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Home > Prudential Regulation Authority > Buy-outs of variable remuneration – PS26/16
 

Buy-outs of variable remuneration – PS26/16

28 September 2016

Overview

This Prudential Regulation Authority (PRA) policy statement (PS) provides feedback on responses to Consultation Paper (CP) 2/16 ‘Buy-outs of variable remuneration’. The PS also includes final rules amending the Remuneration Part of the PRA Rulebook intended to ensure that the practice of buy-outs does not blunt the beneficial incentive effects of the existing rules on malus and clawback, or allow employees to avoid the proper consequences of their actions.

This PS is relevant to banks, building societies and PRA-designated investment firms, including UK branches of non-EEA headquartered firms, and should be read alongside the Remuneration Part of the PRA Rulebook.

In response to consultation feedback, the PRA has made changes to the proposed rules set out in CP2/16. These changes are described in Chapter 2. The PRA is required by the Financial Services and Markets Act 2000 (FSMA) to publish a statement on the impact of rules on mutuals where the final rule differs from the draft of the proposed rule.3 The PRA is also required by FSMA4 to publish a cost benefit analysis of any changes to the consultation proposals which the PRA considers to be significant.

The proposed amendments are responses to the consultation and do not depart materially from the original proposals. In particular, the requirement for the previous employer to provide employees with a remuneration statement is likely to reduce costs on firms by removing the need to trace all previous employers and determine the amounts of the buy-out award pertaining to each, shifting the responsibility to employees and former employers who should already have access to this information. As such, in the PRA’s opinion, the impact of the rules as made is not significantly different from the impact of the proposed rules on mutuals or other deposit-takers.

On 28 September 2016, the PRA also published CP33/16 ‘The PRA’s expectations on remuneration’ which consults on the consolidation of remuneration guidance, and should be read alongside this PS. A list of all publications issued on 28 September 2016 is available under Related Links.

Policy Statement

Buy-outs of variable remuneration – PS26/16

Appendix

PRA RULEBOOK: CRR FIRMS: REMUNERATION BUY-OUT RULES 2016

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