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
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
Related Articles
EBA Launches Stress Tests for Banks, Issues Other Updates
The European Banking Authority (EBA) launched the 2023 European Union (EU)-wide stress test, published annual reports on minimum requirement for own funds and eligible liabilities (MREL) and high earners with data as of December 2021.
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.
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.
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.
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.
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.
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.
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.
HKMA Publications Address Sustainability Issues in Financial Sector
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
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.
