The rule including small institutions not listed

For European traders, the rules of the game's compensation will change to next January 1. The European banking regulator (CEBS) has indeed published Friday the final version of the rules to oversee the payment of the bonus in banks starting in 2011.

This text, which is derived from the CRD3 directive, significantly Toughens the constraints already imposed in the various g-20, but suffered a number of amendments to the initial version, published in October. It gave rise to serious concern on the part of industry, fearing distortions of competition with American and Asian banks. "The CEBS took into account the comments received and has revised its initial proposal to address key topics and concerns identified, including those relating to the"proportionality"," indicates the regulator.

The principle of proportionality in the original text is to link the remuneration policy to the risk profile of the establishment concerned. "The consequence of the principle of proportionality is that all the institutions do not have to apply in the same way and also comprehensive compensation constraints", indicates the regulator in the final version.

Fears for the competitiveness

Thus, a number of institutions or specific teams in banks may be exempted from the rules regarding the deferred and the payment of securities. They will be "neutralized" under the terms of the regulator, if it is established that the teams are not important decision-makers of risk ("risk takers"). The rule including small institutions not listed. According to the lawyer Stefan Martin, "partner" with Allen & Overy, quoted by Reuters, these exemptions can be invoked by the brokers or the institutions themselves as intermediaries not taking risks. "This will be used by small institutions, but by the entire industry to explain why some employees escape the proportionality", he estimated.

In addition, the regulator has left to the discretion banks the fixing of a ratio between fixed and variable remuneration of simple indications and recommendations. He also returned to the banks to identify the teams affected by the rules on the basis of their impact on risk, not the level of their remuneration. CEBS said however that rules are the leaders of banks, "senior management", makers of the functions of control and the other "risk takers".

Other issues were unchanged. Thus, the regulator confirms that 40 to 60 of the variable remuneration must be paid deferred way in function including "impact" of the individual or team concerned about risk. The payment of the deferred extends from three to five years and is 50 at least of the total of the bonus to be paid in securities or instruments replicating the performance of the title. Part non-deferred bonus is concerned: the amount of "cash" affected non-deferred may suddenly be reduced to 20 of the total.

While Brussels welcomed Friday the publication of these rules, the industry was however concerned about the effects on the competitiveness of European banks, which even the subsidiaries outside Europe are concerned. "These rules mean that banks that operate in Europe and European banks around the world, will suffer a competitive disadvantage, unless a global agreement on the subject," said the Association for financial markets in Europe (Afme). Some establishments already questioned the opportunity to relocate their operations outside Europe.