AMAFI - 21-07 - EBA CP - Guidelines on sound remuneration policies - AMAFI Answer

AMAFI / 21-07

29 January 2021

EBA CONSULTATION

GUIDELINES

ON SOUND REMUNERATION POLICIES

AMAFI's answer

Association française des marchés financiers (AMAFI) is the trade organisation working at national, European and international levels to represent financial market participants in France. It acts on behalf of credit institutions, investment firms and trading and post-tradeinfrastructures, regardless of where they operate or where their clients or counterparties are located. AMAFI's members operate for their own account or for clients in different segments, particularly organised and over-the-countermarkets for equities, fixed-incomeproducts and derivatives, including commodities.

AMAFI welcomes the opportunity to respond to this consultation paper on EBA's Guidelines on sound remuneration policies.

Introductory comments

Before answering the questions raised in the consultation, AMAFI would like to highlight some specific comments with regards to (i) the competitive implications of Brexit and (ii) the necessity to avoid conflicts between obligations stemming from national legislations and the EBA Guidelines.

1. For the European Union, Brexit means that it loses its main financial centre. The EU-27 therefore has a sovereignty issue at stake in being able to rebuild within its borders the capacity to ensure the proper financing of its economy and to meet the expectations of its savers. In an environment that is becoming highly competitive with the United Kingdom, it is therefore particularly essential to ensure that European financial players are able to attract the highly qualified staff needed to provide the quality of service that our public institutions, companies and investors expect.
   Faced with this challenge, we should not be naïve: remuneration policies will be a central element in this capacity to attract. At a time when various elements suggest that the rules applicable in this area in the United Kingdom are going to diverge fairly rapidly from those implemented in the EU- 27, it is absolutely essential that the EBA takes account of this risk, which is one of the necessary conditions for European players to play the role expected of them effectively. The European Authority must therefore not unjustifiably raise the level of constraint on European actors. It must also monitor closely and accurately the measures that may be taken by the British authorities in this area.
2. We also would like to point out it is extremely important these Guidelines do not create conflict of laws with national social and labour legislations This would indeed lead to a situation where actors scoped in are not able to comply both with the Guidelines and with national legislations that CRD V does not amend. During the transposition of CRD IV, such situation emerged in various member states including in France and Germany with regards to clawback. The content of the Guidelines should therefore not impinge on national legislations as not only does it creates legal uncertainties, but it could also potentially delay members states' compliance with the legislation.

AMAFI ■ 13, rue Auber ■ 75009 Paris ■ France

Phone : [phone] ■ http://www.amafi.fr ■ E-mail : [e-mail]

AMAFI / 21-07

29 January 2021

Question 1: Are the amendments to the subject matter, scope and definitions appropriate and sufficiently clear?

Paragraph 3

We would appreciate if the starting date of application of these guidelines could be clarified. We would suggest 1st January 2022 as starting date in order for the industry to have a clear understanding of the respective positions of all EU-27 national competent authorities and to have sufficient time to adapt its remuneration policies and processes to comply with the updated guidelines.

Paragraph 8

We would call on the EBA to clarify point (c). In particular, we would like to understand whether it means that a subsidiary of asset management or investment firm would have to apply gender neutral remuneration policies as per these guidelines while they do not have to comply with other CRD V requirements as specified in Articles 92, 94 and 95?

Paragraph 11

We would like to emphasize that the gender pay gap definition does not take into account the type of work, nor does it include the level of responsibility or the experience etc. As such calculating a gender pay gap does not meet the purpose of gender-neutral remuneration policies.

Additionally, given the term "earnings" is not defined in the Guidelines, we would suggest replacing it by "remuneration". Also, as "hourly" is not a common practice in the financial/banking industry, we would suggest switching with "full time annual remuneration awarded" in order to be consistent with paragraph 25.

Considering the definition of severance payments, we believe the concept of "early termination of a contract" could be clarified as the guidelines are not entirely clear to that regard. We would suggest the notion of "early" to be interpreted as (i) a contract with a predefined period (e.g. temporary contracts) terminated before its end-date and (ii) indefinite contracts terminated before the risk taker reaches legal retirement.

Overall, we share similar concerns as the European Banking Federation expressed in its answer.

Question 2: Are the amendments regarding gender neutral remuneration policies sufficiently clear?

On this topic, we consider the EBA guidelines go further than what is explicitly stated in CRD V. They significantly broaden the scope of gender-neutral remuneration policies by including issues related to gender equality policies (e.g. career development, succession plans). Besides, given the scope and primary purpose of CRD V we consider this Guidelines are not necessarily the most appropriate legislative vehicle to tackle in the most efficient way such an important issue.

Paragraph 23

We consider that the reference to "all related employment conditions that have an impact on the pay per unit of measurement or time rate should be gender neutral" goes beyond gender neutral remuneration policies and therefore should be deleted.

Besides, we would also suggest deleting the second sentence of paragraph 23 as not only does it broaden the scope of policies but also because it is not in line with the definition of "gender neutral remuneration policies".

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AMAFI / 21-07

29 January 2021

Paragraph 25

We would suggest using "working time arrangements" as unit of measurement as it is simpler and clearer than "full basis annual remuneration awarded".

Paragraph 26

Rather than documenting a job description, we would recommend focusing on categories of job positions while respecting the principle of proportionality to avoid heavy constraints as it would not have a detrimental impact on the monitoring.

Paragraph 27

We recommend adding an item on "specific skills or competence of staff".

Besides, point h) only concerns children excluding other family responsibilities, we would therefore suggest the following wording: "h) appropriate benefits, including the payment of additional voluntary household and other allowances to staff with dependent family members (e.g. children, other closed relatives).

Overall, we share similar concerns as the European Banking Federation expressed in its answer.

Question 3: Are the guidelines on the application of the requirements in a group context sufficiently clear?

Paragraph 46

We consider that the second part of the sentence in point c) goes beyond the scope of equal remuneration for equal work as defined in the Directive and we suggest replacing it by "how the remuneration policy is gender neutral".

Paragraph 55

We consider the term "significant institutions" should be clarified as otherwise it would create uncertainty for the institutions' remuneration committees. Institutions might potentially have to face conflicting definitions when it comes to taking into account those that are part of national regulations and those competent authorities rely on.

It should also be clarified that EBA does not aim to capture small and non-complex institutions that are part of a group featuring in the list of significant entities directly supervised by the ECB. On the contrary, we consider proportionality should apply to these small and non-complex institutions including when it comes to the composition of their remuneration committees. Otherwise, this would go against the objective behind CRD V remuneration reforms.

Paragraph 63

In order to measure a possible gender pay gap in a meaningful way, a minimum number of persons must constitute the sample on which the calculation is made. Below 1000 members of staff, we consider that the calculated gap will have no probative value.

Besides, we consider the size and activity of each institution should be used to define the differences between average pay.

Paragraph 73

In the last sentence, we consider the term "readily available" as too broad and therefore should not be used. Consolidated institutions cannot be expected to have information about their subsidiaries as if it were their own information. In fact, they are independent legal entities. We would suggest the EBA to recognise that consolidating/sub-consolidating institutions need time to be able to present information a supervisory authority might require.

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AMAFI / 21-07

29 January 2021

Paragraph 75

We consider clarifications are needed for Article 65(3)(a) as it does not provide competent authorities the ability to gather information directly from subsidiaries.

The EBA should bear in mind that national competent authorities do not necessarily operate within a legal framework that enables them to request information directly to subsidiaries and especially if they are based in a third country jurisdiction.

Paragraph 76

We call on the EBA to clarify this paragraph as specific remuneration requirements always have to be taken into account and are independent of gender neutrality provisions.

Overall, we share similar concerns as the European Banking Federation expressed in its answer.

Question 4: Are the guidelines regarding the application of waivers within section 4 sufficiently clear?

Paragraph 93

We would like the EBA to clarify whether the threshold defined in point (b) should apply at the level of the institution concerned or to the whole consolidated group.

Paragraph 94

We propose to delete the reference to a specific exchange rate to convert in EUR or to stress that the rate which should be used should be part of the entities remuneration policy before each yearly exercise is launched. By doing so it would avoid creating confusion for subsidiaries using the exchange rate established by each entity when reporting the remuneration information of their executives. Besides, we understand the existing system with exchange rates has worked well so far and we do not think it is worth establishing a specific exchange rate in these guidelines.

Overall, we share similar concerns as the European Banking Federation expressed in its answer.

Question 5: Is the section 8.4 on retention bonuses sufficiently clear?

Paragraph 142

It is stated in this paragraph that "Institutions should not award to a staff member multiple retention bonuses under the same event or justification or under simultaneous events or justifications" and we call on the EBA to clarify whether this means that there can be an overlap of retention periods.

Paragraph 147

While we understand the two methods proposed for the calculation of the bonus ratio, we would call on the EBA to provide with guidance where the final amount is based on performance criteria and therefore cannot be known upfront. In such situation, should the potential maximum amount be taken into account when using the method described in point a) or should credit institutions always use the method described in point b) or it is not possible to set a fixed amount?

Overall, we share similar concerns as the European Banking Federation expressed in its answer.

Question 6: Is the amended section 9 on severance payments sufficiently clear?

Paragraph 164

We would like to EBA to clarify the meaning of "additional payments" as well as the specific inclusion of members of the management body as stated in this paragraph.

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