Application of the Guidelines on sound remuneration policies to the award and pay out of variable remuneration for the performance year 2016

Directive 2013/36/EU came into force in July 2013 and for all remuneration awarded after the 1 January 2014 all the specific requirements of the Directive as transposed into national law apply. In particular, under Article 162 (3) of the same directive, the laws, regulations and administrative provisions necessary to comply with Article 94(1)(g) shall require institutions to apply the principles laid down therein to remuneration awarded for services provided or performance from the year 2014 onwards, whether due on the basis of contracts concluded before or after 31 December 2013. The CEBS Guidelines on sound remuneration policies and practices will be repealed with effect of 31 December 2016. The EBA guidelines on sound remuneration policies (thereafter referred to as 'Guidelines') specify that they apply as of the 1 January 2017. The Guidelines do not contain any transitional provisions regarding the remuneration awarded for the performance year 2016. In any case, according to Article 16 (3) Regulation 1093/2010 '...competent authorities and financial institutions shall make every effort to comply with those guidelines...'. The Guidelines fully apply to remuneration awarded for the performance year 2017 and onwards. This includes that institutions must already have in place on the1 January 2017 the respective governance arrangements, remuneration policy and performance objectives they want to use in 2017 and onwards. The variable remuneration for the performance year 2016 will be awarded and partially paid out in 2017 at a time where the Guidelines will already be into force. Therefore the Guidelines apply in principle also to the award and pay out of variable remuneration for the performance year 2016 in 2017. However, as the pay-out conditions, including deferral and the pay out in instruments, are typically agreed between institution and staff by contracts or other binding arrangements, it is not always possible to require that these contracts or agreements are changed within the 2016 performance period. Hence, financial institutions - despite making every effort to comply with the Guidelines - may not comply with the Guidelines regarding the award and pay out of variable remuneration awarded for the performance year 2016. In that case they should comply with the legislative framework in place during the performance year 2016. To accommodate these aspects, competent authorities, when implementing the Guidelines, should be able to implement transitional arrangements prescribing that the requirements of the Guidelines only apply to the variable remuneration for the performance year that started in 2017 and onwards.