The European Banking Authority (EBA) has published a follow-up report on the actions taken by Member State competent authorities following the publication of its Opinion on the use of allowances.

In its Opinion, published in October 2014, the EBA considered that in accordance with Capital Requirements Directive IV (CRD IV) and among other things:

  • institutions’ remuneration policies have to make a clear distinction between ‘fixed’ and ‘variable’ remuneration;
  • in order to qualify as fixed remuneration, the conditions for the granting and amount of role-based allowances (RBA) should be predetermined, transparent to staff, permanent and tied to the specific role and organisational responsibilities and, without prejudice to national law, non-revocable; and
  • that RBA that are not predetermined, not transparent to staff, not permanent, that provide incentives to take risks or, without prejudice to national law, are revocable, should be classified as variable remuneration.

Additionally, in the Opinion Member State competent authorities were asked to use all necessary supervisory measures to ensure that, by 31 December 2014, institutions’ remuneration policies comply with it.

In its follow-up report the EBA notes that:

  • Member State competent authorities have taken measures in this respect and, where necessary, asked institutions to implement the necessary changes; and
  • measures will in most cases only be effective for the remuneration awarded for the performance year 2015.

The EBA is currently finalising its guidelines on sound remuneration policies which will contain further criteria to classify remuneration components between fixed and variable ones. In line with article 161 of CRD IV, the EBA is also working closely with the European Commission in reviewing the provisions on remuneration, including identifying whether the legislation requires further reinforcement in this area

View EBA updates on remuneration practices and the use of allowances across the EU, 12 November 2015