The peer review examines implementation of financial sector compensation reforms and focuses on the steps taken by the authorities to implement the FSB’s Principles and Implementation Standards (P&S).

The Review finds that the Prudential Regulation Authority and the Financial Conduct Authority (the Authorities) have implemented financial sector compensation reforms that are consistent with the P&S. Moreover, some of their approaches can serve as examples of good practice for other jurisdictions to consider. While the initial focus was on the banking sector, over time the Authorities have increasingly implemented the P&S in the insurance and asset management sectors. In combination with the Senior Managers and Certification Regime (SM&CR), the remuneration regime has helped firms become more disciplined in mapping responsibilities and has resulted in greater consistency and transparency on acceptable remuneration practices. With implementation well-advanced, the Authorities are increasingly focused on evaluating the regime’s effectiveness.

Notwithstanding this progress, the review concludes that steps can be taken to further strengthen the financial sector compensation framework in a few areas by:

  • reviewing the interaction between the UK’s remuneration regimes and the SM&CR;

  • streamlining data collection for level one banks and investments firms and collecting remuneration data from a broader range of firms;

  • considering other supervisory approaches for assessing the effectiveness of the remuneration regime; and

  • providing additional guidance on remuneration for the insurance sector to promote clarify and consistency of outcomes.

The peer review report includes recommendations to the UK Authorities on these issues.