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    BoE and PRA Publish Regulatory Updates for Financial Sector Entities

    July 19, 2022

    The Prudential Regulatory Authority (PRA) proposed expectations, via CP8/22, in respect of changes to the instruments or claims that comprise unvested deferred sums awarded to material risk-takers as part of their variable pay. Additionally, the Bank of England (BoE) published a statistical notice to clarify reporting of the Economic Crime Levy on Form PL while BoE and PRA jointly published an Index of Prudential and Resolution Policies.

    CP8/22. The proposals in CP8/22 would result in changes to supervisory statement (SS2/17) on remuneration (Appendix 1). PRA proposes that the implementation date for the changes resulting from CP8/22 would be December 12, 2022. PRA is requesting responses by September 19, 2022. CCP8/22 proposes that a new section is added to chapter 4 of SS2/17 setting out the PRA’s expectations that:

    • in general, unvested, deferred claims that comprise the variable pay of material risk takers should not be converted from an equity claim into a claim on other instruments (or vice versa) after an award has been made
    • this expectation should apply to all unvested, deferred sums, and not exclude amounts above the regulatory minima
    • in exceptional circumstances, such as where there are potential conflicts of interest arising from a (proposed) public-sector appointment that cannot otherwise be sufficiently mitigated, it may be appropriate for a conversion to occur subject to the prior non-objection of PRA, and on the basis that the relevant retention requirements remain unchanged

    Index of Prudential and Resolution Policies. Due to the onshoring process following EU Exit, prudential and resolution policies are now hosted across a wide range of sources and websites. As part of BoE and PRA's commitment to make policies more accessible, this Index brings them together in one place and divides them by sectors and topic areas, so that users can easily find them. The Index is easy to navigate and is intended to help firms identify which policies are relevant for their particular areas of business. For each topic area, the Index provides a dedicated page listing links to related policies from the following sources:

    • PRA rules (including waivers and modifications)
    • UK legislation and technical standards
    • PRA Supervisory Statements, Statements of Policy, and approach documents
    • Publications issued by BoE as Resolution Authority
    • Other relevant material (including Guidelines issued by the European Supervisory Agencies)

    Statistical notice. The introduction of the Economic Crime Levy, established as part of the Finance Act 2022 and effective from April 01, 2022, has prompted a need to clarify the reporting of the Levy on the Form PL. Any levy payments made should be reported directly under Tax (PL16), but not within any of the further box breakdowns (16A or 16B). Where possible, data should be reported on an accruals basis. Form PL is used to collect data on the reporting institution’s income and expenditure. It should be submitted via OSCA. This treatment should be implemented with effect from the second quarter of 2022 reporting.

     

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    Keywords: Europe, UK, Banking, Basel, Remuneration, Material Risk Takers, Form PL, Statistical Notice, Reporting, CP8 22, BoE, PRA

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