Response to consultation on Guidelines on sound remuneration policies
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Paragraph 201 mentions expressly “objectives and measures on which the staff member has some direct influence”. In this respect Assosim notes that reference should be made also to teams of staff members. In fact, in some circumstances performance criteria (and, consequently, the amount of remuneration) are set in accordance with performances attributable to specific teams and not to specific person.
Q 2: Are the guidelines in chapter 5 appropriate and sufficiently clear?
NAQ 3: Are the guidelines regarding the shareholders’ involvement in setting higher ratios for variable remuneration sufficiently clear?
NAQ 4: Are the guidelines regarding remuneration policies and group context appropriate and sufficiently clear?
NAQ 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.
NAQ 6: Are the guidelines on the identification of staff appropriate and sufficiently clear?
NAQ 7: Are the guidelines regarding the capital base appropriate and sufficiently clear?
NAQ 8: Are the requirements regarding categories of remuneration appropriate and sufficiently clear?
NAQ 9: Are the requirements regarding allowances appropriate and sufficiently clear?
NAQ 10: Are the requirements on the retention bonus appropriate a sufficiently clear?
NAQ 11: Are the provisions regarding severance payments appropriate and sufficiently clear?
NAQ 12: Are the provisions on personal hedging and circumvention appropriate and sufficiently clear?
NAQ 13: Are the requirements on remuneration policies in section 15 appropriate and sufficiently clear?
Paragraph 183: Assosim retains these requirements too vague and indefinite. To avoid the application of discretionary criteria in determining the features of a performance, we are of the opinion that the term “exceptional” should be deleted. Moreover, such a term might as well evoke the concepts of an extraordinary/unusual/abnormal activity, which could herald the assumption of uncontrolled risks. The provision of targets to be achieved or overcome seems to be a safer approach.Q 14: Are the requirements on the risk alignment process appropriate and sufficiently clear?
NAQ 15: Are the provisions on deferral appropriate and sufficiently clear?
The criteria set out by EBA for risk assessment seem to consider only activities entailing risks on assets; we hold the view that similar criteria should also be provided with reference to fee-based businesses, including advisory (i.e. M&A, etc.), placement of financial instruments and other investment banking services. These services primarily expose bank to relevant operational, compliance, reputational risks which require qualitative assessment and are more complex to measure compared to asset-based risks. As a consequence, risk-adjusted remuneration process is subject to higher level of discretion.Paragraph 201 mentions expressly “objectives and measures on which the staff member has some direct influence”. In this respect Assosim notes that reference should be made also to teams of staff members. In fact, in some circumstances performance criteria (and, consequently, the amount of remuneration) are set in accordance with performances attributable to specific teams and not to specific person.