Regulators have confirmed plans to scrap the cap on bankers’ bonuses with the new policy going live at the end of this month.... In a joint statement, the UK’s financial watchdogs confirmed that they will “remove the current limits on the ratio between fixed and variable pay”.
The timing of the change means banks will be able to offer bigger rewards in the upcoming round of bonuses, which regulators hope will give banks more flexibility about their cost base going into a potential downturn.
One senior banker told City AM that the government has made more of the changes than the industry has.
“We certainly haven’t got any plans to change anything,” they said.
Explaining the policy, the Prudential Regulation Authority (PRA) said the change supports its new objective to further competitiveness by “facilitating effective competition”.
Regulations on the bonus cap were imposed by the EU in 2014 after the financial crisis. It caps bonuses at 100 per cent of annual pay, or 200 per cent with shareholder approval.
Banks have complained that the cap actually increases their costs by forcing them to offer higher levels of fixed pay.
Earlier in the year, Sam Woods, chief executive of the Prudential Regulation Authority (PRA) told MPs that the “only effect” of the cap has been to increase fixed pay. Regulators hope that dropping the cap would better align pay with performance.
© City A.M.
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article