On 25 February 2021, the PRA issued a statement on its website regarding an error it has identified in the Remuneration Part of the PRA Rulebook. The error relates to the ‘higher paid material risk taker’ definition in Rule 1.3 in the Remuneration Part of the PRA Rulebook.
The ‘higher paid material risk taker’ definition currently sets the requirement that an individual would be treated as a ‘higher paid material risk taker’ when their:
- annual variable remuneration exceeds 33% of their total remuneration; and
- total remuneration exceeds £500,000.
The PRA has identified that this is an error. An individual should instead be treated as a ‘higher paid material risk taker’ where either condition (a) or (b) is satisfied. This is in line with the PRA’s position outlined in Consultation Paper 12/20 Capital Requirements Directive V (CRD V) and Policy Statement 26/20 Capital Requirements Directive V (CRD V).
As the error in the rule has been identified, the PRA intends to consult on amending the rule at the earliest opportunity. In the meantime, it expects firms to treat individuals as ‘higher paid material risk takers’ where either condition (a) or (b) has been satisfied.
The FCA has also issued a short statement on its webpage dealing with Policy Statement 20/16: Updating the Dual-regulated firms Remuneration Code to reflect CRD V. The FCA states that it intends to consult at the next suitable opportunity to make a corresponding amendment to the Dual-regulated firms Remuneration Code. This is to ensure that its remuneration requirements for dual-regulated firms remain consistent with the PRA’s approach.
