The European Banking Authority (EBA) has recently published a report on the benchmarking of remuneration practices in the European Union and data on high earning staff earning over EUR1 million, looking at data from 2011 to 2013. The report contains a number of important findings, particularly for UK institutions.
High earners
The research highlights that there was a slight decrease in the overall number of high earners in the EU (i.e. those earning over EUR1 million) over the period, but this could have been impacted by movements in the euro/sterling exchange rate. Interestingly, the UK has the largest number of high earners for the period, compared to other EU countries.
In addition, there was an increase in the percentage of high earners who are also identified staff. This statistic is important as the more onerous remuneration rules on deferrals and payments in instruments will apply only to identified staff.
Fixed to variable ratio
The overall ratio of variable to fixed remuneration paid to identified staff has been reducing, and in 2013 was 104%. The UK’s ratio for 2013 is the highest in the EU at 410%. It is anticipated that the ratio will reduce further upon the introduction of the bonus cap (limiting variable remuneration to 100% of fixed remuneration, or 200% with shareholder approval).
Inconsistent practices
The report noted that the remuneration practices within EU member states are inconsistent, in particular in relation to the application of deferral and payment in instruments. The EBA is currently producing guidelines on sound remuneration polices which are intended to take effect early next year. In light of this, and the general trend of increasing regulation, UK institutions are advised to review their remuneration practices to allow sufficient time to implement any changes in line with bonus cycles. A further report will be issued by the EBA at the end of this year, which will explore the effect of the regulatory technical standards and bonus cap.