The Committee of European Banking Supervisors (CEBS) today publishes its report on the national implementation of its High-level Principles for Remuneration Policies
that was published in April 2009, addressed both to regulators and regulated institutions.
In drafting its principles, CEBS has been acting in close cooperation with the Financial Stability Board, the European Commission and the Basel Committee on Banking Supervision and the Committee of European Securities Regulators. The financial institutions were expected to apply and implement the principles by the end of the third quarter 2009, with a transitional period in order to take necessary steps to renegotiate existing contracts.
Two studies were undertaken by CEBS; a first study, focusing on the national regulatory and supervisory actions and a second, assessing the implementation by the institutions and supervisors. Findings from both studies are presented in this report. Observations presented in the second study regarding implementation in institutions, are mainly based on detailed information and examples concerning large credit institutions.
Both supervisors and institutions have made considerable progress in the field of remuneration; their efforts for change are continuous and genuine, with most countries adopting a regulatory approach for remuneration, supported by supervisory guidance. The most concrete changes observed in institutions are related to the governance mechanisms that must support the remuneration policies and practices. Deferral schemes for variable remuneration are also becoming more frequent.
However, it was noted that the implementation was less satisfactory as regards the adjustment of compensation systems for all material risks. Discrepancies may still be observed between requirements set by supervisors to support adoption of CEBS's principles and remuneration policies and practices that can be observed within supervised institutions. When most pronounced, these discrepancies are caused either by underdeveloped practices in new fields such as risk-adjusted performance measurement, or by remaining uncertainty regarding dimensions such as scope, proportionality and home/host relationships and what implications these can have on the practices of institutions.
CEBS will use the findings of this report as a contribution to the ongoing implementation of its remuneration principles and for preparing guidelines on remuneration policy and practices as required by CRD 3.