Britain's top financial regulators are preparing to consult on reforms to crisis-era rules governing deferred bonuses and clawbacks, sources said on Wednesday, as they weigh another rule change that may boost the competitiveness of the UK's banking sector.
The Prudential Regulation Authority and the Financial Conduct Authority are reviewing rules that currently require senior managers to wait up to seven years before pocketing all of their variable pay, two sources familiar with the matter told Reuters.
Supervisors designed the rules after the 2008 crisis, amid worries bumper pay packages could incentivise bankers and traders to take excessive risks that could collectively threaten the global financial system.
Bloomberg News reported the proposed consultation earlier on Wednesday.
Reuters was unable to confirm when the consultation might begin but scrutiny of the current framework follows years of lobbying for change by banks and trade bodies.
Critics say the rules put Britain at a competitive disadvantage to rival financial centres, including those in the European Union, where most bonuses are typically subject to deferral periods of three to five years.
The PRA and FCA have a remit to aid the competitiveness of the UK financial industry and have already demonstrated a willingness to diverge from the EU rulebook by axing a decade-old cap on bonuses in October 2023.
But Anindya Ghosh Chowdhury, a director in the banking risk and regulatory consulting team at Forvis Mazars, said removal of some existing requirements will mean variable remuneration may no longer be tied to performance and conduct in the future, especially for material risk-takers.
"The biggest impact this might have will be on risk to company culture," he said.
