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The PRA's Remuneration Rules set out the standards that banks, building societies and designated investment firms have to meet when setting pay and bonus awards for their staff. It aims to ensure that firms' remuneration practices are consistent with effective risk management.
The PRA's supervisory statement on the application of proportionality explains the PRA's proportionate approach to implementing the Remuneration Rules and Remuneration Disclosure - see LSS8/13 in Related Links.
The PRA's supervisory statement on malus clarifies its expectations of how firms subject to the Remuneration Rules comply with the requirements on the use of malus (performance adjustment) - see SS2/13 in Related Links.
Self-assessment templates and tables
The PRA's remuneration policy statement (RPS) templates allow firms to record remuneration policies, practices and procedures and assess compliance with the Remuneration Rules. The RPS tables allow firms to keep a record of all Material Risk Takers identified for the current performance year.
CRD IV data collection on remuneration practices
PRA Policy Statement 11/14 'CRD IV: Data collection on remuneration practices' sets out the finalised remuneration data reporting requirements for the PRA Rulebook. Competent authorities are required by the Capital Requirements Directive to collect information on:
- Remuneration benchmarking.
- High earners.
Firms are now required to submit their Benchmarking and High Earners Report via the regulatory reporting system GABRIEL which is available as an External Link.
Instructions for completing both reports is provided below under Key Resources.
On 7 April 2016, the PRA published Solvency II: Remuneration requirements - CP13/16 which seeks feedback on a draft supervisory statement with the PRA’s expectations for compliance with the key Solvency II remuneration requirements. The consultation closes on Thursday 2 June 2016.
On 29 February 2016, the PRA and Financial Conduct Authority published a statement on compliance with the EBA guidelines on Sound Remuneration Policies. The regulators have notified the European Banking Authority (EBA) that they will comply with all aspects of the EBA Guidelines on Sound Remuneration Policies, except for the provision that the limit on awarding variable remuneration to 100% of fixed remuneration, or 200% with shareholder approval (the bonus cap), must be applied to all firms subject to the Capital Requirements Directive (CRD). Whilst the PRA and FCA will not comply with this requirement, all CRD-regulated firms must comply with all other aspects of the Guidelines, and all existing domestic requirements. The PRA and FCA are considering whether any rule changes will be required to implement the guidelines and, if necessary, will consult in due course. See the link below for the full statement.
PRA and FCA statement on compliance with the EBA guidelines on Sound Remuneration Policies.
On 13 January 2016, the PRA published Consultation Paper 2/16 'Buy-outs of variable remuneration', setting out its proposal for the introduction of a new rule on buy-outs of variable remuneration, relating to the practice whereby firms recruiting staff 'buy-out' deferred bonus awards that have been cancelled by their previous employer.
On 23 June 2015, the PRA published its final rules and guidance in relation to proposals under Consultation Paper 15/14 ‘Strengthening the alignment of risk and reward: new remuneration rules’ published jointly by the PRA and the Financial Conduct Authority (FCA) (See related links).
On 8 April 2014, the PRA issued a letter to Category 1 and 2 firms explaining the procedure to increase the permitted ratio of fixed to variable remuneration (see Key Resources).
Readers are referred to the PRA's Policy Statement 7/14 'Clawback', July 2014 (see Related Links) and reminded that the finalised rule on clawback came into force on Thursday 1 January 2015.
On 8 December 2014, Andrew Bailey, Deputy Governor of Prudential Regulation and CEO of the PRA, sent a letter to Remuneration level 1 and 2 firms clarifying the PRA’s expectations on material risk takers, guaranteed variable remuneration, fixed remuneration, and clawback (see Key Resources).