The European Banking Authority (EBA) has published final guidelines on the applicable notional discount rate for variable remuneration as mandated under article 94(1)(g)(iii) of the CRD IV Directive.
The discount rate is only applicable if implemented by a Member State pursuant to article 94(1)(g)(iii) of the CRD IV Directive. The guidelines only apply for the purpose of calculating the ratio between the variable and fixed component of total remuneration awarded for service provided or performance from 2014 and onwards.
The EBA has combined three relevant factors to calculate the discount rate: the national annual inflation rate, the average interest rate of EU Government bonds to take account of opportunity costs and inflation risk and a nominal factor to provide for incentives for paying variable remuneration in instruments which are deferred for a period of not less than five years, or to a lower maximum amount percentage prescribed by national law.
View Guidelines on the applicable notional discount rate for variable remuneration, 27 March 2014