Remuneration
Legal and regulatory framework:
- Banking Law: Article 21, § 1, 6°, Articles 67 to 71 and Annex II
- European regulations:
- Commission Delegated Regulation (EU) 2021/923 of 25 March 2021 supplementing Directive 2013/36/EU of the European Parliament and of the Council with regard to regulatory technical standards setting out the criteria to define managerial responsibility, control functions, material business units and a significant impact on a material business unit’s risk profile, and setting out criteria for identifying staff members or categories of staff whose professional activities have an impact on the institution’s risk profile that is comparably as material as that of staff members or categories of staff referred to in Article 92(3) of that Directive
- Decision (EU) 2015/2218 of the European Central Bank of 20 November 2015 on the procedure to exclude staff members from the presumption of having a material impact on a supervised credit institution’s risk profile (ECB/2015/38)
- Commission Delegated Regulation (EU) No 527/2014 of 12 March 2014 supplementing Directive (EU) No 2013/36/EU of the European Parliament and of the Council with regard to regulatory technical standards specifying the classes of instruments that adequately reflect the credit quality of an institution as a going concern and are appropriate to be used for the purposes of variable remuneration
- Regulation of the NBB of 1 April 2014 on proprietary trading activities
- Relevant thematic NBB circulars:
- Circular NBB_2021_30 of 7 December 2021 on remuneration policy: update of the legal framework and transposition of the EBA Guidelines of 2 July 2021 on sound remuneration policies under Directive 2013/36/EU (EBA/GL/2021/04)
- Circular NBB_2021_28 of 16 November 2021 transposing Guidelines EBA/GL/2021/05 of 2 July 2021 on internal governance
- Circular NBB_2014_08 of 1 September 2014 concerning the EBA Guidelines of 16 July 2014 on the data collection exercise regarding high earners (EBA/GL/2014/07)
- Circular NBB_2014_09 of 1 September 2014 concerning the EBA Guidelines of 16 July 2014 on the remuneration benchmarking exercise (EBA/GL/2014/08)
- International reference documents:
The statutory governing body should develop a remuneration policy aimed at ensuring that the personal objectives of the staff members are aligned with the long-term interests of the institution. To this end, the institution should establish and maintain a remuneration policy and remuneration practices that promote effective risk management.
Identified staff
Institutions must identify the members of staff to whom specific requirements on remuneration apply ("identified staff"). These include in particular the categories of staff whose professional activities have a material impact on the institution’s risk profile.
This identification process must be carried out on the basis of the criteria set out in the regulatory technical standards adopted by the European Commission (Delegated Regulation (EU) No 604/2014). In addition, pursuant to Article 9, § 2 of the Regulation of the NBB of 1 April 2014, all staff members who are authorised to perform risky transactions and who are employed in trade departments should in any case be considered as identified staff.
According to Recital 14 of the above-mentioned Delegated Regulation (EU) No 604/2014, the identification process must be adequately documented, including in respect of staff identified solely on the basis of the level of their remuneration, but who were not ultimately designated as identified staff because their professional activities were considered to have no material impact on the institution’s risk profile (see Decision (EU) 2015/2218 of the ECB for the procedural aspects in this regard).
The NBB recommends that at least 1 % of the total number of staff be selected as identified staff.
EBA guidelines
According to Article 75(2) of CRD IV, the EBA must issue guidelines on sound remuneration policies which comply with the principles set out in Articles 92 to 95 of CRD IV. The latest version of these guidelines (EBA/GL/2021/04) was published on 2 July 2021. These guidelines were transposed into the Belgian legal framework by Circular NBB_2021_30.
These guidelines will assist the NBB in its actual monitoring of institutions’ remuneration policies and practices. They complete and clarify the regulatory framework to be complied with by institutions.
New elements of Guidelines EBA/GL/2021/04 include transparency to stakeholders, proportionality, the need for a gender-neutral remuneration policy and monitoring of the gender pay gap. For more information on this subject, please refer to Circular NBB_2021_30.
Impact of the CAC
The entry into force of the CAC has had a very limited impact on remuneration rules. Following the entry into force of the CAC, listed institutions must ensure that their remuneration policies comply with Article 7:92, fourth paragraph, last sentence of the CAC, which stipulates that no variable remuneration may be awarded to an independent director. In addition, the CAC provides for the possibility for the general meeting to grant a notice period and a severance payment to directors, as the principle of the ad nutum dismissal of directors is now suppletive.
Financial instruments
The NBB expects institutions to comply with the requirement of Article 6 of Annex II to the Banking Law, pursuant to which at least 50 % of all variable remuneration must be appropriately balanced between shares or equivalent instruments and, if possible, other capital instruments mentioned in the law. The conditions under which the said capital instruments can be used for variable remuneration are listed in the regulatory technical standards adopted by the European Commission (Commission Delegated Regulation (EU) No 527/2014).
Termination and severance payments
In line with CRD IV and Guidelines EBA/GL/2021/04, Article 12 of Annex II to the Banking Law specifies the regime applicable to termination payments, which also include severance payments.
In general, termination payments always constitute variable remuneration. This is clear from Article 94(1)(h) of CRD IV, Chapter 9.3 of Guidelines EBA/GL/2021/4 and the preparatory work in relation to Article 12 of Annex II to the Banking Law. As a rule, therefore, such payments should be subject to all the rules applicable to variable remuneration.
However, Article 12 of Annex II to the Banking Law and the above-mentioned EBA Guidelines provide for a limited number of exhaustively listed situations in which the severance payment (or part thereof) may be exempted for (i) the calculation of the fixed/variable remuneration ratio and (ii) the application of deferral and payment in instruments. For further information on this topic, please refer to Circular NBB_2021_30 and Guidelines EBA/GL/2021/04.
Collection of data on remuneration
According to Article 450 of Regulation No 575/2013, institutions must disclose certain quantitative information regarding their remuneration policies and practices. The NBB uses the collected information to benchmark remuneration trends and practices. Institutions selected by the NBB for this purpose should report on a yearly basis, pursuant to Circular NBB_2014_09 of 1 September 2014.
Furthermore, pursuant to Article 20 of Annex II to the Banking Law, institutions should provide the NBB with information on the number of natural persons within the institution that benefit from remuneration of at least EUR 1 million per financial year, in remuneration tranches of EUR 1 million, and on their job description, the financial sector concerned, and the primary elements of remuneration, including bonuses, long-term benefits and pension contributions. The reporting methods are specified in Circular NBB_2014_08 of 1 September 2014.