In August, the U.K. Financial Services Authority (“FSA”) issued a proposal to implement the requirement in the 2010 Capital Requirements Directive (“CRD III”) that competent local authorities collect information concerning the pay practices of relevant financial services firms.  CRD III requires local authorities to transmit this information to the European Banking Authority (“EBA”) to enable it effectively to benchmark pay practices across the European Economic Area.

The Financial Services Authority proposal is based on guidance issued in July by the European Banking Authority. The FSA proposal would amend the FSA Supervision manual to require that FSA-regulated banks, building societies and investment firms with total assets of £50 billion or more submit:

  • a “Remuneration Information Benchmarking Report” concerning remuneration structures generally within the group, including total salary and bonus costs by business division, details of deferred remuneration, termination payments, and so on; and
  • a “High Earners Report” detailing the number of employees within the group (excluding non-EEA subsidiaries and branches) whose total annual remuneration exceeds €1 million; the number of high earners who are also “Code Staff” (as defined by the FSA); and such high earners’ total fixed and variable remuneration, but high earners who mainly perform their duties outside the EEA are excluded.

Much of the detail in the Remuneration Information Benchmarking Report mirrors existing remuneration disclosure rules.  However, the High Earners Report would require reporting information that has not been required previously.

Firms will be expected to submit two Remuneration Information Benchmarking Reports and two High Earners Reports by 31 December 2012; one for each of the two previous complete financial years.  Thereafter, reports should be submitted annually within two months of the firm’s accounting reference date.

FSA has requested comments on these proposals.  Comments are due no later than 30 September 2012.