DELEGATED REGULATION (EU) 2021/923 OF THE COMMISSION

of 25 March 2021

supplementing Directive 2013/36/EU of the European Parliament and of the Council with regard to regulatory technical standards setting out the criteria to define managerial responsibility, control functions, material business units and a significant impact on a material business unit’s risk profile, and setting out criteria for identifying staff members or categories of staff whose professional activities have an impact on the institution’s risk profile that is comparably as material as that of staff members or categories of staff referred to in Article 92(3) of that Directive

(Text with EEA relevance)

(Article 1)

Definitions

For the purposes of this Regulation:

1. ‘managerial responsibility’ means a situation where a staff member: (a) manages a business unit or performs a control function in a senior capacity and reports directly to the management body as a whole, a member of the management body or the executive management; (b) performs one of the tasks listed in Article 5(a) in a senior capacity; (c) in a large institution within the meaning of Article 4(1)(146) of Regulation (EU) No 575/2013, manages a sub-business unit or performs a subordinate control function in a senior capacity and reports to a staff member who has the responsibilities set out in point (a);

2. ‘control function’ means a function that is performed independently from the business areas being controlled and involves objective assessment or review of, or reporting on, the risks of the institution; this includes, inter alia, risk management, compliance and internal audit;

3. ‘material business unit’ means a business unit within the meaning of Article 142(1)(3) of Regulation (EU) No 575/2013 that meets one of the following criteria: (a) it holds allocated internal capital amounting to at least 2 % of the internal capital of the institution within the meaning of Article 73 of Directive 2013/36/EU or is assessed by the institution otherwise as a business unit having a significant influence on the internal capital of the institution; (b) it is a core business within the meaning of Article 2(1)(36) of Directive 2014/59/EU of the European Parliament and of the Council (1).

Application of the criteria

(1) Where this Regulation is applied on an individual basis pursuant to Article 109(1) of Directive 2013/36/EU, compliance with the criteria laid down in Articles 3 to 6 of this Regulation shall be assessed against the individual risk profile of the institution.

(2) Where this Regulation is applied on a consolidated or partial-consolidated basis pursuant to Articles 109(2) to (6) of Directive 2013/36/EU, compliance with the criteria laid down in Articles 3 to 6 of this Regulation shall be assessed against the risk profile of the parent institution, parent financial holding company or mixed financial holding company concerned on a consolidated or partial-consolidated basis.

(3) Where Article 6(1)(a) is applied on an individual basis, the remuneration granted by the institution shall be taken into account. Where Article 6(1)(a) is applied on a consolidated or partial-consolidated basis, the consolidating institution shall take into account the remuneration granted by undertakings included in the consolidation scope.

(4) Article 6(1)(b) shall only be applied on an individual basis.

Criteria for determining whether the professional activities of staff members have a significant impact on the risk profile of the relevant material business unit within the meaning of Article 94(2)(b) of Directive 2013/36/EU

Institutions shall apply all of the following criteria within their remuneration policy to determine whether the professional activities of staff members have a significant impact on the risk profile of a material business unit:

(a) the risk profile of the material business unit; (b) the allocation of internal capital to qualitatively and quantitatively cover the risks pursuant to Article 73 of Directive 2013/36/EU; (c) the risk limits of the material business unit; (d) the risk and performance indicators used by the institution pursuant to Article 74 of Directive 2013/36/EU to identify, manage and monitor the risks of the material business unit; (e) the relevant performance criteria established by the institution pursuant to Article 94(1)(a) and (b) of Directive 2013/36/EU; (f) the duties and powers of the staff members or categories of staff in the relevant material business unit.

Staff members or categories of staff whose professional activities have a comparably as material impact on the risk profile of the institution as those of the staff members referred to in Article 92(3) of Directive 2013/36/EU

Institutions shall classify staff members or categories of staff as having a comparably as material impact on the risk profile of an institution as the staff members referred to in Article 92(3) of Directive 2013/36/EU if those staff members or categories of staff meet one of the criteria set out in Articles 5 and 6 of this Regulation.

Qualitative criteria

In addition to the staff members identified on the basis of the criteria mentioned in Article 92(3)(a), (b) and (c) of Directive 2013/36/EU, staff members shall be considered as staff members with a material impact on the risk profile of an institution if one or more of the following qualitative criteria are met:

(a) the staff member bears managerial responsibility for: (i) legal matters; (ii) the soundness of accounting principles and procedures; (iii) finance including taxation and budgeting; (iv) the conduct of economic analysis; (v) the prevention of money laundering and terrorist financing; (vi) human resources; (vii) the development or implementation of the remuneration policy; (viii) information technology; (ix) information security; (x) the management of arrangements for outsourcing of essential or important functions within the meaning of Article 30(1) of Commission Delegated Regulation (EU) 2017/565 (2);

(b) the staff member has managerial responsibilities for one of the risk categories referred to in Articles 79 to 87 of Directive 2013/36/EU or is a voting member of a committee responsible for managing one of the risk categories referred to in those Articles;

(c) with regard to credit risk exposures with a nominal amount per transaction corresponding to 0,5 % of the institution’s common equity tier 1 capital and amounting to at least EUR 5 million, the staff member meets one of the following criteria: (i) the staff member is empowered to make decisions on, approve or veto such credit risk exposures; (ii) the staff member is a voting member of a committee empowered to make the decisions referred to in point (i);

(d) in the case of an institution for which the exemption for small trading book activities under Article 94 of Regulation (EU) No 575/2013 does not apply, the staff member meets one of the following criteria: (i) the staff member is empowered to make decisions on, approve or veto trading book transactions which in aggregate reach one of the following thresholds: — when using the standardised approach for market risk requirements, corresponding to at least 0,5 % of the institution’s common equity tier 1 capital; — when approving an internal models approach for regulatory purposes, at least 5 % of the institution’s internal risk potential for trading book transactions determined at a confidence level of 99 % (one-sided confidence interval); (ii) the staff member is a voting member of a committee empowered to make the decisions referred to in point (i);

(e) the staff member leads a group of staff members who are all empowered to conclude transactions on behalf of the institution and one of the following conditions is met: (i) in aggregate, the amounts falling under those powers reach or exceed the threshold referred to in point (c)(i) or in point (d)(i), first indent; (ii) when approving an internal models approach for regulatory purposes, the amounts falling under those powers amount to at least 5 % of the institution’s internal risk potential for trading book transactions determined at a confidence level of 99 % (one-sided confidence interval); where the institution does not calculate a risk potential at the level of the staff member concerned, the risk potentials of the staff members reporting to the staff member concerned shall be added;

(f) with regard to decisions on the approval of the introduction of new products or their prevention through veto, the staff member meets one of the following criteria: (i) the staff member is empowered to make such decisions; (ii) the staff member is a voting member of a committee empowered to make such decisions.

Quantitative criteria

(1) In addition to the staff members identified on the basis of the criteria mentioned in Article 92(3)(a) and (b) of Directive 2013/36/EU, staff members shall be considered as staff members with a material impact on the risk profile of an institution if one of the following quantitative criteria is met:

(a) the staff members, including the staff members referred to in Article 92(3)(c) of Directive 2013/36/EU, were awarded total remuneration of EUR 750 000 or more in the previous financial year or for the previous financial year;

(b) in the case of an institution with more than 1 000 staff members, the staff members belong to the 0,3 % of the staff (rounded to the nearest whole number) who were awarded the highest total remuneration within the institution on an individual basis in the previous financial year or for the previous financial year.

(2) The criteria referred to in paragraph 1 shall not apply if the institution determines that the professional activities of the staff member concerned do not have a material impact on the risk profile of the institution because the staff member or category of staff to which he or she belongs meets one of the following conditions:

(a) the business unit in which the staff member or category of staff exclusively exercises professional activities and has powers is not a material business unit;

(b) the professional activities of the staff member or category of staff do not have a significant impact on the risk profile of a material business unit with regard to the criteria referred to in Article 3.

(3) For the application of paragraph 2 by an institution, the prior approval of the competent authority supervising that institution is required. The competent authority shall grant the prior approval only if the institution can demonstrate that one of the conditions referred to in paragraph 2 is met.

(4) Where total remuneration of EUR 1 000 000 or more was awarded to the staff member in the previous financial year or for the previous financial year, the competent authority shall grant the prior approval referred to in paragraph 3 only in exceptional circumstances. To ensure uniform application of this paragraph, the competent authority shall notify the EBA before granting its approval in respect of such a staff member.

The existence of exceptional circumstances shall be demonstrated by the institution and verified by the competent authority. Exceptional circumstances are situations that are unusual and very rare or go significantly beyond the ordinary. The exceptional circumstances must relate to the staff member.

Calculation of average total remuneration for members of the management body and executive management and of variable remuneration granted

(1) When calculating the average total remuneration of all members of the management body and executive management, the sum of fixed and variable remuneration of all members of the management body in its governance and oversight function and all staff members belonging to the executive management within the meaning of Article 3(1)(9) of Directive 2013/36/EU shall be taken into account.

(2) For the purposes of this Regulation, variable remuneration that has already been awarded but not yet paid shall be valued at the value on the day of award without taking into account the application of the discount rate referred to in Article 94(1)(g)(iii) of Directive 2013/36/EU or of claw-back provisions due to a malus or other provision.

(3) All amounts of variable and fixed remuneration shall be calculated gross and on a full-time equivalent basis.

(4) The reference year for variable remuneration used as the basis for calculating total remuneration shall be established in the remuneration policy of the institution. That reference year shall either be the year preceding the financial year in which the variable remuneration is awarded or the year preceding the financial year for which the variable remuneration is awarded.

Repeal of Delegated Regulation (EU) No 604/2014

Delegated Regulation (EU) No 604/2014 is repealed. However, that Delegated Regulation shall continue to apply to investment firms within the meaning of Article 4(1)(2) of Regulation (EU) No 575/2013 until 26 June 2021.

Entry into force

This Regulation shall enter into force on the fifth day following that of its publication in the Official Journal of the European Union.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

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(1) Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012 of the European Parliament and of the Council (OJ L 173, 12.6.2014, p. 190).

(2) Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to organisational requirements for investment firms and the conditions for the provision and reception of services, as well as with regard to the definition of certain terms for the purposes of the said Directive (OJ L 87, 31.3.2017, p. 1).