Barclays is reportedly reviewing its compensation programme to make sure that bonus and “allowance” payments comply with increasingly strict European Union regulations.
The EU’s bonus cap, intended to discourage bankers from taking excessive risks, limits annual bonuses to 100 per cent of an employee’s salary, or 200 per cent with shareholders’ approval.
To circumvent the new regulations, multiple British lenders, including Barclays, have introduced so-called allowances, or fixed annual payments tied to employee’s roles within the company.
Until now, the allowances have not been seen as “bonuses” under the EU rules.
The Sunday Times reported today, however, that Barclays would review whether its allowances were still compliant with EU regulations, as certain flexibilities in the lender’s allowance payments may violate bonus-based regulations.
Last month, the Bank of England published a paper arguing that the bonus cap is counterproductive because it leads to higher fixed costs and increases the risk of instability in the financial sector.
Barclays declined to comment.