201. When setting the ratio, investment firms should consider that a variable component linked to …

When setting the ratio, investment firms should consider that a variable component linked to performance can have a positive effect on ‘risk-sharing’ and incentivising prudent risk taking behaviour in line with the investment firms risk appetite, while a variable component that is inappropriately balanced could, under certain circumstances, have negative effects. The higher the possible variable remuneration compared to the fixed remuneration, the stronger the incentive will be to deliver the needed performance, and the bigger the associated risks may become. Investment firms should consider that staff may become accustomed to and expect to receive a considerable variable remuneration. If the fixed component is too low compared to the variable remuneration, an investment firm may find it difficult to reduce or eliminate variable remuneration in a poor financial year.

1. Overview

1.1 References

1.2 Identified Requirements

1.3 Related Standards

2. Identified Requirements

3. Related Standards

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