According to some opinions the draft establishes tasks or/and responsibilities to more committees or functional areas, however in our position the text is not specific enough to be able to designate, differentiate correctly the responsibilities of each of such areas that could lead to overlapping operation or conflict between the areas.
The adjective of “significant” can be found in many parts of the Draft, even though it provides some flexibility for the application on the other hand can bear uncertainty regarding the interpretation. These are suggested replacing with more clear explanations.
Also, “fair value” of specific instruments are mentioned at more points of the Draft, and it is not clarified what is exactly considered as such with regard to the category of remuneration.
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.
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.
The rules on spot-check inspections regarding the personal hedging cannot be lawfully executed under the current Hungarian jurisdiction. It is suggested including the phrase “ without prejudice to the national laws”, by this providing room to the national legislators to specify the way of the related controls and avoiding to include binding specifications in the Guideline.
We suggest clarifying the personal scope of the bonus pool related rules. In our understanding those only to apply to the identified staffs, however it is not sure.
The rules of point 236 in case of certain managers the Guideline unreasonably make the deferral period related rules stricter. We suggest keeping the current practice giving room to establish –on the basis of applying proportionality principles- their own rules on deferral period between 3 and 5 years. Several other points of the Guideline refer to the institutions own consideration as subject of defining the deferral period, which are somehow contradictory to the discussed rule.
The Draft sets up new rules that go beyond the rules of the CRD defining excess expectations and processes compared to the directive. The compliance to these new rules surely requires a lot of additional administration and resources from each of areas taking part in the relevant functionality (i.e. risk management, internal audit, new committees, HR, general management); however its cost can be hardly figured out at this stage.