We expect the EBA guidelines and recommendations on CRD IV to be released shortly. Once these are released, we will produce an alert informing you of the key updates and how you can comply with these.
The EBA has published a follow-up report on the actions which have been taken since the publication of its Opinion on the use of allowances in October 2014. In the Opinion, Competent Authorities were asked to use all necessary supervisory measures to ensure that by 31 December 2014, those institutions using “role-based allowances” / "fixed allowances”, had adjusted their remuneration policies in line with the criteria set out in the Opinion.
The follow-up report has concluded that competent authorities have:
- Taken measures to ensure that institutions apply the criteria set out in the Opinion in their remuneration policies and practices; and
- Where necessary, asked institutions to implement any changes they thought necessary.
However, in most cases, such measures will only be effective for remuneration awarded for the 2015 performance year, and only in few cases were such changes to remuneration policy and practice already made for the 2014 performance year.
That said, the follow-up report’s press release highlights that none of the member states or competent authorities have adopted specific legal or regulatory instruments following the Opinion.
The EBA viewed the “role-based allowances” and “fixed allowances” as deliberate evasion of the CRD IV bonus cap by reclassifying what was essentially variable remuneration as fixed remuneration, and so the EBA has taken effort to prevent this.
Some Competent Authorities may have held back from issuing further regulations because the EBA had not consulted on what they had specified in their Opinion and they were waiting for the EBA to finalise their guidelines before making any key change. The EBA guidelines may contain the requirements set out in the Opinion, we are not expecting any further changes to what has already been specified. In our experience most firms have moved towards compliance with the Opinion and their regulators’ requirements on fixed allowances and role based pay.