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ANASF - Associazione nazionale promotori finanziari

As a general comment, we think that the definitions are sufficiently clear. Nonetheless, we believe that a “restricted bonus pool” should be clearly defined to isolate the maximum amount of variable remuneration which can be awarded to risk takers (identified staff). This is the detail that, in itself, appears to be proper and necessary for the implementation of the proposed Guidelines.
We emphasize the need to consider the specific characteristics of particular categories of staff as, for example, members of distribution networks conducting activities outside the premises of banks and investment firms (in Italy, promotori finanziari who are qualified as MiFID tied agents and must be distinguished from employees). This peculiarity has already been recognized by the national competent authority (the Bank of Italy, see Circular no. 285 of December 17, 2013, updated to 18 November 2014): in transposing the provisions of Directive 2013/36/EU (CRD IV), the Bank of Italy has established a core of specific rules for the professional category of promotori finanziari. Accordingly, we believe that the implementation of these Guidelines should follow the approach defined by the Bank of Italy.
We also propose a specific exception to general rules in the first three years of employment when hiring new staff (other than identified staff), provided that new staff has not been previously hired by other banks or financial intermediaries. The importance of this exception, in the Italian case, has been acknowledged by the Bank of Italy in its supervisory provisions. Moreover, this exception may be integrated with the provisions on guaranteed variable remuneration that can be awarded to new staff.
As a general comment, we agree with the proposal. However, we point out the need to tailor the rules on the structure of remuneration (both variable and fixed components) to the specific characteristics of the remuneration for particular categories of staff (especially, promotori finanziari-tied agents) mentioned in our answer to Question 1. The Bank of Italy has acknowledged that the remuneration of this category of staff is characterized by the agency contract between agent and principal which is of self-employment nature.
Pursuant to the provisions of the Bank of Italy:
- variable" remuneration of tied agents is the remuneration component which is non-recurring and has an incentive nature (linked, for example, to the increase of net sales, the achievement of product benchmarks, the promotion of new products, etc.);
- “fixed” remuneration is the recurring component of non-incentive nature which represents the most stable and ordinary element of remuneration.
Therefore, these national provisions may be interpreted as follows: for these specific categories of staff, the “fixed” component remunerates the existing portfolio, while the "variable" component remunerates portfolio increase or the achievement of specific targets."
Yes, they are.
Yes, they are. Nonetheless, we point out the need for greater transparency with regard to the timing of the award and vesting of the retention bonus.
The provisions regarding severance payments are clear enough. Nonetheless, we point out a problem relating to the proposed provision specifying that severance payments should not be higher than the reduction of costs achieved by the early termination of contracts in case of failures of the institution. Indeed, we believe that the needs pertaining to the capital base of the institution shall be balanced with the entitlement to accrued pension benefits.
We also consider that, for the sake of transparency and legal certainty of the relationship between institutions and their staff, “obvious failures” which allow for the immediate cancellation of the contract should be interpreted as an exhaustive list and should correspond to the situations specified by the Guidelines (a member of staff is no longer considered as of good repute or as sufficiently experienced and knowledgeable; participation or responsibility for conduct which resulted in significant losses for the institution; breach of internal rules and procedures based on intent or gross negligence). With regard to the second situation, we believe that it should encompass only losses due to intent or gross negligence.
Moreover, we think that it is necessary to specify (possibly, by means of a definition) that discretionary pension benefits are only those benefits which are awarded to staff (or limited categories of staff) on an individual and discretionary basis. Thereby, pensions entitlements acquired under national law should be excluded from this definition (this exclusion is acknowledged by the Bank of Italy in its supervisory provisions). In the Italian case, pension entitlements which are excluded from the definition of discretionary pension benefits encompass the indemnity deposited by the principal each year and paid in case of termination of the agency contract (pursuant to the Italian Civil Code) and all the indemnities pertaining to the so-called “European Indemnity”.
Yes, they are. We think that these requirements respond to need for protection of the position of single staff members.
We agree with the provision regarding the assessment of the performance set in a multi-year framework, for instance 3-5 years. Nonetheless, we consider that it is not possible for institutions to compare performance of their staff with “external” peers (i.e. similar institutions): indeed, single institutions may find it extremely difficult to gather this information.
With regard to performance and risk measurement methods, we emphasize the importance of the provision pertaining to the involvement of panels with staff from business units and functions. The role of these panels should be given due prominence in the remuneration policy of each institution.
Variable remuneration should be awarded also taking into account compliance with relevant European best practices (for instance, those defined by ESMA on proper conduct with investors). Alignment with these best practices should not be limited to a punitive approach (deterrence of non-compliant behaviour) but it should also reward those staff members whose proper conduct benefits investors.
As for the bonus pool, we believe that judgmental approaches are important provided that, as explained in the Guidelines, it is applied with appropriate controls and in a well-documented and transparent process.
As already explained in our answer to Question 1, we suggest referring the setting of the bonus pool not only to the institution and its business units but also to single categories of staff: particularly, specific evidence should be given to the bonus pool of identified staff and of specific staff categories with a common remuneration system (for example, the bonus pool of all promotori finanziari/tied agents). As for the distribution of the bonus pool, we believe that it is important to specify that “either/or” solutions should not be accepted (i.e. mechanisms establishing the distribution either of the whole bonus pool or the cancellation of the entire bonus pool). Conversely, the bonus pool should be distributed on different and granular levels, in order to scale its distribution on the basis of risks and performance (for instance, by means of gates to access the bonus).
Yes, if we consider identified staff. Nonetheless, we point out that, according to the Guidelines, institutions may apply these rules to all staff (although on an individual and voluntary basis). In this case, we believe that, if an institution-wide application is voluntarily chosen, the provisions on deferral should be applied according to the proportionality principle, on a gradual basis that should take into account roles and responsibilities. For example, we do not consider appropriate a discretionary and uncritical application to all staff of the rule whereby a substantial portion (at least 40 %) of the variable remuneration component is deferred over a period which is not less than three to five years. We believe that an uncritical setting of a minimum 40% portion is excessive if related to non-identified staff: accordingly, institutions should be free to set (in any case on a voluntary basis) less stringent requirements. The same goes for the speed at which the voluntary deferred remuneration vests following the performance assessment: we think that a 12 month period for the vesting of the first deferred portion may be appropriate only for identified staff. With regard to non-identified staff, the first deferred portion should vest in a shorter period (e.g. 2-3 months) to account for market features and its flexibility. Moreover, it should be appropriate to provide for a complete exception for new staff other than identified staff (cf. our answer to Q 2) in the first three years of employment, provided that new staff has not been previously hired by other banks or financial intermediaries.
Yes, if we consider identified staff. As explained in our answer to Q 15, according to the Guidelines, each institution may apply these rules to all staff on a voluntary basis. In case of an institution-wide application, we consider that the application should respond to the proportionality principle, on a gradual basis that should take into account roles and responsibilities. For instance, we do not consider appropriate an institution-wide application of the provision whereby at least 50 % of any variable remuneration shall consist of shares and other financial instruments. Indeed, we believe that the setting of a minimum 50% portion is excessive if related to non-identified staff: institutions should be free to set (in any case on a voluntary basis) less stringent requirements.
Yes, they are, especially the proposal pertaining to internal disclosure of the remuneration policy and its accessibility for all staff at all times.
Mattia Suardi