EBA publishes its final revised Guidelines on sound remuneration policies

The European Banking Authority (EBA) published today its revised Guidelines on sound remuneration policies. This update takes into account the amendments introduced by the fifth Capital Requirements Directive (CRD V) in relation to institutions’ sound remuneration policies and, in particular, the requirement that remuneration policies should be gender neutral. The final Guidelines also consider supervisory practices and clarify some aspects of retention bonuses and severance pays. The revised Guidelines will apply from 31 December 2021.

The principle of equal pay for male and female workers for equal work or work of equal value is laid down in Article 157 of the Treaty on the Functioning of the European Union (TFEU). Institutions need to apply this principle in a consistent manner. In this context, the final revised Guidelines specify further that institutions should implement a gender-neutral remuneration policy. All institutions are also required to apply sound and gender-neutral remuneration policies to all staff.

Additional guidance is provided on the application of waivers based on institutions’ total balance sheet and for staff with a low variable remuneration that have been introduced with CRD V regarding the requirements to defer and pay out in instruments a part of the variable remuneration of identified staff.

The final Guidelines also clarify how the remuneration framework applies on a consolidated basis to financial institutions that are subject to a specific remuneration framework (for example, firms subject to the Investment Firms Directive (IFD), the Undertakings for Collective Investment in Transferable Securities Directive (UCITS), or the Alternative Investment Fund Managers Directive (AIFMD)).

Finally, the sections on severance payments and retention bonuses have been revised based on supervisory experience regarding cases where such elements have been used by institutions to circumvent requirements regarding the link to performance or the maximum ratio.

Legal basis and next steps

These Guidelines have been developed on the basis of Article 74 and 94 of Directive 2013/36/EU, which mandate the EBA to further specify and harmonise institutions’ remuneration policies.

The EBA Guidelines will apply to Competent Authorities across the EU, as well as to institutions on an individual and consolidated basis as further specified in the guidelines. Once the revised Guidelines will enter into force, the 2015 Guidelines will be repealed.

The EBA will follow up on institutions’ practices with a report to be published within two year after the publication of the final Guidelines.