CRD IV/CRR—Remuneration requirements
CRD IV/CRR—Remuneration requirements

The following Financial Services guidance note provides comprehensive and up to date legal information covering:

  • CRD IV/CRR—Remuneration requirements
  • Scope of CRD IV and CRR relating to remuneration
  • Which codes apply to CRR firms?
  • General principles behind the remuneration codes
  • Banks that have received exceptional government intervention
  • Variable remuneration
  • EU banking package—amendments to CRD IV variable remuneration requirements
  • Role of the EBA in relation to remuneration
  • EBA Guidelines on Sound Remuneration Policies
  • FSB guidance and recommendations
  • more

As of exit day (31 January 2020) the UK is no longer an EU Member State. However, in accordance with the Withdrawal Agreement, the UK has entered an implementation period, during which it continues to be subject to EU law. This has an impact on this Practice Note. For further guidance on the impact of Brexit on the CRR and prudential regulation, see Practice Note: Preparing for Brexit: CRR and prudential regulation—quick guide.

Following the financial crisis, the Financial Stability Board (FSB) and a number of national regulators conducted reviews into the governance and structure of remuneration arrangements within the financial services sector. The main conclusions drawn from these reviews were that:

  1. firms (and regulators) had failed to appreciate the extent to which remuneration policies and practices could encourage excessive risk taking

  2. the structure of remuneration specifically could encourage excessive risk taking by focusing on cash-based, short-term incentives

  3. bonus pool calculations did not sufficiently take account of firms’ capital and liquidity costs and the risks they faced

  4. performance management systems often focused too heavily on financial performance and didn’t take into account multi-year performance

The FSB formalised the conclusions of its review into a set of FSB Principles for Sound Compensation Practices published on 25 September 2009. National regulators then began to draw up plans for regulating remuneration; in the US a