Capital Requirements Directive

CRD IV

On 16 April 2013, the European Parliament adopted CRD IV.  This includes a cap on bankers’ bonuses of one times salary. There is provision to increase to two times salary with shareholder approval, provided at least 25% of any bonus in excess of one times salary must be deferred for at least five years.

The cap will apply to:

  • Banks, building societies and some investment firms within the scope of the CRD.
  • Staff of the above who are material risk takers (referred to as Code Staff under the FCA’s Remuneration Code)
  • In respect of Code Staff, the ratio of “variable pay” to “fixed pay”. Variable pay is remuneration which reflects “a sustainable and risk adjusted performance as well as performance in excess of that required to fulfil the employee’s job description as part of the terms of employment”. Fixed pay is remuneration which “primarily reflects relevant professional experience and organisational responsibility as set out in an employee’s job description as part of the terms of employment”.

If the legislation is published in the EU Official Journal before 1 July 2013, the cap will apply to remuneration for services and performance on or after 1 January 2014. If the legislation is published on or after 1 July 2013, the cap is only likely to apply to remuneration awarded for services and performance on or after 1 July 2014.

CRD IV is currently being challenged.