View more on these topics

BoE slaps down EU regulator on small bank bonus caps


The Bank of England has told the European Banking Authority that its proposed cap on banking bonuses is unfair to small firms.

The EBA’s Guidelines on Sound Remuneration Policies, published on 21 December, cap bonuses for firms subject to the Capital Requirements Directive at 100 per cent of an individual’s salary, or 200 per cent with shareholder approval.

But a statement on the Bank website says: “The approach to the bonus cap under the guidelines represents an interpretation of CRD with which neither the PRA nor the FCA agree.

“The PRA and FCA take a proportionate, risk-based approach to applying the bonus cap based on the wording under Article 92(2) CRD, which states: ‘competent authorities shall ensure that…institutions comply with the following principles [including the bonus cap] in a manner and to the extent that is appropriate to their size, internal organisation and the nature, scope and complexity of their activities’.

“The PRA and FCA take the view that the ‘extent’ of application in a proportionate manner may include not applying a remuneration principle in its entirety based on the size, internal organisation and the nature, scope and complexity of the activities of the firm in question. The PRA and FCA consider that the CRD proportionality principle applies equally to all numerical requirements, including the bonus cap, deferral, payment in instruments, and ex-post risk adjustment.”

The Bank says it will comply with all other parts of the guidelines, and all large and systemically important firms will have to apply the cap.

The statement says paying bankers in share bonuses is generally better than salaries, as it is easier to recoup shares in the case of misconduct.

The EBA will now have to approve the exemption for small firms.

Bank of England deputy governor Andrew Bailey says: “We have had an extensive debate on the issue of proportionality with our European counterparts.

“The PRA attaches a great deal of importance to the principle of applying policies in a proportionate manner consistent with the legal provisions.

“We have followed the principle of proportionality, which in practice means that smaller firms which pose less risk to the safety and soundness of the financial system face lower regulatory requirements. This is a sensible outcome.”



Bank of England proposes tougher bonus clawback rules

Bankers could have their bonuses clawed back even if they have changed employers, under new rules proposed by the Bank of England. The Prudential Regulation Authority plans to introduce tougher laws around bonus buyouts. This is where an organisation compensates a new employee for any unpaid bonus after they leave the firm. The regulator believes […]

European Banking Authority delays bonus cap rules

The European Banking Authority has delayed the implementation of its controversial bonus caps rules to the start of 2017 and says it will take action against member countries that do not comply. The body will postpone the pay rules in the Capital Requirements Directive for a year to 1 January 2017 in order to give firms […]


RBS ditches cash bonuses for branch staff

Royal Bank of Scotland is to remove cash bonuses for 20,000 branch staff as the lender attempts to improve focus on customers. The bank will scrap incentives for all customer-facing staff, including mortgage advisers and branch managers, and will instead increase their salaries by an average 5 per cent, the Financial Times reports. The move, which […]

Naming a reward programme

Six tips to get your reward programme name right

by Debra Corey, group reward director  Choosing a name isn’t easy. Whether it’s for your new puppy, a bundle of joy or your reward programme, a name determines a first impression – and often a lasting memory. When it comes to your reward programme, the name will determine how your employees feel about it even before […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm