The European Banking Authority (EBA) has published a report on benchmarking of approved higher ratios under article 94 of the Capital Requirements Directive IV (CRD IV).
Under the CRD IV the ratio between the variable and fixed remuneration components of identified staff is limited to 100% to restrict their incentive to take excessive risks. Institutions can increase this ratio to 200% with the shareholders’ approval, if Member States allow for this possibility.
The EBA’s report, which has collected information on this practice and benchmarked the extent to which higher ratios are used by institutions within different Member States, shows that:
- nearly all Member States have allowed for the possibility to increase the ratio to 200% but only institutions in 15 Member States have actually made use of this possibility;
- the practice of increasing the maximum ratio is more frequent among those institutions located in Member States where higher levels of remuneration and higher ratios were observed in the past;
- most of the staff that can receive a higher ratio of variable remuneration are active in the area of investment banking;
- in eight Member States, no institution has so far made use of the possibility to increase the maximum ratio; and
- in Member States with institutions that apply higher ratios, institutions that apply a ratio of 100% can also be found.
The EBA and competent authorities will continue to monitor the development with regard to the approval of higher ratios and will take into account its findings in the review of the remuneration provisions mandated under Article 161 of the CRD IV.
View EBA publishes benchmarking report on the use of higher ratios for variable remuneration, 12 November 2015