Response to consultation Paper on Draft Guidelines on sound remuneration policies under Directive 2013/36/EU
Go back
Nevertheless, we would like to highlight the current uncertainty regarding the date of applicability of the amendments in consultation. The regulatory framework is not yet consolidated so far. So, the actual range of the required adjustment interventions and the terms of entry into force and application are still uncertain.
Directive (EU) no. 2019/878 is applicable from 28th December 2020. Nevertheless, to date, the Commission Delegated Regulation mandated under Article 94(2) CRD has not yet been published. At the same time, these Guidelines will be applicable from 26th June 2021. By then the vast majority of Banks could have completed the approval of the remuneration policy by the shareholders and the annual review .
Therefore, an appropriate period of time for the completion of the interventions required should be provided. Moreover, we deem to be useful to clarify that adjustments required could be implemented starting from the review and the approval of the Remuneration Policies scheduled in 2022.
Moreover, we would like to focus on the scope. Regarding paragraph 8 a), Guidelines should be applied to “any subsidiary undertaking and its staff (including identified staff), where this undertaking is established in the Union and is not subject to specific remuneration requirements in accordance with other instruments of Union legal acts”.
The application of the bonus cap to the identified staff, including those who operate in companies of the group not individually subjected to the CRD V, could be a limit for innovation and to capacity for Banks to compete with not – or differently - regulated companies.
For those reasons, in order to foster a level playing field in an increasingly competitive sector such as the financial one, it is likeable the application of some exceptions for FinTech companies belonging to banking groups.
At the same time, the provision of lighter Guidelines for the above mentioned companies could be a way to preserve the competitiveness of banking groups with respect to the new players in the FinTech ecosystem.
The activities of documenting job descriptions for all staff members, determining which positions are considered as equal or of equal value per unit of measurement or time rate, taking into account at least the type of activities, tasks and responsibilities assigned to the position or staff member - as well as the adoption of further disciplined measures – require significant effort and time (par. 26).
At the same time, the interventions required should be planned and implemented in a complete, certain and consolidated regulatory context. On the contrary, these Guidelines will be applicable from 26th June 2021. By then the vast majority of Banks could have completed the annual review and approval of their remuneration policies.
Moreover, in order to allow uniformity, consistency and comparability in the sector, we would like to suggest some clarifications and examples on the most relevant indicators to evaluate the neutrality.
We would also like to suggest the elimination of the referring to the “time rate”, since it could be influenced by many factors – subjective and not- which detection would require a bigger effort against the actual usability of this information for the purposes introduced by the legislation (“In order to monitor that gender neutral remuneration policies are applied, institutions should document job descriptions for all their staff members and determine which positions are considered as equal or of equal value per unit of measurement or time rate”, par. 26).
Lastly, regarding paragraph 13: “risk culture, including with regard to environmental, social and governance (ESG) risk factors”, we deem necessary to clarify the conditions under which the remuneration policies can be considered compliant with the regulations on environmental, social and governance sustainability (ESG risks and factors). These clarifications are also essential to avoid discrepancies in the application of article 5, Regulation (EU) 2019/2088 (“Transparency of remuneration policies in relation to the integration of sustainability risks”). An alignment with the sustainability regulatory provisions in specific financial sectors such as investments is needed. The definitions of "sustainability", "ESG" factors, "ESG risks", "negative effects on sustainability" must be unique and uniform, as Banks could not manage a large number of sectorial regulations about sustainability.
Remuneration policies are determining factors for the ability of banks and banking groups to contribute to the innovation of financial services.
By now, in consideration of the necessary application of the maximum ratio limits between the variable and fixed components of remuneration, Banks are penalized in the research and maintenance of talents.
The application of the bonus cap to the most relevant staff, including those who operate in companies of the group not individually subjected to the CRD V, could be a limit to innovation and capacity of the Banks to compete with differently (or not) regulated companies.
For those reasons, in order to foster a level playing field in an increasingly competitive sector such as the financial one, it is likeable the application of some exceptions for FinTech companies belonging to banking groups.
At the same time, the provision of lighter Guidelines for the above mentioned companies could be a way to protect the competitiveness of banking groups with respect to the new players in the FinTech ecosystem.
About the identified staff, it is necessary to highlight how the missed publication by the European Commission of the Delegated Regulations for the adoption of the RTS proposed by the EBA – and the discrepancy of the Delegated Regulation (EU) no. 2014/604 to the Directive (EU) no. 2019/878 (and to the following amendments) – does not allow to identify with some reasonable certainty the detailed framework that is actually applicable.
Moreover, by considering that many Banks could have likely completed the Remunerations Policy review process before the effective publication of the newest provisions, it would be useful a confirmation about the possibility of applying the regulatory amendments on identification process at the first Remuneration Policy review and approval planned in 2022 or at the first in between the planned ones.
Regarding to the exemptions, it is needed to guarantee a level playing field between companies which operate in the same market, whether they belong to banking groups or not.
In particular, it is necessary to draw attention to FinTechs belonging to banking groups that are not recipient of specific legislation, so they should apply the CRD. Those operate in a context of constant competitive disadvantage which is most manifested in the ability to attract and retain talent.
This disadvantage does not subsist for those institutions that do not belong to banking groups, but also regarding to Non-EU FinTech companies. The EBF warned about this topic when responding to the public consultation about Delegated Regulation (EU) no. 2014/604: : “There is particular concern that the binding variable / fixed ratio of 1:1 (or up to 2:1 with shareholder approval) provided for in CRD IV will create difficulties for EU headquartered institutions when competing for talent in key financial centers outside of the EU, in particular in the United States and Asia”. This is even more true in the FinTech sector, to which no specific legislation on staff remuneration is directly applicable.
In order to ensure the level playing field with respect to FinTechs not belonging to banking groups and, therefore, to allow the effective innovation of banking services, it is suggested to consider the provision of an exceptionfrom the application of the CRD discipline for these companies, or, at least, lighter and proportionate Guidelines.
Question 1: Are the amendments to the subject matter, scope and definitions appropriate and sufficiently clear?
Amendments are sufficiently clear.Nevertheless, we would like to highlight the current uncertainty regarding the date of applicability of the amendments in consultation. The regulatory framework is not yet consolidated so far. So, the actual range of the required adjustment interventions and the terms of entry into force and application are still uncertain.
Directive (EU) no. 2019/878 is applicable from 28th December 2020. Nevertheless, to date, the Commission Delegated Regulation mandated under Article 94(2) CRD has not yet been published. At the same time, these Guidelines will be applicable from 26th June 2021. By then the vast majority of Banks could have completed the approval of the remuneration policy by the shareholders and the annual review .
Therefore, an appropriate period of time for the completion of the interventions required should be provided. Moreover, we deem to be useful to clarify that adjustments required could be implemented starting from the review and the approval of the Remuneration Policies scheduled in 2022.
Moreover, we would like to focus on the scope. Regarding paragraph 8 a), Guidelines should be applied to “any subsidiary undertaking and its staff (including identified staff), where this undertaking is established in the Union and is not subject to specific remuneration requirements in accordance with other instruments of Union legal acts”.
The application of the bonus cap to the identified staff, including those who operate in companies of the group not individually subjected to the CRD V, could be a limit for innovation and to capacity for Banks to compete with not – or differently - regulated companies.
For those reasons, in order to foster a level playing field in an increasingly competitive sector such as the financial one, it is likeable the application of some exceptions for FinTech companies belonging to banking groups.
At the same time, the provision of lighter Guidelines for the above mentioned companies could be a way to preserve the competitiveness of banking groups with respect to the new players in the FinTech ecosystem.
Question 2: Are the amendments regarding gender neutral remuneration policies sufficiently clear?
We fully endorse the importance of the introduced amendments. It is however necessary the provision of an appropriate period of time for the application of the requirements in consultation, which should coincide with the completion of the review and approval processes of the remuneration policies scheduled for 2022.The activities of documenting job descriptions for all staff members, determining which positions are considered as equal or of equal value per unit of measurement or time rate, taking into account at least the type of activities, tasks and responsibilities assigned to the position or staff member - as well as the adoption of further disciplined measures – require significant effort and time (par. 26).
At the same time, the interventions required should be planned and implemented in a complete, certain and consolidated regulatory context. On the contrary, these Guidelines will be applicable from 26th June 2021. By then the vast majority of Banks could have completed the annual review and approval of their remuneration policies.
Moreover, in order to allow uniformity, consistency and comparability in the sector, we would like to suggest some clarifications and examples on the most relevant indicators to evaluate the neutrality.
We would also like to suggest the elimination of the referring to the “time rate”, since it could be influenced by many factors – subjective and not- which detection would require a bigger effort against the actual usability of this information for the purposes introduced by the legislation (“In order to monitor that gender neutral remuneration policies are applied, institutions should document job descriptions for all their staff members and determine which positions are considered as equal or of equal value per unit of measurement or time rate”, par. 26).
Lastly, regarding paragraph 13: “risk culture, including with regard to environmental, social and governance (ESG) risk factors”, we deem necessary to clarify the conditions under which the remuneration policies can be considered compliant with the regulations on environmental, social and governance sustainability (ESG risks and factors). These clarifications are also essential to avoid discrepancies in the application of article 5, Regulation (EU) 2019/2088 (“Transparency of remuneration policies in relation to the integration of sustainability risks”). An alignment with the sustainability regulatory provisions in specific financial sectors such as investments is needed. The definitions of "sustainability", "ESG" factors, "ESG risks", "negative effects on sustainability" must be unique and uniform, as Banks could not manage a large number of sectorial regulations about sustainability.
Question 3: Are the guidelines on the application of the requirements in a group context sufficiently clear?
About the guidelines on the application of the requirements in a group context, here are some observations.Remuneration policies are determining factors for the ability of banks and banking groups to contribute to the innovation of financial services.
By now, in consideration of the necessary application of the maximum ratio limits between the variable and fixed components of remuneration, Banks are penalized in the research and maintenance of talents.
The application of the bonus cap to the most relevant staff, including those who operate in companies of the group not individually subjected to the CRD V, could be a limit to innovation and capacity of the Banks to compete with differently (or not) regulated companies.
For those reasons, in order to foster a level playing field in an increasingly competitive sector such as the financial one, it is likeable the application of some exceptions for FinTech companies belonging to banking groups.
At the same time, the provision of lighter Guidelines for the above mentioned companies could be a way to protect the competitiveness of banking groups with respect to the new players in the FinTech ecosystem.
About the identified staff, it is necessary to highlight how the missed publication by the European Commission of the Delegated Regulations for the adoption of the RTS proposed by the EBA – and the discrepancy of the Delegated Regulation (EU) no. 2014/604 to the Directive (EU) no. 2019/878 (and to the following amendments) – does not allow to identify with some reasonable certainty the detailed framework that is actually applicable.
Moreover, by considering that many Banks could have likely completed the Remunerations Policy review process before the effective publication of the newest provisions, it would be useful a confirmation about the possibility of applying the regulatory amendments on identification process at the first Remuneration Policy review and approval planned in 2022 or at the first in between the planned ones.
Question 4: Are the guidelines regarding the application of waivers within section 4 sufficiently clear?
Amendments are sufficiently clear.Regarding to the exemptions, it is needed to guarantee a level playing field between companies which operate in the same market, whether they belong to banking groups or not.
In particular, it is necessary to draw attention to FinTechs belonging to banking groups that are not recipient of specific legislation, so they should apply the CRD. Those operate in a context of constant competitive disadvantage which is most manifested in the ability to attract and retain talent.
This disadvantage does not subsist for those institutions that do not belong to banking groups, but also regarding to Non-EU FinTech companies. The EBF warned about this topic when responding to the public consultation about Delegated Regulation (EU) no. 2014/604: : “There is particular concern that the binding variable / fixed ratio of 1:1 (or up to 2:1 with shareholder approval) provided for in CRD IV will create difficulties for EU headquartered institutions when competing for talent in key financial centers outside of the EU, in particular in the United States and Asia”. This is even more true in the FinTech sector, to which no specific legislation on staff remuneration is directly applicable.
In order to ensure the level playing field with respect to FinTechs not belonging to banking groups and, therefore, to allow the effective innovation of banking services, it is suggested to consider the provision of an exceptionfrom the application of the CRD discipline for these companies, or, at least, lighter and proportionate Guidelines.