Background: In the light of the financial crisis in year 2008, regulation on the proportion of the variable remuneration (bonus) to the level of fixed remuneration (base salary) within banks has been introduced at European Union (EU) level. This was approved by the European Parliament (EP) in April 2013, resulting in the CRD IV. By strengthening the existing rules and regulations on remuneration policies and practices, the directive aims at mitigating the excessive risk-taking within financial and credit institutions. The directive introduced a cap on the variable remuneration in an attempt to control the risk behaviour within these institutions. The remuneration cap has become a controversial topic of heavy attention among scholars and in various media worldwide.

Purpose: The purpose of this study is to assess the stakeholders’ opinion, through a European perspective, on the possible impact of the CRD IV variable remuneration cap. With the objective to shed light on the effectiveness of the variable remuneration cap, the findings will be tested through hypotheses deducted from previous research and theory, primary from the agency theory.

Method: This research analyses a public consultation issued towards the EC’s impact assessment (2016) of the CRD IV on the basis of a content analysis. The analysis of the data is primary qualitative, some quantitative elements are incorporated to code and categorize the empirical data.

Conclusion: This study shows mixed support for the three hypotheses deducted from the previous studies and existing theory predicting that the CRD IV variable remuneration cap will have several unintended consequences. The results from this study can confirm the prediction that the directive will lead to an increase in the level of fixed remuneration in order to avoid lowering the total level of remuneration. Further, the result indicates that the regulation will have a negative effect on their competitiveness and thereby diminish the financial stability. This study cannot confirm nor deny the effectiveness of the regulation on lowering excessive risk-taking by managers within banks, and can therefore be regarded as critical towards its usefulness. This study confirms the relevance of the efficient contracting theory and its depiction of variable remuneration in the banks.