2. Elements included in the calculation of the discount rate 7. As no distributions should be paid …

Elements included in the calculation of the discount rate

7. As no distributions should be paid to staff with respect to instruments during the deferral period the discount rate should comprise the following three factors: inflation, interest rate for government bonds and an incentive factor linked to the use of long-term deferred instruments as set out in the following paragraphs of this section. For paragraphs 8 to 10, as part of their remuneration policy the institutions should implement the use of one of the following:

• a. the most recently available data as at the date when the remuneration is awarded;
• b. the most recently available data as at the date when the variable remuneration which could be awarded for the next performance period is determined.

8. For remuneration awarded in a Member State institutions should use one of the following with regard to the factor for inflation:

• a. if the remuneration is to be paid in the currency issued by the Member State where the staff member mainly works, the average annual rate of change for the HICP published by Eurostat⁶ for that Member State;
• b. if the remuneration is to be paid in a currency issued by another Member State or a third country, official statistical data equivalent to that referred to in (a) above available for the country issuing the currency or the HICP rate applicable for the Member State in which the staff members carry on the predominant part of their activities;
• c. the average annual rate of change under (a) or (b) above for the Member State of the EU parent institution.

9. For remuneration awarded in a third country⁷ institutions should use the following for determining the inflation factor:

• a. if the remuneration is to be paid in a currency issued by a third country, the official statistical data equivalent to that referred to in paragraph 8(a) available for the country issuing the currency or the HICP rate for the Member State of the EU parent institution;
• b. if the remuneration is to be paid in a currency issued by an EU Member State, the HICP rate for the Member State of the EU parent institution.

10. For the interest rate for government bonds institutions should use:

• a. If the remuneration is to be paid in a currency issued by a Member State, the average yield for all Member States of the EU of long-term government bond yields as published by Eurostat;⁸
• b. if remuneration is paid in a currency issued by a third country to staff predominantly located outside the EU, equivalent official statistical data available for the country issuing the currency or the rate under (a) above.

11. The incentive factor for deferred variable remuneration paid in instruments deferred for five years should be 10%. The factor should increase by four percentage points for each additional full year of deferral.

⁸ For the calculation EU government bonds with a residual maturity of around 10 years are used. The information on the long-term EU government bond rates can be found under the following link: http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&language=en&pcode=teimf050&plugin=1.

1. Overview

1.1 References

1.2 Identified Requirements

1.3 Related Standards

2. Identified Requirements

3. Related Standards

• EBA - Published by the European Banking Authority at https://www.eba.europa.eu/