June 2017 - Luxembourg Employment News
New Circular 17/658 regarding remuneration policies
Following the enactment of the Capital Requirements Directive 2013/36/EU (“CRD IV”), the competent Luxembourg authority for the supervision of the financial sector – the Commission de Surveillance du Secteur Financier (“CSSF”) has published on 16 June 2017 a new circular (CSSF 17/658) adopting the European Banking Authority’s (“EBA”) guidelines on sound remuneration policies.
The Circular does remind the principal amendments provided for by the EBA’s guidelines, amongst which are:
- the introduction of a bonus cap (in this respect, please see also our Newsletter of 20 January 2015 relating to the CSSF circular 15/601 regarding the notification procedure for remuneration policies in which the ratio of variable to fixed remuneration is to exceed the initial cap provided for by CRD IV);
- the annual identification process of the Material Risk-Takers;
- the compliance Articles 92(2), 93 and 94 of Directive 2013/36/EU by the subsidiary established in a third country that is included in the scope of prudential consolidation of a consolidating institution in a Member State.
However, as expected given the discussion around the topic of “proportionality” and the current review of CRD IV in that respect, the CSSF has decided not to follow the EBA’s legal interpretation concerning the “proportionality” in remuneration policies. The EBA’s interpretation would make it indeed impossible for small and non-complex institutions to neutralise remuneration policies requirements.
The CSSF has therefore opted to maintain Circular 11/505 relating to the application of the proportionality principle. The latter shall henceforth remain in force until new European rules come into force.