Featured Product

    PRA Issues Statement on Standards for Identifying Material Risk-Takers

    May 25, 2021

    PRA published a statement that provides an update on its approach to update the applicable requirements on the identification of material risk-takers and its position concerning applications for exclusion of material risk-takers in the current performance year. The statement should be read in conjunction with Chapter 3 of the remuneration part of the PRA Rulebook and the supervisory statement SS2/17 on remuneration.

    As set out in paragraphs 3.4 and 3.5 of the policy statement PS 26/20 on the Capital Requirements Directive 5 (CRD5), in light of the EU having not adopted an updated version of the material risk-takers regulation before the transposition of CRD V on December 28, 2020, the revised draft of the regulatory technical standards on material risk-takers (MRT RTS), which EBA published in June 2020, is currently used as the basis for the application of the Remuneration Part of the PRA Rulebook. As PS26/20 also set out, this means that there is a discrepancy between standards on material risk-takers (MRT RTS 604/2014), which continue to apply in UK law, and the revised draft MRT RTS, which apply in determining the application of the Remuneration Part of the PRA Rulebook. Thus, PRA intends to consult on updating this position later this year. However, during the intervening period, PRA is of the view that the current position is as follows:

    • MRT RTS 604/2014 continue to apply (together with the technical changes made to it as part of the onshoring process) and be binding in its entirety. Accordingly, firms must continue to comply with it.
    • In addition, firms must also apply the revised draft MRT RTS for the purposes of determining the individuals to which the requirements of the Remuneration Part of the PRA Rulebook apply.
    • In general, the application of the revised draft MRT RTS by firms will result in the identification of a broader scope of individuals than the application of MRT RTS 604/2014. Therefore, in applying the revised draft MRT RTS, PRA considers that firms will also meet the requirements of MRT RTS 604/2014.
    • In any instance where MRT RTS 604/2014 requires firms to identify individuals who do not meet any of the criteria under the revised draft MRT RTS, PRA considers that firms do not need to apply the requirements of the Remuneration Part of the PRA Rulebook in relation to those individuals solely on the basis that they meet the criteria of MRT RTS 604/2014 if the firm does not consider that the professional activities of said individuals have a material impact on the firm’s risk profile.
    • PRA reminds firms that it considers the revised draft MRT RTS to be a minimum standard and that firms will need to assess whether an individual’s professional activities have a material impact on the firm’s risk profile for the purposes of the application of Rule 3.1, even if they do not fall within any of the mandatory criteria established under that rule or the revised draft MRT RTS.
    • PRA is reviewing the templates that may be used by firms on a voluntary basis to communicate to the PRA information on their material risk-takers’ identification and exclusion, as set out in SS2/17 (Chapter 3). Amended templates for Stage 1 and 2 submissions will be published this Summer and the remaining templates by November this year.
    • PRA notes that if firms wish to exclude a material risk-taker in line with the criteria set out in Rule 3.1 and Article 7 of the revised draft MRT RTS, firms have to apply to PRA for a waiver under Section 138A of the Financial Services and Markets Act 2000, including the information submitted using the Remuneration Policy Statement templates. PRA will provide more details on how firms may apply for such waivers when it publishes the updated templates.
    • PRA recognizes that firms with a fiscal year-end of December 31 may require additional time to submit the Remuneration Policy Statement tables on MRT Identification and Exclusion (tables 1a, 2, 8), the Remuneration Policy Statement Questionnaires and Annex 1: malus. In this instance, firms may, therefore, submit them by September 30. Please note, this is only applicable for the 2021/22 remuneration round.

     

    Related LinkStatement

     

    Keywords: Europe, UK, Banking, Regulatory Technical Standards, Remuneration, CRD 5, Material Risk Takers, PRA

    Related Articles
    News

    US Regulators Release Stress Test Scenarios for Banks

    The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).

    February 28, 2024 WebPage Regulatory News
    News

    Asian Governments Aim for Interoperability in AI Governance Frameworks

    The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.

    February 28, 2024 WebPage Regulatory News
    News

    EBA Proposes Operational Risk Standards Under Final Basel III Package

    The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.

    February 26, 2024 WebPage Regulatory News
    News

    EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS

    The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.

    February 23, 2024 WebPage Regulatory News
    News

    ECB to Expand Climate Change Work in 2024-2025

    Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.

    February 23, 2024 WebPage Regulatory News
    News

    BIS Bulletin Examines Cognitive Limits of Large Language Models

    The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.

    January 25, 2024 WebPage Regulatory News
    News

    ECB is Conducting First Cyber Risk Stress Test for Banks

    As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.

    January 24, 2024 WebPage Regulatory News
    News

    EBA Continues Momentum Toward Strengthening Prudential Rules for Banks

    A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.

    January 24, 2024 WebPage Regulatory News
    News

    EU and UK Agencies Issue Updates on Final Basel III Rules

    The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards

    December 19, 2023 WebPage Regulatory News
    News

    Industry Agency Expects Considerable Uptake for Swiss Climate Scores

    The Swiss Federal Council recently decided to further develop the Swiss Climate Scores, which it had first launched in June 2022.

    December 18, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8952