European Banking Authority Responds to Commission Request for Further Information on Application of Proportionality to Remuneration Provisions in the Capital Requirements Directive 

The European Banking Authority published a response to the European Commission’s request for further information on the EBA’s Opinion on the application of the principle of proportionality to remuneration provisions in the Capital Requirements Directive. On December 21, 2015, the EBA published its first Opinion, recommending a possible set of exemptions from some of the remuneration principles, specifically the variable elements of remuneration. The EBA's proposed amendments included: (i) the application of deferral arrangements; (ii) the pay out in instruments for small and non-complex institutions; and (iii) for identified staff that receive only a low amount of variable remuneration when specific criteria are met. The Commission requested further information from the EBA through a letter dated April 21, 2016 on the issue of proportionality. The EBA responded on May 27, 2016, noting the scope of its then-planned analysis and the limitations on such a response given the timing and available data resources.

The EBA found that all but five Member States allow for waivers in the areas of remuneration, that most Member States permit the application of waivers through thresholds based on balance total or by making case-by-case assessments. The EBA concluded that the extent to which banks and identified staff benefit from waivers differs significantly across the EU. 

The Commission also sought further information on the EBA’s proposed exemptions for banks and identified staff as well as for staff who receive low levels of variable remuneration. The EBA outlined its findings on the potential impact of waivers at different thresholds, based on the balance sheet total of EUR 1.5 bn, EUR 5.0 bn and EUR 10.0 bn. The EBA found that, of the banks located in the EEA, around 75% to 90% of such firms, 35% to 60% of the identified staff and 3% to 15% of the market share would be able to benefit from waivers under those thresholds. This would be in addition to staff that could benefit from waivers based on low levels of remuneration. The EBA also provided further analysis on the use of share-linked instruments, recommending that listed firms should be able to use share-linked instruments because they have the same effect as shares when they reflect exactly the value of shares at all times. This approach is already taken in many Member States.

View the EBA’s response.

View the EBA’s Opinion on the application of the principle of proportionality to the remuneration provisions in CRD.