EBA Guidelines on Remuneration policies: CSSF position

On 16 June 2017, the supervisory authority ("CSSF") adopted CSSF Circular 17/658  ("Circular") in relation to the adoption of the EBA Guidelines on sound remuneration policies (EBA/GL/2015/22), which the CSSF intends to follow. The Circular repeals the existing CSSF Circular 10/496 and specifies that CSSF Circulars 10/497 and 11/505 will be amended shortly.

The main amendments introduced by the EBA Guidelines are described in the Circular and the following points are worth mentioning:

• It has been clarified that non-CRR¹ subsidiaries within a CRR group, included in the scope of prudential consolidation of a consolidating institution in a Member State, should (i) have remuneration policies in line with the group-wide remuneration policy for all staff, as well as (ii) comply with the requirements set out in Articles 92(2), 93 and 94 of CRD IV² (including the bonus cap), corresponding to Articles 38-5, 38-6 and 38-7 of the Law of 5 April 1993 on the financial sector, at least for the identified staff whose professional activities have a significant impact on the group's risk profile. This approach will therefore have an impact on staff of management companies/AIFMs which are part of a CRR group and whose professional activities have a significant impact on the group's risk profile.
• According to the EBA’s interpretation of the application of the principle of proportionality in respect of remuneration policies, the wording of Article 92 (2) of CRD IV would no longer permit the neutralisation of requirements in terms of remuneration policy. Nevertheless, the CSSF maintains the application of CSSF Circular 11/505, so that all the requirements that could be neutralised until now may continue to be neutralised until the application of new European rules in the area.

The CSSF further mentioned that it envisages publishing an FAQ in relation to the EBA Guidelines during the course of this year.