“Allowances” used as part of the fixed remuneration targeted by the European Commission, European co-legislators and the EBA - Newsflash - 19.06.2014

Discover our latest newsflash on “Allowances” used as part of the fixed remuneration targeted by the European Commission, European co-legislators and the EBA.

19/06/2014

Often perceived by the media as a tool to circumvent the bonus cap, the practice consisting in introducing so-called “position or role-based allowances” is one of the elements underlined in the detailed analysis on remuneration practices across a sample of EU banks published last Friday by the European Banking Authority (EBA). “In general, these allowances, which are paid as fixed amounts in addition to the base salary, are considered by institutions as fixed remuneration. However, these allowances are discretionary, as they are paid to selected members of staff and in most cases only for limited period of time. Under exceptional circumstances, they can also be cancelled”, stated the EBA. As specified in the report, “the European Commission, European co-legislators and the EBA have concerns that these practices do not conform to the requirements specified in the CRD. The European Commission asked the EBA in a letter dated 12 February 2014 to use its powers… (including the power to request all the necessary information from the competent authorities responsible for ensuring that the institutions referred to above comply with CRD IV) to rapidly establish the facts and to determine whether the remuneration schemes being put in place within banks conform with Union law.” The EBA is therefore currently analysing this emerging practice and it is anticipated that guidance criteria will be set to correctly assign these elements to either variable or fixed remuneration. The report also points out that many institutions and business lines do not yet comply with the ratio between variable and fixed remuneration for identified staff which will be permitted in future periods (100% or 200% with shareholder’s approval). To read the full document, please click on the link below

Contacts

Philippe-Emmanuel Partsch

Philippe-Emmanuel Partsch is the partner in charge of the EU Financial & Competition Law practice of Arendt & Medernach. He specialises in EU and Luxembourg competition law, regulatory aspects of mergers and acquisitions, State aid rules, EU banking and financial law, tax law, telecommunications, public procurement and environmental law. Philippe-Emmanuel advises a wide range of public and private clients, both nationally and internationally, on EU and competition law and sectoral regulation. He represents them before regulatory authorities and the EU and national courts. In addition, he is a member of several high-level Committees within the Luxembourg financial sector and of the Comité Fra...

PARTNER

YOU MIGHT ALSO WANT TO DISCOVER

23/11/2023
Tax – Luxembourg minimum net wealth tax provisions unconstitutional

On 10 November 2023, the Luxembourg Constitutional Court concluded that §8(2) a) of the law on net wealth tax was contrary to the constitutional principle of equality. Pending legislative reform, the taxpayers concerned will be subject to the minimum net wealth tax of EUR 1,605 w...

Read More_