With the transposition of the Capital Requirements Directive (CRD5) expected by the end of this year, the ABBL organised a conference on 15 November on the impact of the directive on remuneration policies. Experts from the ABBL were joined by panelists from the CSSF, Allen & Overy and KPMG.
Towards a neutral remuneration policy
Due to the new rules, we see that the questions of neutrality of remuneration policies and diversity in management bodies will increasingly come under the spotlight. There is still some way to go on these issues, and the CSSF will monitor this closely.
A complex implementation
The CRD4/5 rules remain complex and therefore difficult for banks to implement. We encourage our members to seek support and training on these sensitive issues. See the training on remuneration policies, organised by the House of Training and the ABBL.
Some key points from CRD5
While CRD5 makes slight changes to the proportionality principle applicable at the level of the institution, its most dramatic change is at the level of the significant material risk-taker, as the threshold has been lowered to EUR 50,000 in relation to annual variable remuneration.
Another important addition in CRD5 concerns the gender neutrality requirement of remuneration policies, on which the EBA is expected to publish guidelines soon. In practice, financial institutions will have to review their remuneration policies and ensure that they are gender-neutral, not only for significant material risk-takers, but for all staff. The new provisions also concern retention bonuses and disclosure requirements, which are strengthened.
CRD4: reminder of the most important measures
- Ceiling on bonuses: variable remuneration may not exceed fixed remuneration in principle
- Proportion between cash and instruments: at least 50% of the variable remuneration must be paid in instruments
- Deferred payments: when a part of the variable remuneration cannot be paid directly after the award, it can be deferred for up to 5 years
- Retention period: there is a period after vesting during which the instruments cannot be sold or accessed by the employee
- Malus or clawback situations: the employee may be asked to repay or never have access to the variable pay or part of it
Which employees are affected?
Commission Delegated Regulation 2021/923 of 25 March 2021 on identified personnel provides for and defines 2 criteria for the identification of employees subject to the above provisions:
- A qualitative criterion where the roles and responsibilities of the employee are analysed.
- A quantitative criterion where the employee’s remuneration is analysed. If either criterion is met, the employee should be considered a significant material risk-taker.
If you missed this conference or would like to see it again, contact us to receive the link to the video – reserved for ABBL Members.
By Cristelle Cervellati