Belgian Banking Law: Remuneration Requirements
4.3 Remuneration Requirements
The Belgian banking law implements the requirements of the Capital Requirements Directive (CRD V) and guidelines published by the Financial Services and Markets Authority (FSMA) and the National Bank of Belgium (NBB). The NBB’s circular of December 7, 2021, further explains the European Banking Authority (EBA) guidelines on sound remuneration policies.
Objectives of the Remuneration Policy
The remuneration policy adopted by each credit institution must have three objectives:
- Ensure sound and prudent risk management: To prevent excessive risk-taking
- Align with the bank’s business strategy, objectives, values, and long-term interests: Reflecting the bank’s goals and vision
- Include measures to avoid conflicts of interest: Ensuring that remuneration does not create conflicts between individual and organizational interests
Scope of the Remuneration Policy
Staff whose professional activities have a material impact on the bank’s risk profile must be identified (“identified staff”) and are subject to specific requirements on remuneration. Pursuant to the Royal Decree of April 25, 2014, staff members authorized to perform risky transactions in trade departments are considered identified staff.
Remuneration Policy Requirements
The Banking Law provides that the remuneration policy must cover all types of remuneration, including:
- Variable remuneration: Based on individual or team performance
- Fixed basic salary: A guaranteed amount paid regularly
- Pension policy: Providing a retirement benefit
Key Principles
The remuneration policy must reflect a balance between the fixed and variable component of the remuneration, with the fixed part being large enough to allow a flexible policy for the variable part. The variable part is capped at a maximum of 50% of the fixed part, or EUR50,000 (or the fixed amount, if lower than EUR50,000). The variable component can only be paid if the financial condition of the bank allows such payment.
Exemptions
Credit institutions that are not “large institutions” within the meaning of Regulation 575/2013/EU and whose assets do not exceed EUR5 billion on average over a period of four years may exempt staff whose annual variable remuneration does not exceed EUR50,000, provided that this does not represent more than one third of their total annual remuneration.
Golden Parachutes
All compensation exceeding 12 months of remuneration must be approved by the general meeting of shareholders. This compensation should reflect the actual performance of the beneficiary over the long term and should not be granted in cases of misconduct or irregular behavior.
During the COVID-19 crisis, the NBB issued communications regarding its expectations in respect of remuneration policy, advising to set the variable portion of the remuneration at a conservative level.