“Financial Times” writes that the cap on bankers’ bonuses is to be removed in the United Kingdom. This measure is still a ‘legacy’ of European laws and, from the perspective of the authorities, is a barrier that “restricts labor movement” and is not in force outside the European Union (EU).
The newspaper said the move follows a consultation this year on the possibility of repealing the 2014 rule that restricts bonuses that double the base salary of employees of banks, construction firms and investment firms.
At the time the rule was imposed, the United Kingdom was still in the EU and some British regulators were against it. However, since Brexit, the British government wants to remove this limit, making London more attractive to financial institutions.
In a report published this Tuesday, the Bank of England’s Prudential Regulation Authority said that “no maximum bonus cap is imposed in other major international financial centers outside the EU”. “The maximum bonus limit has been identified as a factor restricting labor mobility”, he continued, adding that it was a “barrier” that needed to be removed in the country.
These changes would allow companies to reduce wages more quickly in economic crises, and would be safer from a financial sustainability perspective, the watchdog added.
The new rules will come into effect from October 31 and will be applicable for this financial year and future ones.
Financial institution chiefs were hesitant about the announcement that the UK would scrap the measure. They initially opposed the cap because it forced them to increase base wages to keep employees.
The delimitation has been criticized by left-wing parties. For example, Labour’s Darren Jones said, “At a time when families are struggling with the cost of living and mortgages, this result tells you everything you need to know about the Conservative government’s priorities”.
Paul Novak, general secretary of the Trade Union Congress (the confederation of the main British trade unions), characterized the decision as “obscene”. “At a time when millions of people across the country are struggling to survive – this is an insult to workers,” he said.
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