UK to move ahead with plan to lift banker bonus cap unveiling The request was made by Liz Truss’ government last year.
The Prudential Regulation Authority will remove the bonus cap of twice bankers’ basic salary from October 31 explain Tuesday.
The PRA said banks can pay staff as they wish this financial year but need to ensure there is an “appropriate balance” between fixed and variable pay.
In 2014, in response to public anger over the financial crisis, the EU imposed bonus caps on “significant risk takers”. Britain unsuccessfully opposed the measure on the grounds that it would prompt companies to raise fixed wages and make it harder to manage costs.
Last year, during his brief tenure as chancellor, Kwasi Quarten announced that the cap would be abandoned to make post-Brexit Britain more attractive as a financial centre.
The PRA said it was still reviewing other aspects of pay rules, such as deferred payments, which have forced some senior executives to wait up to seven years for bonuses. Two interviewees told PRA that the longer extension period in the UK has led to companies increasing their salary packages to remain internationally competitive.
PRA chief executive Sam Woods said last year the agency would consider whether pay rules could be made more “effective and proportionate”, but added that structures were needed to ensure senior staff received the “right incentives”.
While financial firms generally favor lifting the cap, many said last year they would prefer other measures such as tax cuts. They also raised challenges such as how to cut higher fixed salaries to rebalance the pay package and whether existing employees should be treated differently than new hires.
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