EN ECB -PUBLIC  
 
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 23 December 2013   
on variable remuneration for employees of securities traders  
(CON/20 13/95 ) 
 
Introduction and legal basis  
On 5 December 2013 , the European Central Bank (ECB) received a request from the Danish Financ ial 
Supervisory Authority (FSA) for an opinion on a draft law amending the Law on financial business, the 
Law on securities trading and the Law on alternative investment fund managers1 (hereinafter the ‘draft 
law’). 
The ECB’s competence to deliver an opini on is based on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union a nd the sixth  indent of Article  2(1) of Council Decision 98/415/EC of 
29 June 1998 on the consultation of the European Central Bank by national authorities reg arding draft 
legislative provisions2, as the draft law relates to rules applicable to financial institutions insofar as they 
materially influence the stability of financial institutions and markets . In accordance with the first 
sentence of Article  17.5 of the Rules of Procedure of the European Central Bank, the Governing Council 
has adopted this opinion.  
 
1. Purpose of the draft law  
The draft  law introduces a prohibition o n variable remuneration for employees of securities trader s who 
provide advice on or s ell financial instruments directly to retail customers3. The prohibition will only 
apply to that part of the variable pay component that is dependent on the employee achieving  a certain 
sales volume of financial instruments  to retail customers4. 
 The prohi bition is intended to reduce the risk of conflicts of interest  for the advisers and sellers  of 
financial instruments referred to in the draft law . Securities traders are already subject to an obligation to 
                                                 
1  The draft law amends  the rules on supervision of data processing centres allowing the FSA to supervis e undert akings that 
carry out significant IT operations and development for the common payment infrastructure, regardless of the ownership 
of the data processing centre.  The draft law introduces a special supervisory provision in the Law on alternative 
investment fund managers , which allows the FSA to supervis e depositories for an alternative investment fund. Finally, 
the draft law implements  an inflation adjustment regarding  the minimum capital requirements of reinsurance companies  
based on the European Commission 's notice  of 23 July 2013 regarding the adaptation in line with inflation of certain 
amounts laid down in the Reinsurance Directive  (OJ C 208, 23.7.2013 , p. 4 ). 
2  OJ L 189, 3.7.1998, p.  42. 
3  See Section 1(3) of the draft law which introduces a new Secti on 77(e) in the Law on financial business.  
4  See the explanatory memorandum of the draft law , p. 13 . The draft law is based on a recommendation from the 
Committee on the Causes of the Financial Crisis prohibiting such variable remuneration.  
ECB -PUBLIC  
2 minimise the risk of conflicts of interest and address any conflicts which  occur5. The draft law provides 
for further measures that should be taken in those cases where there is a link between the sales targets and 
the variable pay components for employees who are in  direct contact with retail customers. The 
prohibition underlines  that a pay structure that makes it possible to receive  a variable pay component 
based on sales to retail customers is  incompatible with a sound policy addressing conflicts of interest in 
an undertaking that has a licence to opera te as a securities trader6. 
  
2. General observations   
 The ECB notes the potential benefits of prohibiting variable remuneration that is dependent on employees 
reaching certain sales volumes of financial instruments to retail customers in contributing to sound and 
effective risk management applied by securities traders. The ECB also notes  the potential gains of the 
prohibition in terms of avoiding conflicts of interest, establishing sound incentives and constraining 
procyclicality in the financial system.   
 
This opinion will be published on the ECB’s website.  
 
 
Done at Frankfurt am Main, 23 December 2013 . 
 
[signed]  
 
The President of the ECB  
Mario DRAGHI  
                                                 
5  See point 2 .1.1 of the explanatory memorandum of the draft law, p. 6.  
6  See the explanatory memorandum of the draft law , p. 13 .