HomeBusinessBritain scraps cap on...

Britain scraps cap on banker bonuses inherited from EU

A general view of the Bank of England in the City of London, Britain, September 25, 2023. REUTERS/Hollie Adams/File Photo Acquire Licensing Rights

LONDON, Oct 24 (Reuters) – Britain on Tuesday scrapped a decade-old cap on banker bonuses inherited from the European Union, signalling a clear divergence in post-Brexit financial rules from the 27-country bloc it left in 2020.

Britain was outvoted in the EU when the cap was introduced in 2014 to try to prevent the kind of behaviour that led to the global financial crisis of 2008 and its accompanying taxpayer bailouts of lenders.

The move to ditch the cap drew criticism from trade unions and campaigners on Tuesday, who dubbed it inappropriate at a time when many households were struggling in a cost of living crisis.

Most bankers affected by the cap are based in London, and the Bank of England (BoE) has long said the cap, which limits bonuses to twice basic pay if shareholders approve, has simply led to higher fixed salaries to circumvent it.

The BoE and Financial Conduct Authority proposed scrapping the cap in a public consultation earlier this year, and its abolition was confirmed in final policy published on Tuesday.

Both regulators have a remit to aid the competitiveness of London as a global financial centre as it competes with New York, where there are no bonus caps.

Allowing bankers to implement the change earlier than originally proposed will also help them meet their goal.

In a joint statement, the regulators said the changes would enter force from Oct. 31, earlier than the original 2024 proposed start date.

“We support the removal of the bonus cap, which will ensure the financial services industry is globally competitive and make the UK a more attractive place to work for international professionals,” banking industry body UK Finance said.


The change is still probably too late for some banks to adapt their systems in time for this year’s bonus allocations that will be paid in early 2024.

In any case, bonuses may not rise for bankers on a high basic salary that contractually cannot be reduced, as banks try to avoid allegations of adding to inflationary pressures.

A source at one multinational bank, who declined to be named, said it was too early to say if this year’s bonus round would be affected, adding that while the change was disruptive it could help attract talent from the United States and Asia.

The regulators said companies had full flexibility over when or if they changed pay structures.

“What is more likely is that the shift away from capped bonuses will evolve gradually,” said Suzanne Horne, a partner at Paul Hastings law firm.

Other curbs on bonuses remain, such as requiring 40% to be deferred over at least four years, with half the bonus paid in shares, making it easier for regulators to claw back awards if any misconduct emerges.

The TUC confederation of labour unions said the decision to scrap the bonus cap was “obscene”.

“At a time when millions up and down the country are struggling to make ends meet – this is an insult to working people,” TUC General Secretary Paul Nowak said in a statement.

Positive Money, a group that campaigns for a fair financial system, called the policy a “risky move” that prioritised banks over public wellbeing.

Law firm Linklaters said scrapping the cap puts Britain back into line with the rest of the world, apart from the EU, but it would continue to apply to staff working at EU banks in London who are regulated under the bloc’s rules.

Additional reporting by David Milliken and Iain Withers;
Editing by Barbara Lewis, Mark Potter and Jonathan Oatis

Our Standards: The Thomson Reuters Trust Principles.

Acquire Licensing Rights, opens new tab

Source link

Most Popular


Please enter your comment!
Please enter your name here

More from Author

Read Now

Japan’s Cabinet approves security-clearance bill | NHK WORLD-JAPAN News

A bill to set up a security-clearance system is headed for the Japanese Diet. The...

Chris Gauthier, ‘Once Upon a Time’ and ‘Eureka’ Actor, Dies at 48

Chris Gauthier, a prolific British-born, Canadian actor known for his roles in the television shows “Once Upon a Time” and “Eureka,” died on Friday. He was 48.Tristar Appearances/Event Horizon Talent, which represented Mr. Gauthier, said in a statement that he died “after a brief illness.” His...

Draymond takes full responsibility for Warriors’ loss to Nuggets

Draymond Green was a team-worst minus-23 during the Warriors’ 119-103 loss to the Denver Nuggets on Sunday night at Chase Center, and he took responsibility for his rough performance a few hours later. On the latest “Draymond Green Show” podcast, which was recorded after Sunday's game and...

You could win a once-in-a-lifetime total solar eclipse plane ticket and hotel room in Southwest-Omni sweepstakes

Want to see the total solar eclipse on April 8 from a plane? Enter this sweepstakes for this unique opportunity. Southwest Airlines and Omni Hotels are offering two winners and their guests free air travel and hotel stays in their "Solarbration" experience for the 2024 total...

Wendy Williams’ Son Kevin Hunter Jr. Shares Her Dementia Diagnosis Is Alcohol-Induced – E! Online

Wendy Williams' family is speaking out about her dementia diagnosis. The former talk show host's son Kevin Hunter Jr. shared that doctors believe her cognitive disorder is related to her struggles with alcohol addiction. As he explained on the Feb. 25 installment of the Lifetime documentary Where is Wendy Williams?, the...

Revolutionary face unlock system from Metalenz uses Samsung’s ISOCELL Vizion sensor

Two months ago, Samsung unveiled two new ISOCELL sensors: ISOCELL Vizion 63D and ISOCELL Vizion 931. One of those sensors is now being used in a new and revolutionary 3D face unlock mechanism that Metalenz has developed. This shows the superiority of Samsung's new 3D...

Lack of Snow Prompts Cancellation of Longest Sled Dog Race in Eastern U.S.

Jonathan Hayes woke up at 5 a.m. in rural Maine to feed his 20-some dogs Monday morning, and his heart sank when he learned that the sled race they had been training for since the fall was canceled.The Can-Am Crown International Sled Dog Race, the longest...

Family Dollar pleads guilty to holding consumer products in ‘rodent-infested warehouse’

A former employee records video of rodents at a Family Dollar distribution facility. The Department of Justice announced on Monday that Family Dollar Stores LLC has pleaded guilty to holding consumer products in a "rodent-infested warehouse." The DOJ released a statement...

Netflix confirms it’s cutting off Apple billing for grandfathered subscribers

Netflix confirms to The Verge that it has begun booting longtime subscribers off their Apple iTunes billing plans, and will require them to pay Netflix directly using a credit card or debit card instead. Earlier today, The Streamable reported that Netflix had begun telling customers in...

Disney Shake-Up: Sean Bailey Leaving Studio as David Greenbaum Takes Over Live-Action Film Production

Sean Bailey (left) and David Greenbaum The Walt Disney Company via Getty Images; Michael Loccisano/Getty Images Sean Bailey, the producer turned executive who has overseen Walt Disney Studios’ live-action division for almost 15 years, is exiting the studio. In his place, David Greenbaum, who ran Searchlight Pictures with Matthew...

Palestinian Authority Prime Minister Resigns Amid Calls for Reform

Welcome back to World Brief, where we’re looking at Palestinian Authority leadership changes in the West Bank, Hungary approving Sweden’s NATO bid, and Denmark dropping its Nord Stream investigation. ...