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.
Related Links
Keywords: Europe, EU, Banking, CRD5, Proportionality, Regulatory Technical Standards, Operational Risk, Remuneration, EBA
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
EBA Issues Standards on Reporting Requirements for Market RiskRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
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).
Asian Governments Aim for Interoperability in AI Governance Frameworks
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.
EBA Proposes Operational Risk Standards Under Final Basel III Package
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.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
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.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
