New rules on remuneration published by the PRA and FCA - On 23 June 2015, the PRA and FCA published new remuneration rules that will apply to UK banks and building societies, and PRA-designated investment firms, amongst others. The key changes include:
- Extending deferral periods to withhold variable remuneration – up to seven years for Senior Managers, five years for PRA designated risk managers with senior, managerial or supervisory roles, and three to five years for all other staff whose actions could have a material impact on a firm (“Material Risk Takers”);
- Clawback of all or part of variable remuneration that has already been paid – up to ten years from the date of award for Senior Managers, and seven years from the date of award for Material Risk Takers;
- Remuneration of non-executive directors – variable pay is prohibited for non-executive directors.
The rules regarding clawback and deferral will apply to variable remuneration awarded for performance periods starting on or after 1 January 2016. The remainder of the new rules come into force from 1 July 2015.
The FCA commented that the new remuneration rules allow “firms … to build long term decision making and effective risk management into people’s pay packets”.