Consultation on draft guidelines on the applicable notional discount rate for variable remuneration

The European Banking Authority (EBA) launches today a consultation paper on draft Guidelines setting out the calculation of the discount rate for variable remuneration and clarify how it should be applied. The consultation will run until 18 January 2014.

The variable and fixed component of remuneration for identified staff is capped at 100% or at a maximum of 200%, subject to shareholders’ approval. When calculating the ratio between variable and fixed component, Member States may allow institutions to apply a discount rate of 25% (or less subject to national laws) of the variable remuneration, provided the latter is paid in instruments that are deferred over a period of not less than 5 years.

The discount rate consists of the national annual inflation rate, the average interest rate of EU government bonds, an incentive factor linked to the use of long-deferred instruments and an incentive factor linked to the use of additional retention periods. These last two factors increase with the length of the actual deferral and retention periods.

The discount rate is calculated taking into account the length of the period between the award and the vesting of variable remuneration.

Consultation process

Comments can be sent to the EBA by clicking on the "send your comments" button on the consultation page. Please note that the deadline for the submission of comments is 18 January 2014.

All contributions received will be published following the close of the consultation, unless requested otherwise.

A public hearing will take place at the EBA premises on 29 November 2013 from 10:00 to 12:00 UK time. To register for the public hearing, click here.

Background

The proposed draft Guidelines have been developed on the basis of Directive 2013/36/EU of 26 June 2013. The EBA is expected to finalise and publish the Guidelines by 31 March 2014.