On Friday, the Committee of European Banking Supervisors published a consultation paper setting forth draft guidelines on Remuneration Policies and Practices. The purpose of the guidance, which would replace the CEBS's April 2009 "High-level Principles for Remuneration Policies," is to "ensure that the new risk-related philosophy on remuneration in the financial sector is promptly translated into action."
Among other proposals, the guidelines would limit EU banks from paying more than 30% of a bank employee's bonus in cash up front, a position that differs from the position taken by the U.K.'s Financial Services Authority, which interprets existing EU rules to permit cash bonus payments equal to 50% up front. The CEBS consultation paper also provides guidance on other areas of EU rules relating to banker compensation, including claw-back of deferred compensation in the event of poor performance and guidance regarding remuneration governance. Although members of the European Parliament that drafted the EU rules applauded the CEBS interpretations as "essential to cutting the incentives for excessive risk taking," U.K., French and Spanish regulators reportedly opposed the 30% bonus cap.
The CEBS is requesting public comment on the guidelines through November 2010 and a public hearing will take place on October 29, 2010.