The FCA is considering introducing new rules that would mean bankers are forced to hand back their basic pay as well as bonuses where they have been found guilty of wrongdoing.
Giving evidence to the Treasury select committee yesterday, FCA chief executive Martin Wheatley said: “We have lost the tool we had, which was clawback of a significant component of compensation, so being able to claw back fixed pay would be a substitute, to a degree”, the Financial Times reports.
Wheatley said the regulator was “sympathetic” to the idea, despite “all sorts of contractual issues”.
Last March the Bank of England signalled it would be introducing rules that meant firms had to embed clauses in staff contracts that would allow them to claw back bonuses in the event of wrongdoing or serious failure.
An EU-wide cap on bonuses comes into force this year and restricts payouts to 100 per cent of salary or 200 per cent with shareholder approval.
But the UK has fought against the cap, although Chancellor George Osborne dropped a legal challenge in November.
Wheatley said the FCA has anecdotal evidence that shows banks have simply raised base salaries to get around the cap.
At yesterday’s hearing Treasury commitee chair Andrew Tyrie said: “We are going to need to persist in trying to explain to our EU colleagues just how misguided what they have done is, and the long-term deleterious effects.”