‘Plain wrong’ for banks to abandon cap on bonuses
Unions have urged banks to show “restraint” and not abandon the cap on bankers’ bonuses.
The TUC made the call after Goldman Sachs and HSBC announced last week that they would be lifting the cap, which was abolished by the Government in October 2023.
The cap, introduced in 2014 by the European Union in an attempt to limit excessive risk-taking following the financial crisis of 2008, limited bankers to bonuses capped at two times their fixed pay.
Bankers’ reward packages contributed to the crisis because they created a pay structure that encouraged excessive risk-taking: giving bankers a large share in upside rewards when things went well, but smaller, more limited exposure when they did not.
Goldman Sachs, one of the most vocal critics of the cap, told staff last week it would remove the limit. HSBC told investors that scrapping the upper limit on bonuses, which still applies to its staff based in the EU, would help it to attract talent by allowing it to compete with rival banks that were unimpeded by the cap.
The TUC said banks could voluntarily choose not to pay bonuses at a higher rate than the previous cap and pointed out that even with the cap in place, UK banks paid out “bumper”
The TUC said bonuses in finance and the insurance sector have reached a record £20,000 a year on average. It said that is 1.5 times the average pay of teaching assistants.
bonuses in 2022 and 2023. Lloyds Bank will aim for shareholders to back lifting the cap at its AGM later this month but has said this will not affect many of its employees.
Natwest has also increased its limit from one to two times an individual’s base salary.
Barclays said it will continue to operate under the cap but added that it will seek to challenge it in the next financial year.
The TUC general secretary, Paul Nowak, said: “At a time when millions are struggling to make ends meet, it would just be plain wrong for banks to hand out even larger bonuses to those at the very top.
“I urge bank leaders today to do the right thing and show some restraint. Don’t follow the example of Goldman Sachs.
“The bankers’ bonus cap was put in
place to stop the excessive risk-taking and greed we saw in the run-up to the financial crisis.
“The Tories should never have abolished it. We cannot afford a return to the bonus culture which crashed our economy.
“If UK banks press ahead with abandoning the cap for senior staff, it will be further proof of the huge disconnect between Britain’s boardrooms and hard-pressed families.”