UK

Rishi Sunak Savaged As The Cap On Bankers' Bonuses Is Scrapped

The prime minister was accused of taking a leaf out of Liz Truss' playbook.

By Kevin Schofield
24/10/2023


Rishi Sunak is at the centre of controversy once again.
WPA POOL VIA GETTY IMAGES

Rishi Sunak has been slammed after it was confirmed that the cap on bankers’ bonuses is to be scrapped.

The Financial Conduct Authority confirmed that the measure - which has been in place since 2014 - will end on October 31.

Liz Truss’s chancellor Kwasi Kwarteng announced plans to axe the cap in last year’s disastrous mini-budget.

He said it would encourage banks to “invest here and pay taxes here”.

But the announcement, which comes on the eve of Sunak’s first anniversary as PM, has been condemned by Labour.

Darren Jones, shadow Treasury secretary, said: “Rishi Sunak is marking his anniversary of becoming prime minister by pushing ahead with Liz Truss’ plan to axe the cap on bankers’ bonuses. When Truss says jump, Sunak says how high.

“At a time when families are struggling with the cost of living and mortgages are rising, this decision tells you everything you need to know about the priorities of this out of touch Conservative government.”

Unison general secretary Christina McAnea said: “Anyone who thinks that making bankers even richer will achieve anything positive for the country is utterly deluded.

“It’s beyond belief that the disastrous policies of Liz Truss are being reheated. She trashed the economy and everyone else is still paying the price.

“This won’t win public sympathy for a government in desperate need of it.

“Ministers should be helping the millions struggling with rising bills, growing the economy and investing in crumbling public services, not allowing their wealthy pals to feather their nests further.”

Drew Henry, the SNP’s economy spokesperson said: “These shameful plans lay bare the priorities of Westminster: they care more about filling the pockets of bankers than helping vulnerable households through the cost of living crisis.

“While bankers rake in astronomical sums of money, households across the UK are having to choose between heating their home or feeding their families.”

The bonus cap was introduced as a way of curbing the excesses of the banking sector in the wake of the 2008 financial crash.

A Treasury spokesperson said: “Decisions on remuneration in the banking sector are for the Prudential Regulation Authority as the independent statutory regulator.”

London’s bankers can make unlimited bonuses again as UK axes cap

By Hanna Ziady, CNN
Tue October 24, 2023


The UK government believes lifting the cap on banker bonuses will help shore up London's position as an international financial hub.Jason Alden/Bloomberg/Getty Images
LondonCNN —

The UK has abandoned a cap on bankers’ bonuses, in its latest push to boost the competitiveness of London’s financial industry following Brexit.

The rule limiting banker bonuses to two times annual base pay was introduced a decade ago in the wake of the global financial crisis when the country was part of the European Union. It will be scrapped from October 31, the Prudential Regulation Authority said Tuesday.

“A bonus cap is not routinely imposed in other leading international financial centers outside the EU,” the regulator added, noting that the cap had been identified as “a factor in limiting labor mobility.”

The UK government has long been opposed to the cap and believes that lifting it will help shore up London’s position as an international financial hub. Brexit made access to Europe’s vast market for financial services more difficult and costly for UK-based banks, and London has lost some business to cities such as Paris, Frankfurt and Amsterdam.

The EU introduced the limit on banker bonuses as part of a package of measures aimed at reducing excessive risk taking and making the financial system safer. At the time there was also residual popular anger that taxpayers had to bail out banks that were paying huge sums to their top dealmakers, stoked by the fact that many people lost their jobs and homes in the recession that followed the crisis.

Shares in one of London's biggest IPOs this year have crashed 82%

The UK government unsuccessfully challenged the cap when it was put forward in 2013, arguing that it would lead to higher fixed salaries, undermining efforts to link banker pay more closely to long-term success.

Britain’s financial regulators have since echoed these concerns and the PRA said Tuesday that scrapping the cap would better align pay with performance. It would also allow firms to restructure pay faster, giving them “further flexibility over their cost base to deal with downturns,” the regulator added.

A spokesperson for UK Finance, a group representing banks, welcomed the end of the bonus cap, saying it “will ensure the financial services industry is globally competitive and make the UK a more attractive place to work for international professionals.”

However, the spokesperson added that the UK’s lengthy deferral period — which means some executives must wait seven years for their awards — “remains a disincentive to those looking to relocate” to the UK because it is longer than in the EU.

“We’re pleased to see that the financial regulators will take the deferral period into account in their wider review of the remuneration regime,” the spokesperson said.

The UK government has come under increasing pressure to deliver post-Brexit benefits for London, the center of Britain’s hugely important financial services sector. The city suffered a series of setbacks earlier this year when several British companies — most notably chipmaker ARM (ARM) — announced plans to list in New York.