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

    ESAs Issue Multiple Regulatory Updates for Financial Sector Entities

    The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.

    November 15, 2022 WebPage Regulatory News

    FSB and NGFS Publish Initial Findings from Climate Scenario Analyses

    The Financial Stability Board (FSB) and the Network for Greening the Financial System (NGFS) published a joint report that outlines the initial findings from climate scenario analyses undertaken by financial authorities to assess climate-related financial risks.

    November 15, 2022 WebPage Regulatory News

    FSB Issues Reports on NBFI and Liquidity in Government Bonds

    The Financial Stability Board (FSB) published a letter intended for the G20 leaders, highlighting the work that it will undertake under the Indian G20 Presidency in 2023 to strengthen resilience of the financial system.

    November 14, 2022 WebPage Regulatory News

    ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments

    The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.

    November 10, 2022 WebPage Regulatory News

    IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets

    The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.

    November 09, 2022 WebPage Regulatory News

    EBA Finalizes Methodology for Stress Tests, Issues Other Updates

    The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups

    November 09, 2022 WebPage Regulatory News

    EU Finalizes Rules Under Crowdfunding Service Providers Regulation

    The European Union has finalized and published, in the Official Journal of the European Union, a set of 13 Delegated and Implementing Regulations applicable to the European crowdfunding service providers.

    November 08, 2022 WebPage Regulatory News

    OSFI Sets Out Work Priorities and Reporting Updates for Banks

    The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.

    November 07, 2022 WebPage Regulatory News

    APRA Finalizes Changes to Capital Framework, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.

    November 03, 2022 WebPage Regulatory News

    BIS Hub and Central Banks Conduct CBDC and DeFI Pilots

    The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.

    November 03, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8596