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Expansion of Dutch remuneration rules: applicability to branches in the Netherlands

Dutch rules on remuneration have been extended to cover some branches of non-Dutch financial undertakings. The Dutch Act on Remuneration Policies in Financial Undertakings (ARPFE) is known for its strict rules on remuneration, particularly its 20% bonus cap.

Contrary to the 100% (or, under certain circumstances, 200%) bonus cap of the Capital Requirements Directive IV (CRD IV), which applies to Identified Staff of credit institutions and investment firms, the 20% bonus cap of the ARPFE initially applied to all persons working under the responsibility of (i) a financial undertaking, as defined in the Dutch Financial Markets Supervision Act (FMSA) with its seat in the Netherlands, and (ii) a Dutch branch of a financial undertaking with its official seat outside the Netherlands (not being a bank or an investment firm as defined in CRD IV). A financial undertaking is defined in the FMSA and includes not only a credit institution and an investment firm, but also (among others) an insurance company and a premium pension institution. Initially, a branch of a financial undertaking was excluded from the full scope of the ARPFE (except as regards the bonus cap as set out above). However, pursuant to the Financial Markets Amendment Act 2016 (the Amendment Act), the scope of the Dutch rules on remuneration of the ARPFE has been expanded.

Branches

From 1 April 2016:

  • The rules of the ARPFE on sound remuneration policy and publication, and information requirements, will apply to almost all financial undertakings as defined in the FMSA, regardless of whether such financial undertaking has its official seat in the Netherlands.
  • The scope of the rules of the ARPFE in respect of the bonus cap, the prohibition on guaranteed variable remuneration and rules on severance pay, which previously only applied to financial undertakings with their seat in the Netherlands, has, pursuant to the Amendment Act, been expanded to financial undertakings which are required to have a licence for a branch in the Netherlands pursuant to the FMSA.

Branches in the Netherlands of financial undertakings which are not required to have a licence pursuant to the FMSA (ie because they act on the basis of a European passport) are still excluded from the scope of the ARPFE. However, branches of financial undertakings located outside the EEA or branches within the EEA not acting on the basis of a European passport, are now included in the scope of the ARPFE pursuant to the Amendment Act. In addition, it has been made clear that the bonus cap only still directly applies to a Dutch branch of a financial undertaking, with its official seat outside the Netherlands, and which is not covered by the remuneration rules of CRD IV (being, in short, banks or investment firms as defined in CRD IV).

Exceptions to the 20% bonus cap for personnel partly working at a Dutch branch

The following exceptions to the 20% bonus cap still apply:

a) for staff predominantly (at least 50% of their time) working outside the Netherlands, an individual bonus cap of 100% applies;

b) for staff predominantly (at least 50% of their time) working outside the EEA, an individual bonus cap of 200% may apply, subject to shareholder approval and the procedure pursuant to CRD IV.

Legal and Regulatory Risk Note
Europe