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CSSF circular '10/437' - Remuneration policies in the financial sector | Brochure



CSSF circular '10/437'The recent financial crisis highlighted, amongst other things, the risks inherent in financial institutions having inadequate reward governance policies and structures. Over the last year a number of international authorities (G20, FSB, European Commission, CEBS) have consequently studied and issued various recommendations to align the remuneration principles of financial institutions with long-term value creation, to increase their transparency and to ensure adequate control procedures with regard to their application and monitoring.

In particular, the CEBS (Committee of European Banking Supervisors) finalised its list of ‘High-level principles for remuneration policies’ in April 2009, followed by the issue of the European Commission's own recommendation (recommendation 2009/382/ CE). The objective of the CSSF (Commission de Surveillance du Secteur Financier) circular 10/437 is the implementation of the latter in Luxembourg.

Scope and application modalities

The circular applies to all entities, natural or legal persons subject to the prudential supervision of the CSSF, including their foreign branches as well as branches of similar entities established in Luxembourg and the registered office or the central administration of which is located outside the European Economic Area. It thus applies notably to credit institutions, investment firms, managers of pension funds and collective investment undertakings (financial undertakings).

The circular concerns the remuneration of persons who are members of the administration and management of a financial undertaking as well as the categories of staff whose work has a material impact on the risk profile of the financial undertaking.

Entities which only pay fixed salaries are exempted from the circular. It also excludes fees and commissions received by external intermediaries in case of outsourced activities.

The principles of the circular must be included in remuneration policies by 30 June 2010 with effective implementation as of 1 January 2011. Where necessary, existing employment contracts should be renegotiated as soon as possible, however, no later than 31 December 2010.


The assessment of remuneration policies forms an integral part of the supervisory review process, as defined by CSSF Circular 07/301 (ICAAP). In addition, statutory auditors (réviseurs d’entreprises) must assess the internal rules related to the circular and their application in the long-form report for audits of the financial year ending after 31 December 2010. Remuneration policies must furthermore be communicated to the CSSF by the financial undertakings concerned no later than 30 September 2010.


The circular specifies the responsibilities of the board of directors as defining and following-up the implementation of the remuneration policy and those of the executive management for its deployment and communication.

Remuneration policies must be clear, documented and transparent and relevant information relating thereto adequately communicated to staff and other related parties.

The implementation of the remuneration policy shall, at least on an annual basis, be subject to central and independent internal review by control functions (risk management, internal audit, compliance function, etc.). This review must be submitted to the board of directors with a copy of the report being made available to the CSSF.

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