As set out in BBVA's Bylaws, the Board Regulations stipulate that one of the powers of the Board of Directors is to approve the remuneration policy for senior executives and employees whose professional activities may have a material impact on the Entity's risk profile and to determine directors' remuneration, and, in the case of executive directors, the remuneration for their executive functions and other terms and conditions set out in their contracts.
The Regulations of the Board of Directors of BBVA set out the internal rules for the operation of the Board and its Committees, which provide assistance on matters within their competence. The Remuneration Committee assists the Board with matters related to remuneration as set out in the Board Regulations, ensuring compliance with the remuneration policy established.
As set out in Article 36 of the Regulations of the Bank's Board of Directors, the Remuneration Committee performs the following functions:
- Propose to the Board of Directors, for submission to the General Meeting, the remuneration policy for directors, in terms of items and amounts, the parameters for its determination and the payment system. It will also submit its corresponding report as set out in applicable law.
- Determine the extent and amount of the individual remuneration, entitlements and other economic rewards, as well as the contractual terms and conditions, for the executive directors, submitting the relevant proposals to the Board of Directors.
- Propose on an annual basis to the Board of Directors the annual report on the remuneration of the Bank's directors, which will be submitted to the Annual General Meeting as set out in applicable legislation.
- Propose to the Board of Directors the remuneration policy for senior executives and those employees whose professional activities may have a material impact on the Company's risk profile.
- Propose to the Board the basic terms and conditions of the contracts of senior executives and directly supervise the remuneration of senior officers responsible for risk management and compliance functions in the Company.
- Oversee enforcement of the remuneration policy established by the Company and periodically review the remuneration policy applied to directors, senior officers and employees whose professional activities may have a material impact on the Company's risk profile.
- Any others that may have been assigned under these Regulations or conferred by a decision of the Board of Directors or by applicable legislation.
As of the date of this report, the Remuneration Committee was composed of five members, all of them non-executive directors; the majority are independent, including its chairman.
TABLE 67: Composition of the Remuneration Committee
| Name and surname(s) | Position | Status |
|---|---|---|
| Carlos Loring Martínez de Irujo | Chairman | Independent |
| Tomás Alfaro Drake | Member | Independent |
| Ignacio Ferrero Jordi | Member | External |
| José Maldonado Ramos | Member | External |
| Juan Pi Llorens | Member | Independent |
In the exercise of its functions, the BBVA Remuneration Committee met four times in 2014 to deal with matters that fall under its responsibility.
In relation to the determination of the remuneration of Identified Staff, the matters analyzed include direct supervision of the remuneration of managers in the Risk and Compliance areas and review of the application of the remuneration policy for Identified Staff, including directors and members of senior management.
The Board of Directors of BBVA also approved on February 3, 2015, as per the proposal submitted by the Remuneration Committee, the 2014 Annual Report on Remuneration of BBVA Directors, in accordance with the new framework established by the Spanish Securities and Exchange Commission (CNMV) through Circular 4/2013, dated June 12. This Report will be put to the vote at the Annual General Meeting to be held on March 13, 2015, as set out in article 541 of Royal Legislative Decree 1/2010, dated July 2, which approves the amended text of the Corporations Act (hereinafter the “Corporations Act”), and is available on the Company's website (www.bbva.com) from the date of calling the General Meeting.
The Annual Report on the Remuneration of BBVA Directors includes a description of the basic principles of the Bank's remuneration policy with respect to the members of the Board of Directors, whether executive or non-executive, as well as a detailed presentation of the different elements and amounts making up their remuneration. It has been prepared in accordance with BBVA's Bylaws and the Board of Directors' Regulations. The Report also includes the principles and basic elements of the Bank's general remuneration policy.
Likewise, the Board of Directors of BBVA, at the meeting held on February 3, 2015, as set out in article 17 of the Board Regulations, approved, at the proposal of the Remuneration Committee, and considering the best practices and recommendations at local and international level, certain amendments to the remuneration policy applicable to the Identified Staff for the years 2015, 2016 and 2017. These amendments maintain many of the elements of the previous settlement and payment system for the variable remuneration of the Identified Staff (such as payment of a percentage in shares, the deferred payment of a percentage of variable remuneration, mandatory retention periods for the shares, malus, clauses etc.), but including elements aimed at better aligning remuneration with the objectives of profitability and recurrence, liquidity and funding and long-term solvency of the Group, strengthening the principle of prudent risk management, as well as greater correspondence between variable remuneration and the sustainability of earnings in the medium and long term, and seeking increased transparency. The new elements include:
- An increase in the number and types of indicators used to calculate variable remuneration.
- Greater correspondence between variable remuneration and the risk metrics, reinforcing their alignment with prudent risk management.
- A greater weight of the multiannual indicators in the determination of variable remuneration and the reinforcement of the assessment of long-term results.
- Reinforcement of the deferred period for variable remuneration payment.
- Increased transparency in the calculation of variable remuneration.
Based on the above, the Board of Directors, at the proposal of the Remuneration Committee, has also approved the Remuneration Policy for BBVA Directors that will apply for the years 2015, 2016 and 2017, and which in accordance with article 529r of the Corporations Act will be put to the vote at the Annual General Meeting on March 13, 2015 as a separate item on the agenda. The text of the Remuneration Policy for BBVA Directors is available on the Company's website (www.bbva.com) from the date of calling the General Meeting.
As already indicated, BBVA has a decision-making system for remuneration matters in which the Remuneration Committee plays a key role. It is responsible for determining the amount of fixed and variable remuneration for the executive directors and the remuneration policy applicable to the Identified Staff, including the members of the Group's senior management; it then submits the corresponding proposals to the Board.
To perform its functions, in 2014 the Remuneration Committee and the Board of Directors have been supported by the Bank's internal services and the information provided by two of the leading global consultants on remuneration for board members and senior officers, Towers Watson and McLagan (belonging to the AonHewitt group).
The Remuneration Committee conducts an annual review of the application of the remuneration policy approved by the Bank's Board of Directors, as established in Article 33.2 of the aforementioned Act 10/2014.
The Remuneration Committee is also assisted by the Board's Risk Committee, which in accordance with article 39 of the Board Regulations has participated in the establishment of the remuneration policy, checking that it is compatible with adequate and effective risk management and does not offer incentives for assuming risks that exceed the Company's acceptable level.
Lastly, the decisions related to the remuneration of executive directors, when required by law, are submitted to the Bank's Annual General Meeting for approval.
This system ensures an adequate decision-making process on questions of remuneration.
In 2014 the members of the Remuneration Committee received an aggregate total of €278,000 for their work on it. In addition, the Report on the Remuneration of BBVA Directors includes a breakdown of the remuneration by item for each director.