The Financial Services Authority (FSA) has told investment banks to comply with regulatory guidelines or risk losing their licences to operate in the UK.
The FSA told bank bosses that 60% of all pay must be deferred, without exception, regardless of the terms of staff contracts, reports the Telegraph.
A pay executive at a major bank told the paper: “The message came back that while the FSA agreed it does not have jurisdiction over contractual law, it does have jurisdiction over issuing bank licences in London, and that we should go away and unwind the contracts.”
Among the first bankers to be affected were those at Merrill Lynch, who were given the news on Friday when their bonuses were agreed. One said: “We thought that contracts would be immune from changes but were told by bosses that their hands were tied and there was nothing they could do – the regulator had put its foot down”.