On December 21, 2015, the European Banking Authority published final Guidelines on sound remuneration policies and an Opinion on the application of proportionality to the remuneration provisions in the Capital Requirements Directive. The final Guidelines are applicable to banks and investment firms and cover all staff with particular aspects focusing on staff whose professional activities have a material impact on a firm's risk profile. The Guidelines will apply from January 1, 2017, a year later than originally intended. Therefore, firms do not need to amend their existing compensation practices for the 2016 performance year. The Guidelines set out detailed requirements for remuneration policies, the related governance arrangements and processes for implementing remuneration policies, updating the guidelines on remuneration policies published by the Committee of European Banking Supervisors to take into account changes introduced by the revised CRD IV, technical standards on the identification of staff and on the instruments which can be used for variable remuneration, the EBA's opinion on the use of allowances and industry developments.
The EBA's Opinion, addressed to the European Commission, European Parliament and Council, includes a proposed draft legislative proposal which would amend some of the remuneration requirements included in CRD IV. The EBA considers that legislative changes are required to ensure a harmonized approach to the application of the remuneration rules across the EU, in particular, the scope of exemptions. The proposed legislative changes include: (i) excluding certain small, non-complex firms from the application of the principles related to the deferral and the pay out in instruments of part of the variable remuneration; (ii) limiting the scope of the deferral requirements so that staff who receive low amounts of variable remuneration are excluded; and (iii) allowing listed firms to use share-linked instruments as elements of variable remuneration.
The final Guidelines are available at: http://www.eba.europa.eu/documents/10180/1314839/EBA-GL-2015-22+Guidelines+on+Sound+Remuneration+Policies.pdf and The Opinion is available at: http://www.eba.europa.eu/documents/10180/983359/EBA-Op-2015-25+Opinion+on+the+Application+of+Proportionality.pdf.
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