Hoist Finance AB (publ), corporate identity number 556012-8489, is the Parent Company within the Hoist Finance Group, registered in Stockholm, Sweden. Hoist Finance is a registered credit market company under the supervision of the Swedish Financial Supervisory Authority.
Hoist Finance is a leading debt restructuring partner to international banks and financial institutions, with loan acquisition and management operations in twelve countries across Europe. The Group’s core business has historically been the acquisition of non-performing loans (NPLs) originated by large international banks and other financial institutions with whom Hoist Finance has strong and long-term relationships. After purchasing an NPL portfolio, Hoist Finance’s primary method of collecting from its customers is through sustainable payment plan agreements. Most of Hoist Finance’s recovery activities for its acquired portfolios are managed through its own call centres across Europe, supplemented in some cases by carefully selected external debt recovery partners. For over 20 years, the Group has focused exclusively on the acquisition of NPL portfolios. This distinguishes Hoist Finance from many of its competitors, which have evolved from being solely collection companies (i.e., collecting on behalf of a third party) and, therefore, have significantly shorter histories in acquiring claims. This long-term focus and the Group’s flexible and tailored product offering have allowed Hoist Finance to develop the expertise to structure and execute complex transactions.
The Group operates a traditional internet-based retail deposit product in Sweden under the HoistSpar brand, and has also launched savings accounts in Germany, in partnership with one of the largest deposit savings platforms in Europe. As a regulated credit market company, Hoist Finance can offer the public a deposit service which is fully covered by the Swedish state deposit guarantee up to an amount of SEK 950,000 for each account. The state deposit guarantee was increased to SEK 1,050,000 as from 1 January 2021. This gives the Group a cost-effective, flexible and reliable source of funding, which is primarily used for the acquisition of NPLs
Hoist Finance’s geographic focus is Europe. The Group has acquired loan portfolios in Belgium, Cyprus, France, Greece, Italy, the Netherlands, Poland, Spain, the UK, Germany and Austria. In accordance with the Group’s strategy, the prioritised markets are France, Italy, Poland, Germany and the UK. By selling their NPLs, banks and other originators can focus on their core business, free up capital, improve liquidity, limit the risk of doubtful payment profiles and improve key performance indicators. The European NPL market has grown in recent years, mainly as a result of the underlying market expansion of the consumer credit market and the new capital adequacy (Basel III) regulations, as well as the regulation for minimum loss coverage for non-performing exposures (”NPL prudential backstop”) that took effect in 2019. For further information on the NPL prudential backstop, see the "NPL Prudential Backstop" section, the "Development of Risks" section in the Administration Report, and Note 33 "Risk Management". Hoist Finance’s main competitors include debt acquisition and collection companies, integrated players offering a wide range of financial services, and specialised investors.
Group structure and ownership
Hoist Finance was listed on the Nasdaq Stockholm Mid Cap list on 25 March 2015. At 30 December 2020, the number of shares totalled 89,303,000 and the share price closed at SEK 36.46, corresponding to a market capitalisation of SEK 3,256m. See Hoist Finance’s website, www.hoistfinance.com, for additional information on the share and shareholders. The Articles of Association do not include any restrictions on the negotiability of the shares and there are no other circumstances that require disclosure under Chapter 6, 2a § 3–11 of the Swedish Annual Accounts Act.
Hoist Finance together with a number of subsidiaries acquire and hold loan portfolios for the Group. Day-to-day collection operations are mostly run by local branch offices and subsidiaries. Some of these companies also provide commission-based administration services to third parties. The Polish branch office operates as a shared service centre and the Romanian branch office is a nearshoring operation providing services within the Hoist Finance Group.
Note 19 "Shares and Participations in Subsidiaries", sets out the Hoist Finance Group and its key subsidiaries and branch offices as of 31 December 2020.
The Board of Directors proposes that the 2021 Annual General Meeting resolve not to distribute a dividend to the shareholders of Hoist Finance AB (publ) for financial year 1 January – 31 December 2020. The Board deems that this exception to the current dividend policy will be instrumental in strengthening the Company’s CET1 capital ratio and will facilitate the Company’s growth in 2021.
Proposed appropriation of profits
|According to the Parent Company’s balance sheet, the following unappropriated earnings are at the disposal of the Annual General Meeting:||SEK|
|Profit/loss for the year||255,032,807|
|The Board of Directors proposes that unappropriated earnings be|
distributed as follows:
|To be carried forward||3,506,794,341|
Key events during the year
- During the first quarter Hoist Finance established a new sustainability strategy. The strategy outlines ESG goals and indicators, which together with the extensive reporting puts Hoist Finance as a front-runner in the debt management industry.
- Successful AT1 issue further strengthening the capital structure.
- Strong execution on strategic projects with significant IT investments and closing of third party collection in the UK.
- Launch of a new platform to support customers with financial planning.
- The Swedish FSA has assessed and concluded that Significant Risk Transfer (SRT) is achieved in Hoist Finance’s securitisations.
- Successful issuance of senior bonds totalling EUR 200m and repurchase of EUR 102m senior bonds issued in 2017.
- Launch of new operating model to support customer-centric and efficient operations.
- Trust Index© of 77 per cent achieved in 2020 Great Place to Work® survey, demonstrating strong progress in line with the Hoist Finance sustainability strategy.
Developments during the 2020 financial year
Unless otherwise indicated, all comparative market, financial and
operational information refers to full-year 2019.
Total operating income
Interest income from acquired loan portfolios totalled SEK 3,302m (3,359) during the year. The decrease was mainly driven by the low volume of portfolio acquisitions during the year. Other interest income totalled SEK 6m (–2). Interest expense increased to SEK –582m (–494). The increase is mainly attributable to the securitisation of Italian loan portfolios conducted during Q4 2019 and to higher interest expense for deposits from the public in Germany. The shift towards longer maturities, which started during the second half of 2019, continued during the year. There was a sharp drop in demand deposits in EUR following Hoist Finance’s lowering of the interest rate for this product due to the reduced need for funding.
Impairment gains and losses totalled SEK –458m (120), constituting the year’s realised collections against current forecast as well as portfolio revaluations. Price adjustments were made to several portfolios during the year due to guarantee commitments by selling banks in the UK, Greece and France. These guarantee commitments had a negative impact on portfolio revaluations and a positive impact on collection difference against active forecast of SEK 222m.
Portfolio revaluations totalled SEK –805m (–144) during the year. Adjusted for price adjustments, portfolio revaluations totalled SEK –583m and are mainly attributable to portfolio revaluations conducted in Spain during Q1 and to revaluations conducted during Q2 related to Covid-19 and its impact on collections. Collection performance in Spain has been unsatisfactory for quite some time, despite changes implemented to improve profitability. Spain has been greatly impacted by Covid-19 and the weak collection performance continued during the first quarter. Accordingly, the write-down decision was taken as the implemented changes were not expected to produce the desired effect.
Collections against current forecast totalled SEK 348m (267). Adjusted for price adjustments collections against current forecast total SEK 126m. Collections during the third and fourth quarters in particular exceeded projected levels for secured and unsecured loans. Collection performance was strongly impacted by Covid-19 during the first and second quarters and failed to meet projected levels in a number of markets. Collection performance was strong during Q4 despite continued delays in legal proceedings, mainly in Italy and Spain where the legal system is commonly used for recovery activities.
Fee and commission income decreased to SEK 93m (121). The decrease is attributable to the closure of third-party collection services in the UK announced during the second quarter. Net result from financial transactions totalled SEK –6m (–79). Exchange rate effects had a positive effect, while unrealised changes in the value of interest rate hedging positions, as well as bond buy-back costs, had a negative effect. Other operating income totalled SEK 14m (22) during the year.
Total operating expenses
Personnel expenses totalled SEK–862m (–875) for the year. Investments in the shared service centre in Poland and nearshoring in Romania continued to generate a positive result, mainly during the second half of the year, in line with the cost savings programme. Certain restructuring costs had a negative impact on personnel expenses and are attributable to the relocation of operations to Romania and Poland from other markets.
Collection costs decreased SEK 53m during the year to SEK –734m (–787). The decrease is attributable to efficiency measures and digital investments, as well as to the impact Covid-19 has had on opportunities to pursue legal claims in court and to a decrease in loan portfolios due to low acquisition volumes during the year.
Other administrative expenses increased SEK 45m and totalled SEK –613m (–568). The cost increase is related to IT outsourcing and the Group-wide digitalisation initiative. The increase in administrative expenses for IT outsourcing resulted in a reduction in personnel expenses, as Hoist Finance previously had in-house IT staff. This change initiative is expected to reduce collection and personnel cost levels over time. Depreciation and amortisation of tangible and intangible assets totalled SEK –134m (–122), of which SEK –12m pertains to impairment of IT projects.
Earnings before tax and total comprehensive income
Profit from shares and participations in joint ventures totalled SEK 57m (62).
The year’s tax expense was SEK –41m (–143). The effective tax rate was 50 per cent (19) and is affected primarily by non-deductible interest expenses for Tier 2 capital included in own funds, non-deductible expenses for fair value hedging of shares in subsidiaries, and a tax amount of SEK –14m attributable to previous years. Net profit for the year totalled SEK 41m (605).
Total assets decreased SEK –2,523m as compared with 31 December 2019 and totalled SEK 31,864m (34,387). The change is primarily attributable to a decrease of SEK –3,228m in acquired loan portfolios, a result of low acquisition volumes as well as exchange rate effects. Cash and interest-bearing securities increased SEK 446m, while other assets increased SEK 259m.
|SEK m||2020||2019||Change %|
|Cash and interest-bearing securities||9,019||8,573||5|
|Acquired loan portfolios||21,075||24,303||-13|
|Deposits from the public||17,928||21,435||-16|
|Debt securities issued||6,355||5,900||8|
|Total interest-bearing liabilities||25,104||28,187||-11|
|Total liabilities and equity||31,864||34,387||18|
1) This item does not correspond to an item of the same designation in the balance sheet, but to several corresponding items
Total interest-bearing debt amounted to SEK 25,104m (28,187). The change is mainly attributable to deposits from the public, which decreased SEK –3,507m. There is less need for funding due to Covid-19, and Hoist Finance has elected to lower the interest rates for most products. This resulted in deferred outflows during the year. Hoist Finance funds its operations through deposits in Sweden and Germany as well as through the international bond market and the Swedish money market. In Sweden, deposits from the public under the HoistSpar brand amounted to SEK 10,552m (12,243), of which SEK 5,391m (6,400) is attributable to fixed term deposits of one-, two- and three-year durations. In Germany, deposits to retail customers are offered under the Hoist Finance name. At 31 December 2020, deposits from the public in Germany were SEK 7,376m (9,192), of which SEK 7,115m (6,163) is attributable to fixed term deposits of one- to five-year durations.
At 31 December 2020, the outstanding bond debt totalled SEK 7,176m (6,752), of which SEK 6,355m (5,900) was comprised of issued securities. The change in issued securities is mainly attributable to the new EUR 200m bond issued in November. Portions of the outstanding EUR 250m bond maturing in 2021 were also repurchased in conjunction with this transaction at a nominal value of EUR 102m.
Other liabilities increased SEK 300m to SEK 1,602m (1,302). Equity totalled SEK 5,158m (4,898). The increase is mainly due to a capital contribution during the first quarter, which was mitigated by negative effects in the translation reserve.
|SEK m||2020||2019||Change %|
|Carrying amount, acquired loans1)||21,241||24,513||-13|
1) Including run-off consumer loan portfolio and portfolios held in the Polish joint venture.
The loan portfolio acquisition volume was low during the year, largely due to the market uncertainty resulting from Covid-19. Hoist Finance also prioritised having strong liquidity and capital positions during the year. To ensure acquisition capacity during 2021, a 4-year senior fixed-interest bond of EUR 200m was issued in November.
Total 2020 acquisition volume amounted to SEK 1,761m (5,952). The carrying value of acquired loans totalled SEK 21,241m (24,513) on 31 December 2020, a decrease of SEK –3,272m since 2019. Work continued in 2020 on the securitisation of loan portfolios, and after the close of the year Hoist Finance announced a partnership agreement with Magnetar Capital. The agreement covers new portfolio acquisitions in Europe.
|SEK m||2020||2019||Change %|
|Cash flow from operating activies||4,857||3,117||56|
|Cash flow from investing activies||-3,066||-5,098||-40|
|Cash flow from financing activies||-2,410||3,923||N/A|
|Cash flow for the year||-619||1,942||N/A|
Cash flow from operating activities totalled SEK 4,857m (3,117). Amortisation of acquired loan portfolios increased somewhat during the year and totalled SEK 3,164m (3,040). Cash flow from other assets and liabilities amounted to SEK 1,021m (–629), the majority of which pertains to realised cash flows for FX hedging.
Cash flow from investing activities totalled SEK –3,066m (–5,098). Portfolio acquisitions decreased year-on-year to SEK –1,715m (–5,952). Net cash flow from bonds and other securities totalled SEK –1,318m (866). Cash flows from operating activities were partly invested in covered bonds.
Cash flow from financing activities totalled SEK –2,410m (3,923). Net cash flow from deposits from the public amounted to SEK –3,272m (4,204) during the year. Outflows during the year are in accordance with Hoist Finance’s objectives, as the need for funding is significantly reduced due to Covid-19. In Sweden, outflows from deposits from the public totalled SEK –1,710m, with decreased volumes for all savings products. Inflows to savings products of longer durations continued in Germany and totalled SEK 1,125m, and were offset by an outflow of SEK –2,687m from variable interest accounts and accounts with fixed 1-year durations. Issued securities totalled SEK 2,018m (3,450) and pertain to the issuance of a EUR 200m senior bond in November. Repurchases and repayments of issued securities totalled SEK –1,454m (–3,629). Of this amount, SEK –1,029m pertains to the senior bond repurchase in November, SEK –322m to commercial paper repayment, and SEK –103m to repayment of bonds in Italian special purpose vehicle Marathon SPV S.r.l. Other cash flows from financing activities are attributable to interest paid on Tier 1 capital contributions (SEK –60m), amortisation of lease liability (SEK –48m), and SEK -8m in cash flows related to acquisition agreement for treasury shares.
Total cash flow for the year amounted to SEK –619m (1,942).
Hoist Finance works under an organisational structure with a focus on building a stronger, more integrated company to improve the Company’s operational efficiency and better capture market growth. The division of segments into countries forms the basis for the Executive Management Team’s monitoring of operations. See Note 3 ”Segment Reporting” for additional details.
Hoist Finance has prepared a Sustainability Report in accordance with the Annual Accounts Act. The Sustainability Report can be found in the "Sustainability" section under "The value we create" in Hoist Finance Annual report 2020, pages 27-47. The auditor’s report on the statutory sustainability statement can be found on page 219.
Parent Company disclosures
Hoist Finance AB (publ) is a registered credit market company under the supervision of the Swedish Financial Supervisory Authority. The operating Parent Company acquires and holds loan portfolios, which are managed by foreign branch offices. These units also provide commission-based administration services to third parties. The Polish branch office operates as a shared service centre and the Romanian branch office is a nearshoring operation providing services within the Hoist Finance Group.
The Parent Company’s net interest income totalled SEK 1,184m (1,355) during 2020. The decrease is mainly attributable to lower interest income on loans to subsidiaries, as a result of low acquisition volumes during the year and amortisation on loans to subsidiaries. Interest expense increased SEK –63m, mainly due to greater volumes related to deposits from the public of longer durations in the German market.
Total operating income amounted to SEK 1,633m (1,447). Dividends received from subsidiaries totalled SEK 302m (10). Net result from financial transactions totalled SEK –112m (–147) and is mainly attributable to exchange rate fluctuations in assets and liabilities in foreign currencies. Other operating income totalled SEK 256m (232) and is mainly attributable to management fees invoiced to subsidiaries.
Total operating expenses totalled SEK –1,206m (–1,209). Start-up expenses related to IT outsourcing had a negative impact on net profit during the year. Depreciation and amortisation of tangible and intangible assets totalled SEK -62m (-49), of which SEK -12m pertains to impairment of IT projects.
Net operating profit totalled SEK 341m (365). Impairment gains and losses of SEK –41m (56) are attributable to the differences between actual and projected collections, to portfolio revaluations and to loss allowances for performing loans. Shares in participations in subsidiaries were written down by SEK –116m (-). Profit from participations in joint ventures totalled SEK 71m (71).
Net profit for the year totalled SEK 255m (197) and taxes totalled SEK –77m (–121). During the year SEK –7m was provisioned for uncertainties about the tax treatment for previous years.
At 31 December, the carrying value of acquired loan portfolios totalled SEK 6,755m (7,394), a year-on-year decrease due primarily to reduced acquisition volumes as compared with previous years as a result of the Covid-19 situation. Loans to subsidiaries totalled SEK 14,402m (17,432) attributable primarily to the financing of subsidiaries’ acquisitions of loan portfolios. Deposits from the public decreased during the year to SEK 17,928m (21,435). Deposits decreased in both Sweden and Germany, mainly related to deposits in variable interest savings accounts.
Significant risks and uncertainties
Hoist Finance is exposed to a number of uncertainties through its business operations and due to its broad geographic presence. New and amended bank and credit market company regulations may affect Hoist Finance directly (e.g., via Basel IV capital and liquidity regulations) and indirectly through the impact of similar regulations on the market’s supply of loan portfolios. Hoist Finance’s cross-border operations entail consolidated tax issues relating to subsidiaries in several jurisdictions. The Group is, therefore, exposed to potential tax risks arising from varying interpretations and applications of existing laws, treaties, regulations, and guidance.
The impact of Covid-19 on Hoist Finance’s operations is outlined in the Development of Risks section below. Details on Hoist Finance’s risk management and its most significant risks are presented in the Risk Management section and in Note 31, "Risk Management.
Development of risks
Credit risk for Hoist Finance’s loan portfolios is regularly monitored to assess ways in which the challenging situation caused by Covid-19 is impacting the portfolios’ valuation. The value of several loan portfolios was written down during the year due to lower collection rates in the wake of Covid-19. Due to the great uncertainty concerning the duration of the current situation, there is continued risk of additional loan portfolio write-downs. In order to diversify the Company’s assets in a positive way from a risk perspective, Hoist Finance will continue to assess new opportunities to acquire portfolios of non-performing secured loans as well as portfolios of performing loans.
Credit risk in the liquidity portfolio remains low, as investments are made in government, municipal and covered bonds of high credit quality. Credit spreads increased early in the year, contributing to losses in the liquidity portfolio. Credit spreads in bonds held by Hoist Finance stabilised during the second, third and fourth quarters and the risk returned to more normal levels.
Hoist Finance has an internal framework for follow-up and oversight of the Group’s operational risks. The Group is committed to continuously improving the quality of its internal procedures to minimise operational risks. During the year Hoist Finance employees worked remotely to a great extent. This is not deemed to affect operational risks to any significant degree. The level of operational risks is therefore deemed to be unchanged from previous years.
Market risks remain low, as Hoist Finance continuously hedges interest rate and FX risks in the short and medium term.
The Swedish Financial Supervisory Authority decided during the year on changes to the application of the Pillar 2 requirements for market risks in non-trading activities, which will have some impact on capital requirements. Hoist Finance is currently evaluating the effects of this and planning for introduction of the new requirements, which will be implemented in the 2021 ICAAP.
During the autumn the Swedish Financial Supervisory Authority (SFSA) published its decision regarding changes to banks’ capital requirements which will entail, among other things, that the SFSA will make separate decisions on Pillar 2 requirements for each bank and that capital planning buffers will be replaced with a new Pillar 2 guideline. Hoist Finance currently evaluating the effects of the SFSA’s proposal.
Liquidity risk was low during the year. Hoist Finance’s liquidity reserve exceeds Group targets by a healthy margin.
In parallel with its work to develop capital market instruments for risk transfer to external counterparties, Hoist Finance is pursuing its application for a permit to apply an internal method to calculate risk-weighted assets with regard to credit risk.
Remuneration to senior executives
Information on the most recently approved guidelines for remuneration for senior executives is presented in Note 9 “Personnel expenses”. The remuneration policy was adopted by the Board at the constitutive board meeting in May 2020. The Board will present the following proposed guidelines for approval at the AGM in April 2021.
The complete proposed guidelines for senior executive remuneration of the Board of Directors of Hoist Finance AB (publ), reg. no. 556012-8489
These guidelines cover senior executives in Hoist Finance AB (publ) (“Hoist Finance” or the “Company”). The term senior executives shall in this context mean the CEO and the other members of the executive management team, and board members to the extent they receive remuneration for services performed outside of their Board duties. The guidelines are applicable to remuneration agreed, and amendments to remuneration already agreed, after the adoption of the guidelines by the Annual General Meeting 2021. The guidelines do not apply to any remuneration decided by the Annual General Meeting.
The guidelines’ promotion of the Company’s business strategy,
long-term interests and sustainability
The remuneration in Hoist Finance shall encourage senior executives to promote the Company’s business strategy, long-term interests and sustainability and a behaviour in line with the Company’s ethical code of conduct and values. The remuneration shall also be structured to enable Hoist Finance to attract, retain and motivate employees who have the requisite skills. The remuneration shall encourage good performance, prudent behaviour and risk-taking aligned with customer and shareholder expectations.
Hoist Finance’s business strategy, longterm interests and sustainability work are described on the Company’s webpage, www.hoistfinance.com.
Types of remuneration
The remuneration shall be on market terms and may consist of the following components: fixed cash salary, variable cash remuneration, pension benefits and other benefits. Additionally, the Annual General Meeting may, irrespective of these guidelines, resolve on, among other things, share-related or share price-related remuneration.
Fixed cash salary
Salaries shall be gender- and age-neutral and cannot be discriminatory. Hoist Finance views remuneration from a comprehensive perspective and, accordingly, takes all remuneration components into account. Remuneration is weighted in favour of fixed salary, which is based on the position’s complexity and level of responsibility, prevailing market conditions and individual performance.
Variable cash remuneration
Variable remuneration for senior executives shall not exceed 100 per cent of the fixed annual cash salary. The variable remuneration consists to 40 per cent of cash remuneration and to 60 per cent of a long-term share-based incentive programme, a so-called LTIP. Since LTIP is resolved by the NGeneral Meeting it is excluded from the scope of these guidelines. Variable remuneration is based on various financial and non-financial criteria, and is linked to the performance of the Hoist Finance group and the relevant business unit respectively, and to individual targets. It is hence distinctly linked to the business strategy and thereby to the Company’s long-term value creation, including its sustainability.
Variable remuneration takes into account the risks involved in the Company’s operations and is proportional to the Group’s earning capacity, capital requirements, profit/loss and financial position. The payment of variable remuneration must not undermine the Group’s long-term interests and is contingent upon the recipient’s compliance with internal rules and procedures. Variable remuneration is not paid to a senior executive who has participated in or been responsible for any action resulting in significant financial loss for the Group or the relevant business unit.
For senior executives, payment of 60 per cent of the variable remuneration is deferred for a period of at least three years. Variable remuneration, including deferred remuneration, is only paid to the extent warranted by the Group’s financial situation and the performance of the group and the relevant business unit, and the senior executive’s achievements.
The fulfilment of the criteria for payment of variable cash remuneration shall be measured during a period of one year. When the measurement period for the fulfilment of the criteria for the payment of variable cash remuneration has ended it shall be evaluated/determined to which extent the criteria have been fulfilled.
The Remuneration Committee, and the Board of Directors with respect to remuneration to the CEO, are responsible for the assessment.
Pension benefits and other benefits
Pension and insurance are offered pursuant to national laws, regulations and market practices and are structured as collective agreements, company-specific plans or a combination of the two. Hoist Finance has defined-contribution pension plans. A few senior executives receive gross salary; in these instances, the Company does not make pension contributions. Variable cash remuneration shall not qualify for pension benefits.
The pension premiums for premium defined pension shall amount to no more than 30 per cent of the fixed annual cash salary.
Other benefits may include, for example, life insurance, medicial insurance (Sw. sjukvårdsförsäkring) and company cars. Other benefits are designed to be competitive in relation to similar operations in each respective country. Such benefits may amount to no more than 10 per cent of the fixed annual cash salary.
For employments governed by other rules than Swedish rules, pension benefits and other benefits may be duly adjusted for compliance with mandatory rules or established local practice, taking into account, to the extent possible, the overall purpose of these guidelines.
Remuneration for new hires, so-called “sign-on bonus”, is only offered in exceptional cases and then only to compensate for the lack of variable remuneration in the senior executive’s previous employment contract. Sign-on bonuses are paid during the year in which the senior executive begins to work. Decisions on exceptional cases are made in accordance with the decision-making process for variable remuneration.
Issuing loans to senior executives is not permitted.
Salary and employment conditions for employees
In the preparation of the Board of Directors’ proposal for these remuneration guidelines, salary and employment conditions for employees of the Company have been taken into account by including information on the employees’ total income, the components of the remuneration and the increase and growth rate over time, in the Remuneration Committee’s and the Board of Directors’ basis of decision when evaluating whether the guidelines and the limitations set out herein are reasonable.
The decision-making process to determine, review and
implement the guidelines
The Board of Directors has established a Remuneration Committee. The committee’s tasks include the preparation of the Board of Director’s decision on the proposal of guidelines for executive remuneration. The Board of Directors shall prepare a proposal for new guidelines at least every fourth year and submit it to the Annual General Meeting. The guidelines shall remain in force until new guidelines are adopted by the Annual General Meeting. The Remuneration Committee shall also monitor and evaluate programs for variable remuneration for the executive management, the application of the guidelines for executive remuneration as well as the current remuneration structures and compensation levels in the Company. The members of the Remuneration Committee are independent of the Company and its executive management team. The CEO and other members of the executive management team do not participate in the Board of Directors’ processing of and resolutions regarding remuneration-related matters in so far as they are affected by such matters.
Termination of employment
Upon the Group’s termination of an employment contract, the maximum notice period is 12 months and no redundancy payment is made.
Remuneration to board members for services performed
outside of their Board duties
Directors, elected at General Meetings, may in certain cases receive remuneration for services performed within their respective areas of expertise, outside of their Board duties. Compensation for these services shall be paid at market terms and be approved by the Board of Directors. Remuneration may be payable up to SEK 50,000 for a Director’s work in the Board of a subsidiary.
Derogation from the guidelines
The Board of Directors may temporarily resolve to derogate from the guidelines, in whole or in part, if in a specific case there is special cause for the derogation and a derogation is necessary to serve the Company’s long-term interest, including its sustainability, or to ensure the Company’s financial viability. Since the Remuneration Committee’s tasks include the preparation of the Board of Directors’ resolution in remuneration-related matters, any resolutions to derogate from the
guidelines shall also be prepared by the Remuneration Committee.
Report on the most important elements of the system for internal control and risk management for financial reporting
The Board’s report on the most important elements of the system for internal control and risk management for financial reporting for the 2020 financial year is presented as a separate section in the Corporate Governance Report.
Pan-European securitisation partnership agreement for new portfolio
investments signed with Magnetar Capital.
No other significant events affecting operations took place.
The outlook is more uncertain as a result of the rapid Covid-19 development. During 2020 we saw a temporary pause in the supply of debt portfolios, but we anticipate a normalisation in 2021 and firmly believe that the market outlook remains positive in the slightly longer term. More than ten years after the financial crisis, European banks still have significant exposures towards non-performing loans. Driven in part by regulatory changes implemented in 2018 and 2019 but primarily by the effects of Covid-19, the supply of non-performing loans is expected to increase in the next few years.
Meanwhile, we see that the market is more consolidated than it has been and that the cost of funding through the bond market remains relatively high. Many companies in the CMS industry are aiming to reduce their leverage, which also impacts market demand. Margins continued to improve in 2020, and the trend seems to be continuing in 2021.
Over the years, banks have become increasingly comfortable selling non-performing loans across various asset classes. As the CMS industry has proven to be a relevant restructuring partner, the outlook is positive for several NPL segments. We also believe that forward flow arrangements will continue to be a key factor in certain markets. Due to the regulatory changes implemented in 2019, banks will be driven to sell their NPLs at an early stage.
Hoist Finance’s acquisitions were significantly limited during 2020 due to the uncertainty caused by Covid-19. The total supply on the market was on a par with 2013, approximately 50 per cent lower than 2019. However, it is anticipated that over time the impact of Covid-19 will have major effects on the supply, which is expected to double