Regulatory Alerts2017-07-03
Added · Updated
FG18/2: Staff incentives, remuneration and performance management in consumer credit firms
The Financial Conduct Authority introduces new rules, handbook guidance, and non-handbook guidance to help consumer credit firms identify risks their staff incentive and remuneration practices might pose to consumer outcomes. Firms carrying on credit-related regulated activities must apply Principle 3, the Threshold Conditions, and the Senior Management Arrangements, Systems and Controls sourcebook when developing these schemes, ensuring they have effective systems and controls to manage potential risks. The guidance specifies that firms must assess risks by considering the likelihood of occurrence and potential harm, particularly for vulnerable customers, and implement mitigation strategies such as business quality monitoring and management oversight. It highlights that features like volume-based incentives, 100% variable pay, retrospective accelerators, and product bias increase the risk of customer harm, requiring firms to either introduce appropriate controls or amend these elements.
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