Bonus curbs led to higher pay for top bankers: BOE

Bloomberg

Limits on banker bonuses led to pay rising for top British financiers, according to a study by the Bank of England (BOE) released as part of the UK’s plans to abolish the rules.
The restrictions, designed to curb risky behaviour following the 2008 financial crisis, have meant fixed salaries increased to offset the curbs — particularly the delay in bonus payments — two BOE policy analysts said in a working paper based on pay at six major banks.
“While requirements to defer bonus pay can be expected to affect bankers’ risk-taking incentives, we find some evidence that they increased their total compensation,” the paper said.
The European Union introduced a bonus cap of up to two times salary in 2014 on “material risk takers.” Bonus payments can be delayed by three to five years. Now, Rishi Sunak’s government plans to undo the rules as part of a broader attempt to boost the City’s competitiveness following Brexit — though finance firms have responded warily so far.
The BOE and the Financial Conduct Authority opened a joint consultation on the impact of the plans. The regulators said the reversal should “help remove unintended consequences that have arisen as a result of the bonus cap, namely growth in the proportion of the fixed component of total remuneration, which reduces firms’ ability to adjust costs to absorb losses in a downturn.”
The deadline for responses to the consultation is March 31.