13 June 2014
The European Banking Authority (EBA) published today a report providing a detailed analysis on remuneration practices across a sample of EU banks. The report, based on data collected on a consolidated basis from 2010 to 2012, sets benchmarks for different aspects of remuneration policies, and provides additional insight into the previously published data on "high earners" (staff earning EUR one million or more per year). Overall, the report shows an increasing trend in the remuneration paid to "risk takers", as well as a material shift from variable to fixed remuneration.
The report highlights a huge dispersion between different institutions and EU Member States regarding the amounts of remuneration awarded; but also in terms of pay structure, application of specific risk alignment requirements, as well as percentage of "risk takers" (i.e. staff identified as having a material impact on banks' risks and businesses).
In particular, practices regarding the deferral of variable remuneration differ significantly across Member States, depending on the application of the proportionality principle, which allows small and less risky institutions to be exempt from the deferral of variable remuneration when such deferral is disproportionate to their specific risk profile or where only minor amounts of variable remuneration are paid. The EBA is currently investigating the different application of the proportionality principle across Member States and individual institutions.
The report also shows that institutions have been reviewing their remuneration policies to comply with the new requirements introduced by the Capital Requirements Directive (CRD IV) and some firms have introduced so called ‘position or role-based allowances'. In general, these allowances, which are paid as fixed amounts in addition to the base salary, are considered by institutions as fixed remuneration. However, these allowances are discretionary, as they are paid to selected members of staff and in most cases only for limited periods of time. Under exceptional circumstances, they can also be cancelled.
The EBA is currently analysing this emerging practice and will set guidance criteria to correctly assign these elements to either variable or fixed remuneration, so as to ensure that these practices do not lead to a circumvention of the newly introduced cap between the variable and fixed component of remuneration.
In accordance with Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 (CRD IV), the European Banking Authority (EBA) is required to benchmark remuneration trends at Union level. The same requirement was already introduced by Directive 2006/48/EC as amended by Directive 2010/76/EU (CRD III). The report is in line with the ‘EBA Guidelines on the Remuneration Benchmarking Exercise' published on 27 July 2012 to facilitate the collection of data. NCAs collect information on remuneration practices of credit institutions and investment firms to benchmark remuneration trends. These data are submitted to the EBA to benchmark remuneration practices and trends across the EU.
This analysis, together with other additional work in the area of remuneration, will be the basis for the review of the existing "Guidelines on remuneration policies and practices" which will ensure a higher level of harmonisation of remuneration practices. A consultation on the revised Guidelines is expected to be launched by the end of 2014.