UK Authorities Issue Multiple Regulatory Updates in February 2023
The Prudential Regulation Authority (PRA) published a policy statement (PS1/23) that provides feedback to responses to consultation paper (CP8/22) on remuneration related to unvested pay, material risk-taking, and public appointments. The Financial Conduct Authority (FCA) seeks views on a discussion paper (DP23/1) on sustainability-related governance, incentives, and competence in regulated firms, with the comment period ending on May 10, 2023; it also published a feedback statement (FS23/1) on the benefits and limitations of synthetic data within financial services. Additionally, the HM Treasury (HMT) is seeking comments, until April 11, 2023, on the proposed draft legislation that will bring Buy-Now Pay-Later (BNPL) products into the Financial Conduct Authority regulation.
PRA PS1/23. Based on the feedback received, PRA made amendments to the supervisory statement (SS2/17) on remuneration (Appendix 1). The purpose of the supervisory statement was to set out the PRA expectations on how firms should comply with the requirements of the remuneration part, enabling firms to make judgements which advance the objectives of the PRA. The amendments include addition of a footnote (number 19) clarifying circumstances other than public appointments where a conversion is appropriate, addition of footnote (number 20) clarifying that the use of the terms ‘equity’ and ‘other instruments’ include all instruments that can fall under sections 15.15(1)(a) and 15.15(1)(b) of the remuneration part of the PRA Rulebook, addition of a line (paragraph 4A.11) clarifying that the public sector employer should determine whether (or not) its conflicts of interest policy is able to address any conflicts, as well as other changes to add more clarity. The policy statement is relevant to all PRA-authorized banks, building societies, PRA-designated investment firms, including third-country branches, that are subject to the remuneration part of the PRA Rulebook. The new policy will come in effect from February 10, 2023.
FCA DP23/1. The discussion paper aims to help the financial industry deliver against its potential to drive positive sustainable change, by encouraging an industry-wide dialog on firms’ sustainability-related governance, incentives, and competencies. The paper also includes a collection of 10 commissioned articles from experts, including industry practitioners, academics and other thought leaders, with relevant and interesting perspectives on firms’ sustainability-related governance, incentives, competence and stewardship arrangements. Based on the feedback, FCA will assess how to better support the industry in this evolving field and whether there is a case for further regulatory measures in the area of firm governance, incentives and competencies to support the role of finance in contributing to positive change. Going forward, FCA encourage firms to reflect on the matters discussed, and consider incorporating them as they review and refine their current approaches to governance, remuneration, incentives and training. The discussion paper is relevant to all regulated firms across the financial sector including banks, building societies, insurers, asset management firms, and investment firms.
FCA FS23/1. The feedback statement sets out responses to the Call for Input, which was published in March 2022 and aimed to understand the market maturity of synthetic data within financial services, along with its potential to expand data-sharing between firms, regulators, and other public bodies. Synthetic data is a privacy preserving technique that could expand opportunities for data-sharing by generating statistically realistic, but "artificial" data that is readily accessible. Synthetic data is useful for augmenting rare patterns and ‘edge cases’ that are scarce in real datasets, to better train models to respond to infrequent events. FCA, as part of this feedback statement, sets out the responses to the feedback received in relation to four key areas:
- Data access and innovation: Respondents unanimously agreed that data is crucial for innovation, although there are challenges to accessing and sharing data in financial services.
- Assessment of synthetic data: Respondents indicated that data protection regulation places specific conditions on the data they can share and access, and also reiterated the importance of consumer privacy, and that data access should have privacy built in by design at every stage of the process.
- Synthetic data use cases: Feedback indicated fraud and anti-money laundering as a key use case for synthetic data, in part due to its ability to augment rare patterns of behavior in a dataset.
- The role of the regulator: Respondents indicated that the regulator could perform an intermediary role in the provision of synthetic data. Feedback also strongly indicated the need for guidelines, standards and/or governance frameworks to build trust in synthetic data and encourage wider adoption.
Going forward, FCA will host a joint industry-academic roundtable in partnership with the Alan Turing Institute and the Information Commissioner’s Office to understand the challenges of validating synthetic data in early 2023. FCA plans to publish a paper in the coming months outlining its key findings and next steps. FCA will establish a Synthetic Data Expert Group to create an effective framework for collaboration across industry, regulators, academia and wider civil society on issues related to synthetic data. Applications to join the group will open in February, and the first session is expected to take place in the Spring of 2023.
HMT Consultation on BNPL. The consultation summarizes the feedback received from stakeholders on the additional questions on the scope of regulation that were asked in the Government’s June response document and also seeks comments on the draft legislation which will bring BNPL products within the regulatory perimeter. HM Treasury also published BNPL draft statutory instrument, along with the draft legislation. The term BNPL refers to a type of interest-free installment credit that allows borrowers to split the cost of purchases into regular repayments not exceeding a twelve-month period. Based on responses to this consultation, HM Treasury will consider any necessary changes to the draft legislation and intends to publish a consultation response which will set out the anticipated key milestones for regulation. Following that, the government will lay legislation when Parliamentary time allows, with the ambition that this will be during 2023.
Related Links
- PRA Policy Statement PS1/23 on Remuneration
- PRA Supervisory Statement SS2/17
- FCA Discussion Paper DP23/1 on Sustainable Change
- Discussion Paper DP23/1 on Sustainable Change (PDF)
- FCA Feedback Statement FS23/1 on Synthetic Data (PDF)
- HMT Consultation on BNPL Regulation
- BNPL Draft Regulation (PDF)
- BNPL Draft Statutory Instrument (PDF)
Keywords: Europe, UK, Banking, Remuneration, Material Risk Takers, Reporting, PRA Rulebook, Supervisory Statement, Governance, Synthetic Data, Buy Now Pay Later, Credit Risk, Lending, Basel, FCA, PRA, HM Treasury
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
ESRB Report Assesses Cyber Resilience Across EURelated Articles
FINMA Approves Merger of Credit Suisse and UBS
The Swiss Financial Market Supervisory Authority (FINMA) has approved the takeover of Credit Suisse by UBS.
BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks
The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.
OSFI Finalizes on Climate Risk Guideline, Issues Other Updates
The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.
APRA Assesses Macro-Prudential Policy Settings, Issues Other Updates
The Australian Prudential Regulation Authority (APRA) published an information paper that assesses its macro-prudential policy settings aimed at promoting stability at a systemic level.
BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending
BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.
HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks
The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.
MFSA Sets Out Supervisory Priorities, Issues Reporting Updates
The Malta Financial Services Authority (MFSA) outlined its supervisory priorities for 2023
German Regulators Issue Multiple Reporting Updates for Banks
Deutsche Bundesbank published the nationally deactivated validation rules for the German Commercial Code (HGB) users on the taxonomy 3.2, which became valid from December 31, 2022
BCBS Report Examines Impact of Basel III Framework for Banks
The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.
PRA Consults on Prudential Rules for "Simpler-Regime" Firms
Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.