SummaryCompaniesBankers favour fixed pay over bigger scope for bonusesFinancial firms wary of public backlash as economy wiltsRegulators say bonus cap has made sector less able to curb costsEU response to scrapping restrictions remains unclearLONDON, Aug 23 (Reuters) – Banks in Britain may be free to award even bigger bonuses from January but new pay perks are unlikely to help the country’s financial industry outshine its rivals because top bankers are wary of swapping handsome fixed salaries for uncertain rewards.Scrapping the near decade-old cap on bonuses is a core plank of Britain’s post-Brexit easing of rules the European Union adopted to stop excessive risk-taking after taxpayers had to bail out banks in the global financial crisis.The outcome of a Bank of England and Financial Conduct Authority consultation on the proposal to remove curbs on bonuses is due in coming weeks. It would apply to payouts earned over 2024, though bringing forward the start to cover bonuses for 2023 is an option.Ministers and regulators hope this will attract more top-level bankers to Britain, and bolster London’s appeal as an international capital hub as it competes with New York, Singapore, and EU financial centres such as Paris and Frankfurt.Bankers, lawyers and remuneration consultants say, however, high-flyers may lose more than they stand to gain.”Removing the cap isn’t going to attract more top bankers to the UK because their pay will be more uncertain,” Luke Hildyard, director at the High Pay Centre think tank, told Reuters.According to the latest data from the European Banking Authority, more than 70% of EU-based bankers earning over 1 million euros and subject to the bonus cap, were based in Britain before it left the bloc in 2020.A limit on bonuses of 100% of fixed pay – or 200% with shareholder approval – has encouraged some UK banks to supplement base salaries with bespoke and often undisclosed, role-based allowances, or RBAs, to make compensation more competitive globally.This, regulators say, makes it harder for banks to cut costs and absorb losses in a downturn.But many bankers are expected to resist swapping guaranteed pay for potentially higher bonuses, which can swing wildly across economic cycles.”I very much doubt there’ll be a dramatic shift back to the pre-financial crisis days of low base salaries and high bonuses,” Suzanne Horne, head of the International Employment practice at Paul Hastings, told Reuters.”We have a cost of living crisis, high inflation, industrial action by the public sector unseen since the 70s … any announcement of sudden changes to a bank’s bonus structure will likely prove controversial.”With Britain scrapping the bonus limit, the EU would become a global outlier. Countries, such as the United States, Singapore, Japan and Switzerland use other mechanisms to deter excessive risk-taking, which Britain will continue to apply.These include ensuring only a portion of a bonus is paid upfront in cash, with the rest…
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