The European Banking Authority (EBA) has launched a consultation on the instruments that can be used by banks to satisfy the standards of its bankers’ bonus cap legislation.
The EBA’s draft Regulatory Technical Standards, which includes the requirement for banks to pay 50% of variable remuneration in non-cash instruments, is expected to lead to a diversification in the types of instruments that banks use to remunerate staff. The most common instruments to date are shares.
The consultation will be open until 29 October 2013. It will then be submitted to the European Commission by 31 March 2014.
Alex Beidas, employee incentives lawyer at Linklaters, said: “Banks have been waiting for a long time for guidance from regulators on the range of instruments that may be used to remunerate staff, so this development will be welcomed.
“Although shares are likely to remain a popular method of paying staff, we are now likely to see more diversification, including a move to offering employees debt that is written down or converted to equity in the event of a crisis.”