Remuneration policies in banking sector: public consultation on recommended changes

Aim and scope of proposed amendments
Recommended changes


Aim and scope of proposed amendments

The Bank of Italy recently commenced a public consultation on the proposed amendments to Regulation 285/2013 on remuneration policies in the banking sector, the main aim of which is to align the regulation with the European Banking Authority Guidelines of December 2015(1) and ensure compliance with Articles 74(3) and 75(2) of the EU Capital Requirements Directive (2013/36/EC). The consultation will end on May 14 2018.

The proposed amendments to Regulation 285/2013 apply to both banks and investment firms, in line with the joint regulation issued by the Bank of Italy and the Italian Companies and Exchange Commission.

Recommended changes

The recommended changes, which will likely be confirmed, include:

• an updated definition of the different categories of banks, which now includes cooperative banking groups in line with Article 37bis of the Banking Act;
• a more precise definition of 'remuneration', with the introduction of criteria for a correct distinction between fixed and variable remuneration;
• strengthened provisions aimed at avoiding the circumvention of the rules on sound remuneration (including through the introduction of information obligations on risk takers and internal investigations);
• the introduction of a more detailed and documented annual procedure for the identification (and exclusion) of risk takers, to be reflected in the remuneration policy;
• a clearer specification of the role and competences of the:
  • shareholders' meeting;
  • strategic supervision bodies and remuneration committees; and
  • risk management, compliance and auditing functions;
• more specific rules and criteria regarding:
  • the exceptional increase of the 1:1 fixed or variable ratio;
  • the deferred payment of the variable remuneration; and
  • the retention period of financial instruments;
• a definition of what level of variable remuneration constitutes a particularly high amount;
• new requirements on retention bonuses (including an indication of the reasons for paying them and pre-definition of the retention period required to receive the award);
• a more detailed discipline for long-term incentive plans (in terms of duration, deferred payment and inclusion in the fixed or variable remuneration ratio); and
• additional criteria for the payment of variable remuneration by banks which have received state aids.

Additional and more detailed provisions have also been introduced in the sensitive area of golden parachutes.

For further information on this topic please contact Andrea Giannelli or Marco Penna at Legance Avvocati Associati by telephone (+39 02 89 63 071) or email (agiannelli@legance.it or mpenna@legance.it ). The Legance Avvocati Associati website can be accessed at www.legance.com.

Endnotes

(1) Published in Italian in June 2016.