The main objectives of the regulation contained in EU Directive 2014/65/EU on Markets in Financial Instruments (MiFID II) and its implementing regulation (Markets in Financial Instruments Regulation, in short: MiFIR) include strengthening investor protection and increasing transparency. The provisions of MiFID II are partly implemented by Act CXXXVIII of 2007 on Investment Firms and Commodity Dealers and on the Rules Governing their Activities (Investment Firms Act), and Act CXX of 2001 on the Capital Market and directly applicable legal acts of the European Union also play an important role in regulating legal relations relating to investment services.

The aim of the regulation is to ensure uniform conditions and procedures in the field of investment services in the Member States of the European Union, thereby ensuring maximum protection of investors' interests and high quality of service to Clients. The European Union legal framework provides detailed information on financial instruments, makes the operation of investment firms and the execution of transactions transparent, thus facilitating Clients' orientation in the possible maze of the financial world.

Categorisation of Clients

OTP Bank classifies its Clients into the following three client categories required by law:

• Retail Clients
• Professional Clients
• Eligible Counterparties

The significance of the client categorisation is that the investor protection provisions of the legislation are applied to a different extent in relation to each category. For OTP Bank, classification into a client category determines the depth of information that it must provide to the Client before and after the conclusion of the transaction, as well as the information that it must request from the Client, since certain investor protection requirements (e.g. depth and detail of information) are adapted to the characteristics of the Client's classification category.

Based on this, a Client classified as a Retail Client has broader investor protection rights than a Client classified as a Professional Client or a Client classified as an Eligible Counterparty within the framework of OTP Bank's investment and ancillary services activities, while a Client classified as a Professional Client has broader investor protection rights than a Client classified as an Eligible Counterparty.

The detailed rules related to MiFID client categorisation are contained in the Investment Services Business Regulations (hereinafter: Business Regulations) and in the Standard Prior Information Announcement (only in Hungarian).

LEI code and MiFID II identifier of natural persons

If the subject of the investment service or ancillary service used by the Client with OTP Bank is the execution of a transaction relating to a financial instrument, in respect of which, based on MiFIR and Regulation 2017/590 (EU), OTP Bank is subject to a transaction reporting obligation to the MNB. The report must include the National Client ID in the case of natural persons or, in the case of non-natural persons, their LEI code.

• In the case of natural person Clients, the National Client ID is automatically generated by OTP Bank based on the available client data.
• Clients who are not natural persons are obliged to obtain and maintain a LEI (Legal Entity Identifier) code, and to communicate it to OTP Bank.

Clients may place orders for financial instruments subject to transaction reporting obligations (such as financial instruments traded on the trading venue, such as securities, shares, etc. admitted to the BSE, or any financial instrument listed on a foreign stock exchange) only if the National Client ID or their LEI code with the appropriate status is available to OTP Bank.

Details related to client identification can be found in the Supplementary Announcement on general securities distribution information and the order of execution of certain transactions to the Investment Services Business Regulations (only in Hungarian).

Client information

OTP Bank fulfills various information obligations towards its Clients in accordance with the applicable legislation, and some of the most important information in this respect is provided in this section.

OTP Bank shall inform its Clients, prior to the conclusion of the contract, of the terms and conditions of the contract and of the data related to the financial instrument and the services that are the subject of the contract. Information required by law and its availability can be found in the Standard Prior Information Announcement (only in Hungarian).

When providing investment advice, OTP Bank prepares a so-called suitability report for Clients classified as Retail Clients, describing the advice given and how it takes into account the Client's preferences, and how it serves to achieve the Client's goals and meet the Client's needs.

In relation to the provision of investment services and ancillary services, OTP Bank's specific procedure requires the consent of the Client based on the applicable legislation. For example, OTP Bank may, with the consent of the Client, provide certain information electronically instead of in paper form (e.g. on the website or on another durable data medium).Clients must declare this at the latest before their first securities transactionin the OTPdirekt internet bank under “Igénylések/Ügyféltájékoztatás módja és a kereskedési helyszín vizsgálata” (“Requests/Client information method and examination of the trading venue”) or in one of our securities distribution branches. During the term of the contractual relationship, Clients can change their declaration at any time.

An interactive online cost calculator (only in Hungarian) is available on OTP Bank's website, which, in addition to the dynamically selectable time horizon and investment amount, shows the fees charged for the investment service and/or ancillary services provided to the Client, as well as the direct and indirect costs and fees related to the production and management, acquisition, holding and sale of the financial instrument concerned, including the benefits received from third parties.

OTP Bank sends its Clients a consolidated cost statement on an annual basis, in which the costs related to the products/services used by the Clients can be seen retrospectively in a single amount. Upon special request, OTP Bank also informs its Clients about the composition of the costs included in the aggregated cost statement, broken down by item.

OTP Bank provides Key Information Documents (KIDs) to Clients classified as Retail Clients in relation to packaged retail investment products. The function of the KID is to enable Clients classified as Retail Clients to understand and compare the main features and risks of packaged retail investment products.

You can read about the detailed conditions of information before concluding a transaction in the Business Regulations and in the Standard Prior Information Announcement (only in Hungarian).

Suitability and Appropriateness Tests

Pursuant to the Investment Firms Act and Regulation 2017/565 (EU), OTP Bank may only provide investment advice or portfolio management services if, prior to concluding the contract or executing the order, it is satisfied that the Client's knowledge, experience and risk-bearing capacity in relation to the financial instrument or transaction subject to the contract or order are adequate to make an informed investment decision, and, to the extent necessary, it reveals the Client's willingness to take risks, financial capacity and investment objectives, as well as sustainability preferences, in order to recommend a transaction or financial instrument that is appropriate to the Client’s assets and income, consistent with their ability to bear losses, and is suitable for achieving their investment expectations.

Therefore, in order for OTP Bank to be able to offer a suitable financial instrument to the Client, the Client must fill out a so-called Suitability test, on the basis of which OTP Bank classifies the Client into one of the five risk categories, and, on this basis, determines which financial instruments belonging to the product group(s) are suitable for the Client. The definition of client risk profiles used by OTP Bank, as well as the definition of risk profiles and product groups, is contained in the Supplementary Announcement on general securities distribution information and the order of execution of certain transactions to the Investment Services Business Regulations (only in Hungarian).

If, for example, a Client classified as a Retail Client places an order for a complex financial instrument, OTP Bank will in every case examine the Client's knowledge and experience of the substance of the transaction included in the contract, the characteristics of the financial instrument involved in the transaction, and in particular the risks thereof, as part of a so-called Appropriateness Test. If, based on the Appropriateness Test, OTP Bank considers that the financial instrument or transaction included in the contract is not appropriate for the Client, it will draw the Client's attention to this. Based on OTP Bank's notice, the Client has the opportunity to reconsider their order, and if the Client maintains their order despite being aware of the notice, OTP Bank will execute it (so-called order placed at the express request of the client).

If a representative (hereinafter: Representative) is acting on behalf of the Client, in addition to examining the Client's suitability, it is also necessary to examine the Representative's knowledge and experience of the relevant financial instrument, i.e. appropriateness, based on the Representative's answers to the relevant questions of the Representative's own Appropriateness Test.

The detailed rules of the obligation to obtain information prior to concluding a contract or a transaction with the Client are contained in the Business Regulations and the Standard Prior Information Announcement (only in Hungarian).

Target market determination

OTP Bank determines the target market of the financial instruments it sells in accordance with legal requirements. The purpose of determining the target market is for OTP Bank to identify those client groups with whose needs, characteristics and objectives the financial instruments are compatible. When determining the target market, OTP Bank examines and evaluates the following characteristics of the Clients, taking into account the nature and characteristics of the given financial instrument:

• client categorisation
• expertise and experience
• financial situation, with particular attention to the ability to bear losses
• risk tolerance
• other needs
  • investment horizons
  • client objectives
  • sustainability objectives

Based on the above aspects, OTP Bank conducts a so-called target market analysis using the information on financial instruments and clients in accordance with the legal regulations.

Based on the available information, it can be determined whether a particular product or service is in line with the Client's objectives, financial knowledge and experience, as well as their willingness to take risks, and whether the given product or service is appropriate for the Client based on the risk/reward characteristics.

Details related to the determination and examination of the target market are contained in the Supplementary Announcement on general securities distribution information and the order of execution of certain transactions to the Investment Services Business Regulations (only in Hungarian).

Deal execution

In accordance with the provisions of the Investment Firms Act and Regulation 2017/565 (EU), OTP Bank has developed its so-called Execution and Allocation Policy, which contains all the rules that apply to OTP Bank when executing Clients' orders. The purpose of the rules is for OTP Bank to execute the orders in the most favourable way for the Clients, according to the criteria set out in the Investment Firms Act (e.g. net price, costs, time required, etc.).

Based on the principle of "most favourable execution", OTP Bank takes all reasonable measures during the execution of orders in order to achieve the best possible result for the Client during the execution of the order regarding the financial instrument. OTP Bank's Execution and Allocation Policy also contains the allocation rules applied during the execution of orders.

The Execution and Allocation Policy is contained in Annex H of the Business Regulations as in force from time to time.

NOTICE

This general client information is not comprehensive, and its purpose is to draw attention to the importance of the basic investor protection rules applied by OTP Bank based on the MiFID II Directive, and to the fact that knowing and understanding these rules is in the interest of the Clients. Please take the time to read the relevant announcements and business regulations using the links provided.