Response to consultation on remuneration of sales staff

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1) Do you agree with Guideline 1 on design?

Uni Europa Finance (UEF) fully supports that the financial sector should have long-term oriented as well as fair and sound remuneration policies. Company objectives should perform in line with interests of government and society as a whole.
UEF also supports the idea that appropriate criteria should be used to assess performance, which take into account the rights and interests of consumers.

However, as a basic principle, the design of any guidelines on remuneration practices must not interfere with the right of the social partners to negotiate, as stated under recital 69 of CRD4 and in other directives and/or regulations, referring to the strong legal protection on TFEU Article 153(5). Therefore, the social partners must as a rule be left on their own to conclude collective agreements, and employee representatives and social partners should be consulted if there is no tradition of concluding collective agreements, when putting into place any remuneration policy.
It is essential that the EBA respects the right to collective bargaining covering centralized and local collective bargaining. Thus excluding elements negotiated and agreed upon in collective agreements. UEF therefore proposes to add a paragraph under 1. Design in the draft Guidelines saying that “Where applicable, collective agreements, or other arrangements provided for by social partners, as well as national and Union law on the involvement of trade unions and workers’ representatives should be complied with in this regard.” A similar writing is found under BRRD recital 35.

The remuneration policies should also take into account minimum wage levels in those countries where they exist.

In addition, when designing remuneration guidelines, the institutions should ensure that the fixed remuneration has an appropriate level in order to provide for the basic needs of the employees. This is especially important when allowing for an absence of variable remuneration as under 1.7. Employees should in general have a fixed remuneration as a basis that can provide for an adequate living standard. Employees do want to do their best to meet customers’ needs and demands, and customers are best served by employees who are allowed to provide high quality service and not only focus on quantitative targets.

Moreover, remuneration policies should take into account gender equality, as all too often, men and women are not paid equally for the same job, or criteria are put in a place that favor men over women.

Going back to 1.3 in the draft guidelines and that the HR function and compliance function should inform of the policies and give effective input. What is important to recognize here is that the compliance function may not even have the right to give effective input on this topic in all EU Member States since this is not regulated well at neither EU nor national level.

2) Do you agree with Guideline 2 on documentation?

UEF agrees with the documentation policy in general.

However, under article 2.4. the documentation should also be accessible to the social partners for purposes of collective bargaining. Indeed, the definition of “relevant persons” includes natural persons directly offering financial products or services and their managers, they are as bank employees covered by collective bargaining. The relevant trade unions should therefore have access to this information in the same fashion as the relevant persons themselves.

3) Do you agree with Guideline 3 on approval and monitoring?

UEF does not find it within the competence of the EBA to define legally binding guidelines in relation to remuneration. However, UEF knows that the EBA GL are not legally binding as such but do require that competent authorities and financial institutions make every effort to comply with the EBA guidelines and recommendations. It is therefore feared that the guidelines can interfere with Article 153(5) of the TFEU and Article 28 of the EU Charter of Fundamental Right.
EBA Guidelines are issued pursuant to Article 16 of Regulation (EU) No 1093/2010 and the possible addressees of such Guidelines are financial institutions and competent authorities. Thus, the Guidelines cannot address other natural or legal persons.
Therefore, if any parts of any EBA Guidelines interfere with provisions in collective agreements, this can leave financial institutions that are obliged by such a collective agreement in precarious situations. Also, it seems to make little sense to put obligations on the individual financial institutions in EBA Guidelines concerning matters that are dealt with in collective agreements binding those financial institutions, since the institutions cannot unilaterally deviate from those agreements.
UEF expect the collective agreement to have precedence over EBA guidelines both based on our interpretation of Article 153(5) of the TFEU and Article 28 of the EU Charter of Fundamental Right. UEF recommends this precedence to be precisely defined by EBA giving the institution an increased security in their remuneration policies and practices.
While UEF knows that we are now discussing two different Guidelines from EBA we fear that the Guidelines based on CRD 4 will set a precedence with regards to the negative interpretation of free collective bargaining.
In this respect, the compliance function (under 3.3.) has to ensure that the social partners are consulted in an appropriate way.
Under point 3.4 it is suggested that changes can ‘only be made with the approval of the management body, or someone formally delegated from the management body.’ In addition to this suggestion, UEF would propose that representatives from the employee’s side also be at least consulted prior to any changes being made. After all the employees will often themselves be better aware of which practices are to the detriment of their customers and can in this way notify of any problems or unintended consequences.
Under point 3.5 UEF suggests that the review is to be made known to the works council or other workers’ representatives.

4) Do you see a need for any additional requirements?

Continuing on the arguments made under Q3, UEF is of the opinion, that it is essential that EBA respects the right to collective bargaining and includes a reference to this delegated right and by that exclude elements of the Guidelines that are negotiated and agreed upon in collective agreements and joint principles of pay in individual companies.
UEF would like to draw EBA’s attention to both CRD 4 recital 69 and UCITS V recital 10 where it is made clear that any remuneration policies are without prejudice to the right of free collective bargaining. This is especially in the Nordic countries, where it is the social partners who are best placed to set wages and working conditions for employees. But also in a number of other European countries such as Germany and Belgium would this pose a problem. This is a practice that has by and large worked well so far, and interference in this case should be kept to a minimum.
UEF also wants to stress the importance of the so called profit sharing program covering most or all employees in a bank. Those programmes should not be restricted by the draft guidelines. These types of profit sharing systems are based on the results of the bank and are distributed among the employees. They do not create any direct incentives to sell. On the contrary, these types of systems should be considered as something positive as they show to the employees that they are valuable to the company.
Finally, as already raised in Q1, UEF would also like to see an increase in scope of point 1.3 under ‘4. Guidelines on remuneration policies’, in that on top of involving the human resources function in the design of remuneration, European works councils or other worker’s representatives should also participate or at least have the right to comment on the policies before they obtain validity. In countries where there are works agreements, these policies should fall under the right to enforce a works agreement.

5) Do you have any other comments?

UEF would like to comment on the background and rationale to the draft Guidelines, as presented by EBA.

We note that the Guidelines apply to a very broad category of staff. We also note that the Guidelines cover both variable pay and fixed salary. This increases the risk that the Guidelines will interfere with collective bargaining.

In recent years, most banks have incurred high levels of fines because of mis-selling of financial products. Therefore, the EBA has undertaken to set up guidelines on remuneration practices which regulate these practices. The UEF welcomes a regulation which tends to avoid consumer detriment. Indeed, when consumers are mistreated, this can also have negative effects on employees, who may get punished and eventually dismissed when creating consumer detriment.

Further on under 3.2 (13), UEF finds it good that EBA is of the opinion that remuneration should not be solely linked to a quantitative target or to promote one product over another. Employees should in general have a fixed remuneration as a basis that can provide for an adequate living standard. Employees do want to do their best to meet customers’ needs and demands, and customers are best served by employees who are allowed to provide high quality service and not only focus on quantitative targets. UEF is of the opinion that sales targets and performance measurement systems must not have a negative impact on the employee-customer relation. Again, these measurement systems and sales targets are not always based on remuneration as defined by EBA (see comment above on 3.2. (12)).

Under the first bullet point on 3.2 (14) EBA writes that “The remuneration policy is in line with these strategic goals, is based mainly on the total volumes of banking products offered or provided to consumers and does not take into account consumers’ rights and interests.”
The profit sharing systems can therefore be added to the list under 3.2 (15).
In the list of good and positive measures under 3.2 (15), UEF would like to add under the 6th bullet point that the financial institutions should not only be encouraged to do sample studies with their customers on how they find their remuneration policies. The institutions should be equally expected to actually ask their own sales staff on how they find their remuneration policies, sales targets and performance measurements. Do their sales staff find that they are encouraged and have enough time to act in accordance with the consumers’ rights and interests?
UEF finds especially the last bullet point on 3.2 (15) to be an important point and is positive to see it included. As high-earners have both more to gain in relation to remuneration and pose a bigger systemic risk to the system, submitting them to increased scrutiny is seen as the right way to go.

Name of organisation

UNI Europa Finance