PRA Fines Standard Chartered, Issues Rules on Material Risk-Takers
The Prudential Regulation Authority (PRA) imposed a financial penalty of GBP 46.55 million on the Standard Chartered Bank for failing to be open and cooperative with PRA and for failings in its regulatory reporting governance and controls in relation to a tailored PRA liquidity expectation. Additionally, PRA published the policy statement PS28/21, which finalizes changes to the Remuneration Part of the PRA Rulebook on the criteria for identifying material risk-takers and certain relevant definitions. PS28/21 is relevant to banks, building societies, and PRA-designated investment firms, including third country branches, but not to credit unions or authorized insurers.
PS28/21 contains the final policy on the revocation of the PRA version of EU Regulation 604/2014 (Appendix 1) and the updated supervisory statement SS2/17 on remuneration (Appendix 3). PS28/21 also sets out the consequential changes to the Certification Part of the PRA Rulebook (Appendix 1) and the SS28/15 on strengthening individual accountability in banking (Appendix 4); these changes mirror the Remuneration Part changes. In addition, PS28/21 provides feedback to responses to the consultation paper CP18/21, which proposed changes to the applicable requirements on the identification of material risk-takers for the purposes of the remuneration regime. PRA received feedback from three entities and made two changes to the draft policy:
- With respect to the consequential amendment to the Certification Part of the PRA Rulebook, PRA has deleted the reference to the Material Risk Takers Regulation in the Certification Part of the PRA Rulebook, and replaced it with the relevant, updated rules in the Remuneration Part.
- PRA decided to make a minor drafting amendment to Rule 3.3A(2) of the Remuneration Part of the PRA Rulebook to further clarify that 0.3% threshold of employees within the firm who have been awarded the highest total remuneration should be calculated on an individual entity basis, and not calculated at the consolidated level.
The changes to the Remuneration Part of the PRA Rulebook (Appendices 1, 2, and 3) will take effect on December 30, 2021 and are required to be implemented by firms from the first performance year, which starts after this date. The changes to the Certification Part of the PRA Rulebook will take effect on March 01, 2022 (Appendices 1 and 4).
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Effective Date: December 30, 2021/March 01, 2022
Keywords: Europe, UK, Banking, Investment Firms, CRD IV, Basel, Remuneration, Operational Risk, Material Risk-Takers, Governance, PRA Rulebook, Standard Chartered, PRA
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