PRA and FCA publish consultation on pay for senior bankers

In our blog post of 18 October 2024 (here), we referred to the annual Mansion House speech given on 17 October 2024 by the CEO of the Prudential Regulation Authority which proposed a reduction in the current seven year deferral periods applicable to "Higher Paid" material risk takers ("MRTs") undertaking senior manager roles at banks, building societies and other CRR firms.

The Prudential Regulation Authority and the Financial Conduct Authority have now published a joint consultation to reduce restrictions on senior banker pay including:

• reducing the bonus deferral period for the most senior bankers to five years and for less senior bankers to four years; and
• allowing part-payment of bonuses from year one, rather than year three as at present for some bankers.

In addition, the consultation covers:

• removing EU-originated guidelines that (a) prohibit paying dividends or interest on deferred bonuses awarded in shares or other instruments; and (b) require senior bankers to wait up to a year before being able to sell deferred bonuses in shares or other instruments;
• reducing the number of individuals subject to rules on their pay, simplifying the approach for identifying those who should be subject to them, and giving firms more discretion to determine which employees will be subject to the rules; and
• ensuring bankers are held accountable for the outcomes of risk-taking decisions by introducing clarifications to existing policies ensuring that firms consider adjusting pay in the event of risk-management failures.

The consultation paper is available here.

We will continue to keep you updated on the PRA's proposed regulatory developments. If you would like to discuss the consultation paper, please contact a member of the Remuneration and Incentives team.