Germany: German Legislator Decides To Cap Bonuses For Bank Staff – CRD IV Implementation Act Adopted

Last Updated: 13 August 2013
Article by Nicolas Rößler, LLM and Guido Zeppenfeld, LLM
Most Read Contributor in Germany, September 2016

Keywords: German Legislator, Bonuses, Bank, Implementation Act, German Federal Council,

On July 5, 2013, the German Federal Council (Bundesrat) decided to raise no objection against the CRD IV Implementation Act passed by the German Federal Parliament (Bundestag) on June 27, 2013. The legislative procedure for this Act, which implements Directive 2013/36/EU (Capital Requirements Directive IV, "CRD IV") into German law, is thus completed.

Together with Regulation (EU) No. 575/2013 (Capital Requirements Regulation, "CRR"), the CRD IV is part of the so-called "Single Rule Book". The Single Rule Book enhances the capital adequacy of credit institutions and other institutions regulated by the German Banking Act ("Institutions"), provides for liquidity requirements harmonised throughout the EU, and harmonises the European banking supervisory legislation. Unlike the CRD IV, the CRR does not require implementation; it has a direct and immediate effect on the Institutions.

The Act implementing the requirements of CRD IV will enter into force on January 1, 2014. The German Banking Act (Kreditwesengesetz, "KWG") will be changed, and a revision of the German Remuneration Regulation for Institutions (Instituts-Vergütungsverordnung, "InstitutsVergV")) is expected. Under employment law aspects, the new regulations on bonus caps are of particular importance. This Legal Update outlines the main new regulations and their employment law implications.

New regulations

Cap on the variable remuneration

Principle: Maximum 100 per cent of the fixed remuneration

According to the revised Section 25a para. 5 KWG, the variable remuneration of employees or managers of Institutions must generally not exceed 100 per cent of the fixed remuneration.


In exceptional cases, a variable remuneration of up to 200 per cent of the fixed remuneration may be granted by resolution of the shareholders, the owners, the members or the governing bodies of the Institution. The resolution requires a majority of at least 66 per cent of the votes cast provided that at least 50 per cent of the voting rights are represented in the vote, or of at least 75 per cent of the votes cast. Compliance with these requirements has to be ascertained by the auditor in the audit of the financial statements and interim financial statements.

According to Section 25a para. 1 (1) KWG, each Institution must have a proper business organisation. This must in particular include an adequate and effective risk management which again shall ensure that Institutions have in place an appropriate, transparent and sustainable, development-oriented remuneration system for managers and employees, subject to the stipulated principles. This, however, shall according to the wording of the new law not apply "insofar as the remuneration has been agreed under a collective bargaining agreement or within its scope of application by agreement between the contracting parties on the application of the collectively agreed regulations, or in a works council agreement based on a collective bargaining agreement."

Comments: The wording of this regulation suggests the possibility of deviations from the statutory caps through or based on a collective bargaining agreement. In practice, this could give plenty of interesting scope for structural discretion. However, the systematic position of this exception in Sec. 25a para. 1 (3) no. 6 KWG rev., instead of in the following Sec. 25a para. 5 KWG rev. which exclusively deals with capping the variable remuneration, militates against the intention of the legislator to permit such scope of structural discretion. Hopefully, the revised version of the InstitutsVergV will provide further insights.


Proper business organisation furthermore requires a process enabling employees to report to suitable bodies any violations of the CRR or the KWG or any legal regulations adopted on the basis of the KWG and any criminal offences within the Institution while keeping their identity secret.

Comments: Thus, as from January 1, 2014 KWG-regulated Institutions will be obliged to set up whistleblower contacts or appoint internal ombudsmen. A whole range of employment law (especially co-determination) and data protection law requirements needs to be observed upon implementation of such obligation. Always another challenge is the question of the internal response to a corresponding report through the whistleblower system. A one-fits-all solution will not work in this respect.

Amendment of the InstitutsVergV

The revised version of Sec. 25a para. 6 KWG forms the statutory basis for the amendment of the InstitutsVergV by the Federal Ministry of Finance.

It is to be expected that at the same time as the CRD IV Implementation Act a substantially revised version of the InstitutsVergV will enter into force, which may well especially include more detailed provisions on the following:

  • cap on the variable remuneration, including the requirements and parameters for full loss or partial reduction of the variable remuneration; and
  • monitoring of adequacy and transparency of the Remuneration systems by the Institution, and
  • disclosure of the structure of remuneration systems and the composition of the remuneration.

Consequences of non-compliance

The Federal Financial Supervisory Authority ("BaFin") can issue orders that are suitable and necessary to ensure the proper business organisation of an Institution. This also includes adequate, transparent and sustainable, development-oriented remuneration systems for managers and employees (i.e. also a cap on the variable remuneration). When the Institution violates such orders, the BaFin can impose fines of up to EUR 5 million. Other conceivable orders might be to reduce risks or not to engage in certain types of business transactions at all or only to a limited extent.

For example, if the capital endowment of an Institution is inadequate, it could also be ordered that the total annual amount of the variable remuneration of all managers and employees of such Institution is to be capped at a particular portion of the annual results. Also, the payment of variable remuneration components could be entirely prohibited.

Likewise, the BaFin could under certain circumstances request the full or partial extinction of claims for variable remuneration in Institutions obtaining governmental support, unless the claims for variable remuneration arose before January 1, 2011, or before January 1, 2012 for members of corporate bodies and managers.

Comments: Institutions are obliged to consider the regulatory authority of the BaFin in corresponding contractual agreements with their members of corporate bodies, managers and employees. This is necessary because the orders of the BaFin are addressed to the Institution itself. Thus, a corresponding reservation of amendment needs to be included in the contractual agreements. As a result of the new regulations and extended powers of intervention, existing reservations should be reviewed and adjusted if necessary. Regarding the validity of such reservations, the Federal Labour Court developed a mandatory casuistry strongly depending on each individual case.

No rights may be derived from contractual agreements on the granting of a variable remuneration that conflict with any order issued by the BaFin.

Implementation of the new regulations under employment law

The CRD IV Implementation Act enters into force on January 1, 2014, i.e. the new regulations will apply as of that date and Institutions must from then on implement the contents set out above. Therefore, it should already now be considered in the future conclusion of employment contracts and service agreements that the required cap on special payments is correspondingly reflected.

However, the situation is problematic with regard to old contracts which of course fail to contractually implement the corresponding new regulations or even contain conflicting provisions. In our opinion, the following applies in this regard:

Consensual amendment

Employment contracts or service agreements may be amended at any time by common consent. The Institutions concerned can thus offer their employees to amend existing contracts to create compliance with the regulatory requirements.

Comments: In the given constellation we believe it is likely that in the individual case employees or members of management boards of Institutions are obliged to agree to an amendment of their working conditions due to their contractual fiduciary duty. This might especially be the case when the Institution offers a compensation equivalent to the loss of bonus chances.

Variable remuneration at the discretion of the Institutions

If the employment contract or service agreement or a works council agreement only generally provides for a variable remuneration which in terms of amount is at the discretion of the Institution, then the Institution must upon exercising its discretion consider the new requirements for the remuneration system, and must against this background determine a bonus not exceeding the threshold applicable as from 2014.

Comments: In its case law, the Federal Labour Court established very stringent requirements regarding a variable remuneration that is entirely at the discretion of the employer or principal. In particular in general terms and conditions, such regulations can easily be invalid and grant the employee an unintended claim.

Reservation of revocation and a voluntary status

If existing bonus agreements conflict with the new regulations, Institutions might be able to use reservations of revocation and a voluntary status for the adjustment of the agreements, insofar as such reservations were validly agreed in connection with the bonus agreements.

Comments: Such reservations frequently fail to comply with the stringent judicial requirements, and are consequently invalid. This needs to be examined on a case-to-case basis.

Dismissal with the option of continued employment on different terms

The traditional means for unilateral amendment of working conditions is a so-called ""Änderungskündigung",", i.e. a dismissal with the option of continued employment on different terms. However, for lack of a reason for dismissal recognised under the Protection against Unfair Dismissal Act, such dismissal for the amendment of existing bonus agreements should not be validly possible.

Frustration of contract (Strung der Geschftsgrundlage)

According to the principle of frustration of contract, a party may request the adjustment of a contract if the circumstances on which the contract was based materially changed after conclusion of the contract, and the party cannot be reasonably expected to continue the unchanged contract.

Comments: Frustration of contract can be a valuable tool in the given constellation. Due to numerous interpretation issues that need to be clarified for determining a frustration of contract, this also needs to be evaluated for each individual case.

Members of corporate bodies

Employment protection legislation does generally not apply to members of corporate bodies, i.e. in particular managing directors of a company with limited liability (GmbH-Geschäftsführer)) or members of the board of directors of German stock corporations (AGVorstnde), so that an adjustment of existing service agreements should be less problematic.

Comments: It would particularly be an option in respect of members of corporate bodies to invoke the general contractual fiduciary duty in connection with the new regulatory standards. Against this background, it should always be attempted to achieve an adjustment of the contract in mutual agreement with the member of the corporate body. For lack of applicability of the employment protection legislation, the service contract could be terminated with an option of continuation on different terms if a "negotiated solution" fails. As a rule, the agreed or statutory notice periods have to be observed. In individual cases, e.g. for lack of a possibility of ordinary termination or the agreement of a very long notice period, a termination with an option of continuation on different terms can also be possible as an extraordinary dismissal with such option, i.e. with immediate effect.

Employees of branches abroad

The KWG - and thus the strict remuneration provisions - also applies to branch offices of German Institutions in other European countries.

Comments: The remuneration regulations anchored in the KWG might in such cases have to be implemented according to the laws of the state in which the branch is seated. The law applicable to the respective employment depends on the content of the employment contract and the place of work performance.

Regulations of the directly applicable CRR

The CRR, which will also take immediate effect as of January 1, 2014, is less significant with a view to the regulation of remuneration. However, the comprehensive obligations to disclose the remuneration policy and practice as standardised in Art. 450 need to be mentioned, as they are more comprehensive than the disclosure obligations so far contained in the InstitutsVergV.

Sometimes, the Institutions will now also have to disclose the number of persons whose remuneration for the business year amounts to or exceeds EUR 1 million. These statements are to be broken down into remuneration levels of EUR 500,000 for remunerations between EUR 1 million and EUR 5 million, and into remuneration levels of EUR 1 million for remunerations of EUR 5 million and more.


The new regulations of the KWG entering into force on January 1, 2014, the regulations of the CRR and the expected amended version of the InstitutsVergV create challenges for Institutions and their employees. The clean legal implementation of the regulatory requirements against the competing interests of employment law and data protection law is a challenging task without ready-made solutions. However, for each individual case there is a suitable solution that will also in the future enable the relevant Institutions to offer their employees attractive remuneration packages in compliance with the regulatory conditions.

Based on the intervention possibilities provided to the BaFin and the announced additional staffing of the competent BaFin departments it can be expected that the compliance with the statutory requirements will be more strictly monitored as from 2014, and that non-compliance will be more immediately sanctioned. Not only can this tarnish the image of the Institutions concerned, there is also the threat of fines and not least the possible irritation of high potentials who will not receive the expected bonus payments. In view of an increasingly tough war for talent, this aspect should not be ignored.

Previously published in August 2013

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2013. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.