Remuneration in the financial Sector

Date 9 feb. 2015
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On 14 January 2015, the Danish FSA published a memorandum regarding remuneration in the financial sector (“the Memorandum”). The Memorandum highlights the tendencies and practice regarding remuneration which the FSA has identified based on the information on the remuneration of the board of directors, the Executive Board and other substantial risk takers that the financial companies have reported to the FSA.


It is shown by the Memorandum that the area for remuneration in general is a focus point for both the FSA and the European Banking Authority (“EBA”). It also appears from the Memorandum that the FSA repeatedly has sanctioned financial companies as a result of criminal offenses or increased risk pursuant to the remuneration rules.


The main principles of the remuneration rules in the financial sector are described in the following:


Identification of significant Risk Takers in Addition to the Board of Directors and the Executive Board

It is important for financial companies to identify the company’s significant risk takers as special rules on remuneration apply to those employees.


It is the responsibility of the board of directors to specifically evaluate and identify which persons, in addition to the board of directors and the Executive Board, represent the company’s significant risk takers.


On March 2014, the European Commission adopted a set of technical standards containing a list of qualitative and quantitative criteria for when an employee is reckoned to be a significant risk taker.


The qualitative criteria relate to the employee’s role, responsibilities and decision-making authority, while the quantitative criteria relate to the employee’s level of remuneration.


Applicable to the quantitative criteria in particular, employees may be exempted from being considered significant risk takers, even if the employee in question meets one of the quantitative criteria, provided that that the employee’s work is specifically assessed to not have any significant influence on the company’s risk profile.


In the autumn of 2013, the FSA reprimanded four financial companies for not having identified the company’s other significant risk takers.


Variable Remuneration

The special remuneration rules contain a number of restrictions on the allocation of variable remuneration to the board of directors, the Executive Board and other significant risk takers. The restrictions include:

  • ceiling on the variable remuneration;
  • requirement for an appropriate balance between fixed and variable remuneration;
  • requirement for determining the performance based (variable) remuneration; and
  • requirement for independence between employees working in supervision and the relevant department under supervision in of the event that the employee is entitled to performance related remuneration.

It appears from the Memorandum that financial companies have previously categorized bonuses determined based on the employees’ roles and responsibilities etc. as fixed remuneration. It is EBA’s and FSA’s assessment that these bonuses must be categorized as variable remuneration and hence be subject to the special remuneration rules.


Likewise, the special remuneration rules must apply for both new recruitment and severance payments, however with the exceptions that apply to severance payments below a certain value.


Highly paid Employees

Each year no later than 1 May, financial companies must report the number of highly paid employees of the company to the FSA.


Highly paid employees are persons who, as part of their employment or duties as a board member in a financial company, earn a total annual salary, including pension, exceeding an amount equivalent to EUR 1m.


Supervision and Sanctions

The FSA regularly conducts inspections on remuneration, including on-site and off-site inspections.


If the FSA in connection with an inspection determines any potential deficiencies in the remuneration policies set by the financial companies, the FSA may choose to assign one or more of the following responses:

  • administrative fine;
  • notification to the police so that the case is surrendered to police investigation and possible criminal prosecution;
  • order of a particular behavior or action going forward;
  • reprimand on a noted offense that no longer exists; and
  • risk information drawing the company’s attention to any particular increased risk that the company may have in an area without the existence of offenses. 

In relation to the supervisory reactions mentioned above,  both the FSA and the financial company must publish the supervisory reaction on their website, except if the case is handed over to the police for further investigation and publication would cause excessive damage to the reported company, or if the investigative considerations go against publication.


Our Assessment

With the Memorandum the FSA has specified which parts of the remuneration rules may expect special focus going forward.


In addition, the Memorandum provides specific answers to specific issues on remuneration rules, which, according to the information submitted, have been unclear in the financial sector.


The Memorandum also shows that the larger the companies are, the more the use of variable remuneration to the Executive Boards increases, while variable remuneration of directors is rarely seen in Denmark. Thus, the Memorandum can also be used for individual financial companies to draw inspiration regarding trends and tendencies for remuneration in other financial companies.



If you have any questions or would like additional information regarding the rules of remuneration rules in the financial sector, please contact Partner Pernille Nørkær ( or Junior Ássociate Rasmus Albrechtsen (


The above does not constitute legal counselling and Moalem Weitemeyer Bendtsen does not warrant the accuracy of the information. With the above text, Moalem Weitemeyer Bendtsen has not assumed responsibility of any kind as a consequence of a reader’s use of the above as a basis of decisions or considerations.