Section 3 of the Rbb stipulates that a financial undertaking must apply the Regulation at the level of the group, the parent company as well as its subsidiaries. This includes branch offices in off-shore financial centres.
This provision is based on the idea that risks ensuing from remuneration policy must be controlled at group level. This is because if risks materialise at a subsidiary, this will of course have repercussions for the group and its other subsidiaries.
Compliance with the Rbb for the group as a whole should be supervised at group level. Non-standard local policies must be in line with group policy: local policy must in any case conform to the Rbb. Local policies must not conflict with provisions in local legislation that explicitly prohibit compliance with specific elements of the Rbb. However, less strict local legislation cannot be used to justify non-compliance with the Rbb.
'Good practice' means that group policy is defined from the top down and does not consist of a series of different local policy documents. The group policy should set out the general framework within which the details of any local policies can be elaborated.
A subsidiary’s remuneration policy may deviate from or elaborate on the group policy, provided that the nature, size and complexity of the relevant business unit have been taken into account. The remuneration policy will have to be aligned to this. In practice this means that a light internal control regime at a business unit where a great deal of risk is taken cannot and may not be compensated for by applying a stricter regime elsewhere. Effective risk management should be in place at each business unit or branch.