XYZ Bank Fair Value Assessment Methodology 1. Purpose This Fair Value Assessment Methodology (“the Methodology”) sets out XYZ Bank’s (“the Bank”) approach to assessing whether retail products and services deliver fair value to customers. The purpose of this Methodology is to: support compliance with Consumer Duty requirements; support consistent assessment of customer value across products and services; establish principles and assessment criteria for fair value reviews; support governance and challenge relating to pricing and customer outcomes; and support identification and mitigation of foreseeable customer harm arising from pricing, product design or customer behaviour. This Methodology should be read alongside the: Consumer Duty Policy; Product Governance Policy; Conduct Risk Framework; and New Product Approval Procedure. 2. Scope This Methodology applies to: all retail products and services offered by the Bank; all new products and material product changes; periodic reviews of existing products; material pricing changes; and products distributed through third parties where the Bank retains responsibility for customer outcomes. The level of assessment and documentation required should be proportionate to: product complexity; customer risk; pricing complexity; target market characteristics; conduct risk; and potential customer impact. 3. Fair Value Principles The Bank seeks to ensure that customers receive fair value from products and services. In assessing fair value, the Bank recognises that: value should be assessed from the perspective of the target market; value includes both price and non-price considerations; fair value does not require the lowest available price; profitability alone does not determine whether value is fair or unfair; customer understanding may influence customer outcomes and value; product complexity may reduce customer ability to assess value effectively; and customer behaviour and foreseeable use cases should form part of the assessment. The Bank recognises that: products may provide different value outcomes for different customer groups; and customer value should be assessed over the expected lifecycle of the product. 4. Governance and Accountability 4.1 Product Sponsor The Product Sponsor is responsible for: ensuring that a fair value assessment is completed where required; ensuring supporting evidence is available; coordinating stakeholder input; and presenting fair value assessments through governance forums. 4.2 Business Areas Business areas are responsible for: identifying customer benefits and costs; supporting pricing analysis; monitoring customer outcomes and value indicators; and escalating material concerns relating to customer value. 4.3 Risk and Compliance Functions Risk and Compliance functions are responsible for: reviewing fair value assessments; providing challenge where appropriate; supporting interpretation of regulatory expectations; and escalating material concerns where appropriate. 4.4 Governance Forums Fair value assessments should be reviewed through appropriate governance forums as part of: new product approvals; material product changes; and periodic product reviews. Material unresolved concerns should be escalated appropriately. 5. Fair Value Assessment Process Fair value assessments should consider: the target market; product benefits; product limitations and exclusions; pricing and charges; customer understanding; expected customer behaviour; product complexity; distribution arrangements; operational and servicing arrangements; and foreseeable customer outcomes. The assessment should be evidence-based and proportionate to the nature and complexity of the product. 6. Assessment Criteria 6.1 Product Benefits The assessment should consider: the intended purpose of the product; expected customer benefits; customer need; flexibility and accessibility; customer support arrangements; and non-financial customer benefits where relevant. Benefits should be considered from the perspective of the target market. 6.2 Pricing and Charges The assessment should consider: interest rates, fees and charges; pricing structure; contingent charges; penalties and exit costs; pricing transparency; comparable products where appropriate; and expected profitability. The Bank recognises that: higher profitability does not necessarily indicate unfair value; however excessive margins, opaque pricing structures or pricing complexity may indicate increased customer value risk. Where pricing structures are complex, additional scrutiny may be appropriate. 6.3 Product Complexity The assessment should consider: whether product complexity is proportionate to customer need; whether customers are likely to understand key risks and limitations; whether product outcomes are dependent on complex assumptions or market conditions; and whether complexity may impair effective customer decision-making. Products involving: structured returns; conditional outcomes; non-obvious risks; significant behavioural assumptions; or complex pricing structures may require enhanced review and challenge. 6.4 Customer Understanding The assessment should consider: clarity of customer communications; customer ability to understand product risks and limitations; whether disclosures are likely to support informed decision-making; behavioural impacts arising from product design or presentation; and whether customers are likely to misunderstand key product features. The Bank recognises that: technically compliant disclosures may not always result in effective customer understanding; and complexity may reduce customer ability to assess value effectively. Customer testing or behavioural analysis may be used where appropriate. 6.5 Target Market Considerations The assessment should consider: target market characteristics; customer sophistication; financial resilience; vulnerability considerations; likely customer behaviours; and whether the product is appropriate for the intended distribution channel. Products intended for broader retail markets may require enhanced scrutiny where complexity or customer understanding concerns exist. 6.6 Distribution and Servicing The assessment should consider: distribution arrangements; digital journey design; customer support arrangements; complaints handling; operational friction; barriers to switching or exit; and servicing quality. The Bank recognises that poor servicing or operational barriers may adversely affect customer value. 7. Vulnerable Customer Considerations Fair value assessments should consider whether: vulnerable customers are likely to be disproportionately impacted; product complexity may impair understanding for certain customer groups; support arrangements are appropriate; and product design or servicing arrangements may create foreseeable harm. Where vulnerability concerns are identified, additional mitigants or restrictions may be appropriate. 8. Monitoring and Review Fair value assessments should not be treated as a one-off exercise. Products should be subject to periodic review to assess whether they continue to deliver fair value. Monitoring may include: complaints analysis; customer feedback; customer behaviour analysis; attrition and retention data; customer support trends; vulnerability indicators; profitability analysis; remediation events; and regulatory developments. The frequency and depth of review should be proportionate to product complexity and risk. 9. Triggers for Reassessment A reassessment of fair value may be required following: material pricing changes; significant changes to customer outcomes; material complaints trends; changes to target market; regulatory developments; operational incidents affecting customers; changes to product structure or functionality; or evidence of customer misunderstanding or harm. Material concerns identified through monitoring activities should be escalated appropriately. 10. Documentation and Evidence Appropriate records should be maintained in relation to: fair value assessments; assumptions and methodologies; supporting analysis; governance discussions; challenge and actions; approval decisions; and periodic reviews. The level of documentation should be proportionate to the complexity and risk of the product. 11. Escalation Material concerns relating to customer value should be escalated promptly through appropriate governance forums. Examples may include: evidence of poor customer outcomes; excessive complexity; significant customer misunderstanding; pricing concerns; vulnerability impacts; or inability to evidence fair value adequately. Where fair value concerns cannot be adequately mitigated, the Bank should consider whether the product or feature should proceed. 12. Methodology Ownership and Review This Methodology is owned by the Chief Compliance Officer. The Methodology will be reviewed at least annually or earlier where required due to: regulatory developments; material customer outcome concerns; significant remediation activity; emerging conduct risks; or changes to the Bank’s product portfolio. Material amendments require approval by the Product Governance Committee and Board Risk Committee.