Response to consultation on Guidelines on sound remuneration policies
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We think that there are no substantial changes between the CRD III and the CRD IV provisions on proportionality. We therefore do not believe there is a need to deviate from the existing interpretation.
We think that, taken altogether, these provisions allow for the neutralisation of remuneration requirements. This is in line with the European Securities and Markets Authority’s (ESMA) and several national supervisors’ interpretation of the CRD III and/or CRD IV.
We understand that the European Commission recently provided an opinion on article 92(2) CRD according to which all remuneration requirements have to be applied to each institution . We disagree with this reading of the text. We note that the opinion was provided by the Directorate General for Justice and Consumers. We hope that the Directorate General for Financial Stability, Financial Services and Capital Markets Union will also be given an opportunity to contribute to this discussion.
We would also like to point out that some national supervisors already opted for the neutralisation of certain requirements. For example, in Germany, the provisions in points (l), (m) and (n) of article 94(1) CRD, namely the deferral of variable remuneration, its pay-out in instruments and malus are not applied to small and non-complex institutions under the threshold of 15 billion EUR total balance sheet. This is also the case in France where institutions or groups under the threshold of 10 billion EUR total balance sheet benefit under strict conditions from adjustments from the CRD4 remuneration requirements,
Against this background, Eurofinas and Leaseurope believe that the requirements for variable remuneration regarding material risk-takers should be neutralised for small institutions, as well as for institutions with only small amounts of variable remuneration. We believe that the general framework ensures that the remuneration is in line with the risk profile, values and the strategy of the company. Further requirements would prove disproportionate and excessively burdensome for consumer credit, asset finance and leasing providers especially given the low risk nature of their activities.
Remuneration policies cannot exclusively be addressed from the perspective of corporate governance, and risk-taking. It should also be recognised as a key component of firms’ recruitment packages and attractiveness for prospective staff. It is important that, as a result of these new standards, smaller entities are not placed at a disadvantage in the labour market thereby affecting their ability to compete with larger operators.
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.
It is clear from Article 92(2) and 94 CRD that remuneration requirements are not meant to be applied in the same way to all institutions. Recital 66 CRD also provides that institutions may dis-apply certain remuneration requirements insofar as these are disproportionate.We think that there are no substantial changes between the CRD III and the CRD IV provisions on proportionality. We therefore do not believe there is a need to deviate from the existing interpretation.
We think that, taken altogether, these provisions allow for the neutralisation of remuneration requirements. This is in line with the European Securities and Markets Authority’s (ESMA) and several national supervisors’ interpretation of the CRD III and/or CRD IV.
We understand that the European Commission recently provided an opinion on article 92(2) CRD according to which all remuneration requirements have to be applied to each institution . We disagree with this reading of the text. We note that the opinion was provided by the Directorate General for Justice and Consumers. We hope that the Directorate General for Financial Stability, Financial Services and Capital Markets Union will also be given an opportunity to contribute to this discussion.
We would also like to point out that some national supervisors already opted for the neutralisation of certain requirements. For example, in Germany, the provisions in points (l), (m) and (n) of article 94(1) CRD, namely the deferral of variable remuneration, its pay-out in instruments and malus are not applied to small and non-complex institutions under the threshold of 15 billion EUR total balance sheet. This is also the case in France where institutions or groups under the threshold of 10 billion EUR total balance sheet benefit under strict conditions from adjustments from the CRD4 remuneration requirements,
Against this background, Eurofinas and Leaseurope believe that the requirements for variable remuneration regarding material risk-takers should be neutralised for small institutions, as well as for institutions with only small amounts of variable remuneration. We believe that the general framework ensures that the remuneration is in line with the risk profile, values and the strategy of the company. Further requirements would prove disproportionate and excessively burdensome for consumer credit, asset finance and leasing providers especially given the low risk nature of their activities.
Remuneration policies cannot exclusively be addressed from the perspective of corporate governance, and risk-taking. It should also be recognised as a key component of firms’ recruitment packages and attractiveness for prospective staff. It is important that, as a result of these new standards, smaller entities are not placed at a disadvantage in the labour market thereby affecting their ability to compete with larger operators.