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ARTICLE · 09 NOVEMBER 2013

The Annual Bonus Round

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In anticipation of the new year’s annual bonus round, there has been a flurry of regulatory requirements that will have to be taken into account this time around ...

United KingdomFinance and Banking
Harvey Knight
Harvey Knight
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In anticipation of the new year's annual bonus round, there has been a flurry of regulatory requirements that will have to be taken into account this time around:

Clawback or malus? The PRA opines

The PRA has issued a supervisory statement (SS2/13) on the application of the pre-vesting malus provisions to variable remuneration. It clarifies how the PRA expects firms to comply with the ex-post risk adjustment requirements of the Remuneration Code. A clear distinction is drawn between the terms 'clawback' and 'malus', which are often used interchangeably.

'Malus' is defined in the CEBS Guidelines on Remuneration Policies and Practices ('CEBS Guidelines') as 'an arrangement that permits the institution to prevent vesting of all or part of the amount of a deferred remuneration award in relation to risk outcomes or performance' i.e. it is applied before vesting.

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