The European Commission recently published a consultation to assist in their assessment of the maximum remuneration ratio and overall efficiency of the CRD IV Directive remuneration rules. The European Commission is required to produce a report on these issues by 30 June 2016.
Maximum remuneration ratio (bonus cap)
The Directive contains a bonus cap: providing that the variable remuneration of material risk takers (staff whose decisions have a material impact of the risk profile of the company) cannot exceed 100% of their fixed remuneration (up to 200% with shareholder approval). The aim of this rule is to avoid excessive risk taking. The European Commission is looking to assess the impact of compliance with this provision on competitiveness and financial stability of institutions and staff who are subject to the Directive.
Overall efficiency of Directive
Secondly, the consultation aims to assess the efficiency of the remuneration provisions of the Directive overall, including the assessment of performance, and deferral in instruments, together with the type of instruments that can be used for variable remuneration. The European Commission is also looking for views on the remuneration disclosure requirements.
The European Commission’s report will be available next year, with the deadline for responses on 14 January 2016. The findings of the consultation will be awaited with great interest to assess whether the directive has aligned remuneration policies and risk taking at EU level as it intended to do so.
If you are thinking of contributing to the consultation, or would like to discuss the remuneration provisions, please contact a member of the team.