Bonus Clawbacks: Prudential Regulation Authority Policy Statement and Final Rules

1 min

Posted on 01 Aug 2014

The Prudential Regulation Authority (“PRA”) has issued a policy statement and final rules on the requirement for PRA authorised firms to claw back bonuses which have already vested.

The policy statement indicates that:

The rules will not apply retrospectively. Instead, clawback obligations will apply in respect of bonuses awarded on or after 1 January 2015;

The minimum period for which bonuses will be subject to clawback will be seven years from the award (rather than its previous proposal of six years from vesting);

Grounds for applying clawback have been narrowed from the original proposal and no longer include where the firm or relevant business unit suffers a material downturn in financial performance; and

Firms will be able to take a proportionate approach to the enforcement of clawback based on the assessment of individual cases, but their approach to clawback will have to be set out in internal policies.

The policy statement contains the PRA’s response to its consultation on clawback proposals issued in March 2014. The changes will be implemented by way of a change to the Remuneration Code.

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