30 January 2023
The EU’s European Banking Authority (EBA) has published its report on high earners data at EU-regulated banks and investment firms as of the end of 2021. The report also compares the data for 2021 against the data for 2020.
The Capital Requirements Directive (CRD) and Investment Firms Directive (IFD) require the EBA to publish aggregated data on staff members remunerated at EUR 1 million or more for the previous financial year. These staff members are known as ‘high earners’.
The data is collected by the national regulators and then forwarded to the EBA. The data gathered includes the business areas involved and the main elements of salary, bonus, long-term awards and pension contributions.
The EBA will continue to publish data on high earners annually, with the data for 2022 being collected based on revised guidelines. Future iterations of the reporting will include a benchmarking of the derogations from requirements to pay variable remuneration in instruments and on a deferred basis, the gender pay gap and, as relevant, of approved increases in the ‘bonus cap’.
The key findings of the report include the following:
- The number of high earners increased by 41.5% to 1,957, the highest number for the EU/EEA (excluding the UK) since they began collecting data in 2010. 70% of the increase came from institutions located in Italy, France and Spain.
- The increased number of high earners is linked to: (a) good institution performance, in particular in investment banking and trading and sales; (b) further relocations of staff from the UK to the EU post-Brexit; and (c) overall salary level increases. Inflation, and associated increases in labour costs, contributes to an increased number of high earners over time, especially in the EUR 1 million to EUR 2 million bracket.
- High earners were reported in 26 of the 30 in-scope EU/EEA member states and so 4 member states reported no high earners. Most high earners fell within the EUR 1 million to EUR 2 million bracket and the highest bracket was EUR 14 million to EUR 15 million, which was for 1 person (with a significant amount of this relating to one severance payment).
- The percentage of variable remuneration that was deferred increased from 50.1% in 2020 to 56.4% in 2021, and the part of variable remuneration paid out in instruments increased from 43.5% in 2020 to 51.5% in 2021. This is despite the introduction of specific derogations from deferral and payment in instruments requirements.
- The weighted average ratio of variable to fixed remuneration for all high earners increased from 86.4% in 2020 to 100.6% in 2021, driven by: (a) increased institution performance; (b) relief from Covid-19 restrictions on bonuses; and (c) further relocations of staff to the EU post-Brexit.
- 81.8% of the 2021 high earners were ‘identified staff’ (also known as material risk takers), representing a decrease of 3% from 84.8% in 2020. This decrease is linked to: (a) changes in how staff in asset management companies and investment firms are identified within banking groups; (b) many reported high earners having only exceeded the monetary identification threshold to be identified as ‘identified staff’ for the first time (and so would not be identified as such for 2021); and (c) an increase in the monetary threshold for identifying staff from EUR 500,000 to 750,000 in some cases.
- In 2021, 143 high earners received significant severance payments with an average amount of EUR 1,328,048, compared with an average of EUR 1,171,943 across 181 high earners for 2020.
This report considers data from 2021 and 2020, both of which were exceptional years due to the impact of, and initial recovery from, the Covid-19 pandemic during that period. It can be useful to consider the trends shown in this report, particularly around the increased concentration of high earners in particular jurisdictions (Germany continues to have the most but others, e.g. Italy, France and Spain, are catching up), the concentration of high earners in particular business lines and the impact that inflation has on high earner data.
Given the sharp change in market conditions over the last year, with increasing inflation and interest rates and declining financial performance within investment banking leading to job losses, it will be interesting to see what the report for 2022 will look like when it is published in 2024. That report may, for example, show increased severance payments (and an increased number of high earners who are only high earners due to large severance payments) and an increased number of high earners due to increasing labour costs in the current inflationary environment.
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