Bankers to get bonuses quicker under rule change
Senior bankers will be able to pocket bonuses more quickly under a relaxation of rules brought in after the financial crisis of 2007/2008. Senior bankers have had to wait up to eight years to collect their bonus in full to make sure the deals they were being rewarded for turned out to be profitable longer…
Senior bankers will be able to pocket bonuses more quickly under a relaxation of rules brought in after the financial crisis of 2007/2008.
Senior bankers have had to wait up to eight years to collect their bonus in full to make sure the deals they were being rewarded for turned out to be profitable longer term.
From Thursday, that deferral period will be cut to four years and partial payments will be allowed to start in the first year rather than in year three as previously permitted.
Regulators insisted that the rules would still discourage reckless risk taking but boost competitiveness by bringing the UK closer into line with other financial centres around the world.
Big bonuses for bankers were blamed for encouraging a culture of reckless risk taking which contributed to the great financial crisis which crashed markets and pushed many economies into recession 17 years ago.
The decision represents a further relaxation of rules that saw the UK scrap an EU-wide bonus cap that limited payouts to twice bankers base salaries.
Regulators at UK financial watchdogs the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) insisted that the rules would still discourage reckless risk taking but bring the UK closer into line with other financial centres around the world – particularly New York which requires no deferrals at all.
Sam Woods, chief executive of the PRA, said: “These new rules will cut red tape without encouraging the reckless pay structures that contributed to the 2008 financial crisis. These changes are the latest example of our commitment to boosting UK competitiveness.”
Chancellor Rachel Reeves summoned a number of key regulators to 11 Downing Street earlier this year to urge them to find ways to reduce unnecessary regulation and make the UK more business friendly.
The new rules come into effect from Thursday – in plenty of time for the January bonus season. Many financial firms have had a bumper year as market volatility has boosted the money they make from buying and selling shares, government bonds, commodities and currencies.
“The new rules also mean senior managers will continue to follow our high standards and remain on the hook where poor decisions affect consumers and markets”, said Sarah Pritchard, deputy chief executive at the FCA.
