On 21 January 2021, the European Banking Authority (EBA) published final reports containing draft regulatory technical standards (RTS) on:
- Criteria to identify categories of staff whose professional activities have a material impact on an investment firm’s risk profile or assets it manages under the Investment Firm Directive (IFD). The draft RTS set out qualitative and quantitative criteria for the identification of categories of staff whose professional activities have a material impact on the investment firm’s risk profile or of the assets that it manages in accordance with the requirements of Article 30(1) of the IFD. To ensure that all risk takers are identified, members of staff are identified as having a material impact on the institution’s risk profile as soon as they meet at least one of the qualitative or quantitative criteria in the draft RTS or, where necessary because of the specificities of their business model, additional internal criteria. The draft RTS also clarify how the criteria should be applied on a consolidated and individual basis. Some flexibility in calculating the amount of remuneration for the application of the quantitative requirements has been introduced similarly to the remuneration framework applicable under the Capital Requirements Directive IV (CRD IV).
- Classes of instruments that adequately reflect the credit quality of the investment firm as a going concern and possible alternative arrangements that are appropriate to be used for the purposes of variable remuneration. Article 32(8) of the IFD mandates the EBA, in consultation with ESMA, to develop draft RTS to specify the instruments under point (j)(iii) of paragraph (1) of this Article and possible alternative arrangements for the pay out of variable remuneration. Therefore final draft RTS introduce requirements for investment firms regarding Additional Tier 1, Tier 2 and other instruments used for the purposes of variable remuneration, to ensure that they appropriately reflect the credit quality of the investment firm as well as, to specify possible alternative arrangements for the pay out of variable remuneration where investment firms do not issue any of the instruments referred to in Article 32 of the IFD. The provisions in the draft RTS are also aligned with Commission Delegated Regulation 527/2014 on classes of instruments that are appropriate to be used for the purposes of variable remuneration under the CRD IV to ensure that, in particular, groups of credit institutions and investment firms are able to use a common set of instruments for remuneration purposes.
The final reports have been submitted to the European Commission.