Opinion of the European Central Bank of 23 December 2013 on variable remuneration for employees of securities traders (CON/2013/95)
Date: 2013-12-23
Institutions: European Central Bank
Subjects: Denmark, financial stability, investment company, national law, remuneration of work, securities, wage earner

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 23 December 2013  

on variable remuneration for employees of securities traders 

(CON/2013/95) 

Introduction and legal basis 

On  5  December  2013,  the  European  Central  Bank  (ECB)  received  a  request  from  the  Danish  Financial 

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 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/EC of 

29 June  1998  on  the  consultation  of  the  European  Central  Bank  by  national  authorities  regarding  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 on variable remuneration for employees of securities traders who 
provide  advice  on  or  sell  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  prohibition  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 

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The draft law amends the rules on supervision of data processing centres allowing the FSA to supervise undertakings 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 supervise 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). 
OJ L 189, 3.7.1998, p. 42. 
See Section 1(3) of the draft law which introduces a new Section 77(e) in the Law on financial business. 
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 

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 operate 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 

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See point 2.1.1 of the explanatory memorandum of the draft law, p. 6. 
See the explanatory memorandum of the draft law, p. 13. 

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