Banking pay reform: what’s coming up?

Felicity Gemson

Pay regulation was a recurrent theme in last week’s headlines. The Government announced that it is dropping its legal challenge to CRD IV bonus cap rules, confirming what most firms had expected – that the bonus cap is a reality. The Government’s chances of success before the ECJ had plummeted after the Advocate General resoundingly dismissed its case in his preliminary opinion. There were also statements from the Treasury and the Governor of the Bank of England calling for even tougher pay standards to be adopted to address the shift towards fixed pay in Europe, which would potentially extend clawback to salaries as well as bonuses. The Treasury has asked the Financial Stability Board to tackle this issue globally and the UK’s Fair & Effective Markets Review (which is reviewing how the fixed income, currency and commodities (“FICC”) markets can operate more fairly and effectively) to consider its own recommendations.

Key dates

These developments show that remuneration reform is still a moving target. Yet with 2015 – and a new performance year for most firms – nearly upon us, the final framework of remuneration rules is still unclear. The tracker below highlights important dates for firms to be aware of in the coming months, in terms of rules which are coming into effect and missing pieces of the jigsaw.


• By 31 December 2014:  EBA to launch consultation on revised remuneration guidelines.
• Promised by 31 December 2014 (FCA has confirmed date as “TBC”): PRA/FCA to publish policy statements containing final remuneration rules (including extended deferral/vesting periods) to apply for 2015 performance periods. Click here to see our eAlert on the consultation proposals.
• By 31 December 2014: Deadline for PRA/FCA to ensure that firms’ policies are updated to reflect the EBA’s opinion on compliant role-based allowance structures. Click here to see our eAlert on the EBA opinion.
• Promised late 2014/early 2015 (FCA has confirmed date as “TBC”): PRA/FCA to publish policy statements with final rules on Senior Managers/Certification regime to which the new remuneration requirements will be tied. Click here to see our eAlert on the consultation proposals.
• 1 January 2015: New PRA rules on bonus clawback come into force (for awards made from 1 January 2015).
• 1 January 2015: Revised PRA/FCA remuneration rules to apply for performance periods starting on or after 1 January 2015 (see above)/
• By June 2015: EBA to finalise revised remuneration guidelines.
• By June 2015: Fair & Effective Markets Review to publish final report on recommendations to improve FICC markets including potentially tougher constraints on fixed pay.
• Late 2015/early 2016: FCA/PRA expected to implement Senior Managers/Certification regime.

We will report as significant developments unfold

Comments published on Employment Talk do not necessarily reflect the views of Allen & Overy.

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