EBA is consulting on the guidelines on internal governance and remuneration policies under the Investment Firms Directive, or IFD. The guidelines specify the governance and remuneration provisions that Class 2 investment firms should comply with, taking into account the proportionality principle. The draft guidelines apply at both the individual and consolidated levels. EBA has been mandated to develop these guidelines under the Investment Firms Directive. The consultation period for these guidelines is open until March 17, 2021. The amended guidelines on internal governance are expected to be applied as of June 26, 2021 while the publication of final guidelines on remuneration policies is expected before the end of June 2021.
Guidelines on Internal Governance. In terms of the governance requirements for investment firms, the Investment Firms Directive emphasizes the responsibility of the management body for sound governance arrangements, the importance of a strong supervisory function that challenges management decision-making, and the need to establish and implement a sound risk strategy and risk management framework. The EBA guidelines on internal governance complete the various governance provisions in the Investment Firms Directive, taking into account the principle of proportionality, by specifying the tasks, responsibilities, and organization of the management body and the organization of investment firms, including the need to create transparent structures that allow for supervision of all their activities. The guidelines also specify requirements aimed at ensuring the sound management of risks across all three lines of defense and, in particular, set out detailed requirements for the second line of defense (the independent risk management and compliance function) and the third line of defense (the internal audit function). The consultation paper provides details on the establishment of a risk culture, a code of conduct, and the management of conflicts of interest, also in relation to related parties’ transactions to ensure that firms have appropriate decision management and oversight processes for such transactions.
Guidelines on Remuneration Policies. The Investment Firms Directive mandates EBA to develop guidelines on remuneration policies for all staff as part of investment firm’s internal governance arrangements, remuneration policies for identified staff, and guidelines that facilitate the implementation of waivers by member states. Remuneration policies must be gender-neutral and respect the principle of equal pay for male and female workers for equal work or work of equal value. These guidelines further specify the application of the remuneration requirements and the principle of proportionality. The 2015 EBA guidelines on remuneration policies, which have been applicable for credit institutions and investment firms, form the basis for these guidelines. To a large extent these guidelines are aligned with the guidelines on remuneration policies under the Capital Requirements Directive, or CRD, to ensure a level playing field and cross-sectoral consistency. The draft guidelines apply at both individual and consolidated levels. Certain parts of the guidelines are applicable to all staff, ensuring that investment firms have in place sound and gender neutral remuneration policies, while other parts of the guidelines focus on specific provisions applicable for the remuneration policies for identified staff.
- Press Release on Guidelines on Internal Governance
- Guidelines on Internal Governance (PDF)
- Press Release on Guidelines on Remuneration
- Guidelines on Remuneration Policies (PDF)
Comment Due Date: March 17, 2021
Keywords: Europe, EU, Banking, Securities, IFD, Governance, ESG, Remuneration, Proportionality, Investment Firms, CRD, EBA
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.
As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.
A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.
The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards
The Swiss Federal Council recently decided to further develop the Swiss Climate Scores, which it had first launched in June 2022.