FINANCIAL SERVICES
EU to impose strict cap on executive pay in bailed-out banks
Executives in struggling banks in the EU that requires state aid will face tough curbs on their salaries under new European Commission rules coming into force in August 2013.
Page 11 of the Commission's draft “Communication” states:
"For the same reasons, such entities should apply strict executive remuneration policies. This requires a cap on remuneration of executive pay combined with incentives ensuring that the bank is implementing its restructuring plan towards sustainable, long-term company objectives. Thus, any bank in receipt of State aid in the form of recapitalisation or impaired asset measures should restrict the total remuneration to staff, including board members and senior management, to an appropriate level. That cap on total remuneration should include all possible fixed and variable components and pensions, and be in line with Articles 93 and 94 of the EU Capital Requirements Directive (CRD IV).14
"The total remuneration of any such individual may therefore not exceed 15 times the national average salary in the Member State where the beneficiary is incorporated or 10 times the average salary of employees in the beneficiary bank.
"Restrictions on remuneration must apply until the end of the restructuring period or until the bank has repaid the State aid, whichever occurs earlier."
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Title: Communication from the Commission on the Application, from 1 August 2013, of State Aid Rules to Support Measures in Favour of Banks in the Context of the Financial Crisis ("Banking Communication"), European Commission, July 2013.
Availability: You can download the 21-page Communication at http://ec.europa.eu/competition/state_aid/legislation/temporary.html.
The press release is available at http://europa.eu/rapid/press-release_IP-13-672_en.htm.
EU makes major changes to rules on state aid to banks with strict limits on executive pay: http://t.co/pSdFNB7gVP via @reuters
— e-reward.co.uk (@ereward) July 10, 2013
EU moves to curb executive pay at bailed-out banks: http://t.co/PHlfjgu6oW via @FT
— e-reward.co.uk (@ereward) July 10, 2013