Finance

Banks will not challenge UK bonus cap, bosses say

The City’s top banks have no interest in lobbying to change the controversial limit placed on UK banker bonuses, a raft of bosses and lobbyists have said, despite an exodus of London talent to European hubs in the wake of Brexit.

Citigroup’s Europe, Middle East and Africa chief executive David Livingstone said the bank does not view the bonus cap as a priority in its lobbying activity with regulators.

“We’ve been operating under the bonus cap regime in the EU and in the UK for a number of years now, we have the systems in place to comply with it, and we also have, therefore, the experience of competing for talent,” said Livingstone, told a hearing of parliament’s Treasury Committee on 25 October.

“To your question of are we seeking reform of that, no, we don’t think it’s a high regulatory priority at the moment,” he said.

Reports earlier this year suggested that banks and Treasury officials alike had been eager to scrap the measure as a way to set London apart as a destination for skilled workers in the face of competition from the likes of Paris and Brussels.

READ City banker bonus cap may be lifted in post-Brexit revamp

Livingstone’s comments were supported by Matthew Conway, director for strategy and policy at banking lobby group UK Finance, who said the City has largely been disinterested in challenging the bonus cap.

“On behalf of the banking sector I can echo exactly what David has said, which is [that] none of our members are pressuring us to take this forward as a priority,” Conway told the same hearing.

“We’re not taking it forward. In three years, I haven’t had one discussion about it.”

Bankers’ bonuses have been in sharp focus this year as the UK weathers an outpouring of skilled workers to other European hubs amid reshuffles from the likes of Citi, JPMorgan and Santander.

Research from Financial News earlier this year showed that the number of senior European bankers at major firms in London has dropped by almost a third in the five years since Britain opted to leave the EU.

READ City bigwigs return to Europe as Covid speeds up Brexodus

The EU set the banker bonus cap at a maximum of two times salary in 2014, which was criticised by the UK at the time. A challenge in the European Court of Justice against the limit by then-Chancellor George Osborne failed.

Santander UK’s chief legal and regulatory officer John Collins said that the bank did not view the bonus cap as “a current issue”, and that the sector has accepted the limit as the new normal.

“We think the market has adjusted, accepting those constraints, and banks are able to compete for talent in our pool on an equal footing,” said Collins at the hearing, which centred on the future of financial services ahead of the Treasury’s Budget update on 27 October.

“They always have the opportunity to offer [a bonus] fixed as a component of total compensation packages, if they feel they need to compete.”

City minister John Glen said last month that the cap on bankers’ bonuses would be kept “under review” by the government, but that it was not something government was “imminently seeking to make an announcement on”.

To contact the author of this story with feedback or news, email Emily Nicolle

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