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Remuneration Requirements for Banks in Belgium

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The Banking Law in Belgium has implemented EU directives aimed at ensuring sound and prudent risk management practices among banks. This article provides an analysis of the key points related to remuneration requirements for banks in Belgium.

Remuneration Policy Objectives

The primary objectives of a bank’s remuneration policy are:

  • Ensure sound and prudent risk management: The remuneration policy should be designed to promote responsible risk-taking and prevent excessive compensation that could lead to instability.
  • Align with business strategy, objectives, values, and long-term interests: The policy should incentivize staff to act in the best interests of the bank and its stakeholders.
  • Prevent conflicts of interest: The policy should avoid situations where individual interests conflict with those of the bank.

Scope of Remuneration Policy

The following staff members are subject to specific requirements on remuneration:

  • Identified staff: This includes members of the management committee and key function holders.
  • Minimum threshold: At least 1% of total staff should be identified staff.
  • Types of remuneration covered: The policy must cover all types of remuneration, including variable remuneration, fixed basic salary, and pension policy.

Key Principles

The following principles apply to the design of a bank’s remuneration policy:

  • Balance between fixed and variable components: The policy should balance the fixed and variable components of remuneration.
  • Variable component capped at 50%: The variable part of remuneration can only be paid if it does not exceed 50% of the fixed part (or EUR50,000).
  • Conditionality: Variable component can only be paid if the financial condition of the bank allows it.
  • Exemption for small institutions: Small institutions with assets under EUR5 billion and staff annual variable remuneration under EUR50,000 are exempt from certain requirements.

Golden Parachutes

Golden parachutes must comply with the following rules:

  • Approval by general meeting of shareholders: Compensation exceeding 12 months of remuneration must be approved by the general meeting of shareholders.
  • Long-term performance: The compensation should reflect actual performance over the long term and not granted in cases of misconduct or irregular behavior.

National Bank of Belgium Expectations

The NBB has issued communications regarding its expectations on remuneration policy, particularly during the COVID-19 crisis, advising banks to set variable portions at conservative levels.

Mandatory Disclosures

Banks must:

  • Publish their remuneration policy: The policy must be published and provided to the NBB.
  • Disclose staff remuneration information: The number of staff members earning EUR1 million or more per financial year, including their job title and a brief description of their functions.