Dimitrios Goranitis
FSI Risk & Regulatory Advisory
Partner, Deloitte Central Europe
On 30th of June, the European Banking Authority published its final guidelines on the remuneration benchmarking exercise under the Capital Requirements Directive (CRD) and Investment Firms Directive (IFD). The update was necessary to consider the additional requirements introduced by CRD V related to the application of derogations and the benchmarking of the gender pay gap. The EBA also
added guidance to harmonize the benchmarking the benchmarking of approvals granted by shareholders to use higher ratios than 100% between the variable and fixed remuneration.
Separate guidelines on the same topic have been issued for investment firms under the Investment Firm Directive (IFD).
Also, on the 30th of June, the EBA published its final guidelines on data collection exercise regarding high earners. The update of the data collection exercises reflects the amended remuneration framework provisioned in the Capital Requirements Directive (CRD), including the introduction of derogations to pay out a part of the variable remuneration in instruments and under deferral arrangements.
Basically, the CRD and IFD require competent authorities to collect information on the number of natural persons per institution who are renumerated EUR 1 million or more per financial year. The information should also include details on their job responsibilities, the business area and the main elements of the salary, bonus, long-term award, and pension contribution.
The Guidelines provide information on how institutions can ensure that the data is of appropriate quality for deriving reliable and consistent information. Institutions, investment firms and competent authorities should check the accuracy and consistency of data before submission.
The Final report on Guidelines on the benchmarking exercises on remuneration practices, the gender pay gap and approved higher ratios under Directive 2013/36/EU (EBA/GL/2022/06) introduces the additional requirements stipulated in CRD V regarding the application of derogations and the benchmarking of the gender pay gap. Moreover, the guidelines aim to harmonize the benchmarking of approvals granted by shareholders to use ratios higher than 100% between variable and fixed remuneration have been incorporated.
The Guidelines follow up on the already incorporated principle of equal pay for equal work laid down in Article 157 of the Treaty on the Functioning of the European Union (TFEU) and measures to ensure equal opportunities within the EBA Guidelines on sound remuneration practices under Directive 2013/36/EU and the EBA Guidelines on internal governance under Directive 2013/36/EU.
The benchmarking of the gender pay gap will enable competent authorities to monitor the implementation of such measures and their development at different levels of pay and, in particular, the representation of staff of different genders.
In what regards the manner in which the benchmarking will be performed, the EBA specifies that it is based on data from individual institutions and the sample of institutions used for the gender pay gap benchmarking exercise includes different types of institutions to allow for appropriate benchmarking, not only of the largest institutions, but also of smaller institutions.
The benchmarking data will be collected annually and the first data collection under the new Guidelines will be conducted in 2023 for the financial year 2022.
The institutions that are in scope for the remuneration data collection are represented by institutions that cover at least 60% of the banking system’s asset volume in that respective Member State. Where the coverage of 60% cannot be reasonably achieved in a Member State, competent authorities should collect and submit to the EBA remuneration data from up to 20 of the largest institutions in terms of
asset volume in their Member State.
The first data on gender pay gap will be collected in 2024 for the financial year 2023.
Competent authorities should collect and submit to the EBA gender pay gap data on an individual basis from the institutions from which these competent authorities collect remuneration data for remuneration benchmarking.
Competent authorities should also collect gender pay gap data from institutions that do not qualify as small and non-complex and adequately represent the variety of the different types of institutions in that Member State, including institutions with securities admitted to trading or privately held, cooperative and savings banks, state-owned banks and investment firms applying Directive 2013/36/EU.
Generally, gender pay gap data should only be collected from institutions that have at least 50 staff on an individual basis, excluding the members of the management body in its supervisory function.
The current Guidelines implement the changes to the data collection requirements specified in Directive 2013/36/EU following the amendments recently brought. It was essential to reflect these amendments in the Guidelines, especially considering the introduction of the derogations to the requirements to pay out a part of the variable remuneration in instruments and under deferral arrangements.
The EBA Guidelines (EBA/GL/2022/08) have been updated according to Directive 2019/2034 and Regulation 2019/2033. The establishment of two distinct regulatory frameworks required a separation of the data collection on high earners in credit institutions and investment firms. The templates and instructions have been updated accordingly and a specific template for high earners in investment firms
has been provided.
The regulatory framework requires competent authorities to collect information on the number of natural persons per institution who are remunerated EUR 1 million or more per financial year. The information should also include details on their job responsibilities, the business area and the main elements of the salary, bonus, long-term award, and pension contribution.
The Guidelines apply also for the control functions and provide information on how to be applied by institutions: the number of individuals in the row ‘number of individuals in control functions’ should include all high earners in control functions within the business units and the independent compliance, risk control and internal audit function.
The data collected covers all main elements of variable and fixed remuneration for high earners in institutions. Moreover, the regulatory framework requires collecting information on high earners’ responsibilities and the business areas involved. The Guidelines differentiate between management body in its management and supervisory function, senior management, staff whose professional activities have a material impact on the institution’s risk profile (identified staff), staff in control functions and other staff. Business areas were specified, considering the internal organization of institutions and investment firms, and their typical business activities. In line with the EBA’s mandate to benchmark the gender pay gap, the number of high earners will also be collected by gender.
The annual collection of data regarding high earners should begin in 2023 for the financial year ending in 2022. Furthermore, the EBA will continue to annually publish high-earners data on aggregate Member States basis in a common format.
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