Questions and answers on the German Remuneration Ordinance for Institutions

From Interpretation Guide to FAQs

On 21 June 2023, the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – “BaFin”) published draft FAQs on the German Remuneration Ordinance for Institutions (Institutsvergütungsverordnung – IVV) for consultation. These FAQs are intended to replace the Interpretation Guide (Auslegungshilfe) on the IVV published on 16 February 2018. At the same time, BaFin has clarified in the introductory note to the FAQs that it will not abandon its administrative practice and interpretative decisions described in the aforementioned Interpretation Guide on the IVV where the FAQs do not provide for an update. Therefore, it would probably be more adequate to refer to the FAQs as a supplement to the currently still applicable Interpretation Guide and not as a replacement thereof.

As has been the practice in the past, BaFin has adopted the European Banking Authority’s (EBA) Guidelines on Sound Remuneration Policies under Directive 2013/36/EU (EBA/GL/2021/04) in its administrative practice. In principle, these guidelines are to be applied directly, unless the FAQs provide for exceptions. 

In contrast to its previous practice, however, the FAQs are no longer interpretative guidance in a narrow sense. Rather, the FAQs are intended to summarise issues which are not covered by the EBA guidelines or where the application of proportionality appears necessary.

Essential updates

The FAQs contain a number of updates of which we will provide a brief overview below.