EU: EBA consults on guidelines on sound remuneration policies

In brief

On 29 October 2020, the European Banking Authority (EBA) published a consultation paper on amendments to the EBA guidelines on sound remuneration policies. The consultation paper addresses updates that the EBA proposes to make to the guidelines on remuneration policies (which were originally published in 2015).


Contents

What are the proposed changes?

The revisions are designed to capture the amendments introduced by the fifth Capital Requirements Directive (CRD V). 

Among the various amendments proposed by the EBA, the guidelines:

  • Specify that financial institutions should have gender-neutral remuneration policies in place for all staff. This means that remuneration policies must be consistent with the principle of equal pay for male, female and diverse workers for equal work (or work of equal value). 
  • Clarify how the requirements apply to financial institutions on an individual, consolidated and sub-consolidated basis. Subject to national discretion, there are certain exceptions for financial institutions that are subject to a specific remuneration regime (e.g., the Market in Financial Instruments Directive (MiFID), the Alternative Investment Fund Managers Directive (AIFMD) and the Undertakings for Collective Investment in Transferable Securities Directive (UCITS)) and are no longer subject to the bonus cap.
  • Provide further information about the potential to waive certain requirements for institutions that are not "large" (i.e., where they have total assets below a certain threshold set by the relevant Member State in national law) and for staff with low levels of variable remuneration. 
  • Clarify the position in relation to severance pay, retention bonuses and discretionary pension benefits to prevent such payments being used to circumvent the application of the bonus cap. 
  • Clarify the variable remuneration requirements applicable to staff who have a material impact on the institution's risk profile (i.e., identified staff) e.g., a four-year minimum deferral period for certain categories of identified staff and a five-year deferral period for members of the management body and senior management in significant institutions. 

What are the next steps?

Comments on the consultation are requested by 19 January 2021. The EBA has confirmed that they will finalise the guidelines following the public consultation and the final guidelines are expected to be published in the first half of 2021. The guidelines will apply from 26 June 2021.

To access the consultation paper in full, please click here. To access the version of the guidelines which has been published in track changes, please click here.


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