Featured Product

    EBA Report Assesses Application of Sales Staff Remuneration Guidelines

    December 09, 2021

    The European Banking Authority (EBA) published report on the application of the guidelines on the remuneration of sales staff. The guidelines have been in force since 2016. EBA assessed how a sample of 70 financial institutions from 12 member states are applying these guidelines. The analysis focused on institutions’ internal arrangements for designing, approving, and monitoring the remuneration policy and practices for sales staff, in particular the practices for awarding variable remuneration to sales staff. The EBA assessment revealed that financial institutions focus more on prudential requirements and commercial interests than on meeting the interests of consumers. However, EBA also identified good practices that are considered to be compliant with the guidelines.

    The assessment shows that, in terms of governance structures, the design, approval, and monitoring of the remuneration policies and practices are often handled by the same function, thus increasing the risk of an inaction bias when reviewing the remuneration policies and practices. However,  EBA also identified 17 distinct good practices that are considered as compliant with the guidelines, with it being a good practice for financial institutions to:

    • Involve their human resources, compliance, and risk management functions in the design of the policies
    • Involve shareholders before granting variable remuneration in excess of 100% of fixed remuneration
    • Apply a mix of quantitative and qualitative criteria when determining the variable remuneration of sales staff
    • Not consider sales performance as the determining criterion for the promotion of staff
    • Implement measures that explicitly "disincentivize" sales staff from acting in a way that gives rise to consumer detriment
    • Include in the key performance indicators that determine variable remuneration some measurements of customer satisfaction or, conversely, customer detriment
    • Establish a "gatekeeper provision"— that is, reduce or forfeit the variable remuneration of sales staff when they acted to the consumer’s detriment
    • Ensure that payout curves for variable remuneration do not set incentives to maximize sales at a specific point

    Regarding the awarding of variable remuneration, institutions should be more mindful of incorporating consumer interest in the procedures to grant such remuneration. As such, it may not be enough not to set any incentives for sales staff to act to the consumers’ detriment, but instead it could be beneficial to set disincentives to do so. Furthermore, when it comes to monitoring residual risk for consumer detriment, EBA is of the view that institutions can and should do more to implement appropriate and specific control mechanisms. The report also notes that differences in application may also be traced back to the different regulatory requirements applying to each kind of institution. The EBA and relevant competent authorities plan to continue to monitor how institutions apply these and whether they make use of the good practices identified in this report.

     

    Related Links

    Keywords: Europe, EU, Banking, CRD, Governance, Remuneration, Operational Risk, Basel, Guideline, EBA

    Featured Experts
    Related Articles
    News

    EC Regulation Sets Out Methods for Measuring K-Factors Under IFR

    The European Commission (EC) published the Delegated Regulation 2022/25, which supplements the Investment Firms Regulation (IFR or Regulation 2019/2033) with respect to the regulatory technical standards specifying the methods for measuring the K-factors referred to in Article 15 of the IFR.

    January 11, 2022 WebPage Regulatory News
    News

    BIS Studies How Platform Models Impact Financial Stability & Inclusion

    The Bank of International Settlements (BIS) published a paper that assesses the ways in which platform-based business models can affect financial inclusion, competition, financial stability and consumer protection.

    January 10, 2022 WebPage Regulatory News
    News

    ESAs Publish List of Financial Conglomerates for 2021

    The European Supervisory Authorities (ESAs) published the list of identified financial conglomerates for 2021.

    January 07, 2022 WebPage Regulatory News
    News

    APRA Licenses Two More Banks, Reduces Committed Liquidity Facility

    The Australian Prudential Regulation Authority (APRA) granted license to Barclays Bank PLC and Crédit Agricole Corporate and Investment Bank to operate as foreign authorized deposit-taking institutions under the Banking Act 1959.

    January 06, 2022 WebPage Regulatory News
    News

    EU Issues SII Corrigendum; EIOPA Assesses SII Reporting Exemptions

    EU published, in the Official Journal of the European Union, a corrigendum to the Delegated Regulation 2015/35, which supplements Solvency II Directive (2009/138/EC).

    January 06, 2022 WebPage Regulatory News
    News

    EBA Opines on Impact of De-Risking and Associated AML/CFT Challenges

    The European Banking Authority (EBA) published an Opinion on the scale and impact of de-risking in European Union and the steps that competent authorities should take to tackle unwarranted de-risking.

    January 05, 2022 WebPage Regulatory News
    News

    French Financial Markets Authority Sets Out Priorities for 2022

    The French Financial Markets Authority (AMF) published its 2022 work priorities, along with the supervisory priorities for 2022.

    January 05, 2022 WebPage Regulatory News
    News

    US Agencies Issue Statement on Community Bank Leverage Ratio Framework

    The U.S. Department of the Treasury issued a determination on a request for an exemption, by RBC US Group Holdings LLC, from certain requirements of the rule implementing the qualified financial contracts (QFC) recordkeeping requirements under the Dodd-Frank Act.

    January 04, 2022 WebPage Regulatory News
    News

    FCA Informs About Changes to LIBOR Settings From End-2021

    The Financial Conduct Authority (FCA) announced that publication of 24 LIBOR settings has ended and that, going forward, the 6 most widely used sterling and Japanese yen settings will be published using a changed methodology.

    January 04, 2022 WebPage Regulatory News
    News

    PBC Sets Out Fintech Development Plan for 2022 to 2025

    The People’s Bank of China (PBC) formulated the recently issued Fintech Development Plan (2022 to 2025) under the Outline of the 14th Five-Year Plan (2021-2025) for National Economic and Social Development and the Long-Range Objectives through the Year 2035.

    January 04, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 7854