New plans are aimed at bringing the UK in line with other countries’ rules, which could lead to bankers receiving their bonuses earlier.
The proposals, made by the Prudential Regulation Authority and the Financial Conduct Authority, would reduce the waiting period for senior bankers from eight to five years. For less senior bankers the wait time would be shortened to four years.
Part-payments of bonuses will be permitted from the first year, not the third as it is now for some bankers.
The consultation suggests that the timeframes proposed allow for problems to be identified. The timeframes should help “reverse the trend in which banks are putting a greater amount of their total financial reward on fixed pay which is less responsive to shocks than bonuses which can be adjusted if events end up worse than expected”.
The regulators, however, insisted that the plan wouldn’t compromise the UK financial stability and would instead enhance its global position.
Sam Woods (Deputy Governor of Prudential Regulation, CEO of PRA) said that these proposals on bankers bonuses will support UK competitiveness and growth without undermining the financial stability. These proposals will help reduce bureaucracy, and encourage responsible risk-taking.
The UK has changed the rules governing bankers’ salaries for the second time in a little over a year. In the UK, a European Union limit that limited bonuses to double the fixed salary of senior traders and financiers was lifted.
Sarah Pritchard is the executive director of consumers, competition, and international at FCA. She added, “These changes will eliminate unnecessary duplication between regulators, streamline remuneration for firms, further strengthen the reputation, and competitiveness, of the UK banking industry.”
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