The Financial Conduct Authority (“FCA”) and the Prudential Regulation Authority (“PRA”) have jointly launched a Consultation Paper (“CP24/23”) named CP24/23: Remuneration reforms, to increase the effectiveness of remuneration practices within dual-regulated firms. CP24/23 aligns and adds to previous remuneration regime changes enhancing proportionality for small firms, and removes the bonus cap. CP24/23 proposes significant amendments, aimed to enhance the competitiveness of the UK’s financial sector while maintaining financial stability.
Key Proposals of CP24/23:
-
- Simplification and Proportionality: CP24/23 seeks to simplify the remuneration framework, making it more proportionate and easier to understand. This allows firms to concentrate on key aspects of risk management and accountability without unnecessary regulatory burdens.
- Stronger Accountability: The proposed changes aim to enhance responsibility by directly linking pay structures to risk-taking behaviours. This ensures Senior Management is accountable for their decisions, promoting a culture of prudence and responsibility.
- International Competitiveness: By aligning the remuneration regime with global standards, CP24/23 aims to improve the UK’s position as a leading financial center. These reforms are designed to attract and retain professionals, driving innovation and sustainable growth in the industry.
- Consumer and Market Outcomes: CP24/23 emphasises the importance of achieving positive outcomes for consumers and markets. By ensuring that remuneration practices are fair and transparent, the FCA aims to build trust and confidence among stakeholders.
Why CP24/23 is Important:
The CP24/23 remuneration reforms represent a significant step forward in creating a more resilient and competitive financial system. By addressing key issues such as complexity, accountability and international alignment, the FCA is setting a new benchmark for remuneration practices. These reforms are expected to:
-
- Promote Financial Stability: CP24/23 aims to reduce excessive risk-taking, helping to create a more stable and resilient financial system.
- Enhance Trust and Transparency: Increased transparency and accountability will build trust among investors, customers and key stakeholders.
- Driving Economic Growth: By boosting the competitiveness of the UK’s financial sector, these reforms will encourage innovation and support long-term economic expansion.
What Firms should do Next
With these proposed reforms approaching, with the Final Policy anticipated in H2 2025, firms must take proactive steps to ensure they are prepared for the upcoming changes. Firms should focus on:
-
- Reviewing current Remuneration Policies: Evaluate pay structures, deferral periods and accountability measures to align with the proposed regulations.
- Engage in the Consultation Process: Actively provide feedback to help shape the final reforms.
- Enhance Governance and Compliance Strategies: Strengthen risk management and ensure Senior Managers align with accountability measures.
- Stay Informed and Prepare for Implementation: Stay updated, train staff and adjust policies for a smooth transition.
How Complyport can help
Complyport provide comprehensive compliance solutions, expert guidance and tailored strategies to help firms effectively manage and implement the proposed remuneration reforms.
Complyport can support you by providing:
-
- Regulatory Expertise: Offering guidance on the proposed remuneration reforms, ensuring your firm stays compliant with evolving regulations.
- Consultation Support: Supporting with the consultation process, ensuring your firm’s voice is heard.
- Governance and Risk Management: Assisting in strengthening internal governance, accountability measures and risk management frameworks.
- Training and Compliance Support: Presenting training programs and compliance advisory services to ensure staff and Senior Management understand their responsibilities.
- Ongoing Monitoring and Updates: Providing continuous monitoring and compliance updates to stay ahead of regulatory changes.
