On September 28, 2016, the PRA and the FCA published proposed revised guidance on remuneration, principally to bring their guidance into line with the EBA's Guidelines on Sound Remuneration Policies which apply from January 1, 2017. The remuneration rules and guidance will apply to banks, building societies and investment firms, including UK branches of non-EEA headquartered firms.
The PRA sets out its expectations on how firms should adhere to the EBA Guidelines and provides additional guidance on the EBA Guidelines as well as on material risk takers, the application of malus and clawback to variable remuneration, remuneration committees, Long Term Incentive Plans and remuneration structures, including guaranteed variable remuneration and buy-outs. The PRA is proposing to introduce a consolidated Supervisory Statement on remuneration by amalgamating the existing statements on proportionality, the application of malus to variable remuneration and other aspects of remuneration.
The FCA is proposing changes to its Handbook that would remove certain inconsistencies between the existing provisions and the EBA Guidelines. The proposed changes would also provide firms with additional guidance on how the FCA expects firms to implement the EBA Guidelines. Comments on the proposals are due by November 28, 2016. The PRA's existing Supervisory Statements will continue to apply until a final consolidated statement is published. The FCA will publish its final rules and guidance in a Policy Statement after it has assessed feedback to the consultation.
The PRA's consultation paper is available at: http://www.bankofengland.co.uk/pra/Documents/publications/cp/2016/cp3316.pdf and the FCA's consultation paper is available at: https://www.fca.org.uk/sites/default/files/cp16-28.pdf.
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