PRA Identifies Error in Remuneration Part of the Rulebook
PRA has identified error in the “higher paid material risk taker” definition in Rule 1.3 in the Remuneration Part of the PRA Rulebook, which was introduced as part of the PRA implementation of the fifth Capital Requirements Directive (CRD5). PRA intends to consult on amending the rule at the earliest opportunity. FCA is aware of the PRA position on the definition of the term “higher paid material risk taker” and, to maintain alignment, FCA also intends to consult on amending this rule at the next suitable opportunity.
The incorrect definition of the "higher paid material risk taker" sets the requirement that "an individual would be treated as a "higher paid material risk taker" when:
(a) their annual variable remuneration exceeds 33% of their total remuneration; and
(b) their total remuneration exceeds GBP 500,000."
However, according to the correct definition an individual does not need to satisfy both the above-mentioned conditions, rather an individual would be treated as a "higher paid material Risk taker" when either one of these conditions is met. Thus, the correct text should convey that an individual should be treated as a “higher paid material risk taker” where either their annual variable remuneration exceeds 33% of their total remuneration, or their total remuneration exceeds GBP 500,000. This is in line with the PRA position outlined in the consultation paper (CP12/20) and policy statement (PS26/20) on the implementation of CRD5.
Related Link: Statement
Keywords: Europe, UK, Banking, Remuneration, PRA Rulebook, CRD5, Basel, Operational Risk, FCA, PRA
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