Which methodology we apply to determine our variable compensation pool
As an EU headquartered institution, Deutsche Bank is subject to the Capital Requirements Regulation (CRR) and Capital Requirements Directive 4 (CRD 4) globally, as translated into German national law in the German Banking Act and Institutsvergütungsverordnung (InstVV). The Bank continues to apply the InstVV requirements as minimum standards globally and ensure compliance with local regulatory requirements within a robust compensation framework.
Variable Compensation (VC) is a discretionary compensation element that enables us to reward employees for their performance and behaviors, while reflecting the Bank’s affordability and financial situation. There are three components of VC – Group VC Component, Individual VC Component and the Recognition Award.
The Bank applies a robust methodology when determining VC, which reflects risk-adjusted performance and is primarily driven by (i) Group affordability, i.e. what “can” the Bank award in alignment with regulatory requirements, and (ii) performance, i.e. what “should” the Bank award in order to provide an appropriate compensation for performance, while protecting the long-term health of the franchise. These aspects apply to both the Group VC Component and the Individual VC Component.
This year’s total amount of year-end performance based VC reflects the Bank’s overall performance, in the context of its strategic refocus, transformation, and the de-risking of its balance sheet. Thus, carefully balancing the recognition of employees’ demonstrated sustainable performance and contributions against the Bank’s performance, affordability and overall financial health, with full and robust consideration of the macro environment.
The structure of the Group VC Component remained unchanged in 2020 and is based on four key performance indicators (KPIs): the Bank’s Common Equity Tier 1 capital ratio, leverage ratio, adjusted costs and post -tax return on tangible equity. In line with the Individual VC Component, KPIs are measured against the respective annual targets. Throughout 2020, considering the Bank’s change in strategy and its restructuring, the Management Board confirmed an achievement rate of 72.5%, which serves as a basis to calculate the Group VC Component awarded to each eligible employee.
Considerations with regard to VC Determination
The Bank applies moderation in determining VC pools, but without losing sight of the competitive landscape
Robust compensation framework
Deutsche Bank significantly enhanced its variable compensation framework, to ensure that risk-aligned and robust processes are in place which balance distributable amount, stakeholder interests and capital preservation
Extraordinary macro circumstances (such as the COVID-19 pandemic) are taken into due consideration, to ensure that we maintain a sound capital base and to preserve the Bank’s capacity to support lending to the real economy
VC Pool Determination
Long-term financial impact
A prudent and forward-looking approach is taken, to assess the implications of the Bank’s bonus pool determination against the multi-year financial plan and, to ensure that the amount and quality of total capital is sustainable
The viability of our compensation decisions is considered in the context of our global competitor landscape, to ensure long-term competitiveness and talent retention to deliver against our transformation goals and financial targets
We apply a moderate approach when deciding variable compensation payments, without losing sight of the need to remunerate our employees fairly, according to their performance and in-line with market conditions
The Individual Component of discretionary awards, are determined based upon a range of financial and non-financial factors, including divisional performance, the employee’s individual performance against objectives and expectations (reflecting “how” the performance outcomes were achieved), relativities within peer group, and adherence to the Bank’s core values and beliefs. For more information, please refer to our compensation report.
Workforce costs and revenues
|Compensation and benefits
(in € million)
|Ø Compensation and benefits per Ø FTE in period
(in € thousand)
|Share of compensation and benefits in % of total expenses2||49.4%||44.4%||50.4%|
|Wages and Salaries3||8,526||9,184||9,828|
|Social Security costs3||1,945||1,958||1,986|
|thereof: those relating to pensions3,4||1,111||1,146||n.a.|
|Total net revenues
(in € million)
|Ø Revenues per Ø FTE in period
(in € thousand)
Compensation and benefits by division
in € million
|Corporate Bank (CB)||1,064||1,073||1,063|
|Investment Bank (IB)||1,906||1,983||2,175|
|Private Bank (PB)||2,884||2,990||3,059|
|Asset Management (AM)||740||832||787|
|Capital Release Unit (CRU)||168||359||547|
|Corporate & Other (C&O)||3,709||3,906||4,183|