moments in time and shall be awarded under the conditions specified in this Article with regard to each retention bonus. (12) The retention bonuses shall only be awarded if no reasons exist that exclude the right to the retention bonus, such as material compliance breaches, misconduct or other failures of that employee. Guaranteed variable remuneration Article 20 (1) Guaranteed variable remuneration means variable remuneration which can be awarded when hiring new employees and where the credit institution has an adequate capital, taking into account own funds, combined capital buffer requirements and the result of internal capital adequacy assessment, and it shall be limited to the first year of employment. (2) Guaranteed variable remuneration can be awarded either in cash or in instruments. (3) A contractual obligation which obliges a credit institution to pay out to the employee a specific amount of variable remuneration, independent of performance, exclusively under the condition of maintaining the contractual relationship up to a specific date, shall be considered guaranteed payment of a specific amount of variable remuneration and shall be null, except in the case referred to in paragraph (1) of this Article. (4) A credit institution may only award the guaranteed variable remuneration to the same employee once, and this requirement shall also apply to situations where an employee receives a new contract from the same or another undertaking in the group within the scope of prudential consolidation. (5) The provisions of this Decision on malus and clawback arrangements shall not apply to the guaranteed variable remuneration nor shall they be taken into account when calculating the ratio between the variable and fixed components of the total remuneration for the first accrual period, and a credit institution may pay out the full amount of guaranteed variable remuneration in cash, without delay.

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Decision on Remuneration in Credit Institutions (OGM 94/25) 20 Compensation or buyout from previous employment contracts Article 21 (1) If remuneration related to compensation or buyout from a contractual obligation based on the employment contract with the previous employer is contracted by a credit institution with an employee, the credit institution shall align such remuneration with its long-term interests and take into account the conditions referred to in Article 20 paragraph (1) of this Decision. (2) The provisions on variable remuneration specified in this Decision on deferral, retention, pay-out in instruments and clawback shall apply mutatis mutandis to remuneration related to compensation and buyout from contractual obligation referred to in paragraph (1) of this Article. Ratio between the variable and fixed components of total remuneration Article 22 (1) A credit institution shall set in its remuneration policy a maximum ratio between variable and fixed component of total remuneration. (2) A credit institution shall ensure a sufficiently high portion of fixed component in total remuneration of employees to allow the operation of a fully flexible policy on variable remuneration components, including the possibility to pay no variable remuneration component. (3) The maximum ratio between the variable and fixed components of total remuneration of employees shall be calculated as the ratio between the variable component of remuneration that may be awarded as a maximum in a given accrual period and the fixed part of remuneration to be awarded in relation to the same accrual period. (4) When setting an appropriate ratio between the variable and fixed components of total remuneration of employees, a credit institution shall take into account:

the performance measurement and associated risk adjustments referred to in Article 33 of this Decision;
the length of the deferral and retention periods;
the nature, scale and complexity of its activities;
the types of risks to which it is exposed;
the category of an employee;
the position of an employee in the organisational structure and their powers and responsibilities; and
other elements the credit institution consider relevant for setting adequate ratio between the variable and fixed components of total remuneration. (5) The ratio between the variable and fixed components of total remuneration shall be set independently of any potential variable remuneration reductions referred to in Article 39 of this Decision or changes in the prices of instruments in which variable remuneration

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Decision on Remuneration in Credit Institutions (OGM 94/25) 21 may be paid out. (6) A credit institution may set different ratios between the variable and fixed components of total remuneration for different organisational units, control and functions and different categories of employees and in exceptional and duly justified cases, for individual employees belonging to the same category. (7) A credit institution shall set the ratio between the variable and fixed components of the total remuneration of an employee so that the amount of the variable remuneration component of total remuneration does not exceed 100% of the fixed remuneration component, except in the case of the fulfilment of the conditions referred to in Article 124a paragraph (2) of the Law when it shall approve higher ratio of variable and fixed components of the total remuneration. (8) The actual ratio between the variable and fixed components of total remuneration shall be calculated as the sum of all variable components of remuneration that have been awarded for the last accrual period divided by the sum of fixed components of remuneration awarded for the same period, and when the performance assessment is based on a multi-year accrual period, a credit institution may divide the maximum amount awarded at the end of the accrual period by the number of years of the accrual period. (9) Remuneration awarded on the basis of a multi-year accrual period, within the meaning of paragraph (8) of this Article, means remuneration awarded on the basis of the performance assessment that is not performed every year. (10) In the event that a higher ratio of variable and fixed parts of total remuneration is approved, the credit institution is obliged to submit to the Central Bank, within five days from the date of adoption of that decision, the information referred to in Article 124a of the Law, as well as other information at the request of the Central Bank. Remuneration of employees engaged in control functions Article 23 (1) Variable remuneration of employees engaged in control functions shall depend on the achievement of the results of their functions, independent of the performance of the business areas they control. (2) The remuneration of employees engaged in control functions shall be determined as follows:

fixed remuneration may not account for less than two thirds of the employee's total remuneration; and
total fixed annual remuneration of the employee may not be less than the two-year average of the total fixed annual remuneration of the credit institution's employees included in the same remuneration group or employees performing activities of comparable scope, complexity and level of responsibility.

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Decision on Remuneration in Credit Institutions (OGM 94/25) 22 (3) Remuneration group referred to in paragraph (2) item 2) of this Article means the range between the lowest and the highest remuneration amount of a specific group of employees. (4) The provision of paragraph (2) of this Article shall apply to a management board member or a senior management member who is also a person responsible for the operation of a control function. (5) The criteria used for assessing the performance of employees engaged in control functions may be the Tier 1 capital ratio, the non-performing loan ratio, the non-performing loan recovery rate, audit findings and other similar criteria and may be based, to some extent, on the performance of the credit institution as a whole. Remuneration of the members of the management and supervisory boards Article 24 (1) A member of the credit institution’s supervisory board shall receive fixed remuneration, which shall include the fee for participating in the work and attending supervisory board meetings, including the related expenses. (2) By way of derogation from paragraph (1) of this Article, a credit institution may award and pay out variable remuneration to supervisory board member appropriate to the risk profile of the credit institution and to the powers and responsibilities of supervisory board members, the work tasks and the achievement of objectives linked to their functions. (3) Where variable remuneration is awarded in instruments, a credit institution should undertake appropriate measures to prevent conflict of interest of the supervisory board members, including setting retention periods up to the end of their terms of office. (4) Remuneration of the management board members should be in line with their powers, tasks, expertise and responsibilities. Hedging against variable remuneration reduction or loss Article 25 (1) A credit institution shall require employees to undertake not to carry out activities concerning hedging against variable remuneration reduction or loss, including remuneration deferred and paid out for which the retained remuneration has been arranged, or make variable remuneration- and liability-related insurance to undermine the risk alignment effects embedded in their remuneration arrangements. (2) Employees shall be considered to have hedged against risk referred to in paragraph (1) of this Article if they enter into agreement with a credit institution or a third party and where one of the following conditions is met:

a contract requires a credit institution or a third party to make direct or indirect payments to the employee that are linked to or commensurate with the amounts

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Decision on Remuneration in Credit Institutions (OGM 94/25) 23 by which the employee’s variable remuneration has been reduced; or 2) an employee purchases or holds derivatives that are intended to hedge against losses associated with financial instruments received as part of variable remuneration. (3) An employee shall be considered to have hedged against loss of variable remuneration if they take out an insurance contract which enables remuneration based on the occurrence of the insured event which shall not prevent taking out insurance to cover personal payments such as healthcare and mortgage instalments. (4) A credit institution shall establish and maintain efficient mechanisms to prevent hedging referred to in paragraph (1) of this Article, which in particular include a declaration of the employee that they will refrain from carrying out hedging activities against variable remuneration reduction or concluding insurances from losses of variable remuneration or insurances for the purpose of undermining the risk alignment effects in its operations. (5) With regard to the declaration referred to in paragraph (4) of this Article, the credit institution’s human resource’s function or internal audit function shall perform in particular the following activities:

spot-check inspections of the compliance with this declaration with regard to the internal custodianship accounts;
random checks that at least include the internal custodianship accounts of identified employees; and
introduction of mandatory notification to the credit institution of any custodial accounts outside that credit institution. Ratio between variable remuneration and capital Article 26 (1) A credit institution shall ensure that the total variable remuneration does not limit its ability to maintain or increase the amount of its capital taking into account its overall own funds, in particular the Common Equity Tier 1 capital and the combined buffer requirement referred to in Article 165 of the Law, the requirement to maintain leverage ratio buffer, minimum requirement for own funds and eligible liabilities (MREL) and the restrictions on distributions referred to in Article 167 of the Law and regulations governing the resolution of credit institutions, as well as the results of the internal capital adequacy assessment process. (2) Variable remuneration referred to in paragraph (1) of this Article shall also include variable remuneration that may be awarded for a particular year and variable remuneration that will be paid out or vested in that year. (3) A credit institution shall adequately include the impact of variable remuneration, both upfront and deferred amounts, in its capital and liquidity planning and in its overall internal capital adequacy assessment process.

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Decision on Remuneration in Credit Institutions (OGM 94/25) 24 (4) A credit institution which does not have an adequate capital base or its capital base is at risk shall:

reduce the maximum amount of variable remuneration, including the possibility of non-payment;
apply the provisions regarding malus; and
withhold the pay-out of net profit for that year and as needed for subsequent years. (5) Where a credit institution takes measures referred to in paragraph (4) of this Article in a particular year, it may not compensate for the reduction of variable remuneration in later years. Circumvention of remuneration provisions Article 27 (1) A credit institution may not pay out variable remuneration by avoiding the application of policies and procedures for paying out variable remuneration specified in this Decision, including the arrangements between the credit institution and third parties in which an employee has a financial or personal interest (hereinafter: circumvention of remuneration provisions). (2) Circumvention of remuneration provisions is considered to take place in particular where:
variable remuneration other than guaranteed variable remuneration is awarded or vested although there has been no sustainable and risk-adjusted (ex-ante and expost adjustment) performance by an employee, organisational unit or credit institution or are inappropriate with regard to the financial position of the credit institution;
an employee receives payments from the credit institution or an undertaking within the scope of prudential consolidation which do not fall under the definition of remuneration within the meaning of this Decision, but are remuneration that incentivise risk assumption and circumvent remuneration provisions;
fixed remuneration components are awarded as a fixed number of instruments;
adjustments to fixed remuneration components are frequently negotiated and adjustments are made to align the remuneration with the performance of an employee;
allowances are awarded in an amount that is not justified in the underlying circumstances;
remuneration is labelled as payment for early retirement although that payment has the character of a severance payment as it is made in the context of the early termination of employment contract, or the employee remains employed with the credit institution after such award is made or the payments are not granted on a monthly basis;
an employee is awarded fees in instruments or is enabled to purchase instruments which are not valued at market value or fair value in case of instruments which are not listed, and the added value is not taken into account in variable remuneration;
measures taken to disrupt gender neutrality of remuneration; and

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Decision on Remuneration in Credit Institutions (OGM 94/25) 25 9) this remuneration, although considered fixed remuneration within the meaning of this Decision, are not in line with the objectives of this Decision. (3) Circumvention of remuneration provisions shall also occur when a credit institution reduces or restructures variable remuneration in a particular year (e.g., in the context of recovery and resolution measures or other), provides compensation to employees for that reduction or restructuring in later years or by other payments, instruments or methods. (4) A credit institution shall ensure that employee performance measurements are based on appropriate controls to ensure the objectivity of the criteria for awarding ratings, i.e., to prevent subjective decisions on measuring employee performance, especially when there are no clear standards for assessing the achievement of objectives. (5) A credit institution shall not establish legal persons, including the creation of group structures or off-shore entities, or enter into contracts with persons acting on behalf of that credit institution, in order to influence the results of the employee identification procedure, and for the purpose of avoiding the application of the requirements of this Decision. (6) In the case of short-term contracts that the credit institution regularly renews, the Central Bank shall examine whether such contracts constitute a means or a way to avoid the requirements on remuneration under the Law or this Decision. (7) A credit institution may not use financial instruments as part of the fixed remuneration to circumvent variable remuneration requirements and the instruments used shall not provide incentives for excessive risk taking. Criteria for identifying employees Article 28 (1) A credit institution shall identify employees on an annual basis, as a part of the remuneration policy of the credit institution. (2) An employee shall be deemed to be identified employee, where any of the following qualitative criteria are met:

the employee is a member of the supervisory board;
the employee is a member of the management board;
the employee is a member of senior management of the credit institution;
the employee is responsible and accountable for the activities of the individual control function;
the employee has responsibility for risk management within an organisational unit that represents at least 2% of the internal capital of the credit institution (hereinafter: material business unit);
the employee heads a material business unit;
the employee has managerial responsibility in one of the control functions referred to in item 4) of this paragraph or in a material business unit and reports directly to the employee referred to in item 4) or 5) of this paragraph;

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Decision on Remuneration in Credit Institutions (OGM 94/25) 26 8) the employee has managerial responsibility in a material business unit and reports directly to the employee who heads that unit; 9) the employee heads organisational unit responsible for legal issue, correctness of accounting policies and procedures, budgeting, including taxation and drawing up of financial plan, economic analysis, prevention of money laundering and terrorist financing, human resources, remuneration policy, information technology or information security; 10)the employee is responsible for, or is a member of, a body responsible for the management of individual risks other than credit risk and market risk; 11)with regard to credit risk exposures of a nominal amount per transaction which represents 0.5 % of the credit institution's Common Equity Tier 1 capital and is at least EUR 500,000, the employee:

is responsible for initiating new services or credit products, or their structuring, which can result in such credit risk exposures;
has authority to take or approve the decision of such exposure to credit risk; or
is a member of a body which has authority to take the decisions referred to in indents 1 or 2 of this item; 12)the employee has authority to take or approve a decision on transactions on the trading book which in aggregate meet one of the following thresholds:
where the standardised approach is used, an own funds requirement for market risks which represents 0.5 % or more of the credit institution's Common Equity Tier 1 capital;
where an internal model-based approach is approved for regulatory purposes, 5% or more of the credit institution's internal value-at-risk limit for trading book exposures at a 99th percentile (one-tailed confidence interval); 13)the employee is a member of a body which has authority to take decisions set out in item 12) of this paragraph; 14)the employee has managerial responsibility for a group of employees who have individual authorities to commit the credit institution to transactions and either of the following conditions is met:
the sum of those authorities equals or exceeds a threshold set out in item 11) indents 1 and 2 or item 12) indent 1 of this paragraph;
where an internal model-based approach is approved for regulatory purposes, in accordance with the decision governing capital adequacy of credit institutions, those authorities amount to 5% or more of the credit institution's internal valueat-risk limit for trading book exposures at a 99th percentile (one-tailed confidence interval), and where the credit institution does not calculate a valueat-risk at the level of that employee the value-at-risk limits of all employees under the management of this employee shall be added up; 15)the employee has the authority to take or is a member of a body which has the authority to take decisions to approve or veto the introduction of new products; 16)the employee has managerial responsibility for an employee who meets one of the criteria set out in items 1) to 15) of this paragraph. (3) An employee shall be deemed to be identified employee where any of the following quantitative criteria are met:

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Decision on Remuneration in Credit Institutions (OGM 94/25) 27

the employee has been awarded total remuneration of EUR 50,000 or more in the preceding business year;
the employee is within the 3% of the number of employees, rounded up to the next integer, who have been awarded the highest total remuneration in the preceding business year;
the employee was in the preceding business year awarded total remuneration that is equal to or greater than the lowest total remuneration awarded in that business year to a member of senior management or meets any of the criteria in paragraph (2) items 1), 3), 5), 6), 8), 11), 12), 14) and 15) of this Article. (4) A credit institution shall, at the request of the Central Bank, explain the manner in which it identified employees based on the qualitative and quantitative criteria set out in paragraphs (1) and (2) of this Article and submit all relevant documentation. (5) By way of derogation from paragraph (2) of this Article, an identified employee shall not be an employee who:
works and has powers in an organisational unit which is not a material business unit; and
has no material impact on the risk profile of a material business unit through the activities carried out. (6) When determining the material impact referred to in paragraph (4) item 2) of this Article, a credit institution shall take the objective criteria which take into account all relevant risk and performance indicators used by the credit institution to manage risks to which it is exposed, and the powers of the employee or categories of employees and their impact on the credit institution's risk profile when compared with the impact of the activities of employees identified by the criteria set out paragraph (1) of this Article. (7) For the purpose of identifying employees who have a material impact on credit institution’s risk profile at the beginning of the current business year based on the quantitative criteria referred to in paragraph (2) of this Article, a credit institution shall take into account all monetary and non-monetary remuneration components awarded to an individual employee in the preceding business year, independent of the fact when remuneration was paid out. (8) For the purpose of establishing identified employees at the beginning of the current business year on the basis of quantitative criteria, a credit institution shall take into account all monetary and non-monetary fixed and variable remuneration components awarded in or for the preceding financial year irrespective of the fact when such remuneration was paid and the routine remuneration packages that are not accounted for on an individual level based on the overall sum broken down by objective criteria to the individual employee. (9) In addition to the criteria laid down in paragraphs (2) and (3) of this Article, the assessment referred to in paragraph (1) of this Article shall include, where needed to ensure the complete identification of all identified employees, additional criteria set forth

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Decision on Remuneration in Credit Institutions (OGM 94/25) 28 by the credit institution that reflect the levels of risk of different activities within the credit institution and the impact of employees on the risk profile. (10) A credit institution shall ensure that the remuneration policy for identified employees is gender neutral. Re-identification of identified employees Article 29 (1) A credit institution shall annually perform and properly document the process of reidentification of identification employees in accordance with the qualitative and quantitative criteria set out in Article 28 of this Decision. (2) The documenting of the process referred to in paragraph (1) of this Article shall include in particular:

the rationale underlying the re-identification of identified employees and the scope of its application;
the approach used to assess the risks emerging from adequate credit institution’s strategies and activities;
the approach used to assess employees working in credit institution, subsidiary undertakings within the scope of consolidation and branches of the credit institution, including branches located in third countries;
the powers and responsibilities of the different credit institution bodies and functions involved in the drawing up, oversight, review and application of the reidentification process of employees;
results of the re-identification, including the number of employees, the number of employees identified for the first time as employees having material impact on the credit institution’s risk profile, business tasks and activities and organisational unit in which employees work, personal information of employees; and
an explanation for employees who, in accordance with Article 28, paragraph 5 of this Decision, have been determined not to be identified employees; and
documentation on:

the number of identified employees, including the number of employees identified for the first time;
the business responsibilities and activities of the identified employees;
the name and surname of the identified employees;
the business areas assigned to the identified employee in the credit institution;
a comparative overview of the results of the identification of identified employees, with the results of the identification from the previous year. (3) A credit institution shall periodically during the year review the fulfilment of the requirements for identifying potential new employees having a material impact on the credit institution’s risk profile at least with regard to the qualitative criteria referred to in Article 28 paragraph (1) of this Decision, whereby employees identified on the basis of those criteria to have a material impact on the credit institution’s risk profile for a period of at least three months in a business year shall be considered employees for that

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Decision on Remuneration in Credit Institutions (OGM 94/25) 29 business year. (4) A credit institution shall keep the documentation referred to in paragraph (1) of this Article during the period established by the law governing the keeping of business books and documentation. Prior approval of exclusions Article 30 (1) A credit institution shall, for an employee that meets the quantitative criteria referred to in Article 28 paragraph (3) of this Decision, and for whom it has assessed that their professional activities do not have material impact on its risk profile, submit to the Central Bank an application for granting prior approval to exclude the employee from the application of the provisions of Articles 33 to 43 of this Decision, (2) The application referred to in paragraph (1) of this Article shall be supported by the data on:

the employee for whom the prior approval for exclusion is being sought,
the percentage of internal capital allocated to the business unit or subsidiary undertaking; and
the analysis of the impact of the employee on the credit institution’s risk profile on whom the exclusion laid down in Article 28 paragraph (5) of this Decision applies. (3) A credit institution shall submit the application referred to in paragraph (1) of this Article every year, no later than six months following the end of the previous business year. (4) The Central Bank shall grant the prior approval referred to in paragraph (1) of this Article for a limited period, and within 3 months from the date of submission of complete documentation referred to in paragraph (2) of this Article. (5) When the Central Bank grants a prior approval for an employee for whom the application for exclusion is submitted for the first time in accordance with paragraph (1) of this Article, that approval shall pertain to the financial year in which the prior approval was requested and to the following financial year. (6) For employees for whom the exclusion has already been approved for the ongoing financial year, the prior approval shall only concern the following financial year. (7) After obtaining the prior approval of the Central Bank, the management board of the credit institution, with the consent of the supervisory board or the remuneration committee, if established, shall make a decision on the exclusion from paragraph (1) of this Article.

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Decision on Remuneration in Credit Institutions (OGM 94/25) 30 Powers and responsibilities in the identification process of employees Article 31 (1) In addition to the powers of referred to in Article 7 of this Decision, in the identification process of employees in a credit institution as follows, the supervisory board shall:

give consent to the management board for the employee identification process;
continuously monitor the assessment for the identification of employees;
give consent for the exclusion of employees in accordance with Article 30 of this Decision. (2) A remuneration committee shall be actively involved in the identification process for the preparation of decisions regarding remuneration. (3) The risk management function, the compliance function, organisational units responsible for legal affairs and human resources management, as well as the working bodies of the supervisory board shall be involved in the identification process in accordance with their respective powers and responsibilities. (4) Credit institution shall ensure a proper exchange of information among all participants involved in the identification process. (5) Internal audit of the credit institution shall review the identification process and its result. Employees’ identification process on an individual and consolidated basis Article 32 (1) A credit institution which is a parent undertaking in a group of credit institutions in Montenegro shall ensure that employees are identified on a consolidated basis by applying the criteria set out in Article 28 of this Decision and on the basis of consolidated information. (2) Qualitative criteria referred to in Article 28 paragraph (2) of this Decision shall also apply in the employees’ identification process in subsidiary undertakings, where those employees are responsible for the functions referred to in these criteria on a consolidated or sub-consolidated basis. (3) The parent credit institution referred to in paragraph (1) of this Article shall ensure that all subsidiary undertakings in the scope of prudential consolidation, including subsidiary undertakings that are not credit institutions, and subsidiary undertakings in third countries:
implement group remuneration policy and actively participate in the employee’s identification process at group level; and
submit information necessary to perform the identification of employees at group level. (4) The parent credit institution referred to in paragraph (1) of this Article shall perform the

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Decision on Remuneration in Credit Institutions (OGM 94/25) 31 employees’ identification process for subsidiary undertakings which are not credit institutions on an individual basis based on the information submitted by these subsidiary undertakings. (5) A credit institution which is not significant credit institution, but is included in the employees’ identification process on a consolidated basis, may delegate the employees’ identification process on an individual basis to the parent credit institution referred to in paragraph (1) of this Article. (6) Quantitative criteria referred to in Article 28 paragraph (3) of this Decision shall also apply to all employees within the credit institution’s subsidiary undertakings that are subject to the requirements laid down in this Decision, on a consolidated and subconsolidated basis, taking into account all remuneration awarded within the full scope of prudential consolidation. (7) When applying qualitative criteria referred to in Article 28 paragraph (2) of this Decision, the criteria for the employees’ identification shall not be the name of the function but the powers and responsibilities conferred on the function. (8) A credit institution with head office in Montenegro that is a subsidiary undertaking of parent credit institution in third country and a branch of the third-country credit institution shall notify their parent credit institution of the employees’ identification results. (9) A credit institution shall identify employees in its branch established in third country applying the criteria that are applied on individual basis. (10) A parent credit institution shall ensure the overall consistency of the group remuneration policies including the employees’ identification processes and the correct implementation on a consolidated, sub-consolidated and individual basis. Risk adjustment of variable remuneration Article 33 (1) A credit institution shall adjust the variable remuneration for current and future risks taken (ex-ante and ex-post adjustments) to ensure that the incentives to take risks are balanced by incentives to manage risk. (2) A credit institution shall perform the process of risk adjustment of variable remuneration when:

carrying out the performance measurement;
awarding variable remuneration; and
paying out variable remuneration. (3) For the purpose of adjusting variable remuneration referred to in paragraph (1) of this Article, a credit institution shall set appropriate qualitative and quantitative criteria in the form of absolute and relative criteria for assessing the performance.

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Decision on Remuneration in Credit Institutions (OGM 94/25) 32 (4) When determining the criteria referred to in paragraph (3) of this Article, the credit institution shall determine the absolute criteria taking into account the strategy, risk profile and risk appetite, and to determine the relative criteria, the results of the comparison with similar credit institutions. (5) Where a credit institution determines the criteria referred to in paragraph (3) of this Article using the judgemental approaches, it shall:

outline parameters on which the judgement will be based;
document the risk adjustment process;
include control functions into that process;
take measures to prevent any potential conflict of interest;
conduct adequate checks and adjustments within a group of employees from the same organisational unit and control function; and
approve the assessments made by a control function or at an appropriate hierarchical level above the function making the assessment (e.g., at the remuneration committee, supervisory board or management board). (6) A credit institution should adjust the time horizon of the risk and performance measurement with the business cycle of the credit institution in a multi-year framework. (7) A credit institution should set the accrual period and the pay-out periods for remuneration at an appropriate length, differentiating between the remuneration which should be paid upfront and remuneration that should be paid after deferral and retention periods, taking into account the business activity and position of the category of identified employees, and in exceptional cases, individual identified employee. (8) Risk adjustment of variable remuneration process must be transparent to identified employees and include all elements that are based on judgement, and if the assessment is also based on subjective elements and the final outcome is significantly different from the initial outcome using predefined facts, the credit institution shall provide detailed information thereof to the supervisory board or the remuneration committee, if established. Criteria for risk adjustment of variable remuneration Article 34 The criteria for risk adjustment of variable remuneration shall include indicators that a credit institution uses for risk management purposes, taking into account methods applied in its internal capital adequacy assessment process (ICAAP) and internal liquidity adequacy assessment process (ILAAP), as well as information on complying with regulations and internal acts and results and findings of the internal audit.

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Decision on Remuneration in Credit Institutions (OGM 94/25) 33 Criteria for assessing performance with regard to variable remuneration Article 35 (1) A credit institution shall set and document appropriate performance criteria for individual employees, organisational unit and the credit institution which do not incentivise excessive risk taking or mis-selling of products of that credit institution. (2) Quantitative criteria for performance assessment may be:

risk-adjusted capital, liquidity and profit indicators;
capital indicators based on the data from financial statements;
data on risks from the internal capital adequacy assessment process;
budgets of individual organisational units, including the legal and human resources functions; and
other similar indicators. (3) Quantitative criteria that refer to the operating efficiency (e.g., net profits, total revenues, productivity, expenses) or market indicators such as share price or return on equity may not be used, as a rule, as the only quantitative criteria for performance assessment. (4) Qualitative criteria for performance assessment may be:
achievement of strategic targets;
customer satisfaction;
adherence to the risk management policy;
compliance with regulations and internal acts;
leadership;
team work;
creativity;
motivation and cooperation with other business units, internal control functions and other organisational units of the credit institution; and
other similar criteria. (5) The criteria used to measure risk and performance should be linked as closely as possible to the decisions made by the identified employee and the category of employees that are subject to the performance measurement and should ensure that the award process has an appropriate impact on employee’s behaviour. (6) Performance criteria should include achievable objectives and measures on which the identified employee has some direct influence. Performance measurement and assessment Article 36 (1) A credit institution shall adjust performance measurement, as basis for the calculation of variable remuneration component, to all risks it is or may be exposed, and it shall consider the costs of capital and liquidity, and where quantification of risk exposure is

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Decision on Remuneration in Credit Institutions (OGM 94/25) 34 difficult (such as in the case of reputational or operational risk), the credit institution shall base its risk assessment on risk indicators, capital requirements or scenario analysis or other suitable proxies. (2) In the case referred to in paragraph (1) of this Article, a credit institution shall differentiate between the risks which may be considered material to credit institution, organisational units and its employees. (3) Where variable remuneration depends on performance, a credit institution shall base total amount of variable remuneration of employees on a combination of the assessment of the performance of an individual employee, taking into account quantitative and qualitative criteria and of the organisational unit concerned as well as on the overall results of the credit institution. (4) A credit institution shall ensure that the performance assessment referred to in paragraph (3) of this Article includes a multi-year framework in order to ensure that the assessment process is based on longer-term performance and that the payment of variable remuneration takes place during a period which takes into account the credit institution's business cycle and any risks that the credit institution is or might be exposed to in its operation. Award of variable remuneration Article 37 (1) A credit institution shall set a maximum amount of variable remuneration for the period for which variable remuneration is awarded. (2) Variable remuneration shall be awarded after the end of the accrual period, which shall be at least one year. (3) When setting the maximum amount of variable remuneration referred to in paragraph (1) of this Article and awarding variable remuneration, a credit institution shall consider all types of risks, expected and unexpected losses and the ratio between the variable and fixed remuneration, the criteria for performance and risk assessment, the financial situation of the credit institution, including its capital adequacy and liquidity. (4) The performance indicators referred to in paragraph (3) of this Article used by a credit institution to calculate the maximum amount of variable remuneration shall include longterm performance indicators and realised financial results. (5) The bonus pools may not be set at a certain level to meet remuneration demands, and when determining the overall bonus pool, a credit institution shall have appropriate control processes in place. (6) Where a credit institution uses a top-down approach, it shall set the amount of the bonus pool, which is fully or partially distributed among the business units and control

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Decision on Remuneration in Credit Institutions (OGM 94/25) 35 functions after the evaluation of their performance, and the individual awards shall subsequently be based on the assessment of the individual’s performance. (7) Where a credit institution sets the bonus pool in a bottom-up approach, the process shall start at the level of the individual employee and depending on the performance criteria by which employees are assessed, the bonus pool of the business unit and the credit institution equals the sums of potential awards allocated to the respective subordinated levels. (8) When distributing the bonus pool to the level of the business unit or individual employee, the allocation shall be based as appropriate on predefined formulae and judgemental approaches, wherein the credit institution may use scorecards or other appropriate methods to combine different approaches. (9) When choosing the approach referred to in paragraphs (6) to (8) of this Article, a credit institution shall take into account that:

the formulae ensure transparency and incentives, as the employee knows all elements determining their variable remuneration, but do not capture all criteria, especially the qualitative ones;
judgemental approach captures better target and gives more flexibility to management and can, therefore, weaken the risk-based incentive effect of the performance-based variable remuneration. (10) Elements including budget constraints, retention of employees and recruiting considerations, subsidisation among business units, etc. shall not dominate the distribution of the bonus pool as they can weaken the relationship between performance, risk and remuneration. (11) A credit institution shall maintain records on how the bonus pool and employee’s remuneration were determined, including how estimates based on different approaches were combined. Payment of variable remuneration Article 38 (1) Prior to paying out variable remuneration, a credit institution shall perform a reassessment of performance in order to adjust variable remuneration to any risks that may have been identified after variable remuneration award. (2) A credit institution may not pay out variable remuneration or vest right from instruments, including the deferred portion, unless it is sustainable and justified. (3) Variable remuneration, within the meaning of paragraph (2) of this Article, shall be deemed to be sustainable if its payment does not jeopardise the credit institution's financial situation and the safety and stability of the credit institution's operation.

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Decision on Remuneration in Credit Institutions (OGM 94/25) 36 (4) Variable remuneration shall be considered justified, within the meaning of paragraph (2) of this Article, if it is based on the performance of the credit institution, the business unit and the individual employee concerned. Variable remuneration reduction Article 39 (1) In case of a significant performance deterioration or incurred losses, a credit institution shall reduce the total amount of variable remuneration and it shall consider the following:

reduction of remuneration in the current business year;
reduction of previously awarded remuneration which have been deferred and are still not paid out (by applying the malus arrangement); and
subsequent reduction of remuneration which have been previously awarded and paid out (by applying the clawback arrangement). (2) Variable remuneration may be reduced through the application of the malus and clawback arrangements, whereby up to 100 % of the total variable remuneration may be subject to malus or clawback arrangements. (3) In its remuneration policy and in the contract concluded with the employee, a credit institution shall define in more detail the terms under which malus and clawback arrangements apply, in particular in the cases when:
an employee has participated in activities that created significant losses for the credit institution or was responsible for such activities;
an employee has failed to meet the prescribed or internally set suitability standards;
there is evidence of misconduct or serious error by the employee;
the credit institution or the business unit in which the employee works has subsequently suffered a significant downturn in its financial performance;
the credit institution or the business unit in which the employee works has suffered a significant failure of risk management;
there has been a significant increase in the credit institution’s capital requirements; and
the employee’s conduct contributed to the imposing of supervisory measures. (4) Developments in the prices of shares or instruments related to shares may not constitute a criterion for the application of malus and clawback clauses, and the application of which is always related to the performance measurement or risks, and they should respond to the actual risk outcomes or changes to persisting risks of the credit institution, business line or employee’s activities. (5) A credit institution may not perform ex post risk adjustment in order to increase initially awarded variable remuneration or, in case when malus or clawback arrangements have already been implemented in the past, in the increase in the previously reduced variable remuneration.

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Decision on Remuneration in Credit Institutions (OGM 94/25) 37 (6) A credit institution shall analyse their initial ex ante risk adjustments to determine if they were sufficient, in particular if risks have been omitted or underestimated or new risks were identified or unexpected losses occurred, and the extent to which an ex-post risk adjustment is needed depends on the accuracy of the ex-ante risk adjustment and should be established by the credit institution based on back-testing. (7) A credit institution shall define a period for the application of malus or clawback arrangements, and this period may not be shorter than deferral and retention periods. (8) Clawback shall in particular be applied when the employee contributed significantly to the subdued or negative financial performance and in cases where damage has been caused with intent or severe negligence. (9) When employees who have been granted instruments, after the expiry of the deferral and retention period, sell those instruments or the instrument is paid in cash upon maturity, the employees are paid the corresponding amount, and in the event of an increase in the market price or fair value of that instrument, the payment amount may be higher than the initially granted amount. IV. ADDITIONAL PRINCIPLES AND RULES OF THE REMUNERATION POLICY FOR SIGNIFICANT CREDIT INSTITUTIONS Variable remuneration deferral Article 40 (1) A significant credit institution shall defer an appropriate portion of the variable remuneration component over a period of time which shall be set taking into consideration:

business cycle and nature of credit institution’s operations;
expected fluctuations in the credit institution's operations and performance and the impact of employees on these fluctuations;
the risks to which the credit institution and organisational unit is or may be exposed to;
the powers and responsibilities of employees and the tasks they perform;
the approved ratio between the variable and fixed components of the total remuneration and the absolute amount of variable remuneration and the level of risk an employee may take. (2) A credit institution referred to in paragraph (1) of this Article shall defer at least 40% of the variable remuneration component, except in the case of a variable remuneration component of a particularly high amount, a credit institution shall defer at least 60% of the variable remuneration component. (3) For the purposes of paragraph (2) of this Article, a credit institution shall define a particularly high amount of variable remuneration, taking into account the average remuneration paid within the credit institution, remuneration trends and practices at the

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Decision on Remuneration in Credit Institutions (OGM 94/25) 38 banking system level in Montenegro, and other benchmarking results. (4) A particularly high amount referred to in paragraph (3) of this Article means variable remuneration in the amount of EUR 150,000 on an annual basis or variable remuneration that is equal to or exceeds 100% of fixed remuneration. (5) The deferral period for the variable remuneration component may not be shorter than four years or five years for the members of the management board, supervisory board and senior management. (6) The deferred remuneration shall be paid out or rights from the instruments shall be vested in its entirety at the end of the deferral period or on multiple occasions during the deferral period by applying the principle of a pro-rata temporis. (7) The principle of a pro-rata temporis during the pay put of deferred remuneration referred to in paragraph (5) of this Article requires that when remuneration is deferred over a certain number of years (“n” number of years), starting from the end of the accrual period, remuneration paid at the end of each year starting from the end of the accrual period equals the deferred remuneration multiplied by 1/n. (8) A significant credit institution shall pay out the first deferred portion of remuneration at least one year after the start of the deferral period. (9) A credit institution may not pay out deferred portions of remuneration more frequently than on a yearly basis. Award of variable remuneration in instruments Article 41 (1) A significant credit institution shall pay a portion of the variable remuneration component that may not be lower than 50% including the deferred and the non-deferred part, in the form of instruments, and both parts should consist of a balance of instruments in line with this Article. (2) The portion of the variable remuneration component referred to in paragraph (1) of this Article to be paid in the form of instruments shall be determined in accordance with the position and responsibilities of the employee concerned, the amount of variable remuneration payable to that employee and the amount of risks the employee may take in performing their powers. (2) A significant credit institution may use the following instruments for awarding variable remuneration:

ordinary shares of the credit institution,
instruments linked to ordinary shares of the credit institution which have an embedded clause that limits the maximum allowed value of instruments to their value on the date the remuneration was awarded,

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Decision on Remuneration in Credit Institutions (OGM 94/25) 39 3) ordinary shares of the credit institution which is a direct or indirect parent of the credit institution that meets the requirements referred to in this Decision, 4) instruments linked to ordinary shares of the credit institution referred to in item 3) of this paragraph which have an embedded clause that limits the maximum allowed value of instruments to their value on the date the remuneration was awarded, and 5) other classes of instruments that adequately reflect the credit quality of the credit institution and are appropriate to be used for awarding variable remuneration. (4) Types of instruments referred to in paragraph (3) of this Article and the write down or write up and conversion of those instruments shall be regulated in more detail in the guidelines provided in the Annex 1 which is attached to this Decision and makes an integral part thereof. (5) A significant credit institution may use instruments referred to in paragraph (3) items 3) and 4) of this Article for awarding variable remuneration only if the management of capital at the level of the group of credit institutions of which the credit institution is a member prevents or significantly hinders the use of instruments issued by the credit institution itself. (6) For the purposes of meeting the requirements laid down in this Decision, a credit institution shall use, where it deems possible, appropriate balance between the instruments referred to in paragraph (3) items 1) to 4) of this Article and instruments referred to in paragraph (3) item 5) of this Article. (7) The instruments shall be priced at the market price or their fair value on the date of the award of these instruments, and this price shall be the basis for determining the initial number of instruments and for later possible reduction in the number of instruments or their value. (8) A significant credit institution may not pay to an employee any amount of the variable remuneration based on dividend or interest on instruments before vesting. (9) A credit institution shall ensure that they have the awarded instruments available when the variable remuneration awarded in instruments vests and may decide not to hold the instruments during the deferral period, but in that case take into account the relevant market risks. (10) A credit institution may award a fixed number or nominal amount of deferred instruments using different techniques, including custody instruments and contracts, provided that the fixed number or nominal amount of the instruments awarded is provided to identified employee at vesting, unless the fixed number or nominal amount is reduced by the application of malus. (11) A credit institution shall prioritise the use of instruments rather than award variable remuneration in cash and where a credit institution awards a higher portion than 50% of the variable remuneration in instruments, they shall prioritise a higher share of

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Decision on Remuneration in Credit Institutions (OGM 94/25) 40 instruments within the deferred portion of the variable remuneration component. (12) The ratio of variable remuneration that is paid out in instruments shall be calculated as the quotient between the amount of variable remuneration awarded in instruments and the sum of the variable remuneration awarded in cash, instruments and in other benefits and all amounts shall be valued at the point of award unless stated otherwise in this Decision. Retention of variable remuneration awarded in instruments Article 42 (1) A significant credit institution shall establish the period of retention of deferred and non-deferred portion of variable remuneration awarded in instruments, taking into account that the incentives of the employees are in line with the long-term interests of the credit institution. (2) A credit institution shall explain how the variable remuneration retention policy relates to other risk alignment measures and how they differentiate between instruments paid upfront and deferred instruments. (3) When setting the retention period referred to in paragraph (1) of this Article, a significant credit institution shall consider the overall length of the deferral and the planned retention period, the impact of the employees on the credit institution's risk profile, and the length of the business cycle relevant for those employees. (4) The length of the retention period referred to in paragraph (1) of this Article may not be shorter than six months of the date of vesting for each deferred portion of remuneration or it shall not be shorter than one year for members of the management board and senior management of credit institution. (5) Where the risks underlying the performance can materialise beyond the end of the deferral and standard retention period, a longer retention period which is applied in general to all identified employees, should be considered in cases at least for the employees with the highest impact on the credit institutions’ risk profile. (6) Employees may not sell or otherwise access the instruments until the end of the deferral and the retention period of variable remuneration paid in instruments. Discretionary pension benefits Article 43 (1) Discretionary pension benefits, within the meaning of this Decision, shall be pension benefits granted on a discretionary basis by a credit institution observing the principle of gender-neutral remuneration policy to an employee as part of that employee’s variable remuneration, which do not include accrued benefits calculated and granted to an employee by the credit institution in accordance with the law.

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Decision on Remuneration in Credit Institutions (OGM 94/25) 41 (2) A significant credit institution shall align the payment of discretionary pension benefits with its strategy, objectives, values and long-term interests. (3) In the case of termination of employment relationship before retirement, the significant credit institution shall convert the amount of discretionary pension benefits into instruments. (4) In the case referred to in paragraph (3) of this Article, a significant credit institution may not vest the rights from these instruments before the expiry of a period of five years, counting from the date on which the employment relationship with the credit institution has been terminated. (5) In the case of termination of employment relationship due to retirement, a significant credit institution shall pay the discretionary pension benefits to the employee in the form of instruments subject to a five-year retention period. (6) Discretionary pension benefits shall not be paid without the consideration of the economic situation of the credit institution or risks that have been taken by the employee during the employment relationship, which can affect the credit institution in the long term. (7) A credit institution shall ensure that malus and clawback arrangements are applied in the same way to discretionary pension benefits as to other components of variable remuneration. Application of rules on variable remuneration in a significant credit institution Article 44 (1) The provisions of Articles 40 to 43 of this Decision shall be applied to employees whose variable remuneration on an annual basis exceed:

the amount of EUR 50,000; and
30% of their fixed remuneration on an annual basis. (2) A significant credit institution may prescribe in its remuneration policy the amounts lower than the amounts prescribed in paragraph (1) of this Article. V. REMUNERATION IN CASE OF EXTRAORDINARY PUBLIC FINANCIAL SUPPORT Remuneration in case of extraordinary public financial support Article 45 (1) In the case of credit institution benefiting from extraordinary public financial support, in accordance with the regulation governing state aid rules to support measures in favour of banks in the context of financial crisis, a credit institution shall assess the impact of

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Decision on Remuneration in Credit Institutions (OGM 94/25) 42 variable remuneration on:

the maintenance of an adequate level of capital;
the timely repayment of the funds received; and
the objectives of the restructuring plan developed in accordance with the state aid rules. (2) If the assessment shows that variable remuneration has a negative impact on the requirements referred to in paragraph (1) of this Article, a credit institution shall limit variable remuneration as a percentage of its net revenue. (3) Employees, members of the supervisory board and management board of the credit institution that has been given extraordinary public financial support may not be awarded and paid variable remuneration if the award and payment concerned would prevent ordinary and timely repayment of extraordinary public financial support or attainment of the objectives laid down in the restructuring plan. (4) The Central Bank may require the credit institution that has been given extraordinary public financial support the restructuring of variable remuneration in the manner that is in accordance with the sound risk management and long-term growth of the credit institution, including limiting net profit of the credit institution that may be used during defining and paying variable remuneration. (5) In the case referred to in paragraph (4) of this Article, the Central Bank may order the credit institution:
not to pay out variable remuneration for members of the supervisory board and management board from the date on which the extraordinary public financial support was received or to apply malus and clawback to variable remuneration taking into account potential failures of the management body of the credit institution;
not to award any variable remuneration to members of the management body as long as the extraordinary public financial support is not yet paid back, or until a restructuring plan for the credit institution is implemented or accomplished. (6) Measures referred to in paragraph (5) of this Article should be limited in time, and when the extraordinary public financial support is given, the periods of applying limits or the criteria for the application of such limits must be clearly determined and communicated to the credit institution. (7) The restructuring of variable remuneration referred to in paragraph (4) of this Article shall include the following measures:
establishing limits to the remuneration of management bodies of the credit institution;
prohibiting the payment of variable remuneration for the financial year in which extraordinary public financial support was asked for;
reducing previously determined variable remuneration which was deferred and not yet paid or vested;
prohibiting the determination of any variable remuneration until the final repayment

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Decision on Remuneration in Credit Institutions (OGM 94/25) 43 of extraordinary public financial support or until a financial recovery plan for the credit institution is implemented or accomplished; 5) aligning performance criteria with the progress made by the credit institution in achieving the objectives provided for by the restructuring plan and the contribution of identified employee in that regard; 6) increasing the percentage of deferred variable remuneration up to 100%; 7) aligning the accrual and deferral periods for variable remuneration with the deadlines for achieving the objectives provided for by the restructuring plan; or 8) other similar measures. (8) A credit institution and the Central Bank should take into account the possible award of variable remuneration to newly appointed members of the management body who are hired during the recovery or restructuring phase of the credit institution to ensure that suitable members of the management body can be appointed during that phase. VI. DISCLOSURES AND REPORTING TO THE CENTRAL BANK Disclosures of information with regard to the remuneration policy Article 46 A credit institution shall disclose information on remuneration policy in the manner and deadlines specified in the regulation of the Central Bank governing the public announcement (hereinafter: the disclosure) of data by credit institutions. Documentation on remuneration Article 47 (1) A credit institution shall keep the documentation related to employees’ remuneration, including in particular:

the remuneration policy and procedures for its implementation,
decisions of the supervisory board and management board regarding employees’ remuneration in accordance with the provisions of this Decision;
the results of performance measurements in determining the variable remuneration of employees; and
the procedures for setting the maximum amount of variable remuneration awarded to employees for a particular accrual period, including the determining of the maximum ratio between the variable and fixed components of total remuneration referred to in Article 22 of this Decision. (2) A credit institution shall, at the request of the Central Bank, explain the manner in which it has performed the following activities and submit all relevant documentation:
allocation of allowances to the fixed remuneration component referred to in Article 16 of this Decision;
pay-out of severance payments, the adequacy of the awarded amount and the criteria applied in the determination of that amount within the meaning of Article 18 of this Decision;

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Decision on Remuneration in Credit Institutions (OGM 94/25) 44 3) award of retention bonuses for particular employees within the meaning of Article 19 of this Decision; 4) risk adjustment of variable remuneration referred to in Article 33 of this Decision; and 5) other similar activities proving that the remuneration policy and practices are consistent with effective risk management. Remuneration reporting to the Central Bank Article 48 (1) With regard to employees whose total annual remuneration in financial year amounts to or exceeds EUR 50,000, a credit institution shall report to the Central Bank on:

the number of those employees;
the description of job positions and responsibilities of those employees;
the organisational units in which those employees are employed; and
the amount of the total remuneration of such employees allocated to the fixed remuneration component, the variable remuneration component payable in cash, instruments, discretionary pension benefits and other remuneration. (2) Data on remuneration that amounts to or exceeds EUR 50,000 referred to in paragraph (1) of this Article shall be submitted to the Central Bank in remuneration groups that are increased up to EUR 25,000 from the maximum amount of the previous group. (3) The remuneration in a financial year referred to in paragraph (1) of this Article shall cover variable remuneration awarded for that year, irrespective of when fixed remuneration was paid out for that year. (4) A credit institution shall submit the report referred to in paragraph (1) of this Article once a year in accordance with the decision governing reporting of the credit institutions to the Central Bank. VII. FINAL PROVISIONS Repealed regulations Article 49 As of the day of entry into force of this Decision, the Decision on Remuneration in Credit Institutions (OGM 127/20, 27/24) shall be repealed. Entry into force Article 50 This Decision shall enter into force on the eighth day following that of its publication in the “Official Gazette of Montenegro”.

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Decision on Remuneration in Credit Institutions (OGM 94/25) 45 THE COUNCIL OF THE CENTRAL BANK OF MONTENEGRO CHAIRPERSON GOVERNOR, Irena Radović, m.p. Decision number: 0101-5891-14/2025 Podgorica, 25 July 2025

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Decision on Remuneration in Credit Institutions (OGM 94/25) 46 ANNEX 1 GUIDELINES for establishing instruments for awarding variable remuneration and writing down, writing up and converting those instruments I. Classes of instruments

Instruments referred to in Article 41 paragraph (3) item 5) of this Decision that significant credit institutions may use for awarding variable remuneration shall be:

Additional Tier 1 instruments, where they have the characteristics referred to in items 2 and 3 of these Guidelines, and items 17 and 21 sub-item 3) of these Guidelines;
Tier 2 instruments, where they have the characteristics referred to in items 2 and 4 of these Guidelines, and items 9 to 22 of these Guidelines;
instruments which can be fully converted to Common Equity Tier 1 instruments or written down and which are neither Additional Tier 1 instruments nor Tier 2 instruments (hereinafter: Other Instruments) in cases referred to in items 5 to 8 of these Guidelines where they have the characteristics referred to in item 2 and items 9 to 22 of these Guidelines.

Instruments referred to in item 1 of these Guidelines should have the following characteristics:

instruments are not secured or subject to a guarantee that enhances the seniority of the claims of the holder;
where the act governing an instrument allows its conversion, that instrument may only be used for awarding variable remuneration where the rate or range of conversion is set at a level that ensures that the value of the instrument into which the instrument initially awarded is converted is not higher than the value of the instrument initially awarded at the time it was awarded as variable remuneration;
the act governing convertible instruments which are used for the sole purpose of variable remuneration shall ensure that the value of the instrument into which the instrument initially awarded is converted is not higher than the value, at the time of that conversion, of the instrument initially awarded;
the act governing the instrument shall provide that any distributions are paid on at least an annual basis and are paid to the holder of the instrument;
instruments shall be priced at their value at the time the instrument is awarded, in accordance with the applicable accounting standard and taking into account the credit rating of the credit institution established by an independent review;
the act governing the instruments issued for the sole purpose of variable remuneration shall require a valuation to be carried out in accordance with the applicable accounting standard in the event that the instrument is redeemed, called, repurchased or converted.

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Decision on Remuneration in Credit Institutions (OGM 94/25) 47 II. Additional Tier 1 instruments 3. In addition to characteristics referred to in item 2 of these Guidelines, Additional Tier 1 instruments referred to in item 1 sub-item 1) of these Guidelines should have the following characteristics:

the act governing the instrument shall specify an event referred to in Article 42 paragraph (1) item 14) of the Decision on Capital Adequacy;
the event referred to in sub-item 1) of this item occurs where the Common Equity Tier 1 capital ratio of the credit institution issuing the instrument, referred to in Article 101 paragraph (1) item 1) of the Decision on Capital Adequacy, falls below either of the following:

7%; or
a level higher than 7%, where determined by the credit institution and specified in the act governing the instrument;

have one of the following characteristics:

the instruments are issued for awarding variable remuneration and the act governing the instrument ensures that any distributions are paid at a rate which is consistent with market rates for similar instruments issued by the credit institution or by institutions of comparable nature, scale, complexity and credit rating and which is, at the time the remuneration is awarded, no higher than 8 percentage points above the annual average rate of change for the Union published by the MONSTAT in its Harmonised Indices of Consumer Prices, and where the instruments are awarded to employees who perform the predominant part of their professional activities outside Montenegro, a credit institution may use an index of consumer prices produced in respect of another country;
at the time of the award of the instruments as variable remuneration, at least 60% of the instruments in issuance were issued for other purposes and are not held by the following entities or by any connected undertaking: a) credit institution or its subsidiary undertakings, b) the parent undertaking of the credit institution or its subsidiary undertakings, c) the parent financial holding company or its subsidiary undertakings, d) the mixed activity holding company or its subsidiary undertakings, e) the mixed financial holding company and its subsidiary undertakings. III. Tier 2 instruments

In addition to characteristics referred to in item 2 of these Guidelines, Tier 2 instruments referred to in item 1 sub-item 2) of these Guidelines should have the following characteristics:

at the time of the award of the instruments as variable remuneration, the remaining period before maturity of the instruments shall be equal to or exceed the sum of the deferral periods and retention periods that apply to variable remuneration;
the act governing the instrument provides that, upon the occurrence of an event referred to in item 3 sub-item 1) of these Guidelines, the principal amount of the instruments shall be written down on a permanent or temporary basis or the instrument shall be converted to Common Equity Tier 1 instruments;

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Decision on Remuneration in Credit Institutions (OGM 94/25) 48 3) the event referred to in sub-item 2) of this item occurs where the Common Equity Tier 1 capital ratio of the credit institution issuing the instrument, referred to in Article 101 paragraph (1) item 1) of the Decision on Capital Adequacy, falls below either of the following:

7%; or
a level higher than 7%, where determined by the credit institution and specified in the act governing the instrument;

have one of the characteristics referred to item 3 sub-item 3) of these Guidelines. IV. Other Instruments

Other instruments referred to in item 1 sub-item 3) of these Guidelines may be used for awarding variable remuneration referred to in Articles 39 and 40 of this Decision, where they have, in addition to characteristics referred to in item 2 of these Guidelines, the following characteristics:

characteristics referred to item 6 of these Guidelines;
they are linked to an Additional Tier 1 instrument or Tier 2 instrument and have the characteristics referred to in item 7 of these Guidelines;
they are linked to an instrument which would be an Additional Tier 1 instrument or Tier 2 instrument but for the fact that it is issued by a parent undertaking of the credit institution which is outside the scope of consolidation pursuant to the Law and in accordance with item 8 of these Guidelines.

Other instruments should have also the following characteristics:

they shall be issued directly or through an entity included within the group consolidation pursuant to the Law, provided that a change to the credit rating of the issuer of the instrument can lead to a similar change to the credit rating of the credit institution using the Other Instruments for awarding variable remuneration;
the act governing the Other Instruments does not give the holder the right to make payment or distributions of principal before scheduled deadline other than in the case of bankruptcy or winding-up proceedings of the credit institution;
at the time of the award of the Other Instruments as variable remuneration the remaining period before maturity of those Instruments is equal to or exceeds the sum of the deferral periods and retention periods that apply in respect of the award of those instruments;
the act governing the instrument provides that, upon the occurrence of an event referred to in item 3 sub-item 1) of these Guidelines the principal amount of the instruments shall be written down on a permanent or temporary basis or the instrument shall be converted to Common Equity Tier 1 instruments;
the event referred to in sub-item 4) of this item occurs where the Common Equity Tier 1 capital ratio of the credit institution issuing the instrument, referred to in Article 101 paragraph (1) item 1) of the Decision on Capital Adequacy, falls below either of the following:

7%; or
a level higher than 7%, where determined by the credit institution and specified in the act governing the instrument;

have one of the characteristics referred to in item 3 sub-item 3) of these Guidelines.

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Decision on Remuneration in Credit Institutions (OGM 94/25) 49 7. Other Instruments referred to in item 5) sub-item 2) of these Guidelines shall also have the following characteristics:

they meet the conditions referred to in item 6) sub-items 1) to 5) of these Guidelines;
they are linked to an Additional Tier 1 or Tier 2 instrument issued through an entity included within the group prudential consolidation pursuant to the Law (hereinafter: the reference instrument);
the reference instrument meets the conditions of item 6 sub-items 3) and 6) of these Guidelines at the time that the instrument is awarded as variable remuneration;
the value of another Instrument is linked to the reference instrument such that it is at no time more than the value of the reference instrument;
the value of any distributions paid after the Other Instrument has vested is linked to the reference instrument such that distributions paid are at no time more than the value of any distributions paid under the reference instrument;
the act governing the Other Instruments provides that if the reference instrument is called, converted, repurchased or redeemed within the deferral or retention period the Other Instruments shall be linked to an equivalent reference instrument which fulfils the conditions referred to in items 5 to 8 of these Guidelines such that the total value of the Other Instruments does not increase.

Other Instruments referred to in item 5) sub-item 3) of these Guidelines shall be appropriate where:

the Central Bank has determined that the credit institution that issues the instrument to which the other instruments are linked is subject to consolidated supervision by a third-country supervisory authority which is equivalent to that specified the Law;
they have the characteristics referred to in item 7 sub-item 1) and sub-items 3) to 6) of these Guidelines. V. Write down, write up and conversion procedures

For the purpose of item 4 sub-item 2) and item 6 sub-item 4) of these Guidelines, Tier 2 instruments and Other Instruments must comply with the procedures and timing laid down in items 10 to 22 of these Guidelines for calculating the Common Equity Tier 1 capital ratio and the amounts to be written down, written up or converted. The act governing Additional Tier 1 instruments must comply with the procedures laid down in item 17 and item 21 sub-item 3) of these Guidelines in the part regarding to the amounts to be written down, written up or converted.
Where the act governing Tier 2 and Other Instruments requires the instruments to be converted into Common Equity Tier 1 instruments upon the occurrence of a trigger event, those provisions shall specify the following:

the rate of that conversion and a limit on the permitted amount of conversion; and/or
a range within which the instruments will convert into Common Equity Tier 1 instruments;

Where the act governing the instruments provides that their principal amount shall be

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Decision on Remuneration in Credit Institutions (OGM 94/25) 50 written down upon the occurrence of an event referred to in item 3 sub-item 1) of these Guidelines, the write-down shall permanently or temporarily reduce all the following:

the claim of the holder of the instrument in the bankruptcy or winding-up proceedings of the credit institution;
the amount to be paid in the event of the call or redemption of the instrument; and
the distributions made on the instrument.

Any distributions payable after a write-down of an instrument shall be based on the reduced amount of the principal.
Write-down or conversion of the instruments shall, under the applicable accounting framework, generate items that qualify as Common Equity Tier 1 items.
Where the credit institution has established that the Common Equity Tier 1 ratio has fallen below the level that activates conversion or write-down of the instrument the competent authority of the credit institution shall be required to determine without delay that a trigger event has occurred and there shall be an irrevocable obligation to writedown or convert the instrument.
The aggregate amount of instruments that is required to be written down or converted upon the occurrence of an event referred to in item 3 sub-item 1) of these Guidelines shall be no less than the lower of the following:

the amount required to fully restore the Common Equity Tier 1 ratio of the institution to the percentage set as the event in the act governing the instrument;
the full principal amount of the instrument.

Where an event referred to in item 3 sub-item 1) of these Guidelines occurs, a credit institution shall:

inform the employees who have been awarded the instruments as variable remuneration and the persons who hold such instruments;
write down the principal amount of the instruments, or convert the instruments into Common Equity Tier 1 instruments as soon as possible and within a maximum period of 30 days in accordance with items 9 to 15 and items 17 to 22 of these Guidelines.

Where Additional Tier 1 instruments, Tier 2 instruments and Other Instruments include an identical level of events referred to in item 3 sub-item 1) of these Guidelines, the principal amount shall be written down or converted on a pro rata basis to all holders of such instruments which are used for the purposes of variable remuneration.
The amount of the instrument to be written down or converted shall be subject to independent review, which must be completed as soon as possible and shall not create impediments for the credit institution to write-down or convert the instrument.
A credit institution issuing instruments that convert to Common Equity Tier 1 on the occurrence of an event referred to in item 3 sub-item 1) of these Guidelines shall be

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Decision on Remuneration in Credit Institutions (OGM 94/25) 51 required to ensure that its authorised share capital is at all times sufficient to convert all such convertible instruments into shares if such event occurs. The credit institution shall maintain at all times the necessary prior authorisation to issue the Common Equity Tier 1 instruments into which such instruments would convert upon the occurrence of such event. 20. A credit institution may issue instruments that convert to Common Equity Tier 1 on the occurrence of an event referred to in item 3 sub-item 1) of these Guidelines where it has been prescribed in the act of incorporation of the credit institution, articles of association or contract on issuing the instrument. 21. The write-down of an instrument shall be considered temporary where an instrument has the following characteristics:

write-ups are based on profits after the issuer of the instrument has taken a decision confirming the final profits;
any write-up of the instrument or payment of coupons on the reduced amount of the principal shall be operated at the discretion of the credit institution subject to the constraints arising from sub-items 3), 4) and 5) of this item and the credit institution shall not be obliged to operate or accelerate a write-up of an instrument under specific circumstances;
a write-up shall be operated on a pro rata basis among Additional Tier 1 instruments, Tier 2 instruments and Other Instruments used for the purpose of variable remuneration that have been subject to a write-down;
the maximum amount to be attributed to the sum of the write-up of Tier 2 and Other Instruments together with the payment of coupons on the reduced amount of the principal shall be equal to the profit of the credit institution multiplied by the amount obtained by dividing the following amounts:

the sum of the nominal amount of all Tier 2 instruments and other instruments of the credit institution before write-down that have been subject to a write-down;
the sum of own funds and of the nominal amount of Other Instruments used for the purpose of variable remuneration of the credit institution; and
the sum of any write-up amounts and payments of coupons on the reduced amount of the principal shall be treated as a payment that results in a reduction of Common Equity Tier 1 and shall be subject, together with other distributions on Common Equity Tier 1 instruments, to the restrictions relating to the Maximum Distributable Amount as laid down in Articles 166 and 167 of the Law.

For the purposes of item 21 sub-item 4) of these Guidelines, the calculation shall be made at the moment when the write-up is operated.