9 December 2013

Online consultation launched on new remuneration rules for financial undertakings

The Dutch government is holding a public consultation until the end of December 2013 on proposed new rules concerning remuneration awarded by financial undertakings. Included in the proposed new rules is the 20% bonus cap that formed part of this government’s coalition agreement.

The government’s proposals will be incorporated in the Dutch Financial Markets Supervision Act and bring together new and existing remuneration rules. They will also implement provisions on remuneration set out in the Capital Requirements Directive IV (“CRD IV“). One of the new elements in the proposals is a 20% cap on bonuses. Financial undertakings may not award variable pay above 20% of the annual fixed remuneration. Restrictions are also imposed on severance payments. In line with existing codes, such as the Dutch Banking Code, severance payments for managing directors at all financial undertakings will be limited to 100% of the annual fixed remuneration. In certain situations, financial undertakings will also be obligated to lower or claw back bonuses already awarded.

The proposals introduce other significant changes to the FMSA. For example, the existing rule that any stipulation made in violation of the FMSA cannot be invalidated will be subject to an exception, namely that stipulations deviating from the new remuneration rules will be void.

The proposed remuneration rules apply to all financial undertakings with corporate seat in the Netherlands. But these undertakings must ensure that their subsidiaries also comply with the remuneration rules. If a financial undertaking is part of a group, the Dutch holding company must ensure that all legal and other entities within the group apply the rules. Groups whose main activities are not within the financial sector are exempted.

The 20% bonus cap will apply to Dutch branches of financial undertakings established outside the Netherlands, except for banks and investment firms with seat in a member state that fall within the scope of CRD IV.

The bonus cap will not apply to managers of alternative investment funds ((AIFs), managers of UCITS, and investment firms that act exclusively for their own account with their own funds and capital and have no external clients.

The government plans to submit the remuneration proposals to the Dutch parliament in the spring of 2014. The new remuneration rules are likely to take effect on 1 January 2015. But until 1 January 2016 the bonus cap will not apply to variable remuneration arising from obligations entered into by the financial undertaking before 1 January 2015.