EN ECB -PUBLIC  
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 5 September  2019  
on the rules to be followed by financial undertakings  when defining remuneration policies  
(CON/20 19/32) 
 
Introduction and legal basis  
On 11 July 2019 the European Central Bank (ECB) received a request from the Minister for Finance of 
the Netherlands  for an opinion on a draft Law on remuneration measures for the financial sector 
(hereinafter the ‘draft law’ ). 
The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union and the sixth indent of Article 2(1) of Council Decision 98/415/ EC1, as 
the draft law relates to the ECB’s tasks concerning the prudential supervision of credit institutions 
pursuant to Article 127(6) of the Treaty . 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  
1.1 The draft law mainly encompasses two elements related to the remuner ation of staff of  financial 
undertakings2, including credit institutions. The first element is an obligation for financial 
undertakings to take greater  account of the relationship between t he remuneration paid and the 
undertaking’s function in the financia l sector and its position in society. The second element is a 
mandatory retention period of at least five years for shares and other similar financial instruments 
that are part of the fixed remuneration of the board of directors and employees of a financial 
undertaking.  The explanatory memorandum  accompanying the draft law  notes  that the Netherlands 
currently has the strictest laws and regulations governing  remuneration in the financial sector in 
Europe.   
1.2 The first element is intended to ensure that a super visory board or any other body in charge of 
determining remuneration takes greater account of  the position of the undertaking in society  prior to 
the realisation of the remuneration proposals and remuneration policies. The supervisory board 
shall account f or this afterwards in the management report . This obligation should also reflect how 
the supervisory board or other similar body has considered the interest s of all stakeholders, 
including employees and shareholders , in the creation of the remuneration proposals and 
remuneration policies . 
                                                 
1  Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by nat ional 
authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42)  
2  As referred to in Article 1:1 of the Dutch Financial Supervision Act.  
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2 1.3 Regarding the second element, t he explanatory memorandum accompanying the draft law explains 
that shares and similar financial instruments could act as an incentive for short term gain related to 
stock prices. The mandator y retention period should promote a long term profit or growth 
perspective.  
 
2. Observations   
2.1 Within the framework of the s ingle supervisory mechanism ( SSM ) established by  Council 
Regulation (EU) No 1024/20133, the ECB is exclusively competent to carry out, for prudential 
supervisory purposes, specific tasks in relation to all credit institutions established in the 
participating Member States. One of the se tasks is to  ensur e compliance with requirements 
imposed on credit institutions to have in place robust g overnance arrangements, including 
remuneration policies and practices, as set out in relevant Union law4. For the purpose of carrying 
out the tasks conferred on it by Regulation (EU) No 1024/2013, and with the objective of ensuring 
high standards of superv ision, the ECB applies all relevant Union law, and where this is composed 
of directives, the national legislation transposing those directives5. In this respect, when carrying 
out its prudential supervision tasks, the ECB is the competent authority within the meaning of 
Directive 2013/36/EU  of the European Parliament and of the Council6. Article 92(2) of Directive 
2013/36/EU provides that competent authorities must ensure that, when establishing and applying 
the total remuneration policies for categories of  staff, credit institutions comply with the principles 
set out in points (a) to (g) of that paragraph  in a manner and to the extent that is appropriate to their 
size, internal organisation and the nature, scope and complexity of their activities7. 
2.2 The obli gation to take greater  account of how remuneration relates to the position of the 
undertaking in society and  the mandatory retention period do not conflict with the provisions of 
Directive 2013/36/EU  or affect the ECB’s competence as the competent authorit y responsible for 
ensuring compliance with the abovementioned requirement for credit institutions to have in place 
robust governance arrangements, including remuneration policies and practices.  As also noted in 
the explanatory memorandum accompanying  the draft law, the competent authority has no duty to 
supervise the relationship  between individual institutions ’ remuneration polic ies and position in 
society  on its substance or merit , but must  ensure that these  remuneration polic ies include such an 
analysis and that this is  account ed for in the management report afterwards . As previously noted 
by the ECB, banking legislation adopted by the Member States after the establishment of the SSM 
should facilitate the exercise by the ECB of its responsibilities within the SSM, including its capacity 
to enhance consistency of supervision across the euro area. As a result, Member States should 
                                                 
3   Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank 
concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013, p. 63).  
4  Article 4(1)(e) of Regulation (EU) No 1024/2013.  
5  Article 4(3) of Regulation (EU) No 1024/2013.  
6   Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of  
  credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 
2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 338).  
7  See also paragraph 2.1 of Opinion CON/2018/44.  All ECB opinions are published on the E CB’s website at 
www.ecb.europa.eu.  
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3 refrain from setting obstacles both to uniform supervisory practice and to the exercise of 
supervisory discretion by the ECB with in the SSM8. 
This opinion will be published on the ECB’s website.  
 
 
Done at Frankfurt am Main, 5 September  2019 . 
 
[signed]  
 
The President of the ECB  
Mario DRAGHI  
                                                 
8  See paragraph 2.2 of Opinions  CON/2018/44 and CON/2016/53.