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13th October 2016

Remuneration Proposals

The Financial Conduct Authority is currently consulting upon proposals to aid firms in their understanding of the rules that apply to their remuneration policies and practices.

At the same time, the regulator is looking to bring their provisions for remuneration in line with the Guidelines on sound remuneration policies as issued by the European Banking Authority (EBA).

Published last December, the EBA’s Guidelines lay out the requirements for remuneration policies that apply to firms that are subject to CRD IV – the Capital Requirements Directive.

As a result, the FCA is now looking to remove any inconsistencies between their Handbook rules and the EBA Guidance as well as aim to simplify their Handbook guidance on remuneration and general guidance on proportionality.

This means that the FCA’s current remuneration consultation (CP16/28) will affect all firms that fall within the scope of CRD IV (such as banks, building societies, investment firms and overseas firms, who are required to comply with the FCA’s Remuneration Code within SYSC 19A or SYSC 19D).

CP16/28 Remuneration in CRD IV firms: New Guidance and Changes to Handbook

New non-Handbook Guidance upon Remuneration Practices

With focus upon revisions to the remuneration section of the Handbook, the regulator is also proposing to publish new non-Handbook guidance that aims to address some of the frequently asked questions that they receive relating to remuneration implementation under the EBA Guidelines and other general provisions within the FCA Handbook.

Whilst this new non-Handbook Guidance will not set out any new rules or requirements for firm, it will instead aim to bring together the requirements and expectations of the regulator in an easy-to-refer-to guide.

At present, the non-Handbook Guidance will look to cover areas such as:

Identifying material risk takers and assessing awards of variable remuneration;
Providing help to firms in ensuring remuneration policies and practices comply with the relevant rules; and
Helping to align risk and reward and support positive conduct behaviours.

It is also expected that there will be additional information for how CRD IV remuneration rules impact and apply to groups, parent and subsidiary levels with discussion about how these also work alongside other sectoral rules that apply.

Next steps for CRD IV Firms

Those firms that wish to have their comments heard must reply to the FCA by the deadline of 28th November 2016 which is when the consultation for CP16/28 ends.

It is also suggested that Firms should also consider how the EBA Guidelines may affect their remuneration policies and practices more widely and ensure they comply with the EBA Guidelines when they come into effect from 1st January 2017.

Once the FCA’s Consultation process has ended, it is expected the FCA will publish their final rules and guidance before the end of the year.

Compliance Support & Assistance

If should require any assistance with regards to your Remuneration requirements including reviewing your Remuneration Policy and Remuneration Disclosure requirements, please contact our experienced compliance specialists, who would be happy to help.