The New Remuneration Practices under the CRD V

Especially with regard to the last aspect, the European Banking Authority (EBA) was mandated to produce new technical regulatory standards. The EBA and its predecessor organization the CEBS have published and updated Guidelines on Remuneration Policies and Practices[5] and the EBA will review and update those Guidelines in light of the requirements laid down in the revised CRD. To that end, it has run a public consultation on its draft Regulatory Technical Standards (RTS) on the criteria to identify all categories of staff whose professional activities have a material impact on the institutions’ risk profile, i.e. the so-called risk takers. The aim of these standards is to define and harmonise the criteria for the identification of such staff and to ensure a consistent approach across the EU and the consultation closed in February. The EBA is now working on finalizing its draft regulatory standards on the basis of the feedback received and aims to submit it to the European Commission by the end of the month[6].

At the same time, national legislators and regulatory institutions work on the implementation acts. For example, the German Federal Ministry of Finance just closed a public consultation regarding its draft Law to reduce risks and strengthen proportionality in the banking sector. Naturally, considering the regulatory uncertainties of the final rules – amplified by the current Coronavirus crisis and its impact on daily lives – make it a challenging exercise to produce coherent rules on a national and EU level.

One such aspect is the CRD V rule to set the limit to categorise large institutions at 5 billion euros over the four-year period immediately preceding the current financial year. This would result in a substantial increase of systemically important institutions with accompanying requirements on internal governance and control and there already has been significant pushback in the industry.

However, this together with the entire framework remains work in progress and more clarity could come once the final RTS are out, though it looks like many aspects will only be determined towards the very end of the transposition period.

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