29 July 2013
The European Banking Authority (EBA) launches today a consultation on draft Regulatory Technical Standards (RTS) setting out the classes of instruments which can be used for the purposes of variable remuneration. These RTS will be part of the Single rulebook aimed at enhancing regulatory harmonisation in the EU. The consultation runs until 29 October 2013.
These draft RTS set out requirements to ensure that institutions' credit quality is reflected in the instruments they issue and that they are appropriate for the purposes of variable remuneration. In particular, these draft RTS introduce requirements for additional Tier 1, Tier 2 and other instruments and they define the write-down and conversion mechanisms for Tier 2 and other instruments.
In order to ensure that the classes of instruments are appropriate for the purposes of variable remuneration, they should take account of the institutions' long-term interests and incentivise prudent risk-taking of staff. In this respect, these instruments must have a sufficient maturity to cater for deferral and retention arrangements.
Furthermore, to ensure that these instruments are issued at market conditions, these draft RTS require that a significant portion of at least 60% be issued publicly or privately to other investors. Alternatively, a cap must be set on the distributions paid out.
Comments can be sent to the EBA by clicking on the "send your comments" button on the consultation page. Please note that the deadline for the submission of comments is 29 October 2013.
All contributions received will be published following the close of the consultation, unless requested otherwise.
A public hearing will take place at the EBA premises on 3 October 2013 from 10:00 to 12:30 hours UK time.
The proposed draft RTS have been developed on the basis of Directive 36/2013 of 26 June 2013. The EBA expects to finalise the draft RTS at the beginning of 2014 and to submit them to the European Commission for endorsement by 31 March 2014.