Remuneration, again under the spotlight. Banks have new reporting requirements as of this year


Remuneration, again under the spotlight. Banks have new reporting requirements as of this year

26 July 2023

Opinion article by Irina Vasile, Senior Manager, Risk and Regulatory Advisory, Deloitte Romania

Gender pay equality and diversity are important topics in today's society, and the financial services industry makes no exception. Recognizing the need for progress, various initiatives and guidelines have been introduced to address the gender pay gap and promote diversity. This reporting exercise enables banks to evaluate their own pay structures, identify any gender-based discrepancies and implement strategies to eliminate such gaps.

Pressure on remuneration processes

In the last ten years, we have seen remuneration being used by European supervisors in the financial services industry as a risk management tool. Remuneration systems can play a pivotal role in mitigating financial and reputational risks linked to potential breaches of legal or regulatory requirements. In response, organisations should adopt remuneration policies that promote integrity, ethical behaviour and appropriate risk-taking.

Despite having implemented these measures for nearly a decade, substantial gender imbalances persist. According to the EBA's analysis released in March 2023, women occupy only 28% of the board positions and a mere 18% of the executive director roles in the banks that are under its supervision. Additionally, a noteworthy 27% of institutions have yet to establish a mandatory diversity policy. Furthermore, EU banks’ male executive directors’ pay is 9.48% higher than women’s.

EBA guidelines on remuneration benchmarking mandate gender pay reporting

The European Banking Authority (EBA) has recognized the importance of pay equality and diversity within the banking sector and has updated its guidelines on remuneration and internal governance to this end, in June 2022. The guidelines encourage banks to establish gender-neutral remuneration policies and practices, ensuring that all employees receive equal pay for equal work. They emphasize the importance of transparent and objective remuneration systems, allowing for effective monitoring of any pay gaps and for taking corrective actions when necessary.

Gender pay gap benchmarking involves assessing and comparing the differences in pay between male and female employees within an organization. By analyzing and understanding these disparities, organizations can identify and address gender-based pay gaps, taking steps towards achieving fair and equal pay for all employees. Through benchmarking, organizations can gain insights into industry standards and best practices.

NBR steers local banks in line with EU trends

Recently, the National Bank of Romania (NBR) introduced new benchmarking reporting requirement (Order no. 4/2023) on personnel, remuneration and gender pay gap, based on the above mentioned EBA guidelines (EBA/GL/2022/06). Selected credit institutions must report by the end of August 2023 overall employee remuneration data, while gender pay gap reporting data goes live for the first time in June next year.

The NBR's latest reporting requirements signal a paradigm shift towards transparency and accountability in the financial services industry. As such, it is critical for local banks to have the appropriate policies, protocols and frameworks in place.


Diversity is a key factor in fostering innovation, creativity and inclusivity within organizations. It encompasses a range of dimensions, including gender, age, ethnicity, nationality, sexual orientation and more. Embracing diversity within the workforce brings various perspectives, experiences and skills, enhancing problem-solving capabilities and decision-making processes and creating environments that celebrate individual differences and promote equality.

The EBA's report on diversity practices in EU banks, released in March 2023, indicates that setting targets to increase gender representation to 40% of board members for the "underrepresented gender" would align with expectations of good governance. This observation aligns with a 2022 EU directive, which establishes targets of 40% representation of women among non-executive directors or 33% representation among all board members, for all listed companies, including financial institutions, by 2026.

Organizations that prioritize diversity often enjoy numerous benefits, such as a positive work environment, increased employee engagement and satisfaction and attraction and retention of top talent. Furthermore, diverse teams are more likely to understand and meet the needs of a diverse customer bases, leading to better business outcomes.

ESG metrics and remuneration

Environment, social and governance (ESG) considerations have gained prominence in recent years, and organizations are increasingly integrating relevant metrics into their remuneration practices. There's now a significant focus on including social metrics to align with sustainability goals.

Companies have already begun to implement incentive plans for senior management which commonly incorporate social metrics like employee diversity. Furthermore, the inclusion of ESG metrics in remuneration frameworks highlights a commitment to sustainability and responsible business practices.

What should be the next steps?

A well-designed, integrated approach that links employee diversity initiatives to remuneration structures and sustainability goals delivers real business value.

The evolution of remuneration processes needs a proactive approach from organizations. Adhering regulatory reporting requirements, promoting fair remuneration practices, addressing gender pay gaps and fostering diversity will all contribute to a more equitable and sustainable future.

Thus, a review of the remuneration policies and practices, of the internal governance framework and of the diversity and sustainability policies should continue to be a priority for all financial institutions, because these topics are certainly a top priority on the agenda of the supervisory authorities.