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LLB Annual Report 2023 de

Compensation policy

On 18 August 2011, the Board of Directors issued the Group regulation “Compensation policy of the LLB Group” for Liechtensteinische Landesbank AG and its Group companies (revised on 1 February 2023). The Group regulation is based on: the current version of the Ordinance on Banks and Investment Firms (Banking Ordinance) of 22 February 1994, in particular Appendix 4.4; EU Directive 2013 / 36 / EU (CRD) of 26 June 2013 as amended by EU Directive 2019 / 878 (CRD V) of 20 May 2019; Regulation No. 575 / 2013 (CRR) of 26 June 2013 as amended by 2019 / 876 (CRR II) of 20 May 2019; Delegated Regulation No. 527 / 2014 of 12 March 2014; Delegated Regulation No. 2021 / 923 of 25 March 2021; Delegated Regulation No. 861 / 2016 of 18 February 2016; and EBA Guideline EBA / GL / 2021 / 04 of 2 July 2021. The LLB Group applies these legal provisions in a manner that is commensurate with its size and internal organisation as well as the type, scope and complexity of its business.

The Group regulation “Compensation policy of the LLB Group” regulates the framework for the Group-wide compensation policy, in particular in regard to its alignment to risk management. It stipulates the basis, values and objectives and sets out the minimum requirements for the design of the compensation systems. In addition, it regulates Group-internal and Group-external reporting as well as related responsibilities. The Group regulation “Compensation policy of the LLB Group” applies particularly to those persons who are identified as risk takers as part of a process that is carried out annually. For its implementation at Liechtensteinische Landesbank AG, the Board of Directors has also issued the separate Group regulation “Compensation standards of LLB & LCH & ASM” (revised on 1 February 2023).

As a company exempt from Art. 12, Para. 2 of the OaEC, Liechtensteinische Landesbank has no statutory rules on compensation, participations and loans. The Group companies issue company-specific compensation guidelines that take into consideration the applicable (special) legal regulations. Deviations from the Group regulation are only permitted if they arise from mandatory law or special legal regulations.

The compensation policy is in line with the business strategy as well as the targets and values of the LLB Group and is based on the following principles:

  • Sustainability and risk adjustment: Compensation practices must contribute to long-term corporate development. They must support risk management and the pursuit of both sustainable increases in the company’s value as well as long-term client and employee retention. The compensation policy must create incentives that ensure the appropriate risk-taking behaviour by individuals in order to counteract any conflicts of interest. In addition, compensation policy is designed so as to take into account and promote sound and effective risk management with respect to sustainability risks. Specifically, the compensation structure does not encourage excessive risk‐taking with respect to sustainability risks. This is ensured, among other things, by appropriately addressing risks with regard to sustainability aspects and business performance. The LLB Group applies these principles also to corresponding target agreements with relevant persons.
  • Foundation of trust: The design of the compensation regulations and processes is founded on mutual trust between the employee and the employer. This is necessary because there are time differences between the provision of the performance and the acceptance of responsibility on the one hand, and the payment of the compensation on the other. Furthermore, a performance appraisal has subjective elements. For this reason, it is necessary to maintain the voluntary nature of the payment of the variable component and to indicate the scope for discretion in this area.
  • Performance and success orientation: Compensation practices have to reward both individual performance and company-related performance. The focus on the Group’s success promotes, and is in line with, the LLB Group’s long-term interests. Acknowledging individual performance serves performance motivation, the management of individual performance contributions towards achieving company targets as well as the retention of top performers.
  • Simplicity, clarity and comprehensibility: The compensation regulations and models are to be kept simple, clear and comprehensible. Both employees and third parties alike should be able to easily understand the basic concepts.
  • Fair compensation in accordance with responsibilities and management level: When determining compensation, the workload as well as the value of the function in question have also to be taken into consideration and the different management level requirements reflected in a clear and fair manner.
  • Group orientation: Compensation has to promote Group orientation. Participation in the long-term development of value through shared ownership in the form of an appropriate share option scheme is intended to increase commitment to the Group’s success and identification with the corporate Group.
  • Freedom from discrimination: All decisions concerning the employment relationship, including decisions on compensation, are based on the qualifications, the performance and the conduct of the employee or on other objective corporate considerations.

The compensation policy sets out the objectives, processes and requirements for the design of the compensation. It also contains rules for the alignment between compensation and risk management. For employees who receive a variable component of compensation, the compensation model specifies the ratio between fixed and variable portions and the allocation mechanism for the variable portion.