FCA Proposes to Update Remuneration Code for Firms to Reflect CRD5
FCA proposed to amend the dual-regulated firms remuneration code and relevant non-handbook guidance, in line with the Capital Requirements Directive (CRD) 5. The proposals aim to ensure that the FCA remuneration regime applicable to banks, building societies, and PRA-designated investment firms continues to promote healthy culture, minimizes harm to consumers and markets, and remains largely consistent with the PRA remuneration framework. Stakeholders can provide feedback on consultation paper till September 30, 2020. FCA will publish the final rules and guidance before December 28, 2020. In doing so, FCA will continue to work closely with PRA.
PRA published a consultation paper in which it had set out the proposals for implementing CRD5. FCA worked closely with PRA on the proposals related to remuneration. The FCA proposals aim to ensure that its remuneration rules and guidance for dual-regulated firms remain largely consistent with the PRA approach and support its own conduct-based objectives. In the consultation paper, FCA is proposing changes to:
- Dual-regulated firms' Remuneration Code (SYSC 19D), including to the rules on material risk-takers, proportionality, deferral, and clawback
- Non-Handbook guidance General Guidance on Proportionality—the dual-regulated firms' Remuneration Code
- Non-Handbook guidance Remuneration Codes (SYSC 19A and SYSC 19D)—the frequently asked questions on remuneration
The proposals aim to ensure that the amended remuneration requirements can continue to work effectively at the end of the transition period following the exit of UK from EU. These include converting certain thresholds from Euros to Sterling from January 01, 2021 (Chapter 8). FCA proposed that firms apply the amended remuneration requirements from the next performance year that begins on or after December 29, 2020.
Overall, the FCA remuneration rules seek to ensure that firms establish, implement, and maintain remuneration policies and practices that are consistent with, and promote, effective risk management and healthy cultures. The proposals will help to strengthen the remuneration framework for credit institutions and designated investment firms. In doing so, FCA would expect them to contribute to reducing the number of misconduct incidents in these firms and, where misconduct does occur, the level of harm it causes.
Related Links
Comment Due Date: September 30, 2020
Keywords: Europe, UK, Banking, Securities, Remuneration, CRD5, Dual Regulated Firms, Basel, Governance, Operational Risk, PRA, FCA
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
BIS Hub and HKMA Launch Trade Finance Digitization ChallengeRelated Articles
APRA Sets LAC for D-SIBs, Proposes to Enhance Crisis Preparedness
APRA issued a letter on the loss-absorbing capacity (LAC) requirements for domestic systemically important banks (D-SIBs) and published a discussion paper, along with the proposed the prudential standards on financial contingency planning (CPS 190) and resolution planning (CPS 900).
EC to Review Macro-Prudential Rules while ESRB Assesses Policy Stance
The European Commission (EC) launched a call for evidence, until March 18, 2022, as part of a comprehensive review of the macro-prudential rules for the banking sector under the Capital Requirements Regulation (CRR) and Directive (CRD IV).
FSB Sets Out Good Practices for Crisis Management Groups
The Financial Stability Board (FSB) published a report that sets out good practices for crisis management groups.
APRA Penalizes Heritage Bank for Incorrect Reporting of Capital
The Australian Prudential Regulation Authority (APRA) found that Heritage Bank Limited had incorrectly reported capital because of weaknesses in operational risk and compliance frameworks, although the bank did not breach minimum prudential capital ratios at any point and remains well-capitalized.
OSFI Releases Annual Report 2021-2022
The Office of the Superintendent of Financial Institutions (OSFI) released the annual report for 2020-2021.
OSFI Updates Timeline for Implementation of Certain Basel Rules
Through a letter addressed to the banking sector entities, the Office of the Superintendent of Financial Institutions (OSFI) announced deferral of the domestic implementation of the final Basel III reforms from the first to the second quarter of 2023.
EC Defers Adoption of Regulatory Standards for Disclosures Under SFDR
EIOPA recently published a letter in which EC is informing the European Parliament and Council that it could not adopt the set of draft regulatory technical standards for disclosures under the Sustainable Finance Disclosure Regulation (SFDR) within the stipulated three-month period, given their length and technical detail.
FCA Releases MIFIDPRU Application Forms and Third Set of Rules on IFPR
The Financial Conduct Authority (FCA) published the third in a series of policy statements that set out rules to introduce the UK Investment Firm Prudential Regime (IFPR), which will take effect on January 01, 2022.
APRA Finalizes Capital Adequacy Standards for Banks
The Australian Prudential Regulation Authority (APRA) published, along with a summary of its response to the consultation feedback, an information paper that summarizes the finalized capital framework that is in line with the internationally agreed Basel III requirements for banks.
CPMI-IOSCO Seek Comments on Access to Central Clearing and Portability
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) issued a consultative report focusing on access to central counterparty (CCP) clearing and client-position portability.
