Regulators agree to lift cap on bankers’ bonuses
The cap on bankers’ bonuses is being lifted – one of the few policies to survive the short-lived Truss-Kwarteng period in Downing Street.
Bank regulators have confirmed the move from 31 October as part of a post-Brexit shake-up of UK financial rules.
Kwasi Kwarteng, who served as Chancellor in Liz Truss’s ill-fated premiership, announced the plan in last year’s mini-budget as a way of making London a more attractive place to do business.
The cap which was Introduced in 2014 to curb excessive risk taking in the financial services industry in the wake of the excesses during that led to the 2008 financial crash. Bankers saw their bonuses limited to twice their base pay.
However, in practice the cap has merely led to higher base pay and that pushes up banks’ fixed costs. Unlike bonuses, theses costs cannot be adjusted as financial performance varies.
Critics say that removing the cap will benefit the wealthy and fuel a new culture of greed at a time when many households are struggling with the cost of living.
An HM Treasury spokesperson said: “Decisions on remuneration in the banking sector are for the PRA [Prudential Regulation Authority] as the independent statutory regulator.”
Darren Jones, Labour’s shadow chief secretary to the treasury, said the decision “tells you everything you need to know” about the priorities of the government.
“Rishi Sunak is marking his anniversary of becoming Prime Minister by pushing ahead with Liz Truss’s plan to axe the cap on bankers’ bonuses,” he added.
Paul Nowak, general secretary of the TUC, called the decision “obscene”.
In a joint statement issued by the PRA and the Financial Conduct Authority the two regulators said the bonus cap had “unintended consequences” with firms ending up increasing bankers’ fixed pay.