Reckless bankers face bonus losses under new UK rules
Proposed regime will allow bonuses to be clawed back seven years after being awarded
Governor of the Bank of England Mark Carney. Photograph: Lefteris Pitarakis/PA Wire
The Bank of England today confirmed plans for a tough new regime for reckless bankers allowing bonuses to be clawed back seven years after they are awarded.
Changes to the Bank’s remuneration code will also mean that even pay-outs that have already been pocketed could be reclaimed.
The announcement comes after a consultation launched earlier this year and the new rules are expected to come into force from January next year, in time for the next round of City bonuses.
It follows the financial crisis and a series of scandals in recent years, such as the mis-selling of payment protection insurance (PPI), which has already cost the banking industry more than £20 billion in compensation costs so far.
Bonus rules have been strengthened since the credit crunch struck, with bank payouts deferred for five years and made largely in shares.
But there has been frustration that millions of pounds in bonuses paid out in the run-up to the banking meltdown are untouchable.
The rules on clawback set out by the Bank’s Prudential Regulation Authority (PRA) will not apply retrospectively. It said there was a concern that many firms might have to obtain the consent of employees for this and “might be open to challenge for doing so”. “In order to ensure a consistent and even application of the clawback requirement across industry, the final rule requires the application of clawback only to awards made on or after 1 January 2015.” The rules were announced as the PRA and
City regulator the Financial Conduct Authority (FCA) published consultations on “improving individual responsibility and accountability in the banking sector”. It follows recommendations last year by the Parliamentary Commission for Banking Standards (PCBS). A Treasury spokesman said: “This Government has been clear that banks must act responsibly in setting their pay policies, and we have consistently taken robust action to tackle inappropriate remuneration.”