FCA updates handbook rules and guidance for firms subject to the CRD IV Directive

The FCA has updated its guidance in line with the European Banking Authorities’ guidelines for remuneration policies in the banking and investment sectors. 

6 June 2017

From 2017, all firms within the scope of Capital Requirements Directive (CRD) IV (namely, banks, building societies, investment firms, and overseas firms) are expected to conform to the FCA guidelines on remuneration requirements. These aim to ensure that remuneration policies are consistent with and promote sound and effective management, do not provide excessive risk taking, and are aligned with the long-term interests of the firm.

The FCA’s new guidance accompanies their Remuneration Code, the Proportionality Guidance, and the EBA Final Guidelines on sound remuneration policies and aims to give practical guidance on how firms should apply these documents.

What changes have been made?

The guidance with the changes shown is available here, but a summary of particular changes includes:

  • Specification that it is the responsibility of the firm to assess its characteristics, if applicable, and explain to the FCA its rationale for applying the remuneration principles proportionality rule;
  • Noting that it is not automatically proportionate to disapply relevant remuneration requirements at any particular proportionality level of firm, and individual assessments should be carried out; and
  • The introduction of supplemental guidance on dividing firms into proportionality levels where groups of companies have more than one Remuneration Code firm.

The FCA expects firms to ensure that they comply with its rules and guidance, as well as the EBA guidelines, for the 2017 performance year onwards.