CRD IV - CSSF Circular 15/622 on higher ratio notification procedure applicable to remuneration policy according to Article 94(1)(g)(ii) of Directive CRD IV
On 21 October 2015, the CSSF published the circular 15/622 on higher ratio notification procedure applicable to remuneration policy according to Article 94(1)(g)(ii) of Directive 2013/36/EU (“CRD IV”) following its transposition into Luxembourg law via Article 19(7°)(g) of the law of 23 July 2015.
The law of 23 July 2015 requires that CRR institutions, that do not benefit from a derogation granted by the CSSF, set a ratio between the fixed remuneration and the variable remuneration for persons whose professional activities have a material impact on the risk profile of the institutions. These persons may not receive a variable remuneration that exceeds 100% of their fixed remuneration.
However, in accordance to Member States option, Article 38-6(g) of the Law of 5 April 1993 on the financial sector has set the higher maximum ratio at 200%. This higher ratio shall be subject to annual approval by the shareholders, owners or members of the CRR institutions.
Any approval of a higher ratio for Non-Significant Institutions shall be notified to the CSSF.
Any approval of a higher ratio for Significant Institutions shall, in compliance with Circular CSSF 14/596 on the communication regime under the Single Supervisory Mechanism for Significant Entities be notified to the European Central Bank JST team, with a copy sent to the CSSF.
The notification process consists in two different steps:
- the CRR institutions must inform the CSSF without delay once a detailed recommendation requesting the application of a higher ratio has been submitted to the shareholders or owners or members of the CRR institution and should be able to demonstrate to the CSSF that the proposed higher ratio does not conflict with the CRR institution’s obligations. The required information shall be communicated through the Notification Form - Part A;
- the CSSF should be informed without delay once the shareholders or owners or members of the CRR institution have taken a decision regarding the approved higher maximum ratio. The required information shall be communicated through the Notification Form - Part B
This process needs to be renewed annually should the CRR institution wish to maintain this higher maximum ratio.