Remuneration issues for financial services firms

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Following the financial crisis of 2007/2008, the remuneration of employees and directors of companies in the financial services sector became headline news and consequently led to the introduction of an array of regulation and new corporate governance guidelines. This subtopic examines some of the provisions and corporate governance guidelines which were introduced to help encourage and maintain risk-focused remuneration policies in financial services firms.

The regulatory framework

The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) have a duty under the Financial Services and Markets Act 2000 to ensure that authorised firms have a remuneration policy which is consistent with the effective management of risk.

It should be noted that the regulations dealing with remuneration in such firms is set out in various different sources, including the FCA Handbook and the PRA Rulebook, as well as certain provisions which are derived from EU Directives, and various guidance. The following is not an exhaustive list of all of the applicable regulatory requirements.

Firms such as banks, building societies and investment firms must comply with detailed rules under the FCA’s Remuneration Codes, which are set

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