Netherlands | Changes to Dutch Financial Supervision Act

The Dutch Financial Supervision Act (Wet op het financieel toezicht - FSA) regulates supervision of almost the entire financial sector in the Netherlands.

From 1 January 2023, the FSA was changed with respect to certain provisions regarding remuneration.

There are three main changes, as follows:

 (i) A statutory five-year retention period for, among other things, shares as part of fixed remuneration

Board members and other employees of financial companies are obliged to hold shares that are part of fixed remuneration for a period of five years. During this period, these shares may not be sold. This obligation also applies to other comparable financial instruments, such as options. The aim of this change is to align financial incentives with the company's long-term interests

(ii) A legal requirement for financial companies to take account of and disclose the ratio between the remuneration and the social function of the company and how this ratio was established

Financial companies are required to describe in their remuneration policy how the company accounts for the relationship of the remuneration of directors, supervisory directors and employees of the company to its social function and the way of its realization. Financial companies that are required to prepare a management report (bestuursverslag) under the FSA are required to make such report public. The aim of this change is to allow the supervisory board and the general meeting to take more account of the social function of the company and its position in society. Stakeholders can then hold the supervisory board accountable in this regard.

(iii) A tightening of the possibility to deviate from the bonus ceiling  for non-collective bargaining staff

For directors and employees of financial companies, the bonus may be a maximum of 20% of fixed remuneration (the so-called 'bonus ceiling'). There are various exceptions to the 20% bonus ceiling, such as the exception for non-collective bargaining staff. This exception means that the regular 20% bonus ceiling for an individual ('non-collective bargaining employee') can be stretched to 100% of the fixed remuneration if the average of bonuses for non-collective bargaining staff does not exceed the 20% bonus ceiling.

This exception possibility will be narrowed. It is no longer possible to derogate for employees who perform internal control functions or are directly engaged in providing financial services to consumers. Insofar a financial company makes use of this exception, there is an annual notification obligation to the supervisor. In the event of an (annual) supervisory inquiry into the remuneration policy and remuneration data, the communication regarding the collective bargaining exception may be included therein. The aim of this change is to emphasize the exceptional nature of the derogation option and to prevent the derogation option from being applied in the future to personnel who make important risk assessments for the company or deal directly with consumers.

For changes (i) and (iii) above, a transitional period applies for existing employees. For new employees, the new provisions will apply as of 1 January 2023. In addition, provision is made for shares and similar financial instruments in fixed remuneration that have already vested.

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