Remuneration is just one small part of the CRDIV Regulation and Directive on which the Irish Presidency has concluded an agreement between the European Council and Parliament. It is important not to lose sight of what this CRD package is really about: It is about protecting taxpayers into the future by building stronger European banks. We have seen how banks went into the financial crisis without sufficient capital and had to be bailed out by taxpayers across the EU. These new rules will make sure that our banks can better withstand future crises. CRDIV is also about providing a foundation for banking union and giving the future single supervisor a single rule book. The proposed rules on bonuses are part of the CRD package of measures to better manage risk taking by banks. The aim is to make sure that bankers are taking decisions in the long term interest of the stability of the bank and that this is taken into account in their remuneration package. The agreement reached on remuneration contains the following principles:
- a basic ratio of pay to bonus of 1:1 which can only increase to 1:2 with shareholder approval (with a quorum of 50% of shareholders, 66% of votes in favour would be required, and, if that quorum is not reached, 75% of votes in favour).
- in order to incentivise deferral of bonus pay, and facilitate claw-back of remuneration, a portion of the total bonus can consist of long term financial instruments, discounted with reference to factors reflecting risk inherent in the instruments (guidelines on the applicable discount factor will be issued by EBA).
- the EU Commission shall review and report on the application of these provisions, in close cooperation with the EBA, taking into account its impact on competitiveness and financial stability.
ECOFIN on 5 March asked Member State's Ambassadors to finalise the negotiations with the Parliament on the basis of these principles.
What is clear from discussions at EcoFin is that Member States want to move ahead to finalise these new capital rules. We hope to iron out the outstanding technical issues with the Parliament over the coming weeks so that we can finalise this key file during our Presidency.