PS23/15: Remuneration: Ratio between fixed and variable components of total remuneration

Consultation opened
Consultation closed
Policy Statement

We set out joint rule changes with the Prudential Regulation Authority (PRA) to remove the existing limits on the ratio between fixed and variable components of total remuneration (‘the bonus cap’).

Read PS23/15 (PRA PS9/23) 

Why we are making these changes

We want to strengthen the effectiveness of the remuneration regime by increasing the proportion of compensation that can be subject to the incentive setting tools within the remuneration framework.

These changes should also help remove unintended consequences of the bonus cap. In particular, the growth in the proportion of the fixed component of total remuneration, which reduces a firm’s ability to adjust variable remuneration to absorb losses or for material poor performance or misconduct that subsequently comes to light.

We are publishing this final policy jointly with the PRA to ensure consistency between our remuneration regimes for relevant firms.

Who this applies to

  • Banks
  • Building societies
  • PRA-designated investment firms

Next steps

The requirements will come into effect on 31 October 2023. The changes will apply to current and future performance years.


The aim of our remuneration regime is to encourage alignment between risk taking, risk management, long-term performance and individual reward.

This is achieved through the core elements of the variable remuneration framework, including:

  • linking payment of awards to risk-adjusted performance
  • payments in instruments 
  • deferral
  • application of risk adjustment - including the use of malus and clawback 

The bonus cap does not limit total remuneration but limits the variable remuneration a firm can pay relative to an individual’s fixed pay. This has the effect of limiting the proportion of remuneration that can be adjusted by risk and performance measures.

The removal of the bonus cap gives firms the freedom to restructure their pay over time, within the framework of the regulators’ rules on variable remuneration which aim to better align remuneration with prudent risk taking.

In addition to this policy statement, we will shortly be writing to the Remuneration Committee Chairs of level one firms to reiterate our expectations about their remuneration policies aligning with and supporting a healthy culture, and encouraging positive outcomes for consumers.