The European Banking Authority (EBA) published today its final Guidelines on remuneration policies and practices related to the provision and sale of retail banking products and services. The EBA had previously identified poor remuneration policies and practices as a key driver of miss-selling of financial products and services. The Guidelines aim, therefore, to protect consumers from related risks and to reduce conduct costs for financial institutions. They will apply from 18 January 2018.
The guidelines apply to remuneration paid to staff employed by credit institutions, creditors, credit intermediaries, payment institutions and electronic money institutions, when providing deposits, payment accounts, payment services, electronic money, residential mortgages, and other forms of credit to consumers. They provide a framework for these institutions to implement remuneration policies and practices that will improve links between the remuneration of sales staff and the fair treatment of consumers, thus reducing the risk of mis-selling and related conduct costs for firms.
Taking into consideration the feedback received during the public consultation, the EBA has amended the Guidelines to include separate requirements related to the approval and monitoring of the remuneration policies and practices. The amended requirements also clarify the type of information that is to be recorded by institutions in order to ensure compliance with the guidelines and that a delegation of the design and monitoring of remuneration policies and practices is possible only to the extent that the management body retains ultimate responsibility. Other amendments include a clarification that the need to obtain advice on the remuneration policies and practices is limited to institutions that have established a remuneration committee.
Finally, in order to facilitate the national implementation of these Guidelines, and in order to give enough time to market participants to perform the necessary changes to their remuneration policies and practices, the EBA decided to postpone the application date of these Guidelines from 3 January 2017 to 13 January 2018.
These draft Guidelines have been developed according to Article 16 of Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (‘the EBA Regulation'), with a view to ensuring consistent efficient and effective supervisory practices within the European Union. In accordance with Article 16(3) of the EBA Regulation, competent authorities and financial institutions must make every effort to comply with the draft Guidelines by the date of entry into force provided for.