On 19 January 2017, the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin) issued a revised draft version of the Remuneration Ordinance for Institutions (Institutsvergütungsverordnung – InstitutsVergV). The InstitutsVergV will be issued in February 2017 and according to BaFin, it will come into force on 1 March 2017. The revised draft implements the European Banking Authority’s (EBA’s) Guidelines on sound remuneration policies, which apply from 1 January 2017 (see our blog entry here). The ordinance is applicable to credit and financial institutions as well as institutions in the meaning of section 53 para. 1 sentence 1 German Banking Act (Kreditwesengesetz – KWG), which are subject to the special organisational requirements of section 25a KWG.
The major aim of the amended ordinance is, inter alia, to identify the risk bearers, more adequately reflect and address the different remuneration types and to differentiate between the various forms of variable remunerations. The amended ordinance introduces also new documentation and transparency obligations in relation to the remuneration system. Furthermore, it specifies risk adjustment and claw-back clauses. Existing agreements with employees need to be adjusted to the new rules if legally possible.
The new InstitutsVergV was covered by our financial services and products breakfast briefing on 26 January 2017, which took place in Frankfurt. The presentation outlined the significant changes to the InstitutsVergV; specifically explained the difference between fixed and variable remuneration (i.e. severance payments, documentation obligations and disclosure requirements). Moreover, new regulations on the remuneration systems’ requirements for risk bearers acting for important institutions were discussed in the briefing.