Top bankers in the UK will be able to cash in their bonuses sooner under proposals by regulators as they move to relax rules for the financial sector post-Brexit.
Under the plans, the most senior bankers will see the period that bonus payments are deferred reduced from eight years to five years.
Bankers will also be able to receive some of their bonus in the first year instead of having to wait three years.
The proposals, from the Bank of England’s regulatory arm, the Prudential Regulation Authority (PRA), and the Financial Conduct Authority (FCA), come amid pressure on regulators to cut red tape and support risk-taking to bolster economic growth.
Bonuses are often deferred, meaning they are paid out in the future, rather than immediately, and can be cancelled if the performance of the business changes.
Shortening the deferral period – which for less senior bankers would be reduced to four years – means people can receive the cash faster.
Bonus bonanza: Senior bankers will see the period that bonus payments are deferred for reduced from eight years to five years
The regulators said this change would make the UK a more attractive place to work, because current deferral periods are typically longer than in some other countries.
Sam Woods, chief executive of the PRA, said: ‘These proposals on bankers’ bonuses will support UK growth and competitiveness without undermining financial stability.
‘These proposals will reduce bureaucracy and support responsible risk-taking.’
The latest plans follow last year’s decision to axe the cap on bonus payouts for top City bankers, which was previously limited to twice the level of fixed pay.
The PRA and FCA also propose scrapping some of the criteria that mean bankers must be identified as material risk-takers (MRTs), meaning their work has a material impact on the bank’s level of risk.
The regulators said the current criteria mean some can be wrongly categorised as MRTs and be unnecessarily subject to pay restrictions.
Harvey Knight, head of the UK financial services regulatory team at law firm Withers, said it was an ‘encouraging development that the long overhang from the financial crisis of some 15 years ago is at last being reduced’.
Simon Youel, head of policy and advocacy at campaign group Positive Money, said: ‘It seems a bizarre time for the Bank of England to loosen restrictions on bankers’ bonuses, given the governor’s recent warnings about the risks of complacency since the last financial crisis.’
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