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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.
Policy developments and updates
On 7 July 2016, the PRA updated some of the materials published on 30 June in the table above. Please contact firstname.lastname@example.org if you have any queries on the templates, and your usual supervisory contact for firm-specific queries.
On 30 June 2016, the PRA noted that firms within the scope of the Remuneration Part of the PRA Rulebook are expected to ensure that their remuneration policies, practices and procedures are clear and documented. To record those policies, practices and procedures, and assess their compliance with the requirements, firms should complete a Remuneration Policy Statement (RPS) using the templates provided on this page.
The RPS templates and tables have been updated and firms should refer to the template relevant to its proportionality level. A summary of the changes are set out below:
- RPS – level 1 firms - Three changes have been made: i) the sections on role-based allowances and risk adjustment have been streamlined and the number of questions reduced; ii) two new questions have been added to collect information on how firms will adjust their profits as part of the overall process for determining the bonus pool using the incremental movement between the prudent valuation adjustment returns (please refer to 11.5 in the Remuneration Part of the PRA Rulebook); and iii) following the introduction of the Senior Managers Regime (SMR), firms are to provide information on the individual who has been allocated the PRA Prescribed Responsibility for overseeing the development of, and implementation of the firm’s remuneration policies and practices.
- RPS – level 2 and 3 firms - The revised templates for level 2 and 3 firms reflect the changes above and are aligned to the remuneration rules published in the PRA Rulebook in June 2015.
- RPS Table 8 - The purpose of this table is for firms to notify the PRA or to apply for the exclusion of Material Risk Takers (MRTs) who have been captured under the quantitative criteria of the MRTs regulation. Firms in all proportionality levels should complete and submit this table if they have any notifications or exclusions. Firms should refer to the instructions tab in the workbook.
For any queries relating to the RPS templates and tables firms should contact their PRA supervisor or the Firm Enquiries Team (details available in Contact Us).
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).