Developments in recent years, both at a European and international level, have shown significant cases of misconduct and mis-selling by staff in financial institutions, with poor remuneration policies and practices having been identified as a key underlying driver.
In order to address some of these conduct risks, the EBA had already developed detailed Guidelines on product oversight and governance arrangements for retail banking products. Nonetheless, the EBA identified a need for the development of requirements specific to the remuneration of sales staff.
In this context, the EBA published in September 2016 Guidelines (GL) on remuneration policies and practices related to the sale and provision of retail banking products and services.
These Guidelines set requirements for the design and implementation of remuneration policies and practices of sales staff with a view to protecting consumers.
This document made by R&D area of Management Solutions analyses the requirements arising from the Guidelines.
Executive summary
These Guidelines, which apply to remuneration paid to staff employed by certain institutions when selling retail services and products, are divided into four sections: design; documentation, notification and accessibility; approval; and monitoring.
Scope of application
Remuneration paid to staff employed by credit institutions, creditors, payment institutions and electronic money institutions, when selling retail services and products (i.e. mortgages, personal loans, deposits, payment accounts, payment services and/or electronic money).
Main content
- Design of remuneration policies and practices: the GL specify the criteria that should be considered when designing policies and practices, and also the functions that shall be involved in the design.
- Documentation, notification and accessibility: institutions should document policies and practices, keep them for audit purposes and make them available upon supervisory request; relevant persons should be informed of the policies and practices applicable to them; and policies should be easily accessible.
- Approval: the management body approves and retains ultimate responsibility for the remuneration policies; and the compliance function should ensure that the remuneration policies and practices comply with the GL.
- Monitoring: the remuneration policies should be reviewed at least annually, and amended if they do not operate as intended. Moreover, institutions should establish effective controls to check that their remuneration policies and practices are being adhered to.
Download the technical note by clicking here.