On 30 July 2014, the Financial Conduct Authority (“FCA”) and the Prudential Regulation Authority (“PRA”) published a joint consultation “Strengthening the Alignment of Risk and Reward: New Remuneration Rules.” The consultation sets out proposed changes to the Remuneration Code and seeks to address the issues raised in the final report (published in June 2013) of the Parliamentary Commission on Banking Standards. The consultation was published alongside the combined consultation to implement proposals on the senior management regime (about which, see below under Financial Services). The consultation on changes to the Remuneration Code, which  will affect all banks, building societies and PRA-designated investment firms, includes proposals: (i) to extend the deferral period for variable remuneration; (ii) to provide for an option for the clawback period to be extended for senior managers; (iii) to clarify  the presumption against payment or vesting of discretionary payments for senior managers of a bank that has failed; (iv) on the possibility of introducing rules on buy- outs; (v) to introduce a requirement for all UK-regulated firms to calculate profit by deducting a prudential valuation adjustment figure from fair value accounting profit when calculating profit for the purpose of determining the size of the annual bonus pool; and (vi) introducing a rule that non-executive directors should not receive variable remuneration (in line with current practice). The PRA and FCA confirm that they do not intend to introduce further disclosure requirements at this time. The FCA also confirms that it will review financial incentive schemes for sales staff during its work to implement MiFID II.

The consultation paper is available at: http://www.fca.org.uk/news/pra-and-fca-consult-on-proposals-to-improve-responsibility-and-accountability-in-the-banking- sector.