On 16 June 2017, the Luxembourg Financial Regulator (Commission de Surveillance du Secteur Financier – CSSF) issued Circular 17/658 addressed to credit institutions and CRR investment firms on the compliance with the European Banking Authority’s “Guidelines on sound remuneration policies under Articles 74(3) and 75(2) of Directive 2013/36/EU and disclosures under Article 450 of Regulation (EU) No 575/2013” (the Guidelines).

The Guidelines (in French, English, and German):

  • Introduce a bonus cap between fixed and variable remuneration.
  • Require an annual identification of material risk takers.
  • Provide the conditions to pay a variable remuneration in other financial instruments.

In Circular 17/658, the CSSF states that:

  • Credit institutions and CRR investment firms, (subject to Regulation (EU) No 575/2013), should comply with the Guidelines.
  • Circular 10/496 is repealed as of 16 June 2017.
  • It will not apply the European Banking Authority’s legal interpretation of the application of the principle of proportionality in respect of remuneration policies. According to this interpretation, the wording of section 92 (2) of the Capital Requirements Directive (CRD) IV would no longer permit the neutralization of remuneration policy requirements for small and non-complex institutions. This new interpretation has been the subject of intense discussions at European level, as the European Commission introduced in its draft amendment to CRD IV (in French, English, and German) a proposal to amend Article 94 which aims to reintroduce the possibility of neutralizing certain variable compensation requirements for small and non-complex establishments. Given this background, the CSSF will maintain the application of Circular CSSF 11/505 (French and English), so that all the requirements that until present could be neutralized may continue to apply, until new rules on the subject are agreed.