PRA Proposes to Correct an Error in Remuneration Part of the Rulebook
PRA proposed, via the consultation paper CP9/21, to correct an error in the definition of "higher paid material risk taker" in the Remuneration Part of the PRA Rulebook. The proposals in CP9/21, the comment period for which closes on May 26, 2021, would result in changes to the Remuneration Part of the PRA Rulebook and the supervisory statement SS2/17 on remuneration. PRA proposed that implementation of the changes resulting from CP9/21 would take effect on publication of the final policy. To avoid retroactivity, PRA proposed that firms would not be required to apply the corrected definition to remuneration that has been paid, vested, or is subject to an obligation to pay or vest created before that date, in respect of the first performance year beginning on or after December 29, 2020. PRA expects to publish the final policy in the second quarter of 2021.
The proposal is intended to align the "higher paid material risk taker" definition with the intention of PRA of continuing the approach outlined in SS2/17 on remuneration. PRA identified an error in the definition of "higher paid material risk taker" in Rule 1.3 in the Remuneration Part of the PRA Rulebook. The error was introduced as part of the policy statement PS29/20 on the fifth Capital Requirements Directive (CRD5). The erroneous definition states that "higher paid material risk taker" is defined as an individual whose annual variable remuneration exceeds 33% of their total remuneration and whose total remuneration exceeds GBP 500,000. This implies that an individual would need to meet both of these conditions to be considered a "higher paid material risk taker." However, PRA intended the definition to capture individuals who meet either of these conditions. Therefore, CP9/21 is proposing to change the "and" in the definition to "or." Thus, the correct text should convey that an individual should be treated as a “higher paid material risk taker” where either their annual variable remuneration exceeds 33% of their total remuneration, or their total remuneration exceeds GBP 500,000.
CP9/21 also proposes to make a consequential amendment to Table G in SS2/17, to reflect the updated definition in the table heading. The proposals set out in CP9/21 have been designed in the context of the UK having left EU and the transition period having come to an end. Unless otherwise stated, any references to EU or EU derived legislation refer to the version of that legislation which forms part of retained EU law. PRA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework.
Related Links
Keywords: Europe, UK, Banking, Remuneration, PRA Rulebook, CRD5, Basel, SS2/17, CP9/21, Operational Risk, PRA
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
CBIRC to Further Promote Development of Financial Services for SMEsRelated Articles
BIS Paper Studies Impact of Fintech Lending on Small Businesses in US
The Bank for International Settlements (BIS) published a paper that studies impact of fintech lending on credit access for small businesses in U.S.
UK Regulators Issue CRR Changes and Stress Test Scenarios for Banks
The Prudential Regulation Authority (PRA) issued the policy statement PS8/22 to amend the Own Funds and Eligible Liabilities (CRR) Part of the PRA Rulebook and update the supervisory statement SS7/13 titled "Definition of capital (CRR firms).
EBA Launches EU-Wide Transparency Exercise in 2022
The European Banking Authority (EBA) launched the EU-wide transparency exercise for 2022, with results of the exercise expected to be published at the beginning of December, along with the annual Risk Assessment Report.
SRB on CRR Quick-Fix to Policy for Multiple Point of Entry Banks
The Single Resolution Board (SRB) welcomed the adoption of the review of the Capital Requirements Regulation, or CRR, also known as the "CRR quick-fix."
EC Rule Lists Advanced Economies for Market Risk Capital Calculations
The European Commission (EC) recently adopted the Delegated Regulation 2022/1622, which sets out the regulatory technical standards to specify the countries that constitute advanced economies for the purpose of specifying risk-weights for the sensitivities to equity.
EBA Publishes Final Regulatory Standards on STS Securitizations
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.
ECB Further Reviews Costs and Benefits Associated with IReF
The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.
EBA Publishes Funding Plans Report, Receives EMAS Certification
The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).
MAS Launches SaaS Solution to Simplify Listed Entity ESG Disclosures
The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.
BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules
The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.
