On 7 July 2010, the European Parliament approved various amendments to the Capital Requirements Directive regarding bankers’ remuneration, resulting in what has been termed CRD3. On 30 September 2010, the Council published a revised text of CRD3. The final text is expected to be published towards the end of 2010. The European Parliament has described the amendments as ‘some of the strictest rules in the world on bankers’ bonuses’.
The amendments will need to be implemented by each EU member state. Most have already made steps towards implementation. The key remuneration provisions affecting bankers are:
- upfront cash bonuses will be capped at 30 per cent of total remuneration (20 per cent for particularly high awards);
- at least 40 per cent of variable remuneration should be deferred for at least three to five years (60 per cent for particularly high awards);
- at least 50 per cent of variable remuneration should be in shares and, where appropriate, contingent capital; and
- discretionary pension benefits should be paid to the employee in shares or, where appropriate, contingent capital subject to a five-year retention period.