Response to consultation Paper on Draft RTS on classes of instruments that adequately reflect the credit quality of the investment firm as a going concern and possible alternative arrangements that are appropriate to be used the purposes of variable remuneration
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• We also welcome the general assumption made by the EBA in its impact assessment that the RTS should not lead to alternative arrangements that are overly burdensome to create and use for the purpose of variable remuneration and respect the principle of proportionality. In our view, the Draft RTS largely reflects that approach.
Question 3: Are the provisions in Article 6 appropriate and sufficiently clear? Where respondents are of the view that the draft RTS should define a set of specific arrangements rather than providing conditions that such arrangements should meet, comments are most helpful, when they clearly describe the alternative arrangements that investment firms desire to use to ensure that variable remuneration is aligned with the long-term interest of the investment firm and its risk profile.
In general, the purpose of the IFD is to offer some flexibility to investment firms in the way they use non-cash instruments to pay variable remuneration, provided that such instruments are effective in achieving the objective of aligning the interests of staff with the interest of various stakeholders, such as shareholders, creditors and clients, and contribute to the alignment of variable remuneration with the risk profile of the investment firm (cf. Recital 24 of the IFD). In this regard, a principle-based approach should be adopted to enable competent authorities to assess the specificities of markets and diverse legal structures of investment firms. We therefore support the selection of Option A in setting conditions for alternative arrangements that ensure they meet the same objective as the pay out of variable remuneration in instruments without specifying in detail the form such an arrangement should take (e.g. financial instruments or deferred cash on frozen accounts).• We also welcome the general assumption made by the EBA in its impact assessment that the RTS should not lead to alternative arrangements that are overly burdensome to create and use for the purpose of variable remuneration and respect the principle of proportionality. In our view, the Draft RTS largely reflects that approach.