On 21 December 2015, the European Banking Authority (EBA) published its opinion on the application of the principle of proportionality to the remuneration provisions in the Capital Requirements Directive IV (CRD IV), recommending to introduce possible exemptions from some of the remuneration principles set out in Article 94 of the CRD IV.
On 21 April 2016, the European Commission sent a letter to the EBA requesting further clarification and additional information with regard to the application of the principle of proportionality to the remuneration provisions in the CRD IV. In particular, the Commission sought the EBA’s further clarification regarding the:
- current waiver practices for CRD IV institutions and staff and, in particular, information, by member state, about the institutions and staff currently benefiting from waivers from the application of the requirements of Article 94(1) points (l), (m) and the second subparagraph in point (o) of the CRD IV;
- current practices regarding the application of CRD IV remuneration requirements to UCITS and alternative investment fund managers, which are subsidiaries of CRD IV regulated groups; and
- exemptions for CRD IV institutions and staff proposed in the EBA’s opinion for certain institutions that are small, as well as for staff who receive low levels of variable remuneration.
The EBA has now published its report relating to the review of the application of the proportionality principle to the remuneration provisions in the CRD IV. The report’s main findings include:
- most member states allow for the application of waivers, either using thresholds based on the balance sheet total and/or the amount of variable remuneration or by making case-by-case assessments, taking into account the size, the internal organisation and the nature, scope and complexity of institutions’ activities;
- within the EU, two thirds of credit institutions and about 60% of their identified staff benefit from waivers. However, the market share of these institutions is about 15%, which is not as high as the number of institutions would suggest. These divergences are mainly a result of differences in the thresholds being applied, the levels of variable remuneration being paid, and the structural difference of the banking sectors of member states; and
- the EBA has calculated estimates for thresholds of EUR 1.5 bn, EUR 5.0 bn and EUR 10.0 bn for potential waivers, which would, for the EU, lead to respectively to 2.8%, 6.8% and 10.2% of the aggregated market share being excluded from the remuneration provisions within Article 94(1) points (l), (m) and the second subparagraph of point (o) of the CRD IV.