Response to consultation on Guidelines on sound remuneration policies

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Q 2: Are the guidelines in chapter 5 appropriate and sufficiently clear?

Please refer to attached document. We note para 14 is simple and efficient. A definition of corporate functions (mentioned in para 14) would help.

Q 3: Are the guidelines regarding the shareholders’ involvement in setting higher ratios for variable remuneration sufficiently clear?

Please refer to attached document. Too much information to be potentially provided to shareholders (para 34), as Remco and board have more efficient oversight role for technical and confidential incentive structures.

Q 4: Are the guidelines regarding remuneration policies and group context appropriate and sufficiently clear?

Please refer to attached document. Para 57 is unclear as to which functions are concerned.

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.

Please refer to attached document. Notably for proportionality, and for paragraphs 80 and 81.

Q 6: Are the guidelines on the identification of staff appropriate and sufficiently clear?

Please refer to attached document. There is too much complexity and costly paperwork and processes, notably on identification of staff. It gives the impression that busineses are static entities, which they are not. We welcome para 104.

Q 7: Are the guidelines regarding the capital base appropriate and sufficiently clear?

Please refer to attached document. CET1 considerations not relevant for asset management entities.

Q 8: Are the requirements regarding categories of remuneration appropriate and sufficiently clear?

Please refer to attached document. Vesting word seems ignored, and award used instead, which is confusing.

Q 9: Are the requirements regarding allowances appropriate and sufficiently clear?

Please refer to attached document. Not applicable to asset management companies, which have no capping of variable remuneration.

Q 10: Are the requirements on the retention bonus appropriate a sufficiently clear?

Please refer to attached document. Para 126 (ratio) not applicable to asset management entities.

Q 11: Are the provisions regarding severance payments appropriate and sufficiently clear?

Please refer to attached document.

Q 12: Are the provisions on personal hedging and circumvention appropriate and sufficiently clear?

Please refer to attached document. AFG considers newly required compliance checks on personal accounts are additionnal complexity and operational burden, of little value vs. the former declarative approach.

Q 13: Are the requirements on remuneration policies in section 15 appropriate and sufficiently clear?

Please refer to attached document. AFG considers the differentiated ratio per business" approach proposed in the GL, is excessively burdensome and complex, and does not reflect day-to-day business operational requirements in a financial conglomerate."

Q 14: Are the requirements on the risk alignment process appropriate and sufficiently clear?

Please refer to attached document. AFG is concerned (para 223) that too many years of records be required, with excessive granularity of information, proving again, burdensome and administratively costly, with overall little value added.

Q 15: Are the provisions on deferral appropriate and sufficiently clear?

Please refer to attached document.

Q 16: Are the provisions on the award of variable remuneration in instruments appropriate and sufficiently clear? Listed institutions are asked to provide an estimate of the impact and costs that would be created due to the requirement that under Article 94(1)(l)(i) CRD only shares (and no share linked instruments) should be used in parallel, where possible, to instruments as set out in the RTS on instruments. Wherever possible the estimated impact and costs should be quantified and supported by a short explanation of the methodology applied for their estimation.

Please refer to attached document. Overall, this section seems too prescriptive (eg shares and no cash-indexed instruments for listed companies), and does not allow for sufficient freedom of business, unnecessarily restraining ability to be efficient. Loss absorbency concept is a welcome criteria (para 249).

Q 17: Are the requirements regarding the retention policy appropriate and sufficiently clear?

Please refer to attached document. Overall, this section seems too prescriptive, and does not allow for sufficient freedom of business, unnecessarily restraining ability to be efficient. Retention is often less efficient than deferral, and we would prefer maximising deferral. Pls see our proposal for Para 257 in the attached document.

Q 18: Are the requirements on the ex post risk adjustments appropriate and sufficiently clear?

Please refer to attached document. AFG points out the high difficulty to implement claw back in French labour law. A time limit for claw back and malus implementation is welcome (para 269). Back testing approach is a welcome one (para 268).

Q 19: Are the requirements in Title V sufficiently clear and appropriate?

Please refer to attached document.

Q 20: Are the requirements in Title VI appropriate and sufficiently clear?

Please refer to attached document. Again, excessive administrative work (e.g. very detailed and complex disclosure requirements) is costly and weighs on competitiveness, and too detailed information will severely hinder it as well. More thought is needed on what synthetic and relevant information, shareholders should really have to make well-informed judgements. AFG believes this is more about quality than quantity.

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Name of organisation

AFG- Association Française de la Gestion Financière