FCA proposed to amend the dual-regulated firms remuneration code and relevant non-handbook guidance, in line with the Capital Requirements Directive (CRD) 5. The proposals aim to ensure that the FCA remuneration regime applicable to banks, building societies, and PRA-designated investment firms continues to promote healthy culture, minimizes harm to consumers and markets, and remains largely consistent with the PRA remuneration framework. Stakeholders can provide feedback on consultation paper till September 30, 2020. FCA will publish the final rules and guidance before December 28, 2020. In doing so, FCA will continue to work closely with PRA.
PRA published a consultation paper in which it had set out the proposals for implementing CRD5. FCA worked closely with PRA on the proposals related to remuneration. The FCA proposals aim to ensure that its remuneration rules and guidance for dual-regulated firms remain largely consistent with the PRA approach and support its own conduct-based objectives. In the consultation paper, FCA is proposing changes to:
- Dual-regulated firms' Remuneration Code (SYSC 19D), including to the rules on material risk-takers, proportionality, deferral, and clawback
- Non-Handbook guidance General Guidance on Proportionality—the dual-regulated firms' Remuneration Code
- Non-Handbook guidance Remuneration Codes (SYSC 19A and SYSC 19D)—the frequently asked questions on remuneration
The proposals aim to ensure that the amended remuneration requirements can continue to work effectively at the end of the transition period following the exit of UK from EU. These include converting certain thresholds from Euros to Sterling from January 01, 2021 (Chapter 8). FCA proposed that firms apply the amended remuneration requirements from the next performance year that begins on or after December 29, 2020.
Overall, the FCA remuneration rules seek to ensure that firms establish, implement, and maintain remuneration policies and practices that are consistent with, and promote, effective risk management and healthy cultures. The proposals will help to strengthen the remuneration framework for credit institutions and designated investment firms. In doing so, FCA would expect them to contribute to reducing the number of misconduct incidents in these firms and, where misconduct does occur, the level of harm it causes.
Comment Due Date: September 30, 2020
Keywords: Europe, UK, Banking, Securities, Remuneration, CRD5, Dual Regulated Firms, Basel, Governance, Operational Risk, PRA, FCA
Previous ArticleBIS Hub and HKMA Launch Trade Finance Digitization Challenge
PRA published the policy statement PS8/21, which contains the final supervisory statement SS3/21 on the PRA approach to supervision of the new and growing non-systemic banks in UK.
EBA published a report that sets out the final draft regulatory technical standards specifying the conditions according to which consolidation shall be carried out in line with Article 18 of the Capital Requirements Regulation (CRR).
EBA updated the list of other systemically important institutions (O-SIIs) in EU.
BCBS published two reports that discuss transmission channels of climate-related risks to the banking system and the measurement methodologies of climate-related financial risks.
UK Authorities (FCA and PRA) welcomed the findings of FSB peer review on the implementation of financial sector remuneration reforms in the UK.
PRA and FCA jointly issued a letter that highlights risks associated with the increasing volumes of deposits that are placed with banks and building societies via deposit aggregators and how to mitigate these risks.
MFSA announced that amendments to the Banking Act, Subsidiary Legislation, and Banking Rules will be issued in the coming months, to transpose the Capital Requirements Directive (CRD5) into the national regulatory framework.
EC finalized the Delegated Regulation 2021/598 that supplements the Capital Requirements Regulation (CRR or 575/2013) and lays out the regulatory technical standards for assigning risk-weights to specialized lending exposures.
OSFI launched a consultation to explore ways to enhance the OSFI assurance over capital, leverage, and liquidity returns for banks and insurers, given the increasing complexity arising from the evolving regulatory reporting framework due to IFRS 17 (Insurance Contracts) standard and Basel III reforms.
ECB published results of the benchmarking analysis of the recovery plan cycle for 2019.