The European Banking Authority published final Guidelines on compensation policies and practices related to the sale and provision of retail banking products and services. The purpose of the Guidelines is to protect consumers from risks associated with poor compensation policies and practices that promote the mis-selling of financial products. The Guidelines apply to compensation paid to staff employed by credit institutions, credit intermediaries, payment institutions and electronic money institutions when selling deposits, payment accounts, payment services, electronic money, residential mortgages and other forms of credit to consumers. The Guidelines contain a framework for such firms to implement compensation policies and practices to improve the correlation between compensation of sales staff and the fair treatment of consumers, with the overall objective of reducing the risk of mis-selling whilst also minimizing conduct costs for firms. The final Guidelines have been amended following feedback received during consultation. Amendments include separate requirements for approval and monitoring of compensation policies and practices, clarification of the type of information to be recorded by firms to achieve compliance, limiting delegation of design and monitoring of compensation policies to ensure that the management body retains ultimate responsibility and clarification that the need to obtain advice on the compensation policies and practices is limited to firms that have established a compensation committee. The implementation date of Guidelines has been postponed from January 3, 2017 to January 13, 2018. The extension is to provide market participants with enough time to implement the Guidelines given the revised application date of MiFID II of January 3, 2018 and align with the application date of the Payment Services Directive II, January 17, 2018.

View the Guidelines.