Activities of Sharon BOWLES related to 2009/0099(COD)
Plenary speeches (1)
Capital requirements for the trading book and for re-securitisations, and the supervisory review of remuneration policies - Remuneration of directors of listed companies and remuneration policies in the financial services sector (debate)
Amendments (24)
Amendment 71 #
Proposal for a directive – amending act
Recital 3
Recital 3
(3) In order to address the potentially detrimental effect of poorly designed remuneration structures on the sound management of risk and control of risk- taking behaviour by individuals, the requirements of Directive 2006/48/EC should be supplemented by an express obligation for credit institutions and investment firms to establish and maintain, for those categories of staff whose professional activities have a material impact on their risk profile, remuneration policies and practices that are consistent with effective risk management. Those categories of staff should include at least senior management, risk takers and control functions, and any employee whose total remuneration, including pension provisions, takes them into the same remuneration bracket.
Amendment 73 #
Proposal for a directive – amending act
Recital 4
Recital 4
(4) Because excessive and imprudent risk- taking may undermine the financial soundness of financial institutions and destabilise the banking system, it is important that the new obligation concerning remuneration policies and practices should be implemented in a consistent manner and should cover all aspects of remuneration including salaries and pensions. It is therefore appropriate to specify core principles on sound remuneration to ensure that the structure of remuneration does not encourage excessive risk-taking by individuals or moral hazard and is aligned with the risk appetite, values and long-term interests of the institution while having due regard to their size, internal organisation and the nature, scope and complexity of their activities. In order to ensure that the design of remuneration policies is integrated in the risk management of the financial institution, the management body (supervisory function) of each credit institution or investment firm should establish the general principles to be applied, and the policies should be subject to at least annual independent internal review.
Amendment 81 #
Proposal for a directive – amending act
Recital 5
Recital 5
(5) Remuneration policy should aim at aligning the personal objectives of staff members with the long-term interests of the credit institution or investment firm concerned. The assessment of the performance-based components of remuneration should be based on longer- term performance and take into account the outstanding risks associated with the performance. The assessment of performance should be set in a multi-year framework, for example of three toof at least five years, in order to ensure that the assessment process is based on longer term performance and that the actual payment of performance-based components of remuneration is spread over the business cycle of the firm. To further align incentives, the pension allocations of all staff members covered by those requirements should be held as subordinated debt of the credit institution.
Amendment 85 #
Proposal for a directive – amending act
Recital 9
Recital 9
(9) In order to ensure effective supervisory oversight of the risks posed by inappropriate remuneration structures, the remuneration polices and practices adopted by credit institutions and investment firms should be included in the scope of supervisory review under Directive 2006/48/EC. In the course of that review, supervisors should assess whether those policies and practices are likely to encourage excessive risk-taking by the staff in question. In addition, supervisors should conduct thorough and intrusive checks on senior management, risk-takers and control functions, whose professional activities have a material impact on the risk profile of credit institutions, before they can take up their roles in order to ensure their suitability. Such procedures should also apply to staff whose total remuneration, including pension provisions, takes them into the same bracket as these categories as staff. Furthermore, supervisors should be notified whenever a credit institution initiates any malus or clawback in order to inform such interviews.
Amendment 86 #
Proposal for a directive – amending act
Recital 9 a (new)
Recital 9 a (new)
Amendment 100 #
Proposal for a directive – amending act
Recital 15
Recital 15
(15) Banks investing in re-securitisations are required under Directive 2006/48/EC to exercise due diligence also with regard to the underlying securitisations and the non- securitisation exposures ultimately underlying the former. Depending on the complexity of the layers of securitisation structures and depeFor a better understanding onf the complexity and the diversity (or both) of the non-securitisation exposures that ultimately underlie the re-securitisations, the required due diligence may be impossible or uneconomical (or boeffectiveness of those provisions for securitisations and re-securitisations, the Commission should comply with th)e to carry out. This is in particular the case where the ultimate underlying exposures are, for example, leveraged buy-out or project finance debt. In these cases, institutions should not invest in such highly complex re-securitisations. In their review of the required due diligence, competent authorities should devote particular attention to such highly complex securitisations and require their full deduction from capital, unless it has been convincingly demonstrated to their satisfaction that in each individual case of enth paragraph of Article 156 of Directive 2006/48/EC which provides for a Commission report on the expected impact of Article 122a, and submit that report to the European Parliament and the Council, together with any appropriate proposal, by 31 December 2009. Pending such a review, additional requirements for 'highly complex' re-securitisation exposures, the institution has performed the due diligence required by Directive 2006/48/EC, including with regard to the ultimate underlying exposuresshould not be covered in this Directive.
Amendment 103 #
Proposal for a directive – amending act
Recital 16
Recital 16
(16) In order to promote the convergence of supervisory practices with regard to the supervision of due diligence for highly complex re-securitisations, the Committee of European Banking Supervisors should establish guidelines, which should include a definition of or criteria for the types of re-securitisations that should be considered as 'highly complex' for this purpose. That definition or those criteria should be adapted to developments in market practicesssion should comply with the tenth paragraph of Article 156 of Directive 2006/48/EC which provides for a Commission report on the expected impact of Article 122a and submit that report to the European Parliament and the Council, together with any appropriate proposal by 31 December 2009. The issue of 'highly complex' re-securitisations and a definition of such vehicles should be considered in that review.
Amendment 105 #
Proposal for a directive – amending act
Recital 16 a (new)
Recital 16 a (new)
(16a) The Commission has failed to comply with point (b) of the third paragraph of Article 156 of Directive 2006/48/EC, which calls for a review of that Directive by 31 December 2009 to address the need for better analysis of the response to macro- prudential problems including an examination of the rationale underlying the calculation of capital requirements in that Directive. The Commission should report on that review as a matter of urgency and, furthermore, in the light of the economic situation, provide an impact assessment of the cumulative effect of those measures on the real economy.
Amendment 118 #
Proposal for a directive – amending act
Article 1 – point 2 – point a a (new)
Article 1 – point 2 – point a a (new)
Directive 2006/48/EC
Article 22 – paragraph 2 a (new)
Article 22 – paragraph 2 a (new)
Amendment 120 #
Proposal for a directive – amending act
Article 1 – point 2 – point b a (new)
Article 1 – point 2 – point b a (new)
Directive 2006/48/EC
Article 22 – paragraph 3 a (new)
Article 22 – paragraph 3 a (new)
(ba) The following paragraph 3a is added: "3a. The Commission shall report to the European Parliament and the Council on any measures agreed at international level regarding a common structure for disclosure of the number of individuals in pay brackets of EUR 1 million and upwards including the main elements of salary, bonus, long-term award and pension contribution. In the event of international agreement, the Commission shall adopt delegated acts in accordance with Articles 151, 151a and 151b"
Amendment 128 #
Proposal for a directive – amending act
Article 1 – point 9
Article 1 – point 9
Directive 2006/48/EC
Article 122b – paragraph 1
Article 122b – paragraph 1
1. Notwithstanding the risk weights for general re-securitisation positions in Annex IX, Part 4, the competent authorities shall require that credit instituThe risk weighted exposure amounts for securitisations apply a 1250 % risk weight to positions in highly complexnd re- securitisations, unless the credit institution has demonstrated to the competent authority for each such re- securitisation position concerned that it has complied with the requirements set out in Article 122a(4) and (5) positions shall be calculated in accordance with in Annex IX, Part 4.
Amendment 132 #
Proposal for a directive – amending act
Article 1 – point 9
Article 1 – point 9
Directive 2006/48/EC
Article 122b – paragraph 2
Article 122b – paragraph 2
2. Paragraph 1 shall apply in respect of positions in new re-securitisations issued after 31 December 2010[...]. In respect of positions in existing re-securitisations, paragraph 1 shall apply from 31 DecemberJanuary 2014 where new underlying exposures are added or substituted after that date."
Amendment 152 #
Proposal for a directive – amending act
Annex I – point 1
Annex I – point 1
Directive 2006/48/EC
Annex V – section 11 – point 22 – introductory part
Annex V – section 11 – point 22 – introductory part
22. When establishing and applying the total remuneration policies for, inclusive of salaries and pensions, for categories of staff including senior management, risk takers and control functions, and any employee receiving total remuneration that takes them into the same remuneration bracket as those categories of staff, and whose professional activities have a material impact on their risk profile, credit institutions shall comply with the following principles in a way that is appropriate to their size, internal organisation and the nature, the scope and the complexity of their activities:
Amendment 172 #
Proposal for a directive – amending act
Annex I – point 1
Annex I – point 1
Directive 2006/48/EC
Annex V – section 11 – point 22 – point h a (new)
Annex V – section 11 – point 22 – point h a (new)
(ha) subdued or negative financial performance of the credit institution leads to a contraction of its total variable remuneration, taking into account both current compensation and reductions in payouts of amounts previously earned, including through malus or clawback arrangements; any malus or clawback is reported to supervisors along with the identification of the individuals to whom it applies, taking into account the assessment of suitability for holding positions of senior management, risk- takers and control functions or being in that income bracket;
Amendment 174 #
Proposal for a directive – amending act
Annex I – point 1
Annex I – point 1
Directive 2006/48/EC
Annex V – section 11 – point 22 – point h b (new)
Annex V – section 11 – point 22 – point h b (new)
(hb) a substantial proportion (at least 50 %) of any variable remuneration is held in a pool for a defined period of time of at least five years prior to vesting and constitutes subordinated debt of the credit institution and where the legal structure of a credit institution does not permit the use of subordinated debt, a comparable instrument is used;
Amendment 181 #
Proposal for a directive – amending act
Annex I – point 1
Annex I – point 1
Directive 2006/48/EC
Annex V – section 11 – point 22 – point i
Annex V – section 11 – point 22 – point i
(i) payment of the major part of a significant bonusa substantial proportion of the variable remuneration component is deferred over a sufficient period; the size of the deferred proportion and the length of the deferral period is established in accordance with the business cycle, the nature of the business, its deferred for an appropriate periodrisks and the activities of the member of staff in question; remuneration payable under deferral arrangements vests no faster than on a pro-rata basis; at least 40 % of the variable remuneration component is deferred; and, is linked to the future performance ofn the event of a variable remuneration component of a particularly high amount, at least 60 % of the amount is deferred and the deferral period is no less thean firmve years.
Amendment 185 #
Proposal for a directive – amending act
Annex I – point 1
Annex I – point 1
Directive 2006/48/EC
Annex V – section 11 – point 22 – point i a (new)
Annex V – section 11 – point 22 – point i a (new)
(ia) the pension policy is in line with the business strategy, objectives, values and long-term interests of the credit institution and pension allocations are held as subordinated debt of the credit institution.
Amendment 193 #
Proposal for a directive – amending act
Annex I – point 3 – point a
Annex I – point 3 – point a
Directive 2006/48/EC
Annex IX – part 3 – point 1 – point c
Annex IX – part 3 – point 1 – point c
(c) The credit assessment shall not be based or significantly partly based on unfunded support provided by the credit institution itself."
Amendment 195 #
Proposal for a directive – amending act
Annex I – point 3 – point b – point i
Annex I – point 3 – point b – point i
Directive 2006/48/EC
Annex IX – part 4 – point 5
Annex IX – part 4 – point 5
Where no credit assessment of a nominated ECAI can be used for aa credit institution has two or more overlapping positions in a securitisation, it will be required to the extent that they overlap to include in its calculation of risk- weighted exposures amounts only the position or portion of a position producing the higher risk-weighted exposure amount. The credit institution may also recognise such overlap between specific risk capital charges for positions in the trading book and capital charges for positions in asset backed commercial paper because of the requithe banking book, provided that the credit institution is able to calculate and compare the capital charges for the relevant positions. For the purpose of this point 'overlapping' means that the positions, wholly or partially, repremsent set out in point 1(c) of Part 3, the credit institution mayan exposure to the same risk such that the extent of the overlap there is a single exposure. Where point 1(c) of Part 3 applies to positions in asset backed commercial paper, the credit institution may, subject to the approval of the competent authority, use the risk-weight assigned to a liquidity facility in order to calculate the risk- weighted exposure amount for the commercial paper if the liquidity facility is not more junior than the commercial paper of an ABCP-programme and to the extent that the liquidity facility form overlapping positions."
Amendment 196 #
Proposal for a directive – amending act
Annex I – point 3 – point b – point i a (new)
Annex I – point 3 – point b – point i a (new)
Directive 2006/48/EC
Annex IX – part 4 – point 5 a (new)
Annex IX – part 4 – point 5 a (new)
(ia) In Part 4, the following point is inserted: "5a. When determining whether an exposure to an asset backed commercial paper programmes constitutes a re- securitisation exposure: (i) a pool-specific liquidity facility shall not be a re-securitisation exposure where it represents a direct exposure to a single pool and does not involve further tranching; (ii) a programme-wide liquidity facility shall not be regarded as a re- securitisation where it covers 100 % of the outstanding commercial paper; (iii) a programme-wide credit enhancement covering only some of the losses above the seller-provided protection across the various pools shall be regarded as a re-securitisation exposure where there is tranching of the risk of a pool of multiple assets containing at least one securitisation exposure; and (iv) where a programme, which contains securitisation exposures according to the definition in Article 4, funds itself entirely with a single class of commercial paper, it shall not be treated as a re-securitisation exposure if either: (a) the programme-wide credit enhancement is not a re- securitisation, or (b) the commercial paper is fully supported by the sponsoring credit institution, leaving the commercial paper investor effectively exposed to the default risk of the sponsor instead of the underlying pools or assets."
Amendment 200 #
Proposal for a directive – amending act
Annex I – point 4 – point b
Annex I – point 4 – point b
Directive 2006/48/EC
Annex XII – part 2 – point 14 – point n – point v
Annex XII – part 2 – point 14 – point n – point v
Amendment 201 #
Proposal for a directive – amending act
Annex I – point 4 – point b
Annex I – point 4 – point b
Directive 2006/48/EC
Annex XII – part 2 – point 14 – point o – point i
Annex XII – part 2 – point 14 – point o – point i
(i) the aggregate amount of securitisation exposureitions retained or purchased and the associated capital requirements, broken down between securitisation and re- securitisation exposures and further broken down into a meaningful number of risk- weight or capital requirement bands, for each capital requirements approach used. The amount of securitisation exposures that are deducted from own funds or risk- weighted at 1 250%;
Amendment 215 #
Proposal for a directive – amending act
Annex II – point 1 – point b
Annex II – point 1 – point b
Directive 2006/49/EC
Annex I – point 16 a – subparagraph 1 a (new)
Annex I – point 16 a – subparagraph 1 a (new)
The capital charge for securitisations under the Standardised measurement method shall be capped at the maximum possible loss. Hence for a short risk position this limit shall be calculated as a change in value due to the underlying names immediately becoming default risk- free. For a long risk calculation position, the maximum possible loss shall be calculated as the change in value in the event that all underlying names were default with zero recoveries.
Amendment 216 #
Proposal for a directive – amending act
Annex II – point 1 – point b
Annex II – point 1 – point b
Directive 2006/49/EC
Annex I – point 16 a – point c
Annex I – point 16 a – point c
(c) Paragraphs (a) and (b) notwithstanding, for re-securitisation positions that would be subject to a 1 250 % risk weight according to Article 122b(1(a) of Directive 2006/48/EC if they were in the same institutions non- trading book, 8 % of the risk-weighted exposure amount according to that Article.