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Global HR Lawyers

Remuneration code - For banks, building societies and investment firms

30 October 2016

The financial services industry has been the focus of wide-ranging reform over the past few years as a result of both UK Government and European initiatives. In January 2014, a package of reforms implementing the fourth set of amendments to the EU Capital Requirements Directive (“CRD4”) took effect.

The remuneration requirements of CRD4 build on the remuneration requirements of the third amendment to the Capital Requirement Directive (“CRD3”) which aimed to align remuneration principles in banks, building societies and investment firms across the EU. In particular, CRD3 imposed restrictions affecting the structure and timing of bonus payments including, for example, deferring entitlement to bonuses already earned by individuals. CRD4 goes a step further and imposes restrictions on the quantum of variable remuneration under the so-called “bonus cap”. In June 2015 the Prudential Regulation Authority (“PRA”) and the Financial Conduct Authority (“FCA”) issued new Remuneration Codes taking into account the requirements of “CRD4” and other developments.  

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