‍ Corporate Governance, Remuneration Policy and System, Conflict of Interest

Qred Bank AB (hereinafter referred to as “Qred”)

Corporate governance

Qred is a banking company licensed to carry out banking activities in accordance with the Banking and Financing Business Act (2004:297).

The general meeting

The general meeting is Qred's highest decision-making body, where shareholders exercise their voting rights and decisions are made about, among other things, the balance sheet and profit and loss account in the annual report, discharge, board members for the coming year and the election of auditors.

Board of Directors

Qred's Board of Directors is responsible for the organization and management of Qred in accordance with, among others, the Swedish Enterprise Act, and has the ultimate responsibility to ensure that activities are conducted in accordance with good internal governance and control. Qred's internal governance and control has been formalized through internal rules in the form of policies and instructions and supporting routine descriptions, process descriptions, and checklists.

The Board of Directors meets at least four times a year and decides on internal regulations for internal governance and control, while the CEO is responsible for implementing them into Qred's activities in line with the Board of Directors instructions.

The Board of Directors is also responsible for ensuring that Qred conducts its activities in an ethically responsible and professional manner, that conflicts of interest are adequately and appropriately identified and managed, and that Qred maintains a healthy risk culture.
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Chairman of the Board of Directors

The Chairman of the Board of Directors directs the work of the Board of Directors and ensures that the Board of Directors complies with its obligations under the Swedish Companies Act and other applicable rules. The Chairman of the Board of Directors follows Qred's development through contact with the CEO.

The Chairman of the Board of Directors of Qred is responsible for conducting an annual eligibility assessment to ensure that the members of the Board of Directors, CEO and senior management are individually suited to their duties at all times. This assesses whether they

• Be sufficiently reliable
• Have sufficient knowledge, skills and experience to carry out their tasks.
• Being able to act honestly and with integrity and be able to think independently in order to effectively assess decision-making and adjust it where necessary.
• Be able to free up enough time to carry out their tasks.

The eligibility assessments and results are documented.
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Committees

To support the Board of Directors in certain specific areas, the Board of Directors has established two committees responsible for preparing the basis for decisions on issues within the remit of each committee:

• Remuneration Committee
• Risk and Audit Committee

The members of the Remuneration Committee are appointed annually and consist of the Chairman of the Board of Directors and an additional board member. The Remuneration Committee meets twice a year and the CEO and other senior executives may be invited to attend the meetings.

The Risk and Audit Committee meets quarterly prior to the board meeting and consists of 2-3 board members and 1-3 senior company executives. One of the members of the committee is appointed chairman of the committee by the Board of Directors. At least one member of the committee must have experience in identifying, assessing and managing risks of the size and complexity of the company and its direct and indirect subsidiaries and at least one of the members must have accounting or auditing competence.

The committees assist the Board of Directors with expertise and prepare proposals, advice and case preparation in their respective areas. The work of the committees is regulated in more detail in instructions.
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CEO

The Board of Directors appoints Qred's CEO, who is authorized to make decisions on all matters that are not decided by the Board of Directors or the General Assembly. The CEO is responsible for day-to-day management in accordance with the instructions of the Board of Directors and for the CEO's obligations under external regulations.

The CEO is responsible for implementing policies, instructions, and routine and process descriptions within the organization and that all employees have access to relevant documentation.
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Management Team

The company's CEO has an advisory forum, the management team, with the aim of ensuring that the company's activities are carried out in a healthy and efficient manner. In its work, the management team will always consider the interests of the company and its customers. The management team normally meets when necessary, but at least every month. The CEO convenes and chairs the meetings; they have a fixed agenda and are minutes taken.

Internal administration and control

Three lines of defense

Qred applies the principle of three lines of defense to determine where the responsibility and control over taking risks should lie in the organization.

The first line of defense consists of business operations, including the CEO, who is responsible for and controls daily risk management and compliance. Business operations are also responsible for controlling the processes that Qred uses, in the form of internal controls.

The second line of defense consists of the Risk Control function and the Compliance function, which include monitoring, controlling and reporting Qred's risks and how the company complies with internal and external regulations. The control functions in the second line of defense are subordinate to the CEO and are primarily the CEO's independent control body, but report directly to both the Board of Directors and the CEO.

The third line of defense consists of the internal audit function. The Internal Audit Function reports directly to the Board of Directors and is the Board of Directors's independent control body. The third line of defense assesses and evaluates the first and second lines of defense.

Remuneration policy and remuneration system

Remuneration policy

Qred has a remuneration policy (“policy”) that aims to describe and establish principles for how the company's remuneration system is designed, monitored and continuously monitored. The policy is consistent with and promotes effective risk management and prevents excessive risk taking. In addition, the policy ensures that the interests of customers are not negatively affected by the company's remuneration structure. The remuneration system promotes Qred's ability to attract and retain competent staff and contributes to achieving the Company's long-term goals.

The Board of Directors is ultimately responsible for the content, establishment, implementation and compliance with the remuneration policy. The policy is reviewed regularly, at least annually, and, if necessary, updated before being approved by the Board. A risk analysis forms the basis for the board's decision to adopt the policy. The board also decides on:

• Management Team Remuneration,
• Remuneration of control functions,
• The result and payment of variable remuneration, and
• Measures to monitor the application of the policy.

Remuneration Committee

The Board of Directors has appointed a Remuneration Committee

The Remuneration Committee is responsible for monitoring and reviewing the company's remuneration system at least annually and for preparing decisions on remuneration issues for the board of directors. In monitoring the remuneration system, the Remuneration Committee will also monitor the development of unjustified salary differences between women and men.

If applicable, the Board of Directors will comply with the remuneration decisions of the annual general meeting.

Risk analysis

The Company makes an annual risk analysis to identify employees whose tasks have a significant impact on the Company's risk profile. The analysis covers all risks to which the company is or may be exposed, including those related to this policy and the company's remuneration system. The analysis is documented and attached to this policy. The Remuneration Committee reviews the risk analysis before the policy is approved by the Board of Directors.

Reward System

General principles

The Company's remuneration system shall be designed to be compatible with and promote healthy and effective risk management and prevent excessive risk taking. Remuneration systems encourage employees to perform well and help the Company attract and retain skilled employees. The remuneration system is applied in a gender-neutral manner.

Fixed allowance

Fixed salary

The basis of the company's remuneration system is a fixed salary. The fixed salary is set on a rolling basis, with the first review usually taking place 12 months after employment. As a general rule, the salary is revised once a year.

The fixed salary of employees is determined on the basis of objective criteria and is in line with the market. In the case of new employment, the fixed salary is determined based on the market situation for the profile in question and the value that the employee is expected to add to the company. In the event of subsequent salary revisions and when changing jobs, an individual assessment will form the basis for determining the salary, based on parameters such as work performance, independence, initiative, responsibility and personal development. Discriminatory or other unjustified differences between employees' fixed salaries should not occur.

In connection with a salary review, the salary-determining manager conducts a development and salary interview with the employee, in which the relationship between work tasks, work results and performance in general and salary development is made clear to the employee.

Vacation benefits are determined in accordance with current legislation and individually in conjunction with the assessment of employment and salaries.

Variable remuneration

The Board of Directors decides on the variable remuneration for the Management Team and employees whose tasks have a significant impact on the company's risk profile. The CEO can decide whether other employees (outside the group mentioned above) are entitled to variable remuneration.

The company applies a variable remuneration system in the form of performance-based bonuses for the CEO, Management Group and most functions and business units. Performance-related bonuses are designed to meet the criteria in this section and the Policy in general. The criteria for receiving variable remuneration are based on the company's overall performance, the employee's individual performance, and the performance of the business unit where the employee works.

The variable remuneration is based on:

1. Achieving financial objectives related to the budget;
2. Business operational objectives; and/or
3. Performance-related goals related to individual or group performance.

Results that form the basis for calculating variable remuneration are mainly based on risk-adjusted profit figures. The company takes into account both current and future risks and the costs of capital and liquidity that are required for the company. The company ensures that variable remuneration is based on long-term sustainable results by assessing the results in a multi-year perspective.

In addition, the approval and payment of the variable remuneration takes into account the company's underlying economic cycle and business risks.

When determining variable remuneration, both financial and non-financial factors are taken into account when assessing the individual results and performance of employees. When it comes to non-financial factors, the company takes into account, among other things, compliance with internal rules, accountability, customer satisfaction and protection of customers' interests.

If the Company's risk control, compliance and internal audit control functions are employed by the Company and are entitled to variable remuneration, the Company shall ensure that such remuneration is set based on objectives associated with each control function, regardless of the performance of the business units they control.

The company ensures that variable remuneration does not affect the company's ability to maintain an adequate capital base or to strengthen the capital base if necessary.

The company maintains a reasonable balance between the fixed and variable remuneration of employees. The fixed remuneration of employees must always be high enough to set the variable part of the remuneration to zero. The total variable remuneration that employees receive should never be at a level that threatens to undermine the company's capital base and its ability to generate positive results in the long term. The total variable remuneration for an employee may never exceed 100% of the employee's annual fixed remuneration. The Company's sales function, which is completely disconnected from the Company's credit function and credit decisions, is exempt from the above limitation, but can never receive more than SEK 100,000 per month in variable remuneration.

Guaranteed variable remuneration

As a general rule, the company will not grant a guaranteed variable remuneration to an employee. If there are special reasons, the board of directors may decide to provide a guaranteed variable compensation to an employee, but only in connection with a new employment and only during the employee's first year of employment.

Ethical guidelines and conflict of interest

Qred has established an ethics policy with the aim of ensuring that the company does business in an ethically responsible and professional manner in accordance with Qred's internal and external rules. The purpose of this policy is also to promote transparency, integrity and a corporate culture that protects Qred's activities against corruption.

The policy sets common standards to promote Qred's ethical approach and to help employees in situations where applicable rules are missing or contain limited guidelines.

Conflict of interest

Qred has created a policy and instruction for dealing with conflicts of interest that may occur in the company.

Qred's employees are always expected to act in Qred's best interests and to have good judgment that is not influenced by private interests or divided loyalties.

No employee may participate in managing a business or making a credit decision related to a family member, a family member's business, or otherwise when there is a risk of fraud. An employee may also not deal with cases in which the employee has a personal interest or cases where such an interest is held by a family member of the employee or with a company in which the employee or a family member of the employee has a substantial interest. In such a situation, the employee should be exempted from credit processing and the credit decision.

Qred employees will not purchase goods or services from related parties without prior approval from the CEO, and the CEO will not purchase goods or services from related parties without prior approval from the board of directors.