Opinion of the European Central Bank of 23 October 2018 on the rules to be followed by systemically relevant credit institutions when defining fixed remuneration policies (CON/2018/44)
Date: 2018-10-23
Institutions: European Central Bank
Subjects: Netherlands, banking supervision, credit institution, financial supervision, managing director, remuneration of work, wage determination

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 23 October 2018  

on the rules to be followed by systemically relevant credit institutions when defining fixed 

remuneration policies 

(CON/2018/44) 

Introduction and legal basis 

On  21  September  2018  the  European  Central  Bank  (ECB)  received  a  request  from  the  Ministry  of 

Finance of the Netherlands for an opinion on a law on approval from the Minister for Finance regarding 

fixed remuneration of directors of systemically relevant credit institutions (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, 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 encompasses two elements related to the fixed remuneration of staff of systemically 

relevant  credit  institutions.  For  this  purpose,  systemically  relevant  credit  institutions  include 

essentially those credit  institutions  which are considered by De Nederlandsche  Bank as global or 

other systemically important credit institutions in accordance with national law transposing Directive 
2013/36/EU of the European Parliament and of the Council 1 2. 

1.2  The  first  element  refines  the  definition  of  ‘basic  fixed  remuneration’  by  stipulating  that  basic  fixed 

remuneration  must  not  consist  of  shares  in  a  systemically  relevant  credit  institution  or  other 

financial instruments whose increase in value is partly dependent on an increase in the value of the 

credit institution’s shares or benefits associated therewith.  

1.3  The second element introduces a requirement for systemically relevant credit institutions to obtain 

prior  approval  from  the  Minister  for  Finance  for  any  increase  in  basic  fixed  remuneration.  In 

particular,  any  proposal  by  the  body  or  individual  within  the  credit  institution  responsible  for 

establishing remuneration, or to establish the fixed remuneration of a new director or increase the 

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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  investment  firms,  amending  Directive  2002/87/EC  and  repealing  Directives  2006/48/EC  and 
2006/49/EC (OJ L176, 27.6.2013, p. 338).  

See Title VII, Chapter 4 of Directive 2013/36/EU on capital buffers and national law transposing those provisions, in 
particular  Article  3:62a  of  the  Wet  op  het  financieel  toezicht  (‘Financial  Supervision  Act’  (FSA)  adopted  on 
28 September 2006) and Articles 105c and 105d of the Besluit Prudentiële regels Wft (Decree on Prudential Rules 
FSA, adopted on 12 October 2006).  

 
 
 
 
                                                 
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fixed remuneration of an existing director, is to be submitted to the Minister for Finance for his/her 

prior  consent.  The  Minister  must  refuse  to  consent  if  he/she  deems  the  amount  of  the  fixed 

remuneration  inappropriate  with  a  view  to  a  cautious,  controlled  and  sustainable  remuneration 

policy  taking  into  account  the  broad  consensus  that  exists  within  society.  More  detailed  rules 

regarding  the  appropriateness  of  the  level  of  any  fixed  remuneration  may  be  set  by  means  of  an 

administrative order. Furthermore, under or pursuant to such an order, rules may be laid down with 

regard to the details to be submitted in connection with the Minister’s consent.  

1.4  The explanatory memorandum to the draft law and the opinion of the Council of State on the draft 

law contain divergent views as to whether the role proposed for the Minister for Finance under the 

draft law  is consistent  with the  ECB’s prudential supervisory competence  within  the framework of 
the single supervisory mechanism (SSM) as set out in Council Regulation (EU) No 1024/2013 3.  

2. 

Observations  

2.1  Within  the  framework  of  the  SSM  as  set  out  in  Regulation  (EU)  No  1024/2013,  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 those tasks consists of 

ensuring  compliance  with  requirements  imposed  on  credit  institutions  to  have  in  place  robust 

governance  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 supervision, the  ECB applies 

all  relevant  Union  law,  and  where  this  is  composed  of  directives,  the  national  legislation 

transposing those directives. In this respect, when carrying out its prudential supervision tasks, the 

ECB is the competent authority within the meaning of Directive 2013/36/EU. 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 

that  Directive in  a manner  and  to the extent that  is appropriate to their size, internal organisation 
and the nature, scope and complexity of their activities 5. 

2.2  The competence granted to the Minister for Finance under the draft law does not seem to conflict 

with  the  ECB’s  competence  as  the  competent  authority  responsible  for  ensuring  compliance  with 

the  abovementioned  requirement  for  credit  institutions  to  have  in  place  robust  governance 

arrangements,  including  remuneration  policies  and  practices.  The  ECB  understands  that,  in 

exercising his/her competence under the draft law, the Minister would assess the appropriateness 

of a proposed basic fixed remuneration for new or existing directors on an individual basis with a 

view  to  a  cautious,  controlled  and  sustainable  remuneration  policy  taking  into  account  the  broad 

consensus  that  exists  within  society.  As  long  as  the  Minister  does  not  assess  credit  institutions’ 

compliance  with  their  obligation  to  have  in  place  robust  governance  arrangements,  which  falls 

under the ECB’s competence, this approach does not seem to conflict with the ECB’s supervisory 

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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). 
See Article 4(1)(e) of Regulation (EU) No 1024/2013. 

See Article 92 and further of Directive 2013/36/EU. 

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powers  under  Regulation  (EU)  No  1024/2013.  In  this  vein,  it  has  to  be  avoided  that  the  eventual 

general  administrative  orders  detailing  the  rules  regarding  the  appropriateness  of  the  level  of 

individual  fixed  remuneration  create  a  conflict  with  the  ECB’s  supervisory  powers.  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  the  consistency  of  supervision  across  the  euro  area.  Member  States  should 

refrain  from  setting  obstacles  both  to  uniform  supervisory  practice  and  to  the  exercise  of 
supervisory discretion by the ECB within the SSM6.  

This opinion will be published on the ECB’s website.  

Done at Frankfurt am Main, 23 October 2018. 

[signed] 

The President of the ECB 

Mario DRAGHI 

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See  paragraph  2.2  of  ECB  Opinion  CON/2016/53.  All  ECB  opinions  are  published  on  the  ECB’s  website  at 
www.ecb.europa.eu. 

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