Smaller banks and building societies across Europe face the prospect of implementing a strict bonus deferral regime from January next year under proposed new guidelines on pay from the European Banking Authority (EBA). UK regulators will have to implement the new guidelines if they are adopted by the EBA later this year. The Financial Conduct Authority (FCA), which regulates approximately 1,000 UK banks, building societies, and other financial institutions, has urged smaller banks and building societies to respond to the EBA’s consultation before it closes in June 2015.
The key changes cover how and when any variable pay (typically bonuses and long-term incentives) can be paid to identified staff (employees who can have a material impact on the risk profile of their employer through their day-to-day activities). Currently only the largest banks and building societies are restricted by the relevant provisions of the remuneration code. Under the EBA proposals, all firms would have to adopt the rules on variable pay, regardless of size.
So should smaller financial services firms be concerned about the EBA’s proposals? Pay expert Andrew Menhennet of Yellow Hat Reward explains the changes and gives his view on their likely impact in his latest blog.
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