British regulators have criticised the European Banking Authority's limit on awarding variable remuneration to 100% of fixed remuneration, or 200% with shareholder approval (the bonus cap), at all firms that are subject to the European Union's Capital Requirements Directive.

The Prudential Regulation Authority, with the Financial Conduct Authority in tow, declared recently: "The approach to the bonus cap under the Guidelines represents an interpretation of CRD with which neither the PRA nor the FCA agree. The PRA and FCA take a proportionate, risk-based approach to applying the bonus cap based on the wording under Article 92(2) CRD, which states: 'competent authorities shall ensure that … institutions comply with the following principles [including the bonus cap] in a manner and to the extent that is appropriate to their size, internal organisation and the nature, scope and complexity of their activities.'

"The...“extent” of application in a proportionate manner may include not applying a remuneration principle in its entirety based on the size, internal organisation and the nature, scope and complexity of the activities of the firm in question. The PRA and FCA consider that the CRD proportionality principle applies equally to all numerical requirements, including the bonus cap, deferral, payment in instruments, and ex-post risk adjustment."

All large and systemically important CRD-regulated firms must continue to apply the bonus cap. In parallel, the PRA and FCA has decided to keep on requiring smaller firms to determine an appropriate ratio between fixed and variable remuneration for their business but not to apply the bonus cap.