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

    EBA Proposes Standards for IRRBB Reporting Under Basel Framework

    The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.

    January 31, 2023 WebPage Regulatory News

    FED Issues Further Details on Pilot Climate Scenario Analysis Exercise

    The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.

    January 17, 2023 WebPage Regulatory News

    US Agencies Issue Several Regulatory and Reporting Updates

    The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.

    January 04, 2023 WebPage Regulatory News

    ECB Issues Multiple Reports and Regulatory Updates for Banks

    The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.

    January 01, 2023 WebPage Regulatory News

    HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements

    The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.

    December 30, 2022 WebPage Regulatory News

    EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR

    The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.

    December 29, 2022 WebPage Regulatory News

    CBIRC Revises Measures on Corporate Governance Supervision

    The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.

    December 29, 2022 WebPage Regulatory News

    HKMA Publications Address Sustainability Issues in Financial Sector

    The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.

    December 23, 2022 WebPage Regulatory News

    EBA Updates Address Basel and NPL Requirements for Banks

    The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.

    December 22, 2022 WebPage Regulatory News

    ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite

    The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.

    December 22, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8699