Brussels, 22/07/2016 (Agence Europe) - The rules on remuneration in credit institutions have helped reduce excessive risk taking and short-termism. They have, however, proved too costly and cumbersome given the prudential benefits they provide, particularly for small organisations operating in this sector, stated the Commission in a report published on Thursday 28 July.
The Commission will carry out an impact study with a view to providing possible clarification of these rules and their application in small and non-complex institutions.
The Commission report says that the majority of member states have put in place thresholds or criteria (nature of its business and the level of variable staff remuneration) under which certain remuneration rules do not need to be applied. The scope of these waivers differs significantly across member states in terms of both the type of institution and staff which may benefit from them and the remuneration rules to which they apply. The rules that have been subject to such waivers are most often the requirements on deferral and pay-out instruments.
The European Banking Authority (EBA) observed earlier this year that the deferral and nature of the financial instruments granted varied “significantly” in the member states and banks (see EUROPE 11521). The EBA argued that the capital requirements directive (CRD) should allow the possibility of waivers from the application of the rules on deferral and pay-out in instruments for institutions which are small and non-complex and for staff receiving low levels of variable remuneration.
A second issue identified concerns the requirement for listed institutions to use only shares (and not share-linked instruments) to meet the CRD pay-out in instruments requirement. The Commission is therefore examining the possibility of amendments to allow listed institutions to use the share-linked instruments too.
The Commission said that it is too early to draw definitive conclusions regarding a threshold on bonuses because this rule was only introduced recently and it is therefore not possible to gauge its effects in full. In March 2016, the EBA said that the bonus threshold had not had a significant effect on financial stability or banks' operational costs (see EUROPE 11521). The Commission will continue to evaluate this issue.
The Commission also intends to examine the implications of the conclusions of the current report on the remuneration rules included in legislation in other financial sectors, particularly the directive on the undertakings for the collective investment in transferable securities Directive (UCITS V) and the alternative investment fund managers directive (AIFMD). (Original version in French by Élodie Lamer)