The remuneration aspects of the amended Capital Requirements Directive (CRD 3) are required to be implemented in Member States by 1 January 2011. The Committee of European Banking Supervisors (CEBS) recently published draft guidelines (CEBS Guidelines) on the implementation of the remuneration provisions within CRD 3 in European financial institutions. The final CEBS Guidelines are expected to be published by 10 December 2010.
The CEBS Guidelines contain helpful clarification in certain respects, including the proposal that certain CRD 3 requirements may be disapplied in their entirety on proportionality grounds, subject to adequate justification. These comprise the requirements relating to deferral of variable remuneration, the payment of at least 50% of variable remuneration in shares or share-equivalent instruments and the necessity for a remuneration committee. For further information, please see our recent briefing available on our website at http://www.herbertsmith.com/NR/rdonlyres/ B8E5BEB7-535C-497E-94EE-0D6FCDC59A4F/0/ FSAconsultsonremunerationdisclosurerequirements 11Nov2010.html.
In the UK, the remuneration provisions within CRD 3 will be implemented in the form of the revised Remuneration Code (Code). Although non-binding, the final CEBS Guidelines will need to be carefully considered by the FSA as it prepares to publish the final Code before the 1 January implementation deadline. The Code will apply to all banks, building societies and MiFID investment firms, extending the scope of the existing Code from the current 27 to approximately 2,500 firms.
The FSA had originally planned to publish the final Code in a policy statement (following up on the proposals in consultation paper CP10/19, http://www.fsa.gov. uk/pages/Library/Policy/CP/2010/10_19.shtml) in mid‑November. However, it recently announced through trade associations that it will now delay publication of its final policy statement until mid-December, after CEBS has published its guidance. The FSA has also recently published a consultation paper (CP10/27) on the implementation of remuneration disclosure requirements based on those set out in CRD 3. The FSA intends to publish a policy statement on remuneration disclosure in mid-December.
Although the FSA will only be publishing the final Code just before Christmas, firms that are already within the scope of the current Code will still be required to comply in full with the Code from 1 January 2011. As the FSA expects many aspects of the Code to be implemented on broadly similar lines to those proposed in CP10/19, it is encouraging firms to continue to work on that basis for the 2010 round. The FSA has said that extended scope firms (ie those firms which are not currently within the scope of the Code) should be able to rely on transitional guidance set out in CP10/19 in order to justify a delay in full implementation until 1 July 2011.