Featured Product

    UK Authorities Welcome FSB Review of their Remuneration Regime

    April 14, 2021

    UK Authorities (FCA and PRA) welcomed the findings of FSB peer review on the implementation of financial sector remuneration reforms in the UK. The review finds that the UK Authorities have implemented reforms that are consistent with the FSB Principles and Implementation Standards for sound compensation practices. While the initial focus was on the banking sector, over time, the UK Authorities have increasingly implemented the Principles and Implementation Standards in the insurance and asset management sectors.

    The FSB report highlights that the UK Authorities are increasingly focused on evaluating the effectiveness of the regime and require firms to periodically review the design and implementation of their remuneration policies. Some of the approaches of the UK Authorities can serve as examples of good practice for other jurisdictions to consider. These include adopting a risk-based and proportional regulatory and supervisory approach, setting expectations through public communication to Remuneration Committee Chairs of firms, a supervisory approach that focuses on close interaction between prudential and conduct rules and reinforces accountability with links to compensation outcomes, and evaluation of the effectiveness of remuneration regime. In combination with the Senior Managers and Certification Regime (SM&CR), the remuneration regime has helped firms become more disciplined in mapping responsibilities and has resulted in greater consistency and transparency on acceptable remuneration practices. Notwithstanding this progress, the review concludes that steps can be taken to further strengthen the financial sector compensation framework in a few areas:

    • Review interaction between SM&CR and compensation. UK Authorities should review the interaction between the SM&CR and remuneration framework, including how the interplay between the SM&CR and remuneration rules/codes reward diligent and proactive risk management.
    • Improve efficiency of data collection. UK Authorities should consider streamlining and automating the data collection and analysis for level one banks and investment firms. They could also consider collecting remuneration data from a broader range of firms while having regard to the cost and complexity for all stakeholders, including minimizing the burden on firms where possible.
    • Assess effectiveness of remuneration regime. As part of the initiative of UK Authorities to assess the effectiveness of remuneration rules, they should consider complementing business as usual supervision practices and the data analytics performed on the Remuneration Policy Statement submissions (for level one banks and investment firms) with additional thematic reviews and onsite visits. Results of such reviews could be published to guide implementation by the industry.
    • Provide additional guidance on remuneration for the insurance sector. UK Authorities should consider supplementing the Solvency II remuneration requirements with more detailed guidance for the insurance sector, to ensure effective risk alignment and avoid potential inconsistent interpretation by firms.

    The peer review process and report preparation took place prior to the UK implementation of the fifth EU Capital Requirements Directive (CRD5), which came into force on December 29, 2020. The report does not examine these changes in depth. FCA also plans to consult on a new remuneration regime for investment firms shortly as part of the new Investment Firms Prudential Regime. The UK is the first FSB member jurisdiction to undergo this kind of peer assessment of the effectiveness of remuneration reforms in the financial sector.

     

    Related Links

    Keywords: Europe, UK, Banking, Remuneration Form, SM&CR, Peer Review, Data Collection, FSB, FCA, PRA

    Related Articles
    News

    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.

    September 15, 2022 WebPage Regulatory News
    News

    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.

    September 15, 2022 WebPage Regulatory News
    News

    IOSCO Welcomes Work on Sustainability-Related Corporate Reporting

    The International Organization of Securities Commissions (IOSCO) welcomed the work of the international audit and assurance standard setters—the International Auditing and Assurance Standards Board (IAASB)

    September 15, 2022 WebPage Regulatory News
    News

    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).

    September 15, 2022 WebPage Regulatory News
    News

    BoE Allows One-Day Delay in Statistical Data Submissions by Banks

    The Bank of England (BoE) published a Statistical Notice (2022/18), which informs that due to the Bank Holiday granted for Her Majesty Queen Elizabeth II’s State Funeral on Monday September 19, 2022.

    September 14, 2022 WebPage Regulatory News
    News

    ACPR Amends Reporting Module Timelines Under EBA Framework 3.2

    The French Prudential Control and Resolution Authority (ACPR) announced that the European Banking Authority (EBA) has updated its filing rules and the implementation dates for certain modules of the EBA reporting framework 3.2.

    September 14, 2022 WebPage Regulatory News
    News

    APRA to Modernize Prudential Architecture, Reduces Liquidity Facility

    The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility (CLF) for authorized deposit-taking entities to ~USD 33 billion on September 01, 2022.

    September 12, 2022 WebPage Regulatory News
    News

    PBC Issues List of Systemic Banks, Adds 2 Foreign Banks to CERB List

    The China Banking and Insurance Regulatory Commission (CBIRC) published the administrative measures for internal control of wealth management companies, which come into force on the day of promulgation.

    September 09, 2022 WebPage Regulatory News
    News

    PRA Publishes Discussion Paper on Its Future Approach to Policy

    The Prudential Regulation Authority (PRA) proposed its approach to policy-making as it takes on wider rulemaking responsibilities under the Financial Services and Markets Bill.

    September 08, 2022 WebPage Regulatory News
    News

    ECB Publishes Opinion on Proposed Regulation on Data Act

    The European Central Bank (ECB) published its opinion on the proposal for a regulation on harmonized rules on fair access to and use of data (Data Act).

    September 08, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8511