The City wants to regain its former place in the global financial system. The British market was especially affected by the entry into force of Brexit, whose departure from the European Union resulted in a loss of attractiveness among bankers. The two main regulators of the British financial sector, the Prudential Regulatory Authority (PRA) and the Financial Conduct Authority (FCA), have announced a measure that could reverse the trend: the relief of bonuses granted to bankers.
Established almost ten years ago at the European level after the 2008 financial crisis, the limit plans to limit the bonus to double the fixed salary. In September 2022, Liz Truss’s first Chancellor of the Exchequer, Kwasi Kwarteng, launched this project which his successor Jeremy Hunt continued despite his political sensitivity. On the eve of the general election, Labor Party leader and poll favorite Keir Starmer denounced “a rise in bankers’ salaries, a fall in nurses’ salaries”, while a significant part of the population suffered the energy crisis and inflation of recent months.
Application starting next Tuesday
The British regulator justifies this measure by the ineffectiveness of the limit to curb remunerations: on the contrary, it encourages banks to offer higher fixed salaries to attract candidates. “The maximum limit on bonuses has been identified as a factor that limits employee mobility,” says the PRA in the document published yesterday. Another argument put forward by the regulatory actor is that this limit “is not imposed in other large financial centers outside the European Union.”
The Prudential Regulation Authority found that employees receiving a bonus equal to around 200% of their fixed salary saw their pay rise much faster than average the following year. In addition to the disruption to bank payrolls, the absence of a cap on total compensation “drives up salaries and benefits that would not be tied to long-term performance, and that cannot be reduced in the event of misconduct or subsequent misconduct.” . Particularly popular among the financial actors consulted, the effective date of the end of the bonus limit was brought forward to Tuesday, October 31 instead of next year.
Source: BFM TV
