Executive summary
 

The BSA welcomes what appears to us to be a sensible, well thought through and practical proposal.

We agree with the overall aims of:

• Reducing the number of Material Risk Takers (MRTs); 
• Simplifying the approach for identifying MRTs, with more emphasis on firms
• owning and safeguarding the process; 
• Bringing rules on bonus deferral more in line with international practice;
• Ensuring that variable remuneration better reflects risk taking outcomes and
• individual responsibilities; and 
• Aligning the regulators’ rules on buy-outs in relation to small firms.

We agree that it is unnecessary to overhaul the core regulatory approach to remuneration, while  recognising that the current arrangements are complex and that complexity has brought with it increased costs of compliance for firms.

We are pleased to see the PRA and FCA consulting jointly on this cross-cutting area. We consider this to be a much more efficient use of time and resource for the regulators and the regulated alike. 

We are encouraged by the fact that this approach is allowing the FCA to reduce volume in the FCA  Handbook rather than creating unnecessary duplication. We would caution, however, that if as  envisaged in the CP the detailed rules for this area would mainly be in PRA rule book, the link between remuneration, conduct and culture and ensuring good customer outcomes must not be diluted and the FCA should maintain a strong focus on this.

he current intention is that the proposals would come into force on the next calendar day after  publication of the final policy (currently anticipated for the second half of 2025) and would apply to firms’ performance years starting after that date. While in general not uncomfortable with this, some members consider that a 6 month period to finalise, communicate and implement any chances to remuneration is necessary. Under the current plans, which would see final policy confirmed in H2 2025, and applied from 2026, this would be achievable. However, a shorter period or indeed implementation part way through a performance year could be challenging. We urge the regulators to publish their final policy in a timely manner.

Read the full response