15.4 Award of variable remuneration in instruments

270.The instruments used for the award of variable remuneration should contribute to the alignment of variable remuneration with the performance and risks of the institution.

271.Where instruments issued by an institution in the scope of consolidation under points (i) and

• (ii) of Article 94(1)(l) of the CRD are available, the variable remuneration should consist of a balance of different types of instruments. Institutions should, where such instruments are available, prioritise the use of instruments subject to bail-in, in line with the instruments set out in the RTS on instruments, and shares, rather than the use of value-based items like share-linked instruments.

272.The availability of instruments under Article 94(1)(l)(i) of the CRD depends on the legal form of an institution:

• a. For institutions which are stock corporations (both listed and non-listed), shares or share-linked instruments are available.
• b. For institutions which are non-stock corporations, ownership interests that are equivalent to shares or non-cash instruments that are equivalent to share-linked instruments are available.

273.Share-linked or other equivalent non-cash instruments (e.g. stock appreciation rights, types of synthetic shares) are those instruments or contractual obligations, including instruments based on cash, whose value is based on the market price or, where a market price is not available, the fair value of the stock or equivalent ownership right and track the market price or fair value. All such instruments should have the same effect in terms of loss absorbency as shares or equivalent ownership interests.

274. The availability of ‘other instruments’ under Article 94 (1)(l)(ii) of Directive 2013/36/EU depends on whether an institution or an institution in the scope of consolidation has already issued such instruments and sufficient amounts of such instruments are available. Where institutions are primarily wholesale funded, or rely to a large extent on additional Tier 1, Tier 2 or bail-in-able debt to meet their capital requirements, such instruments should be available for the purposes of variable remuneration, provided that these ‘other instruments’ comply with Commission Delegated Regulation (EU) No 527/2014.

275. Where there are no specific factors or national laws that prevent the use of ‘other instruments’ under Article 94(1)(l)(ii) of Directive 2013/36/EU, or factors that prevent institutions from issuing instruments in compliance with Commission Delegated Regulation (EU) No 527/2014, then such instruments should be used for the award of variable remuneration, where they are available.

276.Where both equity or equity-linked and other eligible instruments defined under Commission Delegated Regulation (EU) No 527/2014 are available, it is possible to pay variable remuneration as a balance of different instruments. In that case, institutions must ensure that the portion of variable remuneration that is paid in instruments comprises an appropriate balance of instruments under point (i) and point (ii) of Article 94(1)(l) of Directive 2013/36/EU. Institutions should be able to demonstrate that they have taken into account the interests of shareholders, creditors, bondholders and other stakeholders when setting the balance between different instruments.

277.Institutions should ensure that they have the awarded instruments available when the variable remuneration awarded in instruments vests. Institutions may decide not to hold the instruments during the deferral period, but should in that case take into account the relevant market risks.

278.Instruments should be priced at the market price or their fair value on the date of the award of these instruments. This price is the basis for the determination of the initial number of instruments and for later ex post adjustments to the number of instruments or their value. Such valuations should also be done before the vesting to ensure that ex post risk adjustments are applied correctly and before the retention period ends. Institutions that are not large institutions and that are not listed may establish the value of the ownership interests and ownership interest-linked instruments based on the last annual financial results.

279.Institutions may award a fixed number or nominal amount of deferred instruments using different techniques, including trustee depot facilities and contracts, provided that in every case the number or nominal amount of the instruments awarded is provided to identified staff at vesting, unless the number or nominal amount is reduced by the application of malus. Institutions should make sure that the awarded instruments are available for the pay out to staff at the latest when they vest.

280.Institutions should not pay any interest or dividend on instruments which have been awarded as variable remuneration under deferral arrangements to identified staff; this also means that interest and dividends payable during the deferral period should not be paid to staff after the deferral period ends. Such payments should be treated as received and owned by the institution.

281.Competent authorities should not limit the possibility to use instruments under Article 94(1)(l) to such an extent that institutions cannot establish an appropriate balance between instruments under point (i) and point (ii) of Article 94(1)(l) of Directive 2013/36/EU.

1. Forbhreathnú

1.1 Tagairtí

1.2 Ceanglais aitheanta

1.3 Caighdeáin ghaolmhara

2. Ceanglais aitheanta

3. Caighdeáin ghaolmhara

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