Einde inhoudsopgave
State aid to banks (IVOR nr. 109) 2018/11.4.1
11.4.1 Why is this a relevant characteristic?
mr. drs. R.E. van Lambalgen, datum 01-12-2017
- Datum
01-12-2017
- Auteur
mr. drs. R.E. van Lambalgen
- JCDI
JCDI:ADS590582:1
- Vakgebied(en)
Financieel recht / Europees financieel recht
Mededingingsrecht / EU-mededingingsrecht
Voetnoten
Voetnoten
In the literature, it has been argued that remuneration restrictions might be counterproductive. Heimler & Jenny (2012, p. 364) argue that remuneration restrictions might induce good managers of beneficiary banks to leave the bank for better jobs elsewhere. This would obviously not contribute to the return to long-term viability of the bank.
For instance, the decision on Abanka (SA.38228, 13 August 2014, para. 142) explicitly mentioned the restrictions on remuneration as a cost-cutting measure: “Third, as regards covering the restructuring costs associated with the implementation of the restructuring plan through Abanka’s internal measures, Abanka will carry out cost-cutting measures resulting in a decrease of its operating costs from EUR 59.8 million in 2013 to EUR [50- 60] million in 2018. The restructuring plan and the commitments also provide for restrictions to be applied, until 31 December 2018, to the total remuneration of any board member and employee performing special work.”
See, for instance: LCCU, SA.34208, 26 September 2012 para. 58. In the decision on Fortis (NN42/2008, 3 December 2008, para. 96), the Commission held that it was “not necessary to impose any behavioural remedies, such as a prohibition on dividends or a reduction in management remuneration, which it generally imposes as an incentive to minimising the period of public ownership”.
The Restructuring Communication only required that the restructuring plan should include information on the remuneration incentive structure. See point 11 of the Restructuring Communication.
Many restructuring plans include changes to the remuneration policy. These changes will usually entail that the remuneration of the bank’s senior management will be restricted. This is relevant from three perspectives. In the first place, the remuneration policy can be considered as part of the corporate governance framework or risk management.1 Remuneration restrictions are thus relevant from a viability-perspective.2 In the second place, limiting the staff remuneration can be classified as a cost-cutting measure (see section 11.7).3 In the third place, remuneration restrictions usually cease to apply when the State aid has been fully repaid. In this sense, remuneration restrictions serve as an incentive to exit from State aid. From this perspective, remuneration restrictions can be regarded as behavioural remedies.4
The relevance of this characteristic is also underlined in the Crisis Communications.5 In particular, point 45 of the Recapitalisation Communication stipulates that the behavioural safeguards for distressed banks should, in principle, include a limitation of executive remuneration or the distribution of bonuses. Point 45 of the Recapitalisation Communication only concerns distressed banks (as opposed to fundamentally sound banks). A more general provision can be found in the 2013 Banking Communication: point 38 provides that any bank in receipt of State aid in the form of recapitalisation or impaired asset measures should restrict the total remuneration to staff, including board members and senior management, to an appropriate level. The 2013 Banking Communication further specifies that the cap on total remuneration should be in line with Articles 93 and 94 of the EU Capital Requirements Directive (CRD IV). In addition, point 38 of the 2013 Banking Communication provides that the total remuneration of a board member or senior manager may not exceed 15 times the national average salary in the Member State where the beneficiary bank is incorporated or 10 times the average salary of employees in the beneficiary bank.