On the 22nd of November 2021, the European Banking Authority (EBA) published its revised guidelines on remuneration policies for investment firms under the Investment Firms Directive (IFD).
These Guidelines will enter into force on 30.4.2022 and will apply credit institutions and investment firms alike. Per paragraph 11 of the Final Report (page 22) “where shareholder approvals are required for such revisions, approvals should be requested before 30 June 2022. Without prejudice to the implementation of Directive (EU) 2019/2014 into national law, the remuneration policy should be applied in line with these guidelines for the performance year starting after 31 December 2021.”
The Guidelines emerge from the EBA’s mandate under Article 30(4) which provides that the “EBA, in consultation with ESMA, shall develop draft regulatory technical standards to specify appropriate criteria to identify the categories of staff whose professional activities have a material impact on the risk profile of the investment firm as referred to in paragraph 1 of this Article.”
The rationale behind the revision is “to ensure that a level playing field is preserved amongst investment firms within Member States, taking into account the nature, scale and complexity of their activities.”
Therefore, an important focal point of the revised guidelines is the extensive focus on what constitutes sound remuneration policies under the IFD and how Class 2 investment firms will have to comply with specific remuneration provisions. In the UK similar regime was introduced by the IFPR.
Namely, the onus for mid-sized investment firms is on gender-neutral remuneration policy (encompassing both variable and fixed remuneration) for all employees which means that compliance with the principle of equal pay for equal work or equal value of work that is enshrined under Article 157 TFEU and para 12 Article 3(1) of Directive (EU) 2019/2034 is expected. Further, anti-discrimination and equal opportunities provisions are kept so to bolster diversity and equality.
From now on, investment firms’ remuneration policies will be required to show “the performance objectives for the investment firm, business areas and staff; the methods for the measurement of performance, including the performance criteria; the structure of variable remuneration, including where applicable the instruments in which parts of the variable remuneration are awarded; [and finally] the ex ante and ex post risk adjustment measures of the variable remuneration.”(see para 20 page 24 of the Final Report).
The EBA’s final report can be found here: Final Report on GL on sound remuneration policies under IFD.pdf (europa.eu)
