Commission Delegated Regulation (EU) 2021/923 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)

• CELEX: Delegated Regulation (EU) 2021/923
• Articles: 9

Article 1 Definitions

For the purposes of this Regulation, the following definitions shall apply:

(1)

‘managerial responsibility’ means a situation, in which a staff member:

(a)

heads a business unit or a control function and is directly accountable to the management body as a whole or to a member of the management body or to the senior management;

(b)

heads one of the functions laid down in Article 5(a);

(c)

heads a subordinated business unit, or a subordinated control function in a large institution as defined in Article 4(1), point (146), of Regulation (EU) No 575/2013 and reports to a staff member that has the responsibilities as referred to in point (a);

(2)

‘control function’ means a function that is independent from the business units it controls and that is responsible to provide an objective assessment of institution’s risks, review or report on those, including, but not limited to, the risk management function, the compliance function and the internal audit function;

(3)

‘material business unit’ means a business unit as defined in Article 142(1), point (3), of Regulation (EU) No 575/2013 that meets any of the following criteria:

(a)

it has allocated internal capital of at least 2 % of the internal capital of the institution as referred to in Article 73 of Directive 2013/36/EU, or is otherwise assessed by the institution as having a material impact on the institution’s internal capital;

(b)

it is a core business line as defined in Article 2(1), point (36), of Directive 2014/59/EU of the European Parliament and of the Council  ( 6 ) .

Article 2 Application of criteria

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

2.   Where this Regulation is applied on a consolidated or sub-consolidated basis in accordance with Article 109, paragraphs 2 to 6 of Directive 2013/36/EU, compliance with the criteria set out in Articles 3 to 6 of this Regulation shall be assessed against the risk profile of the relevant parent institution, financial holding company or mixed financial holding company on a consolidated or sub-consolidated basis.

3.   Where Article 6(1), point (a), is applied on an individual basis, the remuneration awarded by the institution shall be considered. Where Article 6(1), point (a), is applied on a consolidated or sub-consolidated basis, the consolidating institution shall consider the remuneration awarded by any entity that falls within the scope of consolidation.

4.   Article 6(1), point (b), shall only apply on an individual basis.

Article 3 Criteria for determining whether the professional activities of staff members have a significant impact on the relevant material business unit’s risk profile as referred to in Article 94(2), point (b), of Directive 2013/36/EU

Institutions shall apply within their remuneration policies all of the following criteria 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 distribution of internal capital to cover the nature and level of the risks, as referred to in 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 to identify, manage and monitor risks of the material business unit in accordance with Article 74 of Directive 2013/36/EU;

(e)

the relevant performance criteria set by the institution in accordance with Article 94(1), points (a) and (b), of Directive 2013/36/EU;

(f)

the duties and authorities of staff members or categories of staff in the material business unit concerned.

Article 4 Staff members or categories of staff the professional activities of which have an impact on the institution’s risk profile that is comparably as material as that of staff referred to in Article 92(3) of Directive 2013/36/EU

Institutions shall identify staff members or categories of staff as having an impact on an institution’s risk profile that is comparably as material as that of the staff members referred to in Article 92(3) of Directive 2013/36/EU where those staff members or categories of staff of staff meet any of the criteria laid down in Articles 5 or 6 of this Regulation.

Article 5 Qualitative criteria

In addition to staff members identified under the criteria set out in Article 92(3), points (a), (b) and (c) of Directive 2013/36/EU, staff members shall be deemed to have a material impact on an institution’s risk profile where one or more of the following qualitative criteria are met:

(a)

the staff member has managerial responsibility for:

(i)

legal affairs;

(ii)

the soundness of accounting policies and procedures;

(iii)

finance, including taxation and budgeting;

(iv)

performing 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)

managing outsourcing arrangements of critical or important functions as referred to in Article 30(1) of Commission Delegated Regulation (EU) 2017/565  ( 7 ) ;

(b)

the staff member has managerial responsibilities for any of the risk categories set out in Articles 79 to 87 of Directive 2013/36/EU, or is a voting member of a committee responsible for the management of any of the risk categories set out in those Articles;

(c)

with regard to credit risk exposures of a nominal amount per transaction, representing 0,5 % of the institution’s Common Equity Tier 1 capital and which is at least EUR 5 million, the staff member meets one of the following criteria:

(i)

the staff member has the authority to take, approve or veto decisions on such credit risk exposures;

(ii)

the staff member is a voting member of a committee which has the authority to take the decisions as referred to in point (i) of this point (c);

(d)

in relation to an institution for which the derogation for small trading book businesses set out in Article 94 of Regulation (EU) No 575/2013 does not apply, the staff member meets one of the following criteria:

(i)

the staff member has the authority to take, approve or veto decisions on transactions on the trading book that in aggregate represent one of the following thresholds:

—

where the standardised approach is used, an own funds requirement for market risks that represents 0,5 % or more of the institution’s Common Equity Tier 1 capital;

—

where an internal model-based approach is approved for regulatory purposes, 5 % or more of the institution’s internal value-at-risk limit for trading book exposures at a 99th percentile (one-tailed confidence interval level);

(ii)

the staff member is a voting member of a committee that has the authority to take the decisions mentioned in point (i) of this point;

(e)

the staff member heads a group of staff members who have individual authorities to commit the institution to transactions and either of the following conditions is met:

(i)

the sum of those authorities equals or exceeds the threshold referred to in point (c)(i) or in point (d)(i), the first indent;

(ii)

where an internal model-based approach is approved for regulatory purposes, those authorities amount to 5 % or more of the institution’s internal value-at-risk limit for trading book exposures at a 99th percentile (one-tailed confidence interval level); where the institution does not calculate a value-at-risk at the level of that staff member, the value-at-risk limits of staff under the management of this staff member shall be added up;

(f)

the staff member meets either of the following criteria with regard to decision on approving or vetoing the introduction of new products:

(i)

the staff member has authority to take such decisions;

(ii)

the staff member is a voting member of a committee that has authority to take such decisions.

Article 6 Quantitative criteria

1.   In addition to staff members identified under the criteria set out in Article 92(3), points (a) and (b), of Directive 2013/36/EU, staff members shall be deemed to have a material impact on an institution’s risk profile where any of the following quantitative criteria are met:

(a)

the staff members, including staff members as referred to in Article 92(3), point (c), of Directive 2013/36/EU, have been awarded in or for the preceding financial year a total remuneration that is equal to or greater than EUR 750 000;

(b)

where the institution has over 1 000 members of staff, the staff members are within the 0,3 % of staff, rounded to the next higher integral figure, which has, within the institution, been awarded the highest total remuneration in or for the preceding financial year on an individual basis.

2.   The criteria laid down in paragraph 1 shall not apply where the institution determines that the professional activities of the staff member do not have a material impact on the institution’s risk profile, because the staff member, or the category of staff to which the staff member belongs, meet any of the following conditions:

(a)

the staff member or categories of staff only carry out professional activities and has authorities in a business unit that is not a material business unit;

(b)

the professional activities of the staff member or category of staff have no significant impact on the risk profile of a material business unit having regard to the criteria set out in Article 3.

3.   The application of paragraph 2 by an institution shall be subject to the prior approval of the competent authority responsible for prudential supervision of that institution. The competent authority shall only give its prior approval where the institution can demonstrate that one of the conditions set out in paragraph 2 are satisfied.

4.   Where the staff member was awarded a total remuneration of EUR 1 000 000 or more in or for the preceding financial year, the competent authority shall only give its prior approval under paragraph 3 in exceptional circumstances. In order to ensure the consistent application of this paragraph, the competent authority shall inform the EBA before giving its approval in respect of such a staff member.

The existence of exceptional circumstances shall be demonstrated by the institution and assessed by the competent authority. Exceptional circumstances shall be situations that are unusual and very infrequent or far beyond what is usual. The exceptional circumstances shall be related to the staff member.

Article 7 Calculation of the average total remuneration for members of the management body and senior management and of variable remuneration awarded

1.   The average total remuneration of all members of the management body and senior management shall be calculated by taking into account the total of the fixed and variable remuneration of all members of the management body in its management function and supervisory function as well as of all staff that belongs to the senior management as defined in Article 3(1), point (9), of Directive 2013/36/EU.

2.   For the purposes of this Regulation, variable remuneration that has been awarded but has not yet been paid shall be valued as at the date of the award without taking into account the application of the discount rate referred to in Article 94(1), point (g)(iii), of Directive 2013/36/EU or reductions in pay-outs, through clawback, malus or otherwise.

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

4.   Institution’s remuneration policies shall set out the reference year for the variable remuneration that they take into account when calculating the total remuneration. That reference year shall be either 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.

Article 8 Repeal of Delegated Regulation (EU) No 604/2014

Delegated Regulation (EU) No 604/2014 is repealed. That Delegated Regulation, however, shall continue to apply to investment firms as defined in Article 4(1), point (2), of Regulation (EU) No 575/2013 until 26 June 2021.

Article 9 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 .