External regulatory requirements and internal drivers for cultural change continued to shape the compensation policy and systems within the Group. As a result, 2013 saw significant further progress with regards to our overall compensation strategy, structures and governance framework both at the Management Board level and Group-wide.
We continue to support and value the merits of Variable Compensation. Operated and governed within a sound risk management framework it is a vital tool to attract, retain and appropriately incentivize high performing talent. In this regard, our Group Variable Compensation pool in respect of FY 2013 was € 3.16 billion. In keeping with our historic approach, 44 % of the pool was deferred over three to five years and made subject to a combination of behavioral and performance based forfeiture provisions. The scope of the forfeiture provisions have been significantly extended this year.
The Supervisory Board restructured the compensation system for members of the Management Board. This change was approved by the General Meeting in May, with effect as of January 1, 2013. The restructuring is largely based on the recommendations of the “Independent Panel“ established in 2012, and constitutes an additional component of the implementation of the Strategy 2015+. Compensation is now even more clearly aligned to the strategic goals and values of Deutsche Bank. In particular, broadening the performance criteria in both of the Variable Compensation components demonstrates even greater balance and sustainability for remuneration.
In accordance with the requirements of the InstitutsVergV, a new Compensation Control Committee, which is mandatory as of January 1, 2014, was established from Supervisory Board members. The Committee will assume the functions of the Chairman’s Committee, in particular with regard to preparing the design of the compensation system and the determination of the compensation of Management Board members. The Compensation Control Committee already began its work at the end of 2013.
In accordance with the InstitutsVergV we identified 1,295 material risk takers (referred to as “Regulated Employees”) in respect of 2013. This represents a 7 % increase from 2012 which is driven in part by an increase in Risk function personnel identified and reduction in the compensation threshold, above which an employee is automatically deemed to be a material risk taker. This action has been taken voluntarily and in advance of the final European Banking Authority (EBA) Technical Standards which have been submitted by the EBA to the Commission in December 2013 and are expected to be published in 2014.
Approximately 560 of the Regulated Employee group are based in the European Union (EU). From the Regulated Employee population, we again identified a core senior management group consisting of 133 employees. As the leaders and stewards of the Bank it is prudent that the majority of their compensation should be linked to the long-term success of the Group. As such, their deferred equity awards are subject to a combined deferral and retention period of five years and the average deferral rate of Variable Compensation across this group was in excess of 85 %.