EBA欧洲银行-EBA-GL-2014-01-28Final-Guidelines-on-the-discount-rate-for-remuneration29_53页_1mb

Summary of EBA/GL/2014/01: Guidelines on the Applicable Notional Discount Rate for Variable Remuneration

Core Content

These guidelines, published by the European Banking Authority (EBA) on 27 March 2014, are issued under Article 16 of Regulation (EU) No 1093/2010 and are intended to assist Member States and institutions in calculating the notional discount rate for variable remuneration as required by Article 94(1)(g)(iii) of Directive 2013/36/EU (CRD). The guidelines apply for the purpose of calculating the ratio between the variable and fixed components of total remuneration awarded for services or performance from 2014 onwards.

Main Objectives

• To ensure that variable remuneration is calculated in accordance with the CRD, which limits the variable component to 100% of the fixed component for staff whose activities significantly affect the institution's risk profile.
• To allow Member States to set a maximum of 25% of variable remuneration to be discounted, provided it is paid in deferred instruments for at least five years.
• To provide a harmonized approach across the EU to ensure a level playing field in remuneration frameworks.

Key Information

1. Discount Rate Definition

• The discount rate is a factor used to calculate the discounted value of variable remuneration paid in deferred instruments.
• It is calculated based on three main components:
  • Inflation rate (HICP for the relevant Member State or third country)
  • Average interest rate of EU government bonds
  • Incentive factor for long-term deferral (10% for 5 years, increasing by 4% for each additional year)

2. Discount Rate Application

• The discount rate is applied only to variable remuneration that is:
  • Paid in equity, debt, or linked instruments
  • Deferred for at least five years
• The maximum discount rate is 25% of total variable remuneration, unless a lower percentage is set by national law.
• The discounted value is used to adjust the variable component when calculating the variable/fixed ratio.

3. Calculation Formula

The discount rate is calculated using the following formula:

$$
discount\ rate = \frac{1}{(1 + i + g + id)^n}
$$

Where:

• i = inflation rate (in percentage)
• g = average interest rate for EU government bonds (in percentage)
• id = incentive factor for long-term deferral (in percentage)
• n = number of years in the vesting period (rounded down to the next integer)

4. Vesting Period and Pro Rata Vesting

• Variable remuneration must not vest faster than on a pro rata basis.
• For pro rata vesting, the discount rate is applied to each portion of variable remuneration based on the vesting year, with n calculated for each year of vesting.

5. Reporting and Compliance

• Competent authorities must notify the EBA by 27 May 2014 whether they comply with these guidelines or provide reasons for non-compliance.
• Institutions are required to document and disclose the use of the discount rate, including:
  • The discount rate applied
  • The amount of variable remuneration discounted
  • The total variable remuneration (discounted + non-discounted)
  • The number of identified staff whose remuneration was discounted
• These disclosures should be made in accordance with Article 96 of the CRD and Article 450(1)(d) of Regulation (EU) No 575/2013.

6. Supervisory Review

• Competent authorities should review how the discount rate is calculated and applied when assessing an institution's remuneration framework.

7. Example of Application

• Example 1:

  • Total variable remuneration: EUR 150,000
  • Amount deferred for at least 5 years: EUR 30,000
  • Discount rate applied to EUR 30,000:
    • EUR 20,000 deferred for 5 years: discount rate = 10%
    • EUR 10,000 deferred for 6 years: discount rate = 14%
  • Discounted variable remuneration = EUR 13,630.84
  • Total variable remuneration for ratio calculation = EUR 133,630.84
  • Final variable/fixed ratio = 98.99%, which is within the 1:1 limit.

• Example 2:

  • Total variable remuneration: EUR 150,000
  • 60% deferred for 6 years: EUR 90,000
  • 25% of the deferred amount (EUR 37,500) can be discounted
  • Discount is applied to each vesting portion over the 6-year period
  • The discount rate is calculated for each vesting year (n = 1 to 6)

8. Legal Basis

• The CRD allows Member States to set a maximum discount rate of 25% on variable remuneration paid in deferred instruments for at least five years.
• Member States may allow a higher ratio (up to 200%) of variable to fixed remuneration, provided shareholder approval is obtained.
• The EBA is tasked with providing guidance on the appropriate discount rate, considering inflation, interest rates, and incentives for long-term deferral.

Conclusion

These guidelines provide a clear framework for the application of the notional discount rate in the context of variable remuneration for staff whose activities have a material impact on the risk profile of an institution. They aim to encourage long-term remuneration structures through the use of deferred instruments, while ensuring compliance with the CRD and harmonization across the EU. Institutions and competent authorities are required to implement and report on the use of the discount rate, and the EBA expects full compliance with these guidelines.