Remuneration Policies in the Financial Service Sector (Recommendation)

The financial crisis has led to a controversial public debate about bonus payments to staff members of the financial industry. The EU-Commission is responding by submitting a Recommendation which has public appeal but is legally non-binding and which is to be regarded above all as a political signal. However, for the banking sector the Commission announced that it would be proposing in June 2009 amendments to the Directive on capital requirements for banks (“Basel II”), which should allow the inclusion of remuneration practices into capital requirements for financial service providers.


The Commission is quite right in emphasising the fact that certain remuneration practices can generate risks which are currently not taken into sufficient consideration. It is reasonable to incorporate through supervisory rules the risks emanating from remuneration practices into the requirements for own capital to be withheld. However, the Commission should explicitly reject a direct regulation of wages.