The UEFA Executive Committee today approved the new UEFA Club Licensing and Financial Sustainability Regulations at its meeting in Nyon.
The regulations are the first major reform of UEFA's finance regulations since they were first introduced in 2010.
UEFA President Aleksander Čeferin said:
"UEFA's first financial regulations, introduced in 2010, served its primary purpose. They helped pull European football finances back from the brink and revolutionised how European football clubs are run. However, the evolution of the football industry, alongside the inevitable financial effects of the pandemic, has shown the need for wholesale reform and new financial sustainability regulations.
"UEFA has worked together with its stakeholders across European football to develop these new measures to help the clubs to address these new challenges. These regulations will help us protect the game and prepare it for any potential future shock while encouraging rational investments and building a more sustainable future for the game."
Given their name, it is no surprise that the key objective of the new regulations is to achieve financial sustainability. These will be achieved through three key pillars: solvency, stability, and cost control.
For solvency, the new no overdue payables (towards football clubs, employees, social/tax authorities, and UEFA) rule will ensure better protection of creditors. Controls will be performed every quarter and there will be less tolerance towards late payers.
The new football earnings requirements are an evolution of the existing break-even requirements and will bring greater ability to club finances. To ease the implementation for clubs, the calculation of football earnings is similar to the calculation of the break-even result. While the acceptable deviation has increased from €30 million over three years to €60 million over three years, requirements to ensure the fair value of transactions, to improve the clubs' balance sheet, and to reduce debts have been significantly strengthened.
The biggest innovation in the new regulations will be the introduction of a squad cost rule to bring better cost control in relation to player wages and transfer costs. The regulation limits spending on wages, transfers, and agent fees to 70% of club revenue. Assessments will be performed on a timely basis and breaches will result in pre-defined financial penalties and sporting measures.
The new regulations will come into force in June 2022. There will be gradual implementation over three years to allow clubs the necessary time to adapt.
The new 'Financial Sustainability and Club Licensing Regulations (FSCLR)' will limit spending on wages, transfers and agent fees to 70 per cent of a club's revenue - with that figure reached after a three-year gradual change.
The old FFP regulations were devised in 2010 by UEFA's Financial Control Panel under Michel Platini and Gianni Infantino, and the European Club Association initially appealed against its introduction.
It was designed to stop European clubs from spending beyond their means and eliminate financial doping form the game. At present, clubs are allowed to spend up to €5m (£4m) more than they bring in across a three-year period.
But rules allowed them to go over that amount - to a limit of €30m (£25m) - if the excess was covered in full by the club's owner or a related party.
The new rules are designed to try to achieve a form of competitive balance and greater sustainability for clubs but still provide a built-in advantage to the richest clubs rather than narrowing the gap.
UEFA had been exploring salary caps, but their legality under European law was questioned.
Teams over-spending could now be relegated within UEFA's competitions, from the Champions League to the Europa League and the third-tier Europa Conference League.
