United Kingdom: COVID-19 - PRA allows cash bonuses of large UK banks to recommence
On 10 December 2020, the Prudential Regulation Authority (PRA) published a statement on capital distributions by large UK banks.
In a move that reflects the PRA’s view that large UK banks remain well capitalised, it has confirmed that banks may recommence some distributions and it is updating its expectations on the payment of cash bonuses to senior staff, including all material risk takers (MRTs), by large UK banks. However, against the backdrop of the global COVID-19 pandemic, the end of the Brexit transition period and the uncertainty that these entail, the PRA urges banks to take a cautious and measured approach.
In March 2020, the PRA sent public letters to the CEOs of seven large UK banks requesting that they cancel dividend payments for outstanding 2019 dividends and suspend dividends and buybacks on ordinary shares until the end of 2020. The PRA also confirmed that it expected banks not to pay any cash bonuses to senior staff and it was confident that bank boards would take appropriate action in relation to the accrual, payment and vesting of variable remuneration in the months following March 2020.
Now, the PRA has confirmed that they have assessed large UK banks’ distribution plans for 2020 and concluded that banks remain well capitalised and able to support the economy, despite the impact of the COVID-19 pandemic on the global economy. Furthermore, the PRA is also updating its expectations on the payment of cash bonuses to senior staff, including all MRTs, by large UK banks. The PRA expects firms to exercise a high degree of caution and prudence in determining the size of any cash bonuses granted to senior staff given the uncertain outlook and the need for banks to deploy capital to support the wider economy. The PRA will also scrutinise proposed pay-outs closely to ensure large banks have applied the PRA’s rigorous remuneration regime appropriately.
To read the PRA’s statement in full, please click here.
Copyright © Law Business ResearchCompany Number: 03281866 VAT: GB 160 7529 10