The European Banking Authority has published a report on remuneration practices that shows that the number of high earners in the European Union's banks increased significantly in 2014, while the average ratio between their variable and fixed remuneration dropped significantly for high earners, as well as for all other identified staff.

This routine report looks at the identification of staff, the application of deferral arrangements, the pay-out in instruments and the effect of the bonus cap on institutions' financial stability and 'cost flexibility,' which was found to be trifling. The report differentiates between data on the remuneration of 'high earners' and benchmarking data for 'identified staff.'
 
The number of high-earners in the EU increased significantly, from 3,178 in 2013 to 3,865 in 2014 - a 21.6% increase on the previous year. The percentage of those high-earners who are 'identified staff,' i.e. those who might have an effect on institutions' risk profiles, also increased significantly from 59% in 2013 to 87% in 2014; and the absolute number of identified staff went up from 34,060 in 2013 to 62,787 in 2014.
 
This increase in numbers is mainly the result of the EBA's Regulatory Technical Standard (RTS) on identified staff, which came into force in 2014 to identify those staff that have a material impact on the risk profile of institutions to a more rigorous standard than previously.

From variable to fixed
 
The introduction of the so-called ‘bonus cap' – the limitation of the ratio between the variable and the fixed components of remuneration to 100% (200% with shareholders' approval) which is applicable since 2014 – had an effect on remuneration practices; EU banking institutions shifted the remuneration for their identified staff towards the fixed component, bringing the ratio into line with the dictates of EU legislation. As a result, the average ratio between the variable and fixed salary paid to identified staff was 65.48% in 2014, down from 104.27% in 2013. At the same time, the average ratio between the variable and fixed remuneration paid to high earners dropped from 317% in 2013 to 127% in 2014.
 
The introduction of the bonus cap was found to have no significant effect on institutions' financial stability and cost flexibility. For most institutions, the fixed salary of identified staff accounted for less than 1% of their own funds and on average accounted for only 3.12% of the institutions' administrative costs. This small increase in the fixed remuneration for identified staff is a mere trifle compared with the administrative costs of institutions.
 
The EBA report also showed that institutions' remuneration practices were still not standardised across the EU - something the regulator seems to want. The application of deferral and pay-out in instruments varied significantly between member states and institutions. The ECB blames this on 'national implementation' which, in many cases, allows for waivers of these provisions when certain criteria apply.

There is a review underway of remuneration provisions mandated in Article 161(2) of the Capital Requirements Directive. The EBA will continue to benchmark remuneration trends regularly.