BoE consults on bonus clawback: BoE is consulting on how to achieve clawback of "vested remuneration". It already has powers to require firms to stop paying unvested bonuses, and now wants to further strengthen the remuneration code by requiring PRA-regulated firms to amend their employment contracts to allow vested remuneration to be clawed back if certain conditions are met. This would be if either:
- there is reasonable evidence of employee misbehaviour or material error; or
- the firm or business unit suffers a material financial downturn or a material failure of risk management.
Clawback is not limited to employees who misbehave but, where a decision is based on failures of risk management or misconduct, one factor would be whether the employee could reasonably have been expected to be aware of the problem but did not address it, or was senior enough to be considered indirectly responsible or accountable for the failure. BoE wants the rules to take effect from January 2015 but they could apply to awards made but not vested before that date. Consultation closes on 13 May. (Source: BoE Consults on Bonus Clawback)
BoE reports on FMI work: BoE has published its annual report on supervision of financial market infrastructures (FMI). The report focuses on work BoE has carried out to examine the key elements of Central Counterparties' (CCPs) financial risk management. It also looks at developments in retail payment systems and on its work to improve the resilience of the UK financial sector to cyber attack. (Source: BoE Reports on Infrastructures)
BoE makes new appointments: BoE has announced the appointment of Anthony Habgood as the Chairman of Court, Ben Broadbent as Deputy Governor for Monetary Policy and Nemat Shafik as Deputy Governor responsible for Markets and Banking. (Source: BoE Makes New Appointments)
BoE launches strategic plan: BoE has presented its strategic plan, to be implemented over the next three years, with which it seeks to take full advantage of its expanded responsibilities. Some of the major changes as regards financial regulation and supervision include the creation of:
- a new Deputy Governor-level position for Markets and Banking, who will also hold a seat on the Financial Policy Committee (FPC).
- a new Financial Stability Strategy and Risk Directorate, bringing together several existing divisions from the Financial Stability Directorate and the PRA. The area will primarily serve the FPC and will co-ordinate the new annual stress tests.
- an Executive Director for Specialist Supervision and Regulatory Operations in the PRA, who will also be a Deputy Head of the PRA. The role will be responsible for Supervisory Oversight, Supervisory Support, the PRA Chief Operating Officer function and, through a Director of Specialist Supervision, the PRA Risk Specialists and both Banking and Insurance Prudential Supervision Support functions. It will have a secondary reporting line to the Financial Stability Risk and Strategy Directorate.
- a new Prudential Policy Directorate, bringing together relevant PRA and Financial Stability (FS) policy divisions.
- an enhanced PRA line supervision team. Expert line supervision and senior level engagement with firms will be reinforced. The Executive Director for International Banks Supervision will lead the supervision of branches and subsidiaries of overseas banks, and an Executive Director for supervision of UK deposit takers will be created.
(Source: BoE Launches Strategic Plan)