British banks fight against new rules on bonus payments
LONDON: The UK banking sector is fighting a rearguard action against new rules on bonus payments ahead of major announcements by both the European Union (EU) and the Financial Services Authority (FSA) on remuneration expected in the next two weeks.
Senior banking sources have revealed that a number of banks are concerned that new rules banning guaranteed bonuses will effectively be a "poacher's charter" which will mean a loss of talent from British banks.
The FSA is set to propose that banks and other firms in the financial sector will not be allowed to offer guaranteed bonuses of more than one year. A draft of the new rules, published in July, said: "Guarantees may only be given in exceptional circumstances to new hires for the first year of service."
Banking officials point out that because the guarantees can be given only to people being recruited it will be harder to retain talent. "What if one of your people is offered a guarantee to start a new job, how do you retain that person if you are not able to make a similar offer?" the source said. "It is a poacher's charter."
This week the Committee of European Bank Supervisors (CEBS) - which oversees the banking sector in the 27 EU member states - will announce a raft of new rules on remuneration set to restrict upfront cash bonuses to 20pc of the total award. The regulations are also expected to say that 60pc of remuneration awards should be deferred and 20pc given in shares that cannot be immediately sold.
Following the CEBS announcement, the FSA will publish its own guidelines which will also include similar deferral rules and new regulations stipulating that the amount of money paid out in bonuses and salaries does not affect banks' capital base. -PB News