The Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) have launched a consultation which proposes several changes to the current senior banker remuneration regime.
The consultation will look at reducing the bonus deferral period for the most senior bankers to five years, down from eight for some as announced by PRA deputy governor of prudential regulation and chief executive officer Sam Woods at Mansion House in October.
For less senior bankers under the regime it will be reduced to four years.
It will also propose to allow part-payment bonuses from year one, rather than year three as at present for some bankers.
The consultation aims to remove EU-originated guidelines that prohibit paying dividends or interest on deferred bonuses awarded in shares or other instruments and will require senior bankers to wait up to a year before being able to sell deferred bonuses in shares or other instruments.
In addition, the PRA and FCA aim to reduce the number of individuals subject to rules on their pay, simplify the approach for identifying those who should be subject to them, and give firms more discretion to determine which employees will be subject to the rules.
Finally, the consultation ensures bankers are held accountable for the outcomes of risk-taking decisions by introducing clarifications to existing policies ensuring that firms consider adjusting pay in the event of risk-management failures.
Commenting on this, Woods states: “These proposals on bankers’ bonuses will support UK growth and competitiveness without undermining financial stability. We should not return to the very dangerous pay structures that were commonly in place before 2008, but these proposals will reduce bureaucracy and support responsible risk-taking.”
Data from Dartmouth Partners, as reported in The Guardian, shows that average pay tumbled last year across most investment banking positions at eight of the major investment banks, ranging from junior-level analysts to more senior associates and vice-president roles.
While lower-paid analysts took home bonuses worth an average of £44,267 in 2023 – marking a near 50% increase compared with a year earlier – mid-tier associates’ bonus payouts fell by nearly a fifth to £80,065 on average, sending their total pay down 8.3% to £213,940.
Meanwhile, some vice-presidents had their bonuses slashed by 22% to £135,183, reducing total average pay by 11.8% to £303,204.