Treasury review

Bankers bonus cap may be lifted to boost City

London and financial services
Going up: Kwarteng wants to boost the City’s competitiveness (pic: Terry Murden)

A cap on bankers’ bonuses may be removed as UK Business Secretary Kwasi Kwarteng looks at new measures to maintain the competitiveness of the country’s financial sector.

Companies supporting the move argue that the EU-wide rules, which limit bonusesto twice an employee’s salary, lead to higher base pay that pushes up banks’ fixed costs.

Those costs cannot be adjusted in line with the firm’s financial performance, they add, making the UK less attractive than the US or Asia.

Mr Kwarteng’s review, reported by the Financial Times, has sparked concern that it may encourage the sort of excessive behaviour that led to the 2007-09 banking crash.

However, City bosses say there are new rules that can hold senior managers personally and potentially criminally responsible for misconduct. There is also an opportunity to claw back bonuses years after they are granted.

Even so, there is bound to be a backlash to any move to grant City bankers millions in extra income at a time when many households are struggling with the rising cost of living.

Mr Kwarteng’s plans are part of an expected wider relaxation of regulations that hold back growth.

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