Thursday, 16 October 2014

Europe: EBA reports - banks, remuneration and allowances

The European Banking Authority has published the results of its investigation into discretionary remuneration practices within the EU banking sector, focusing in particular on the use of role based allowances: see here (pdf). The use of such allowances, which some banks have classified as fixed remuneration, is controversial because it has provided one way to sidestep the bonus cap within the Capital Requirements Directive 2013/36/EU.

The EBA states in its report that role based allowances that are discretionary, not predetermined, not transparent to staff or not permanent, should be regarded as variable remuneration and not fixed remuneration. In light of this finding, the EBA has issued an Opinion to the European Commission, and to the EU competent authorities, calling for supervisors to ensure that banks' remuneration practices on allowances comply with the EU Law: see here (pdf).

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