EBA publishes standard on classes of instruments eligible for variable remuneration use under CRD IV
This, the second draft RTS issuing from the EBA so far in 2014, addresses the classes of instruments that are appropriate to be used for the purposes of variable remuneration under Article 94(2) of the CRD IV Directive.
CRD IV requires that at least 50% of the variable remuneration of staff whose professional activities have a material impact on the institution’s risk profile must be awarded in non-cash instruments. In accordance with Article 94(1)(l) of the Directive, the instruments must consist of a balance of (i) shares, share-linked or equivalent non-cash instruments and, (ii) where possible, Additional Tier 1 (AT 1), Tier 2 or other instruments, subject to the conditions set out in the CRD and this draft RTS.
The draft RTS introduce requirements for AT 1, Tier 2 and Other Instruments, to ensure that they appropriately reflect the credit quality of the institution, and define for Tier 2 and Other Instruments the write-down, write-up and conversion mechanisms. Specific requirements have been designed for Other Instruments that do not count as regulatory own funds under the Capital Requirements Regulation, which defines such things.
Click here to download the draft RTS.