Formulas for the calculation of the discount rate

Application of the discount rate

14. The discount rate should be applied to a maximum of 25% of the total variable remuneration of an individual staff member (or a lower percentage prescribed by the Member State) paid in instruments that are deferred for at least five years.

15. Institutions should calculate for each individual staff member:

• a. the sum of all amounts of variable remuneration which are awarded before the discount rate is applied;
• b. the amount under (a) which is awarded in instruments and deferred for a period of at least five years; and
• c. the amounts under (b) for which different discount rates apply.

16. In order to calculate the discounted variable remuneration the applicable discount rate should be applied by multiplying it by the relevant part of variable remuneration.

17. For the purpose of calculating the ratio between the variable and the fixed component of remuneration for an individual staff member, the total variable remuneration is the sum of all discounted amounts of variable remuneration and the non-discounted variable remuneration.

Documentation and transparency

18. Institutions should document the calculation and use of the discount rate.

19. Institutions should keep a record of the fixed and variable components of remuneration awarded to an individual staff member, the parts of variable remuneration paid in instruments which are deferred for five years or more, the applied discount rate and the ratio between the variable and fixed component of total remuneration.

20. Institutions are required, in accordance with Article 16 of the EBA Regulation, to report, in a clear and detailed way, whether they comply with these guidelines. Institutions should provide information on the discount rates together with the disclosures required regarding the remuneration policy under Article 96 of Directive 2013/36/EU and Article 450(1)(d) of Regulation (EU) No 575/2013⁹ . In particular, institutions should disclose the following on a country by country basis:

• a. the extent to which the discount rate is used (the maximum being its application to 25% of the total variable remuneration or a lower percentage prescribed by the Member State); and
• b. the number of identified staff to whose variable remuneration the discount rate was applied.

⁹ Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 27.6.2013, p. 1).

Supervisory review of the discount rate

21. When competent authorities review the remuneration framework of an institution, they should review how the discount rate is calculated and applied to the variable remuneration which was awarded to identified staff.