Study on the remuneration provisions applicable to credit institutions and investment firms

Research output: Book/ReportCommissioned report

Authors

  • Udo Reifner
  • Doris Neuberger
  • Sebastian Clerc-Renaud
  • Paola Schwizer
  • Andreas Nastansky
  • Andreas Stephan
  • Maria Gaia Soana
  • Giovanni Ferri
  • Saul Schwartz
  • William Forbes
  • Christine Riefa

External organisations

  • institute for financial services
  • University Parma
  • Carleton Univ
  • Waterford Institute of Technology, Waterford, Ireland
  • Brunel University

Abstract

Variable remuneration in credit institutions and investment firms can encourage
excessive risk-taking behaviour. The present research investigates the impact of the Capital Requirement Directive and Regulation (CRD IV package) on this type of behaviour. The research shows that the Directive has had a significant effect on risk management. Deferral of variable pay, malus arrangements and a maximum ratio for the variable pay of risk-taking personnel are seen to be effective incentives even at this early stage. Competitive disadvantages with regard to attracting and retaining staff from unregulated sectors could not be verified. Problems have been found with regard to clawback clauses in the context of national employment law. Other problems concern the need for rules that are better adapted to the business scale. The rules work well in the case of big and significant institutions. For small and non-complex institutions, which are less engaged in risky activities and which pay out low amounts of variable remuneration, the relatively high implementation cost of deferral and payout
in instrument are of concern. Member States have made wide use of exclusions.
Regulating the extent, process and identification of such exclusions at the EU-level would further harmonise remuneration policies in the member states.

Bibliographic note

© European Union, 1995-2016

Details

Original languageEnglish
PublisherEuropean Commission
Commissioning bodyDG Justice
Number of pages320
Publication statusPublished - Jan 2016

Keywords

  • executive remuneration, banks, CRD(IV)