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PRA and FCA further consult on CRD IV

  • PRA Image
  • FCA Image

10 Oct 2013

The Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) have published further consultation papers on implementing the new EU Capital Requirements Directive (CRD) and Capital Requirements Regulation (CRR), collectively known as CRD IV. Among other things, the consultations include proposals for changes to the FCA handbook and the PRA handbook to incorporate the remuneration provisions arising from CRD IV.

In August 2013, the PRA and FCA both consulted on a number of proposals for amendments to their respective handbooks as a result of the transposition of CRD IV.  The FCA handbook is applicable to nearly all investment firms under the Capital Requirements Directive (CRD) and the PRA handbook applicable to credit institutions and those investment firms ‘designated’ for prudential supervision by the PRA. 

The consultations in August 2013 noted the key features of the changes in remuneration policies that will be required as a result of CRD IV but did not consult on these.  These consultations are now included in the FCA consultation paper ‘CP13/12 – CRD for investment firms’ and the PRA consultation paper ‘CP8/13 – Occasional Consultation paper’. 

The CRD IV requirements are in respect of “variable elements of remuneration”.  The areas that are being consulted on are: 

  • Limits on bonuses (limits between the fixed and variable component of total remuneration);
  • Areas of national discretion to set up stricter measures on bonuses; and
  • Use of the principle of proportionality in applying the bonus limits according to the ‘type’ of investment firm. 

Subsequently to publishing their consultation, the PRA has also published a Supervisory statement (link to Bank of England website) as to how they expect companies, subject to the Remuneration Code in SYSC 19A of the handbook, to comply with the malus provisions.  A further consultation will be published later proposing clawbacks of vested awards. 

Comments on the FCA consultation are invited until 10 November 2013 and comments on the PRA consultation are invited until 1 November 2013. 

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