EU rules on remuneration for credit institutions and investment firms work, but the proportionality principle needs to be clarified

Today the European Commission has published a report on EU remuneration rules for credit institutions and investment firms. The report draws on work carried out by the European Banking Authority, public consultations and an external study. It finds that the remuneration rules are generally effective in curbing excessive risk-taking behaviour and short-termism – precisely the reason why the rules were introduced in the aftermath of the financial crisis – but concludes that in certain cases, some of the rules may be too costly and burdensome to apply, compared to their prudential benefits. Věra Jourová, Commissioner for Justice, Consumers and Gender Equality, said “The EU rules on remuneration brought in after the financial crisis are working. They have proven useful tools to curb excessive risk-taking by staff and to ensure their focus on longer-term interests of credit institutions and investment firms, thereby contributing to financial stability” but added that “there may be room to make remuneration rules more proportionate and less burdensome from an administrative perspective for the small and less complex institutions”. In light of the report’s findings, the Commission will conduct an impact assessment, which will look into a possible clarification of these rules and their application to the smallest and least complex institutions.