EBA publishes benchmarking report on the use of higher ratios for variable remuneration

The European Banking Authority (EBA) published today a report benchmarking the institutions' remuneration practices concerning the use of the possibility to increase the maximum ratio between variable and fixed remuneration up to 200%. The Capital Requirements Directive (CRDIV) limits the aforementioned ratio to 100%, unless it is increased following the shareholders' approval. The report also shows that nearly all Member States have allowed for the possibility to increase the ratio between the two remuneration components to 200% but only institutions in 15 Member States have actually made use of this possibility.

 

The ratio between the variable and fixed remuneration components of identified staff is limited to 100% to restrict their incentive to take excessive risks. Institutions can increase this ratio to 200% with the shareholders' approval, if Member States allow for this possibility. The EBA has collected information on this practice and benchmarked the extent to which higher ratios are used by institutions within different Member States. 

 

All but six EU Member States have implemented the possibility for institutions to increase the maximum ratio between the variable and the fixed remuneration to 200% with the shareholders' approval. Institutions made use of such possibility only in 15 Member States. 

 

The report highlights that the practice of increasing the maximum ratio between the two components is more frequent among those institutions located in Member States where higher levels of remuneration and higher ratios were observed in the past.

 

Institutions with approved higher ratios account for slightly more than half of the market share of the banking system. Most of the identified staff that can receive a higher ratio of variable remuneration is active in the area of investment banking. 

 

The EBA and Competent Authorities will continue to monitor the development with regard to the approval of higher ratios and will take into account its findings in the review of the remuneration provisions mandated under Article 161 of the CRDIV.