The first of two reviews into UK bonus rules will begin this month, Bank of England governor Mark Carney has said.
The Financial Times reports Carney has written to Treasury committee chairman Andrew Tyrie, saying the Bank’s Prudential Regulation Authority will start consultations on reinforcing rules for recouping bankers’ bonuses.
Later this year the PRA will also discuss other recommendations for the parliamentary commission on banking standards, which include extending the bonus deferral period beyond the current three to five years.
The PRA will also discuss the proposal to pay a greater share of bonuses in the form of ‘bail-in’ bonds that can either be written off or converted to equity.
Last month, PRA chief executive Andrew Bailey slammed the EU cap on bank bonuses warning it will create riskier banks and make regulation “more difficult”.
While Carney has expressed his belief that the majority of the recommendations can be implemented, the exception to this is the proposal that bonuses and pension rights of senior bankers should be cancellable, if their institution requires taxpayer support.
Carney also notes in his letter to Tyrie that British banks have a greater exposure to China than any other banking system, with claims of $184bn as of Q2 2013.
He told the Treasury committee chairman that the PRA would conduct stress tests on a selection of big lenders – with HSBC and Standard Chartered tipped as the most likely candidates – to assess their ability to weather a slowdown in China.