Wed, Mar 4, 2015

The EBA publishes its CRDIV remuneration guidelines consultation

The EBA has today (4 March 2015), published its  CRDIV Remuneration Guideline Consultation. The consultation period runs until 4 June 2015.

We strongly advise all firms to engage with this consultation, not only those which are subject directly to CRDIV (i.e. in the UK, firms designated as CRR firms by the PRA and as IFPRU firms by the FCA) but also those subject to authorization under AIFMD or UCITS and those firms now classified as BIPRU firms, particularly where they are subsidiaries within groups which contain firms subject directly to CRDIV.

In summary, the key items that firms should look at include:

  • The EBA’s proposal that the concept of proportionality, which is a fundamental principle of the Directive, cannot be applied in the context of the CRDIV remuneration provisions;
  • The limit to variable remuneration as a proportion of fixed remuneration (the so-called Cap) which must apply to all Identified Staff, irrespective of proportionality, and
  • Subject to certain circumstances, the guidelines which apply to subsidiaries of groups which contain firms subject to CRDIV but are themselves not subject to these remuneration provisions (for example, where these subsidiaries might be AIFM, BIPRU firms or UCITS ManCo)


What should firms do now?

We strongly advise firms to engage fully with this consultation. This can be done directly or via trade bodies who will, without doubt, be submitting comprehensive submissions to this consultation.

It is vital that firms explain the difficulties with which they are presented, should the guidelines go ahead as drafted. What, for example, is the impact from the disapplication of proportionality with reference to its concepts and desired outcomes? Is it appropriate to apply the Cap to all, or even any staff, bearing in mind the desired outcomes this is intended to foster? Do firms have any concerns about the application on CRDIV groups containing subsidiaries not directly subject to CRDIV?

Financial Services Compliance and Regulation

End-to-end governance, advisory and monitorship solutions to detect, mitigate, drive efficiencies and remediate operational, legal, compliance and regulatory risk.