EBA consults on bankers’ bonuses

The European Banking Authority (EBA) has launched a consultation on the technical standards of its bankers’ bonus cap legislation.

The EBA’s draft Regulatory Technical Standards, which are intended to help identify material risk takers who will be subject to specific provisions of the capital requirements directive, will apply the bonus cap to employees who meet one or more of the following criteria:

  • Their total remuneration exceeds €500,000 (£426,472) per year (whether or not they are material risk takers).
  • The employee is included in the 0.03% of staff with the highest remuneration in their organisation (whether or not they are a material risk taker).
  • Their remuneration bracket is equal to or greater than the lowest total remuneration of senior management and other risk takers.
  • Their variable pay exceeds €70,000 (£59,706) and 75% of their fixed pay.
  • They meet certain qualitative criteria, which includes employees who are directors, senior managers, who commit the organisation to certain levels of credit risk exposure or transactions on the trading book or transactions, and employees who have the authority to take, approve or veto decisions on the introduction of new products, material processes or material systems.

The consultation will be open to responses until 21 August 2013 and a public hearing will take place at the EBA on 4 July 2013 regarding the consultation.

Nicholas Stretch, a partner in the tax team at law firm CMS Cameron McKenna, said: “Although the headline proposal suggests that receiving a certain amount of remuneration will automatically lead to pay being caught by the rules, there is, in fact, an important opt-out available.

“If a firm can show that a relevant employee who is otherwise caught has no material impact on the organisation’s risk profile, then that employee can be excluded.

“Employers will be pushing to make as much use as they can of this.”