Remuneration

Culture and Principals

We supervise a broad range of firms carrying out a wide range of financial activities. We assess the effectiveness of four drivers of culture within firms. They are: 

• leadership 
• purpose 
• governance 
• firms’ approach to managing and rewarding employees.  

Across all firms, we look at principles of effective remuneration practices such as: 

• how a firm’s reward strategy is aligned with its business strategy and purpose 
• how firms measure individual performance to assess good behaviour and conduct 
• the link between behaviours and reward outcomes including how individuals are held to account for their conduct and competence 
• a firm’s governance and oversight of remuneration arrangements 

Firms should be able to demonstrate how their remuneration practices lead to appropriate outcomes and show how effective their governance arrangements are in identifying, managing, and mitigating the risk of harm that inappropriate incentives may cause.

The Remuneration Codes

Some firms are subject to specific remuneration rules through the Remuneration Codes. The Remuneration Codes support prudential soundness and risk management in firms and ensure appropriate outcomes for customers and markets to reduce the likelihood of harm. The overall aim of the Remuneration Codes is to: 

• promote effective risk management in the long‑term interests of the firm and its customers 
• ensure alignment between risk and individual reward 
• support positive behaviours and healthy firm cultures 
• discourage behaviours that can lead to misconduct and poor customer outcomes 

We have several Remuneration Codes applying to different types of firms such as banks, asset managers, and MIFIDPRU investment firms. A firm may be subject to more than one of our Remuneration Codes due to being within a consolidation group with different institutions subject to different remuneration requirements. In these circumstances, firms should ensure they comply with all relevant requirements.   

While the requirements do not apply to all the firms we regulate, appropriate remuneration practices are relevant for sound and effective risk management across all firms.   

Each page sets out key features of each Remuneration Code and our proportionate approach.   

The Remuneration Codes are tailored to different types of firm:

• SYSC 19B[1] – AIFM Remuneration Code
• SYSC 19D[2] – Dual-regulated firms Remuneration Code
• SYSC 19E[3] – UCITS Remuneration Code
• SYSC 19G[4] - MIFIDPRU Remuneration Code

Supervisory approach 

Through our supervisory approach we look at what drives behaviour in a firm, including the firm’s approach to managing and rewarding people. Find out about more about our approach to supervising firms[5].

Sales incentives 

We know that the way sales staff are incentivised influences how and what they sell to customers. We have rules on the remuneration and performance management of sales staff ensuring that sales staff and advisers are not remunerated in a way that creates misaligned incentives for staff to sell products inappropriately (SYSC 19F[6]).

We have guidance for consumer credit firms on how to pay and incentivise staff and manage the risks arising from reward arrangements. (See FG18/2 Staff incentives, remuneration and performance management in consumer credit[7]). The guidance identifies features of incentive schemes or performance management arrangements that may harm consumers, through mis-selling or other poor conduct and contains many examples of good and poor practice. Although it does not apply directly, firms in other sectors may find some parts of the guidance useful when assessing features of their sales incentives arrangements.  

For more information and previously published guidance on financial incentives and performance management can be found here:   

More information on performance management[8].

More information on financial incentives[9].