On the 2nd of February 2017, the European Banking Authority published its report on high earners in EU banks. According to its report, the total number of high earners increased from 3.865 in 2014 to 5.142 in 2015, representing a 33.04% increase compared to 2014 (a 61.8% increase from 2013).
The Capital Requirement Regulation (CRR) and Directive (CRD) aim to stabilize and strengthen the banking system by making banks set aside more and higher quality capital as a cushion against crises. The fourth Capital Requirements Directive (CRD IV) aims to ensure that every credit institution firm, including banks, has sound and fair remuneration policies, so that pay reflects effective risk management and performance, without encouraging unjustified risk-taking.
According to the Capital Requirement Directive (article 75(3), Directive 2013/36/EU), the EBA has to collect information on the number of individuals (called “high earners”) per institution who received a remuneration above EUR 1 million or more for one financial year, which includes incomes such as the salary, bonus, long-term awards and pension contributions.
The Regulatory Technical Standard (RTS) requires that the remuneration policies of Institutions ( credit institutions, banks…) for staff members, whose professional activities have material impact on the institution’s risk profile, shall ensure that remuneration is consistent with sound and effective risk management and provides an incentive for prudent and sustainable risk taking. The RTS introduced a definition of “identified staff”, based on qualitative and quantitative criteria, in order to better identify those staff that have an impact on the risk profile of institutions.
According to the EBA’s report, in 2015, 5.142 high earners have been declared. In Europe, the total fixed remuneration for this “category” of staff amounted to EUR 4.165.085.865 billion and the total variable remuneration amounted to EUR 6.135.266.163 billion. In total, the 5.142 people declared as “high earners” have earned EUR 10.300.352.028 billion (averaging over EUR 2.003.180 million per person and per year).
This increase of the number of high-earners in financial institutions is particularly interesting given than EU banks are complaining that, because of this new EU legislation on Capital Requirement (Regulation (EU) No 648/2012 and Directive 2013/36/EU) they are struggling to be profitable. The EU banks also highlight that this legislation would threaten their business models and their ability to lend to the wider economy and will tend to crimp growth. Since 2011 however, profits of EU banks have increased constantly.
Read the EBA Report on High earners here