FCA Revises Rules on Remuneration Code to Reflect CRD5
FCA published a policy statement (PS20/16) that sets out final rules on remuneration for dual-regulated firms, along with the revised versions of the relevant guidance documents. In August 2020, FCA proposed to amend the dual-regulated firms remuneration code and relevant non-handbook guidance, in line with the Capital Requirements Directive (CRD) 5. PS20/16 also summarizes the feedback received during the consultation period and FCA’s response to the feedback. The new rules and guidance will come into force on December 29, 2020. Firms are required to apply the new rules and guidance from the next performance year starting on or after December 29, 2020.
FCA is amending the dual-regulated firms' Remuneration Code and the relevant non-Handbook guidance to reflect the changes made by CRD 5. The finalized non-handbook guidance documents are general guidance on proportionality and dual-regulated firms and investment firms' Remuneration Codes (SYSC 19A and SYSC 19D)—the frequently asked questions on remuneration. The amendments include the following:
- Adding categories of staff who must be included as material risk-takers
- Replacing the current proportionality thresholds with exemptions from some remuneration rules for firms below a certain size and for individuals with remuneration below a certain level
- Amending the criteria for assessing whether a UK branch of a third-country firm is in scope of application of certain rules
- Amending the minimum deferral and claw-back periods
- Introducing a new requirement for firms to have gender neutral remuneration policies and practices
- Permitting listed firms to award variable remuneration in the form of share-linked instruments and equivalent non-cash instruments
FCA is also introducing changes to ensure that the dual-regulated firms' Remuneration Code remains effective after the end of the implementation period following the exit of UK from EU. This includes addressing deficiencies in the dual-regulated firms' Remuneration Code and converting certain thresholds that are in Euros to Sterling. These amendments will come into force from January 01, 2021.
The amendments to the dual-regulated firms' Remuneration Code will help to strengthen the remuneration framework for credit institutions and designated investment firms. The final rules and guidance on remuneration for dual-regulated firms remain broadly consistent with those of PRA, while supporting the objectives of FCA. These changes will ensure that firms can have stronger risk management, implement higher levels of individual accountability, and better incentivize their staff to make decisions not involving short-term or excessive risks. This in turn will contribute to reducing the number of misconduct incidents in these firms and, where misconduct does occur, the level of harm it causes.
Related Links
- PS20/16
- General Guidance on Proportionality
- Dual-Regulated Firms Remuneration Code: FAQs
- Investment Firms Remuneration Code: FAQs
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
EC Amends Rule on Deduction of Software Assets from CET1 ItemsRelated Articles
UK Authorities Consult on Implementation of Basel 3.1 Standards
The UK authorities have published consultations with respect to the Basel requirements for banks. The Prudential Regulation Authority (PRA) published the consultation paper CP16/22 on rules for the implementation of Basel 3.1 standards.
ESAs Issue Multiple Regulatory Updates for Financial Sector Entities
The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.
FSB and NGFS Publish Initial Findings from Climate Scenario Analyses
The Financial Stability Board (FSB) and the Network for Greening the Financial System (NGFS) published a joint report that outlines the initial findings from climate scenario analyses undertaken by financial authorities to assess climate-related financial risks.
FSB Issues Reports on NBFI and Liquidity in Government Bonds
The Financial Stability Board (FSB) published a letter intended for the G20 leaders, highlighting the work that it will undertake under the Indian G20 Presidency in 2023 to strengthen resilience of the financial system.
ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments
The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.
IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets
The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.
EBA Finalizes Methodology for Stress Tests, Issues Other Updates
The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups
EU Finalizes Rules Under Crowdfunding Service Providers Regulation
The European Union has finalized and published, in the Official Journal of the European Union, a set of 13 Delegated and Implementing Regulations applicable to the European crowdfunding service providers.
OSFI Sets Out Work Priorities and Reporting Updates for Banks
The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.
APRA Finalizes Changes to Capital Framework, Issues Other Updates
The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.
