UK regulators are considering rolling back restrictions on banker bonuses in an effort to boost international competitiveness and growth. The Prudential Regulation Authority and the Financial Conduct Authority have proposed reducing the waiting time for senior bankers to receive bonuses from eight years to five, and for less senior bankers from five years to four. Additionally, partial payment of bonuses could start as early as the first year, rather than the third. The mandatory one-year waiting period to sell shares or other deferred instruments should also be eliminated, according to the regulators. They also suggest that bankers should be allowed to earn dividends or interest on deferred bonuses awarded in shares or other instruments.
The reforms are aimed at reducing bureaucracy and supporting responsible risk-taking, while not reverting to the pre-2008 pay structures that contributed to the financial crash. Regulators also propose tying bonuses more closely to risk management rather than just executive success. The new rules are meant to increase competitiveness without compromising financial stability. The changes are expected to boost the reputation of UK banking and remove unnecessary duplication of rules between regulators.
The announcement follows the UK financial regulators’ decision to scrap a cap on bankers’ bonuses last year, which was put in place as part of an EU response to the financial crisis. The regulators believe that the new proposals will streamline guidance and support a more efficient and effective banking industry.
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