On 21 December 2015, the EBA published its final guidelines on sound remuneration policies under Articles 74(3) and 75(2) of the CRD IV Directive (2013/36/EU) and disclosures under Article 450 of the Capital Requirements Regulation (Regulation 575/2013) (CRR). It published a consultation on a draft version of the guidelines in March 2015.

The guidelines set out the requirements for remuneration policies, group application and proportionality, along with criteria for the allocation of remuneration as fixed and variable and details on the disclosures required under the CRR.

Chapter 6 to the EBA’s final guidelines sets out a summary of the feedback received by the EBA and policy decisions taken in response to feedback. In particular, the EBA has revised its approach to the valuation of long-term investment plans and sought to clarify the application of CRD IV provisions in the context of groups. The EBA also intends to develop separate guidelines aimed at aligning the interest of consumers with the remuneration policy of sales staff.

The guidelines will apply from 1 January 2017 (rather than from 1 January 2016, as originally proposed). The guidelines on remuneration policies and practices published by the Committee of European Banking Supervisors (CEBS), the EBA’s predecessor, in December 2010 will be repealed on 31 December 2016.

The EBA has also published an opinion on the application of the principle of proportionality to the CRD IV Directive remuneration provisions, based on responses to its March 2015 draft guidelines. Article 92(2) of the CRD IV Directive requires competent authorities to ensure that the remuneration principles in Articles 92 to 94 are applied in a manner and to the extent appropriate to the firm’s size, internal organisation and the nature, scope and complexity of its activities. The EBA’s hard line opposing some Member State practices, particularly so-called “neutralisations” (disapplication of requirements for some investment firms) was met with alarm by many industry groups. The EBA has softened its tone in the opinion but sticks with the view that the CRD IV remuneration requirements must be applied consistently. With an eye to the ongoing Article 161 CRD IV review, it recommends amending CRD IV to:

  • exclude certain small, non-complex firms from the requirements to apply the remuneration principles regarding deferral and payment in instruments for variable remuneration;
  • limit the scope of the remuneration principles in respect of staff who receive low amounts of variable remuneration, including in large firms; and
  • allow listed firms to be able to use share-linked instruments for variable remuneration.

The EBA’s proposals for amendments to the CRD IV Directive are set out in Annex I to the opinion. Annex II contains a report on Member States’ implementation of the principle of proportionality with respect to the CRD IV remuneration provisions.