EBA Finalizes Standards for Identifying Staff as Material Risk Takers
EBA published the final draft regulatory technical standards on criteria to identify all categories of staff whose professional activities have a material impact on the risk profile of institutions (also known as risk-takers). Once the final draft standards have been adopted, risk-takers will be identified based on the criteria laid down in the revised Capital Requirements Directive (CRD) 5 and the criteria specified in the regulatory technical standards. The identification process is based on a combination of qualitative and quantitative criteria.
The EBA consultation on these standards ended in February 2020. Based on feedback received during the consultation phase, the qualitative criteria have been revisited to enhance the application of proportionality. The definition of managerial responsibility has been revised taking into account that institutions of different sizes have different layers of hierarchical levels. The final draft regulatory technical standards also clarify how the criteria should be applied on a consolidated, sub-consolidated, and individual basis. To ensure that all risk-takers are identified, members of staff are identified as having a material impact on the risk profile of an institution as soon as they meet at least one of the criteria, be it the criteria foreseen under the CRD, the qualitative or quantitative criteria in the regulatory technical standards, or, where necessary because of the specificities of their business model, additional internal criteria.
Additionally, some flexibility in calculating the amount of remuneration for the application of the quantitative requirements has been introduced. In terms of quantitative criteria, the revised CRD set out a threshold of total remuneration of EUR 500,000 combined with the average of the remuneration of members of the management body and senior management. The final draft regulatory technical standards retain the qualitative criteria that identify the staff at high levels of remuneration as above EUR 750,000. In addition, the 0.3% of staff with the highest remuneration criterion has been amended to be applied only by institutions that have more than 1,000 staff members, to reduce the burden for small institutions. The quantitative criteria are based on the rebuttable assumption that the professional activities of those staff members would have a material impact on the risk profile of institutions. It should be noted that the quantitative criteria set out in the draft standards should be applied to institutions only on an individual level, so that subsidiaries that are subject to specific remuneration requirements can follow those.
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Keywords: Europe, EU, Banking, CRD5, Proportionality, Regulatory Technical Standards, Operational Risk, Remuneration, EBA
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