1. Remuneration policies and practices

The CSSF monitors compliance with the requirements relating to remuneration policies in the financial sector. The remuneration procedures and arrangements put in place by entities are an integral part of sound internal governance arrangements, which in turn contribute to effective and sustainable risk management. The remuneration structure, the processes for determining it and the policies implemented by entities in this area are part of the sound governance of entities in the financial sector, the aim of which is to avoid excessive risk-taking.

Institutions should take into account the nature, scope and complexity of their activities when determining their remuneration policies.

The credit institutions’ remuneration policy must, among other things, describe the governance mechanisms surrounding remuneration issues. Credit institutions must also establish a list of staff whose professional activities have a significant impact on the credit institution’s risk profile and detail the performance evaluation process used to award variable remuneration.

Credit institutions must comply with the requirements of Section 1 of Chapter 4a of the Law of 5 April 1993 on the financial sector, as amended, (LFS) transposing the requirements relating to governance arrangements and remuneration policies of Directive 2013/36/EU (CRD IV), as amended by Directive 2019/878/EU (CRD V). In particular, the remuneration policies and practices of credit institutions must be gender-neutral. When applying the proportionality principle, credit institutions must refer to Article 38-6 (2) and (3) of the LFS.

In addition, credit institutions that provide investment services or activities must also comply with the Law of 30 May 2018 on markets in financial instruments, transposing into the LFS the remuneration policy requirements of Directive 2014/65/EU (MiFID II).

Credit institutions must also comply with the disclosure requirements in Article 450 of Regulation (EU) No 575/2013 (CRR), as amended by Regulation (EU) No 2019/876 (CRR II). Commission Implementing Regulation (EU) 2021/637 sets out implementing technical standards and provides tables and formats for the disclosure requirements of Article 450 of the CRR in Article 17 and Annex XXXIII.

Furthermore, credit institutions must comply with the requirements of Article 38-5 (2) of the LFS and Commission Delegated Regulation (EU) 2021/923 and use the qualitative and quantitative criteria set out therein when identifying the material risk-takers within the credit institution. The credit institution must list all material risk-takers and indicate the criteria which led to their identification.

Additionally, credit institutions must comply with the requirements of the revised EBA Guidelines on sound remuneration policies (EBA/GL/2021/04) for all staff and for material risk-takers, adopted by Circular CSSF 22/797. Credit institutions must also comply with the EBA Guidelines on remuneration policies for sales staff (EBA/GL/2016/06), which set out requirements on remuneration policies and practices to improve links between incentives and the fair treatment of consumers for staff providing products or services to consumers.

In addition, Commission Delegated Regulation (EU) No 527/2014 specifies the categories of instruments that appropriately reflect the credit quality of the institution and are intended to be used for the purposes of variable remuneration. Credit institutions must ensure proper application of this regulation.

Finally, in the event that the variable remuneration of a material risk-taker exceeds 100% of its fixed remuneration, the notification procedure defined in Article 38-6 (1) g) of the LFS must be followed, as described in Circular CSSF 15/622.

Laws, regulations and directives

Circulars

2. Remuneration reporting

Credit institutions are required to report and disclose certain remuneration data, as required by Article 38-10 of the LFS and further detailed in Article 450 of the CRR as well as Article 17 and Annex XXXIII of Commission Implementing Regulation (EU) 2021/637 laying down implementing technical standards with regard to public disclosures. The data collection exercises are further detailed and described in the following EBA Guidelines:

  • EBA Guidelines on the benchmarking exercises on remuneration practices, the gender pay gap and approved higher ratios under Directive 2013/36/EU (EBA/GL/2022/06), adopted by Circular CSSF 23/836; and
  • EBA Guidelines on the data collection exercises regarding high earners under Directive 2013/36/EU and under Directive (EU) 2019/2034 (EBA/GL/2022/08), adopted by Circular CSSF 23/837.

These Guidelines organise the EBA remuneration data collection exercises. Entities that are in scope of the exercises are informed by letter in due course. Additionally, the CSSF will continue to conduct national data collection exercises including a wider scope of entities, in line with its supervisory role detailed in Article 38-10 of the LFS.

From the data collection exercises in 2023 for the financial year 2022, the EBA data collection format will be XBRL rather than Excel, and data will need to be submitted using communication means proposed by the CSSF as per Circular CSSF 23/833:

  • through a dedicated procedure available on the eDesk platform (https://edesk.apps.cssf.lu/); or
  • via the API interface (S3) provided by the CSSF.

Technical support can be found in the User Guide, the Excel file describing the different XBRL tables (both below), as well as the EBA website on the reporting framework: https://www.eba.europa.eu/risk-analysis-and-data/reporting-frameworks/reporting-framework-3.2.

The EBA data collection exercises and frequencies of these exercises are listed in the table below

EBA/GL/2022/06

Exercise Frequency First data collection
Remuneration benchmarking of a sample of credit institutions annually 2023 for financial year 2022
Gender pay gap data collection of a sample of credit institutions every three years 2024 for financial year 2023
Approved higher ratios data collection of all credit institutions that have approval every two years 2023 for financial year 2022

EBA/GL/2022/08

Exercise Frequency First data collection
High earners (earning more than €1m) data collection of credit institutions annually 2023 for financial year 2022
High earners (earning more than €1m) data collection of non-SNI IFR investment firms 1 annually 2023 for financial year 2022

1 Only relevant for CIs that include non-SNI IFR investment firms in their consolidated situation.

Laws, regulations and directives