Remuneration requirements

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.

Investment firms that are classed as credit institutions or CRR investment firms must comply with the remuneration requirements for credit institutions. Please refer to the following page:

Remuneration requirements

Non-SNI IFR investment firms are IFR investment firms that do not meet the conditions for eligibility as a small non-interconnected IF set out in Article 12(1) of Regulation (EU) 2019/2033 (IFR).

The remuneration policy of non-SNI IFR investment firms must, among other things, describe the governance mechanisms surrounding remuneration. Non-SNI IFR investment firms must also establish a list of staff whose professional activities have a significant impact on the risk profile of the investment firm or the assets it manages, and detail the performance assessment process used to award variable remuneration.

Non-SNI IFR investment firms must comply with the requirements of Articles 38-13 to 38-24 of the Law of 5 April 1993 on the financial sector, as amended, (LFS) transposing the requirements on governance arrangements and remuneration policies of Directive (EU) 2019/2034 (IFD). The remuneration policies and practices of non-SNI IFR investment firms must be gender neutral. When applying the proportionality principle, non-SNI IFR investment firms should refer to Article 38-22 (3) and (4) of the LFS.

In addition, non-SNI IFR investment firms must also make their remuneration policy and practices compliant with the Law of 30 May 2018 on markets in financial instruments, transposing the requirements relating to conflicts of interest and remuneration of Directive 2014/65/EU (MiFID II).

Non-SNI IFR investment firms must also comply with the disclosure requirements of Article 51 of the IFR.

Furthermore, non-SNI IFR investment firms must comply with the requirements of EBA Guidelines on sound remuneration policies (EBA/GL/2021/13) for all staff and for material risk-takers.

Additionally, non-SNI IFR investment firms must comply with the requirements of Commission Delegated Regulation (EU) 2021/2154, in particular the qualitative and quantitative criteria set out therein to identify material risk takers within the non-SNI IFR investment firm. Non-SNI IFR investment firms must list all material risk-takers and indicate the criteria that led to their identification.

Finally, Commission Delegated Regulation (EU) 2021/2155 specifies the classes of instruments that adequately reflect the credit quality of the investment firm as a going concern and possible alternative arrangements that are appropriate to be used for the purposes of variable remuneration. Non-SNI IFR investment firms must ensure proper application of this regulation.

Investment firms are required to report and disclose certain remuneration data, as required by Article 38-24 of the LFS and Article 51 of the IFR. The EBA data collection exercises, which are only applicable to non-SNI IFR investment firms, are further detailed and described in the following EBA Guidelines:

• EBA Guidelines on the benchmarking exercises on remuneration practices and the gender pay gap under Directive (EU) 2019/2034 (“EBA/GL/2022/07”), adopted by Circular CSSF 23/838; 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 38-24 of the LFS.

From the data collection exercises in 2023 for financial year 2022, the 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 dedicated procedure available on 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.

Class 3 investment firms are small and non‐interconnected investment firms as set out in Article 12 (1) of the IFR.

Class 3 investment firms must comply with the remuneration requirements described in Circular CSSF 10/437.

In addition, Class 3 investment firms must also make their remuneration policy compliant with the Law of 30 May 2018 on markets in financial instruments, transposing the requirements relating to conflicts of interest and remuneration of MiFID II.