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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