Banker bonus rules to be relaxed under new plans

Bankers could get their bonuses sooner under new plans designed to bring the UK’s rules more in line with other countries.

Set out by Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA), the proposals would see the time senior bankers have to wait for their bonuses shortened from eight years to five, while for less senior bankers it would be reduced to four years.

Under the plans, which aim to simplify the guidelines, part-payment of bonuses would also be allowed from year one, rather than from year three as is currently the case for some bankers.

According to the consultation, the proposed timeframes allow for any problems to surface. They should also help to “reverse a trend whereby banks have put a higher amount of total financial reward into fixed pay, which is less reactive to shocks, rather than bonuses, which can be adjusted down if events turn out worse than expected”.

However, regulators insisted the plan would not compromise the UK’s financial stability but would instead boost its position globally.

Sam Woods, deputy governor of Prudential Regulation and CEO of the PRA, said: “These proposals on bankers’ bonuses will support UK growth and competitiveness without undermining financial stability. We should not return to the very dangerous pay structures that were commonly in place before 2008, but these proposals will reduce bureaucracy and support responsible risk-taking.”

This is the second shake-up of the rules concerning bankers’ pay in around a year, after a European Union cap that restricted bonuses for financiers and senior traders to double their fixed wage was removed in the UK.

Sarah Pritchard, executive director for consumers, competition and international at the FCA, added: “These important changes will remove unnecessary duplication of rules between the regulators, streamline the remuneration regime for firms, and further strengthen the reputation and competitiveness of the UK banking sector.”

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