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Home > Prudential Regulation Authority > Remuneration - Application to vary a firm's proportionality level
 

Remuneration - Application to vary a firm's proportionality level

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A firm or group that believes it should fall into a lower level than the one indicated in Chapter 2 of the Supervisory Statement 2/17 ‘Remuneration’ may apply for individual guidance from the PRA to vary its proportionality level. 

The application for such guidance will need to be supported by sound reasons explaining why the firm or group considers a variation in its proportionality level to be justified, with reference to remuneration proportionality rule 5.1 in the PRA Rulebook. Once the PRA has received this information it will determine whether to give the firm guidance to move into a lower level.
 
Applying to vary a firm’s proportionality level
 
Firms wishing to apply to vary their proportionality level should:
 
  • Identify the firms within their group that the Remuneration Rules apply to directly and determine which proportionality level they fall into, based on Chapter 2 of SS2/17.
  • If the firm believes that a solo firm, the group, or an entity within the group should fall into a lower level than the proportionality level determined by the criteria set out in Table B of Chapter 2 of SS2/17, they should prepare an application for individual guidance using either Template A, B or C, available below under Key Resources.
  • Provide a separate request for each legal entity for which individual guidance is requested.
  • Email completed application(s), supporting documents and all relevant contact details to remuneration@bankofengland.co.uk. Firms should copy in their usual supervisory contact where relevant.
  •  Be prepared to supply further information, if requested.

 

Application templates

In order to facilitate a consistent decision-making process and to help firms understand the type of information the PRA may require when deciding whether to issue individual guidance, the PRA has three separate application templates tailored to the three most common types of request:
 

a.     For groups only: application to move an IFPRU limited license firm engaging in asset management activities from the group level into level 3.

b.     For groups only: general application to move a firm from the group level into a lower level (excluding IFPRU limited license asset management firms).

c.     For stand-alone firms or firms that are the only firm directly caught by the Remuneration Rules in the group: general level change application.

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Further notes

  • If a firm's request does not fit one of the above scenarios, the firm should speak to its supervisor.
  • The PRA will not charge firms for making these applications.
  • If firms are applying for Individual Guidance to change their proportionality level, they should continue to apply the Remuneration Rules as relevant for their current proportionality level until the PRA notifies the firm of its decision.
  • The firm should not assume that applications to change proportionality level will be accepted.
 

What the PRA will do

Once the PRA receives a complete application, it will:

  • Log and acknowledge it.
  • Discuss the application with the firm's supervisor and other relevant PRA areas. 
  • Prepare the application for review at the appropriate decision making forum.
  • Inform the firm of the decision, providing the key reasons for that decision.
 

The PRA will attempt to process applications and provide a decision within 30 working days of receipt. However, if the request raises complex issues, it may not be possible to meet this deadline. To allow enough time for the PRA to consider applications, firms should submit applications well in advance of the performance year end.

The PRA will not make its decisions public. If it is minded to decline, the PRA will send the firm details of the reconsideration process.

Background information

The remuneration proportionality rule 5.1 recognises that a firm can comply with the Remuneration Rules (in a way and to the extent that is appropriate to its size, internal organisation and the nature, the scope and the complexity of its activities. The PRA has set out in Chapter 2 of SS2/17 a three-level framework for applying the Remuneration Rules proportionately.

The proportionality framework provides a starting point to help firms understand the PRA’s general expectations of what constitutes adherence to the Remuneration Rules. Recognising the nature of the proportionality rule, the PRA will consider a firm’s specific risk characteristics when deciding whether the proportionality level determined for it by the proportionality framework is appropriate to that firm’s individual circumstances.

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Key Resources

 

Template A - Groups only - Application to move a IFPRU limited licence firm engaging in asset management activities from the group level into level 3.

Template B - Groups only - General application to move a firm from the group level into a lower level (excluding IFPRU limited licence asset management firms).

Template C - General level change application - For stand-alone firms or firms that are the only firm directly caught by the Remuneration Rules in the group.

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