Bonuses for bankers in UK could be clawed back

UK bankers may lose part or all of their bonuses even after they switch firms if they are responsible for losses at their previous employer, according to a Bank of England proposal.

The BoE’s Prudential Regulation Authority is asking for feedback on the plan designed to ensure that employees can be punished financially for excessive risk-taking that goes wrong.

The PRA is suggesting that an employee’s contract with any new firm would allow a penalty to be applied should the old employer determine he or she engaged in misconduct.

Buyout packages from new employers threaten to undermine regulations for compensation put in place after the financial crisis that seek to curb excessive risk-taking, the PRA said.

By switching jobs and having new employers buy out the unvested portions of bonuses, employees are able to sidestep the impact of pay clawbacks from their old firms, the regulator said.

“Having the right incentives is a crucial part of an effective accountability regime,” said Andrew Bailey, chief executive of the PRA.

“Remuneration policies which lead to risk-reward imbalances, short-termism and excessive risk taking, undermine confidence in the financial sector.

"Individuals should be held accountable for their actions and not be able to actively evade the consequences of their actions.”

The plan would also allow new employers to apply for a waiver if they believe the decision was unfair or unreasonable.

The proposal, at present, would apply only to senior staff, known as material risk takers, at PRA-regulated firms.

The Financial Conduct Authority plans to wait for responses to the PRA’s consultation before deciding how and whether to apply rules on buyouts to its charges, the PRA said.


Lifestyle

The actor knows how to impress when it comes to high profile events.6 times Katie Holmes wowed on the red carpet

Glamour, fun and feathers all feature in this year’s hottest looks – but first and foremost, individual style rules.10 on-trend ways to transform your home in 2020

Abi Jackson shares the enduring appeal of Pooh Bear’s wisdom on Winnie-the-Pooh Day – author A.A. Milne’s birthday.Winnie-the-Pooh Day: The wellbeing lessons we can learn from Pooh Bear

We asked three experts for the low-down on shampooing frequency.How often should you really wash your hair?

More From The Irish Examiner