Directive 2010/76/EU, which amends Directives 2006/48/EC and 2006/49/EC, requires banks and investment companies are financially sound by laying down rules on capital requirements that cover their risks to protect depositors.
It also requires appropriate remuneration policies that do not encourage or reward excessive risk taking; and this aims to combat remuneration incentive based practices that may have unfortunate consequences. Supervising authorities are allowed to impose penalties on banks that do not comply with these requirements. How the court identifies what is a "poorly designed remuneration structure" will be interesting to see. Although the Directive does lay down guidance as to what is an appropriate remuneration structure for credit institutions i.e. Annex I, which amends Annex V of the 2006/48/EC Directive on remuneration policies.
Finally, the Directive also lays down a ratio for capital specifically earmarked for re-securitisation to ensure banks take due regard to the risks involved with this kind of complex financial product.
The EC hopes to take advantage of the new possibility provided by the Lisbon Treaty to impose daily penalty payments on Member States that have not transposed the Directive in full by the date of its judgment establishing non-compliance. In this case the penalty requested for Italy €96446.70/day and for Poland €37396.80/day.
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