The European Banking Authority has drafted up some tentative guidelines to govern the ways in which EU countries regulate remuneration at financial firms, in accordance with the Capital Requirements Directive or CRD IV. It is asking interested parties to comment on them, with a closing date of 4 June.

According to the Capital Requirements Directive, remuneration is either fixed or variable; there is no third category of remuneration. The guidelines set out criteria for the allocation of remuneration to its fixed and variable component, taking into account an opinion that the EBA has already publicised, along with one of its reports on the use of allowances.

CRD IV allows EU countries to apply the rules in a 'proportionate' way, i.e. expecting less rigorous compliance from firms with fewer resources. The 'proportionality principle' include the rules that will govern remuneration. The FCA is keen to apply this rule as it is the prudential regulator of approximately 1,000 firms under CRD IV and already applies the proportionality principle to its smallest charges, especially (according to an obscure phrase on its website) in the field of competition.

The EBA is of the view that specific exemptions from the rules that govern deferral and payment in instruments could be introduced for certain institutions that do not rely extensively on variable remuneration and, if confirmed by further analysis, also for identified staff who receive only a low amount of variable remuneration. To this end, the EBA intends to lobby for amendments to EU law that would allow for a broadening of the proportionality principle. It wants your views about whether it should do so.