The Bank of England introduces new Clawback Rules: Code Staff face seven-year clawback on bonuses
By Annaliese Bate and Richard Brown
The Bank of England (in its capacity as the Prudential Regulation Authority, or PRA) has published new Clawback Rules setting out the standards that banks, building societies and designated investment firms have to meet when setting variable remuneration for their staff.
The new Clawback Rules provide that past awards for variable remuneration (e.g. a discretionary bonus) may be adjusted (i.e. ‘claw back’) to reflect new information about the underlying risk (including evidence of poor risk management). The Clawback Rules apply: to any variable remuneration awarded on or after 1 January 2015; and for at least seven years from the date on which the variable remuneration is awarded.
Firms must make ‘all reasonable efforts’ to claw back an ‘appropriate amount’ of vested variable remuneration if: (a) there is reasonable evidence of employee misbehaviour or material error; or (b) the firm or the relevant business unit suffers a material failure of risk management…
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