Response to consultation on Guidelines on sound remuneration policies
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Regarding the rules on remuneration committees the recommendations of the Guideline in some extent are not in line withy to the rules of the relevant act in Hungary (Act CCXXXVII of 2013), i.e. regarding the composition of such committees. We suggest not specifying too restrictive rules in the Guidelines and by this providing room for the local authorities to be able to apply the local law prescriptions with this respect.
Point 40 allows only for the non significant institutions to have tasks beyond those specified in the Guidelines. Considering our comment for Q1 this can be too restrictive, since, for example, the tasks of a nominating committee could overlap much with the remuneration committee thus these two functions could be operated in one committee without conflict of interest in case of institutions, which are considered as significant within the Hungarian environment.
Point 42 has also some discrepancies with the Hungarian rules. Our local rules expects the remuneration committee to be principally composed of the external members of the management body in charge of management function and if there are not enough of such then the supervisory board members may be included. The Guideline should leave room for this operation. In addition, the obligation to include the employees’ representative to the committee may hurt the principles of independency and qualification thus we suggest smoothing this obligation to a recommendation.
In our opinion the task listed in point 44 / i. is over the general scope of the remuneration committee and the specification of the task itself is not appropriately clear and can hardly be interpreted to be able to implement.
Furthermore, we suggest including in points 81-82 additional criteria: the level/amount of the paid variable remuneration. For example in case of payout of bonus equal to 1-2 months’ salary such rules as deferral or non-cash payments are not able to reach its purpose. We suggest defining such minima criteria that if the variable remuneration is below the special payout rules (deferral, non-cash payments) shall not be applied.
Q 4: Are the guidelines regarding remuneration policies and group context appropriate and sufficiently clear?
It is clear and agreed by our members that the principles of the Guidelines shall be applied both at group and individual level within a banking group. On the other hand there are some subsidiaries operating on specific markets where remuneration related legislations do not exists and the rules of CRD cannot be interpreted properly or at all or the application of such rules would cause competitive disadvantages for certain subsidiaries. Due to it the Draft should specify that those specific rules of the directive and the Guidelines shall apply that fit to or can be interpreted with regard to the operation of the subsidiaries not under the effect of CRD.Regarding the rules on remuneration committees the recommendations of the Guideline in some extent are not in line withy to the rules of the relevant act in Hungary (Act CCXXXVII of 2013), i.e. regarding the composition of such committees. We suggest not specifying too restrictive rules in the Guidelines and by this providing room for the local authorities to be able to apply the local law prescriptions with this respect.
Point 40 allows only for the non significant institutions to have tasks beyond those specified in the Guidelines. Considering our comment for Q1 this can be too restrictive, since, for example, the tasks of a nominating committee could overlap much with the remuneration committee thus these two functions could be operated in one committee without conflict of interest in case of institutions, which are considered as significant within the Hungarian environment.
Point 42 has also some discrepancies with the Hungarian rules. Our local rules expects the remuneration committee to be principally composed of the external members of the management body in charge of management function and if there are not enough of such then the supervisory board members may be included. The Guideline should leave room for this operation. In addition, the obligation to include the employees’ representative to the committee may hurt the principles of independency and qualification thus we suggest smoothing this obligation to a recommendation.
In our opinion the task listed in point 44 / i. is over the general scope of the remuneration committee and the specification of the task itself is not appropriately clear and can hardly be interpreted to be able to implement.
Q 5: All respondents are welcome to provide their comments on the chapter on proportionality, with particular reference to the change of the approach on ‘neutralisations’ that was required following the interpretation of the wording of the CRD. In particular institutions that used ‘neutralisations’ under the previous guidelines for the whole institution or identified staff receiving only a low amount of variable remuneration are asked to provide an estimate of the implementation costs in absolute and relative terms and to point to impediments resulting from their nature, including their legal form, if they were required to apply, for the variable remuneration of identified staff: a) deferral arrangements, b) the pay out in instruments and, c) malus (with respect to the deferred variable remuneration). In addition those institutions are welcome to explain the anticipated changes to the remuneration policy which will need to be made to comply with all requirements. Wherever possible the estimated impact and costs should be quantified, supported by a short explanation of the methodology applied for their estimation and provided separately for the three listed aspects.
he new interpretation of the proportionality and the ceasing “neutralization” principle – considering the specialities of the Hungarian regulations would make impossible to implement the Guidelines reasonable way, especially to some sub-level group members. Even though an affiliate belongs to the same banking group its activities, operation and risks may be totally different to the parent banks, which is reasonable to be reflected in the affiliates’ internal rules on remuneration. We suggest taking over the neutralization principle from the concerning CEBS Guidelines.Furthermore, we suggest including in points 81-82 additional criteria: the level/amount of the paid variable remuneration. For example in case of payout of bonus equal to 1-2 months’ salary such rules as deferral or non-cash payments are not able to reach its purpose. We suggest defining such minima criteria that if the variable remuneration is below the special payout rules (deferral, non-cash payments) shall not be applied.