The Prudential Regulation Authority’s (PRA) Policy Statement (PS) provides feedback to responses to Consultation Paper (CP) 9/21 ‘Remuneration: Correction to the definition of ‘higher paid material risk taker’. It also contains the PRA’s final policy, as follows:
- amendments to the Remuneration Part of the PRA Rulebook (Appendix 1); and
- an updated Supervisory Statement (SS) 2/17 ‘Remuneration’ (Appendix 2).
In CP9/21 the PRA made the following proposals which have now been finalised in PS18/21:
- as regards the definition of a ‘higher paid material risk taker’, change the ‘and’ to ‘or’, thereby ensuring that a ‘higher paid material risk taker’ is defined as either an individual (a) whose annual variable remuneration exceeds 33% of their total remuneration, or (b) whose total remuneration exceeds £500,000;
- make a consequential amendment to Table G in SS2/17, to reflect the updated definition in the table heading; and
- make an addition to the Remuneration Part of the PRA Rulebook to make clear that firms would not be required to apply the corrected definition to remuneration that has been paid, vested, or is subject to an obligation to pay or vest created before Friday 23 July 2021 in respect of the first performance year beginning on or after Tuesday 29 December 2020. This is in order to avoid retroactivity.
All the changes set out above will take effect from Friday 23 July 2021. To view the PRA’s webpage on PS18/21, please click here.