The Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) have confirmed final reforms to senior banker remuneration rules aimed at increasing flexibility in variable pay while tightening the link between bonus outcomes and responsible risk-taking. The package shortens deferral requirements and reduces duplication between the two regulators’ frameworks, with the new rules taking effect from 16 October 2025 for 2025 pay awards and other awards that have been made but not yet fully paid. Key changes include cutting the bonus deferral period for senior bankers from eight to four years and allowing part-payment of bonuses for the most senior bankers from year one rather than year three. Deferral proportionality has been adjusted so that, instead of deferring 60% of the full bonus once the GBP 660,000 threshold is exceeded, only 60% of the amount above GBP 660,000 must be deferred. Firms gain flexibility over the composition and timing of variable pay, including a greater ability to pay more of the cash element up front and to defer a larger share of the equity and other instrument component, and the previous requirement that both upfront and deferred components be 50% cash and 50% instruments is removed. The PRA is also abolishing the 6 to 12-month retention period that previously applied alongside longer deferrals for certain higher-paid senior managers, removing specified EU-originated guidelines on dividends or interest on deferred instruments and on post-vesting sale restrictions, and reducing the number of individuals captured by giving firms more discretion over who is subject to the rules. The reforms also seek closer alignment with the Senior Managers Regime by requiring firms to consider performance against PRA supervisory priorities in bonus decisions for the responsible Senior Managers. Operationally, firms will largely be expected to refer to the PRA’s remuneration rules, with the FCA cutting its Remuneration Handbook rules by more than 70%. The FCA also flagged a review of the effectiveness of its solo remuneration rules, with an update planned next year following engagement with industry and stakeholders.
Bank of England 2025-10-15
Bank of England's Prudential Regulation Authority and Financial Conduct Authority cut senior banker bonus deferral to four years and streamline remuneration rules
The Prudential Regulation Authority and the Financial Conduct Authority have finalized reforms to senior banker remuneration rules, enhancing flexibility in variable pay and linking bonuses to responsible risk-taking. Key changes include reducing the bonus deferral period from eight to four years and adjusting deferral proportionality above the GBP 660,000 threshold. Effective from 16 October 2025, the reforms align with the Senior Managers Regime and simplify the regulatory framework by reducing duplication between the two authorities.