UK: FCA and PRA consultation on the implementation of the CRD IV remuneration provisions

 The Financial Conduct Authority (“FCA”) and the Prudential Regulatory Authority (“PRA”) have each published a consultation on the implementation of the new Capital Requirements Directive (“CRD IV”) in the UK, which address implementation of the remuneration provisions.

 CRD IV largely restates the remuneration provisions of the existing Capital Requirements Directive (“CRD III”), but with some material additions, including the bonus cap.

 The key issues are: 

• no guidance is given on the implementation of the new bonus cap
• some investment firms will now fall outside the scope of CRD IV, whilst other firms will become subject to the Remuneration Code for the first time
• there will now be two CRD Remuneration Codes: one implementing CRD IV and another to maintain the status quo for firms that were subject to CRD III but fall outside CRD IV (plus a third code applying to firms subject to the AIFMD)
• firms will be required to operate post-payment claw-back, rather than just pre-vesting malus, and claw-back/malus will have to be operated in respect of all variable remuneration, not just deferred variable remuneration
• the new claw-back requirement may have to be applied by all firms
• CRD IV firms will become directly subject to the European remuneration disclosure rules, in place of the UK rules, which include some new disclosures

The consultation documents are available here (FCA) and here (PRA). The FCA consultation is open until 30 September 2013 and the PRA consultation is open until 2 October 2013.  For more detail from our Employment Notes, click here.