FINANCIAL SERVICES
CEBS publishes EU rules on pay and bonuses in banking sector
The Committee of European Banking Supervisors (CEBS) has published its final "Guidelines on Remuneration Policies and Practices" for financial service firms.
Under the revised Capital Requirements Directive (CRD III), as agreed upon by the European institutions, CEBS is “required to elaborate and issue guidelines on sound remuneration policies in the financial sector in order to facilitate the compliance of the remuneration principles included in the amended Annex V of the CRD”. Article 22 of the revised CRD lays down the fundamental principle whereby institutions are “required to ensure that their remuneration policies and practices are consistent with their organisational structure and promote sound and effective risk management”.
CEBS had already published a set of High-level Principles for Remuneration Policies (Rem. HLP) on 20 April 2009 aimed at assisting in remedying unsound remuneration policies. These principles also built on the remuneration work carried out by other bodies, namely the Financial Stability Board and the European Commission.
An extensive implementation study regarding the national implementation of the High-level principles was carried out by CEBS in the first semester of 2010 and served as an input to the current guidelines.
--> CEBS Implementation report, June 2010: High-level Principles for Remuneration Policies: www.c-ebs.org/News--Communications/Latest-news/CEBS-today-publishes-its-report-on-national-implem.aspx.
CEBS has considered the feedback received (download PDF Feedback document) and has revised its initial proposal in order to address the main issues and concerns raised, namely those related to:
proportionality
equity-linked and other instruments as part of variable remuneration
distribution of such instruments
retention periods.
Timetable
The final guidelines shall be implemented as from 1 January 2011 in line with the entry into force of CRD III.
CEBS plans to carry out an implementation study in the fourth quarter of 2011 “in response to the concerns raised with regard to the convergent application of the CRD and the guidelines within the EEA”.
These guidelines will be implemented in the UK through an updated FSA Remuneration Code, to be issued shortly.
Want to know more?
Title: Guidelines on Remuneration Policies and Practices, Committee of European Banking Supervisors, 10 December 2010.
Availability: Download the 86-page report in PDF format at www.c-ebs.org/News--Communications/Latest-news/CEBS-has-today-published-its-Guidelines-on-Remuner.aspx.
The Committee of European Banking Supervisors (CEBS) is composed of “high level representatives from the banking supervisory authorities and central banks of the European Union”. CEBS’s main tasks are to “advise the Commission in the field of banking activities, to contribute to the consistent implementation of Community Directives and to the convergence of supervisory practices, and to enhance supervisory co-operation”. For more information visit www.c-ebs.org.
Media reports
--> “Banks to sidestep bonus crackdown by raising salaries”, by Jill Treanor, guardian.co.uk, 10 December 2010: www.guardian.co.uk/business/2010/dec/10/banks-sidestep-bonus-crackdown.
--> ”European pay rules set to hit US groups”, by Megan Murphy, ft.com, 10 December 2010: www.ft.com/cms/s/0/e6de05ec-04a3-11e0-a99c-00144feabdc0.html.