This joint FCA and PRA policy statement presents new rules and guidance for the remuneration of banking staff.
The paper follows our joint consultation paper (FCA CP14/14; PRA CP15/14) in June 2014 in which both regulators proposed a number of changes to the FCA Handbook and PRA Rulebook in response to the final report of the PCBS, ‘Changing Banking for Good’.
The paper should be read alongside our forthcoming publication, to be published shortly, which sets out our joint rules for increasing individual accountability in banking.
Policy Statement PS15/16 [PDF]
These changes will affect:
The main changes are:
The FCA is also issuing new General Guidance on ex-post risk adjustment. This guidance is intended to share the latest good practice observed in the 2014 remuneration round and clarify the FCA’s expectations on how relevant firms should meet the Remuneration Code requirements on ex-post risk adjustment.
More information can be found in our Q&A Remuneration - revising the code.
The behaviour and culture within banks played a major role in the 2008-09 financial crisis and in conduct scandals such as PPI mis-selling and the attempted manipulation of LIBOR. One of the key drivers of this was reward incentives that drove excessive risk-taking and poor conduct in firms and which collectively gave rise to significant detriment.
In June 2012, the Government established the PCBS to consider and report on these issues. It concluded that public trust in banking was at an all-time low and recommended a series of measures to restore trust and improve culture. These recommendations proposed a new framework for approving and holding individuals to account alongside other measures, including recommendations regarding remuneration and whistleblowing.
This policy statement introduces changes in the Remuneration Code to strengthen the alignment between risk and reward.
The new rules on deferral and clawback will come into force for performance years starting on or after 1 January 2016. The new rules on Non-Executive Directors, the updated General Guidance on Ex-Post Risk adjustment, and all other new or amended rules will come into force from 1 July 2015.
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