Revising the Remuneration Code
The Financial Services Authority ("FSA") has published a revised Remuneration Code ("revised Code") to comply with the remuneration requirements under the Capital Requirements Directive ("CRD3") and guidelines of the Committee of European Banking Supervisors ("CEBS"). Subject to grandfathering for some provisions, the new requirements apply from 1 January 2011.
The existing Code is applicable to the largest banks, building societies and broker dealers and requires the application of 'remuneration policies, practices and procedures that are consistent with and promote effective risk management'.
The revised Code will now apply to all banks, broker dealers and investment managers. Key revisions include:
- Proportion in Shares - at least 50% of variable deferred and undeferred remuneration should consist of either shares or specified non-cash instruments.
- Retention period - variable remuneration paid in either shares or specified non-cash instruments should be subject to an appropriate retention period.
- Guaranteed bonuses - may only be used in very limited circumstances.
- Proportionality - elements of the revised Code may be neutralized where application may be disproportionate.
Date December 20, 2010
Cross Reference (links require a Cabinet subscription) Capital Requirements Directive