Remuneration Code: Changes to Guidance

The FSA has issued amended consultative guidance on proportionality in relation to the Remuneration Code (the current guidance was issued last December).

At present the FSA’s guidance provides for the division of Remuneration Code firms into one of four proportionality tiers based on capital resources.

The revised approach will divide such firms into one of three proportionality tiers based upon ‘relevant total assets’. The latter, for BIPRU firms, will be the average of the firm’s total assets on the firm’s last three accounting reference dates.

The table of proportionality tiers can be found on page 7 of the guidance. BIPRU limited licence and BIPRU limited activity firms will remain in the lowest tier, so in practical terms there will no impact on such firms. This tier will now also contain UK Banks and Building Societies, where relevant assets do not exceed £15bn, and full scope firms not falling into tiers one or two.

The proposed approach will allow the FSA to focus its resources on the most significant firms who pose risks to financial stability.

Any comments on the changes need to be made by 6 September.