Senior bankers in the UK will soon have access to bonuses more quickly due to a relaxation of rules established following the 2007/2008 financial crisis. Previously, bankers had to wait up to eight years to receive their bonuses in full, ensuring that the profitability of the deals for which they were rewarded was assessed over a longer term. Starting from Thursday, this deferral period will be reduced to four years, with partial payments allowed in the first year instead of the third.
Regulators, including the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA), have indicated that while these changes are intended to enhance competitiveness by aligning the UK with other global financial centers, they still aim to discourage risky behaviors in banking. Notably, this decision follows the UK’s repeal of an EU-wide cap on bonuses, which had limited payouts to twice a banker’s base salary.
The rationale behind these rule updates is rooted in a desire to create a more business-friendly environment, as emphasized by Chancellor Rachel Reeves during discussions with key financial regulators earlier this year. However, questions remain regarding the implications of these adjusted regulations for risk behavior within the banking industry, especially in light of past criticisms that high bonuses contributed to reckless decision-making during the financial crisis.
The new rules are designed to take effect in time for the upcoming January bonus season, coinciding with a period of increased profitability for many financial firms due to market volatility. Sarah Pritchard, deputy chief executive at the FCA, stated that these updates will ensure that senior managers adhere to high standards and are held accountable for decisions impacting consumers and markets.
Source: https://www.bbc.com/news/articles/cr43xkv3y4go?at_medium=RSS&at_campaign=rss