The Prudential Regulatory Authority (PRA), via the consultation paper CP18/21, proposed changes to the applicable requirements on the identification of material risk-takers for the purposes of the remuneration regime. The proposals would result in changes to the Remuneration Part of the PRA Rulebook (Appendix 1), updates to the supervisory statement SS2/17 on remuneration (Appendix 2), and revocation of the EU Regulation 604/2014 (Appendix 3). PRA proposed that the implementation date for the changes resulting from this CP18/21 would be from the first performance year starting after the publication of final rules, which, subject to the extent and nature of feedback received, is planned for the fourth quarter of 2021. This consultation closes on November 08, 2021.
Individuals identified as material risk-takers are subject to all PRA remuneration rules. Material risk-takers are subject to the application of PRA rules derived from the EU Capital Requirements Directive (CRD) IV. These requirements were previously based on the PRA rules and the EU Regulation 604/2014 supplementing CRD IV with regard to the regulatory technical standards for qualitative and appropriate quantitative criteria to identify categories of staff whose professional activities have a material impact on an institution's risk profile. The policy proposals included in CP18/21 are intended to:
- revoke the application of the onshored version of Regulation (EU) No 604/2014 as regards to PRA-regulated firms
- insert the provisions of the Material Risk Taker Regulation (as adopted by the European Commission on June 09, 2021) into the Remuneration Part of the PRA Rulebook, without substantive policy amendments.
- make technical drafting fixes
- update SS2/17 to reflect the rule changes and the amended process for excluding an employee identified solely based on the quantitative criteria.
This consultation is relevant to banks, building societies, and PRA-designated investment firms, including third-country branches. CP18/21 is not relevant to credit unions or PRA-authorized insurers. The proposed amendments to the PRA Rulebook and the revocation of the onshored regulatory technical standards with regard to the PRA-regulated firms are aimed at rationalizing the material risk-taker identification regime, removing duplications, and promoting clarity by consolidating all legislative requirements within the PRA Rulebook. PRA does not expect that firms would incur additional costs as a direct result of the proposals. PRA would expect that removing duplicative and partially diverging requirements and consolidating the rules for identification of material risk-takers into PRA Rulebook would provide clarity to firms and reduce the cost of compliance.
Comment Due Date: November 08, 2021
Effective Date: Q4 2021 (Proposed)
Keywords: Europe, UK, Banking, Investment Firms, CRD IV, Basel, Remuneration, Operational Risk, Material Risk-Takers, Governance, PRA Rulebook, ESG, PRA
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