New rules for investment firms remuneration policies as of 31 July 2021 in Luxembourg

Directive 2019/2034 on the prudential supervision of investment firms was implemented by a law of 21 July 2021, amending the law of 5 April 1993 on the financial sector, and which entered into force on 31 July 2021.

Content of the policy

The below rules do not apply to small and non-interconnected investment firms. The remuneration policy shall:

  • clearly described and be proportionate to the size, internal organisation, nature, scope and complexity of the company's activities;
  • make a clear distinction between the criteria used to determine the basic fixed remuneration and variable remuneration;
  • be gender neutral;
  • enable and promote sound and effective risk management;
  • be consistent with the company's strategy and economic objectives and also takes into account the long-term effects of the investment decisions that are made;
  • include measures to avoid conflicts of interest, encourage responsible conduct of the company's business and promote risk awareness and prudent risk-taking.

In addition, the staff performing control functions shall be independent from the business units they supervise, have the necessary authority and be remunerated on the basis of the achievement of objectives related to their functions, independently of the performance of the business areas they control.


Ratio between the variable and fixed components of total remuneration shall be appropriate, taking into account the business activities of the investment firm and the risks associated with them as well as the impact on different categories of staff.


It shall establish variable remuneration in a manner appropriate to their size and internal organisation and to the nature, scope and complexity of their activities.

Variable remuneration

General requirements

The rules only apply for categories of staff, including senior management, risk takers, staff engaged in control functions and any employees receiving overall remuneration equal to at least the lowest remuneration received by senior management or risk takers, whose professional activities have a material impact on the risk profile of the investment firm or of the assets that it manages.

Variable remuneration shall reflect sustainable and risk-adjusted performance by the staff member, as well as performance beyond that required by his or her job description.

The variable remuneration does not affect the investment firm's ability to ensure a sound capital base.

Specific rules apply in case the investment firm benefits from extraordinary public financial support.


Investment firms whose on balance sheet and off-balance sheet assets are on average greater than EUR 100,000,000 over the four-year period immediately preceding the financial year concerned and persons whose annual variable compensation exceeds EUR 50,000 or represents more than a quarter of their total annual compensation, also comply with at least 50% of the variable remuneration consisting of instruments.

Assessment of performance

Where variable remuneration is performance-based, the total amount of variable pay should be determined on the basis of a combined assessment of individual performance, the performance of the business unit concerned and the overall results of the investment firm.

In assessing individual performance, both financial and non-financial criteria are taken into account.

The performance assessment shall be based on a period of several years, taking into account the length of the business cycle of the investment firm and its economic risks.


At least 40% of the variable remuneration shall be deferred for a period of three to five years, as appropriate, depending on the length of the business cycle of the investment firm, the nature of its business, its risks and the activities of the individual concerned, unless the variable remuneration is particularly high, in which case the proportion of variable remuneration deferred shall be at least 60%.

Malus and clawback

Up to 100% of the variable remuneration shall be subject to contraction in the event of poor or negative financial performance of the firm, including through malus or clawback arrangements subject to criteria set by the investment firms which are in particular applicable to the following situations:

  1. the person in question has been involved in, or is responsible for, conduct that has resulted in significant losses to the investment firm;
  2. the person in question is no longer considered to be sufficiently fit and proper.


If certain criteria are met, the threshold of EUR 100,000,000 is raised to EUR 300,000,000 for investment firms.


Management body

In the exercise of its supervisory function, it adopts and regularly reviews the remuneration policy and has overall responsibility for overseeing its implementation.

The implementation of the remuneration policy is subject to a central and independent internal evaluation in the exercise of supervisory functions, at least once a year.

Remuneration committee

The remuneration of senior risk and compliance managers is directly supervised by the remuneration committee or, if such a committee has not been established, by the management body in the exercise of its supervisory function.


  • The CSSF has the right to require investment firms to limit variable remuneration as a percentage of net income where such remuneration is not compatible with the maintenance of a sound financial basis;
  • collects published information provided by investment firms on the gender pay gap and uses this information to compare remuneration trends and practices. The CSSF shall transmit this information to the EBA;
  • shall be provided with information on the number of natural persons per investment firm whose remuneration amounts to EUR 1,000,000 or more per financial year, broken down by remuneration bands of EUR 1,000,000, including their professional responsibilities, the relevant area of activity and the main elements of salary, bonuses, long-term allowances and pension contributions;
  • shall be provided, upon request, with the total amounts of remuneration for each member of the management body or of the authorised management.