Opinion of the European Central Bank of 5 September 2019 on the rules to be followed by financial undertakings when defining remuneration policies (CON/2019/32)
Date: 2019-09-05
Institutions: European Central Bank
Subjects: Netherlands, banking supervision, financial institution, national law, remuneration of work, staff

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/2019/32) 

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  remuneration  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  the  remuneration  paid  and  the 

undertaking’s  function  in  the  financial  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  supervisory  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 for this afterwards in the management report. This obligation should also reflect how 

the  supervisory  board  or  other  similar  body  has  considered  the  interests  of  all  stakeholders, 

including  employees  and  shareholders,  in  the  creation  of  the  remuneration  proposals  and 

remuneration policies. 

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2  

Council  Decision  98/415/EC  of  29  June  1998  on  the  consultation  of  the  European  Central  Bank  by  national 
authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42) 
As referred to in Article 1:1 of the Dutch Financial Supervision Act. 

 
 
 
 
                                                 
1.3  Regarding the second element, the 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  mandatory  retention  period  should  promote  a  long  term  profit  or  growth 

ECB-PUBLIC 

perspective.  

2. 

Observations  

2.1  Within  the  framework  of  the  single  supervisory  mechanism  (SSM)  established  by  Council 
Regulation  (EU)  No  1024/2013 3,  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  these  tasks  is  to  ensure  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 law 4. 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 5.  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 activities 7. 

2.2  The  obligation  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  authority  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  policies  and  position  in 

society on its substance or merit, but must ensure that these remuneration policies include such an 

analysis and that this is accounted 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). 
Article 4(1)(e) of Regulation (EU) No 1024/2013. 

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6     Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of  

Article 4(3) of Regulation (EU) No 1024/2013. 

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). 
See  also  paragraph  2.1  of  Opinion  CON/2018/44.  All  ECB  opinions  are  published  on  the  ECB’s  website  at 
www.ecb.europa.eu. 

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refrain  from  setting  obstacles  both  to  uniform  supervisory  practice  and  to  the  exercise  of 
supervisory discretion by the ECB within the SSM8. 

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

ECB-PUBLIC 

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.  

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