A Material Gender Pay Gap Persists Across EU Banks And Investment Firms, The EBA Observes In Its Benchmarking Report

The European Banking Authority (EBA) today published its Report on Remuneration and Gender Pay Gap Benchmarking for institutions and investment firms. The Report shows a material gender pay gap in 2023 with women earning less than men. Remuneration practices in institutions remained stable between 2021 - 2023, but the ratio between the variable and fixed remuneration in investment firms increased significantly after the introduction of the Investment Firms Directive (IFD).

Alongside its annual Report on Remuneration of identified staff, the EBA is releasing, for the first time, a detailed section on gender pay gap covering all staff as well as those identified as having a material impact on the risk profile of institutions and investment firms.

In 2023, the average ratio between variable and fixed remuneration for identified staff in investment firms stood at 145.85% (2022: 191.42%), higher and less stable compared to the ratio in institutions of 59.59% (2022: 58.62%). Higher bonuses in investment firms are driven by different business models and a more volatile profitability. In 2023, the highest bonuses in institutions were paid in the area of investment banking, whereas in investment firms in the area of dealing on own account, underwriting and placing of instruments, where the average ratio reached 521%. This is a material increase compared to 2021, where for investment firms a 100% limit (200% with shareholders’ approval) for bonuses compared to the fixed remuneration applied. The bonus ratios in other business areas were much lower and remained between 35% and 120%.

On average, female staff in institutions earned 24.48% less in 2023 than their male counterparts. For risk takers (identified staff) the difference was at 21.64%. The pay gap was even more pronounced in investment firms, with female staff earning 32.0% and female identified staff earning 31.74% less than their male colleagues. The pay gap was mainly caused by the underrepresentation of women in higher paid positions. The Report shows the gender pay gap for each quartile of pay level. Women only held 33.45% of the highest paid positions in institutions and just 12.99% of them in investment firms. However, overall, women and men were equally represented in institutions (median representation of women 51.65%) but underrepresented in investment firms (35.43%).

The data underscores the need for entities and competent authorities to analyse closer the reasons for the observed gender pay gap and to address gender pay and gender representation disparities. In this context the EBA is also revising its internal governance Guidelines to further improve the monitoring of gender aspects in institutions and investment firms.

Legal basis and background

The EBA collects remuneration and gender pay gap data from competent authorities for benchmarking under Article 75(1) of Directive 2013/36/EU (CRD) and Article 34(1) of Directive 2019/2034/EU (IFD) and as specified in Guidelines (EBA/GL/2022/06) and (EBA/GL/2022/07), both published on 30/06/2022.

The Capital Requirements Directive (CRD) and the IFD include requirements on the variable remuneration of identified staff, who have a material impact on the banks or investment firms risk profile, or the assets managed by them. Until 2021, investment firms were subject to the same requirements as banks, including a limitation of the variable to fixed remuneration of identified staff to 100% (200% with shareholders’ approval). As of 2022, this requirement, that aims to prevent excessive risk taking, no longer applies to investment firms, that have to set an appropriate ratio for this purpose in their remuneration policies.