The European Central Bank chair of the supervisory board has called for bank executives around Europe to show restraint when it comes to variable remunerations in the face of the coronavirus.
In an open letter, Andrea Enria asked the banking bosses to “adopt extreme moderation” when it comes to things like allowances, complementary bonuses and commissions to ensure the organisations have enough money to offer credit to households and businesses.
Given bonuses and other variable remunerations can cut a big hole in the banks’ capital, the ECB head honcho advised the banks to show some restraints in case they can do so without risking litigation or breaching contracts.
Enrica also warned that keep giving people hefty bonuses could also mean the organisations having to face massive backlashes.
“The reputational impact of the payment of variable remuneration in a global crisis situation should not be underestimated – particularly in the case of large individual amounts – and should be duly considered, aslo bearing in mind the important role of financial institutions,” he said.
Enrica said he expected the the considerations to be in place until New Year’s Day 2021. Moreover, he asked the bosses not to try to be clever and circumvent the advice.
“Your institution should also not adopt measures that compensate staff for the reduction or loss of variable remuneration, as this would amount to a circumvention of the relevant regulatory provisions and the ECB’s supervisory expectations, and would hamper the overall objectives pursued via aforementioned measures,” he said.
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