BANKS will get a chance to challenge the implementation of the bonus cap and offer ways to make the new pay rules less damaging, as the Bank of England plans to launch a consultation.
The rules come from the EU so cannot be stopped by the Bank of England’s prudential regulation authority (PRA).
But the PRA will be responsible for implementing the cap, which will see senior staff and risk-takers in banks and other institutions have their bonuses capped at the level of their salary or, if shareholders say so, twice their salary.
The consultation will cover how to implement the cap and document firms’ concerns over how it will work.
All so-called Code Staff – tens of thousands of senior workers across the City – are likely to be covered by the cap, as they most closely fit the profile targeted by the EU.
But if respondents to the consultation put forward alternative suggestions as to how the limit could be applied they may be able to reduce the impact.
The PRA has long been against the cap, fearing banks will have to hike salaries to make up for the lost bonuses if they are to compete for talent internationally.
Higher salaries will mean higher fixed costs for banks, which the PRA has warned will make banks less stable in economic downturns when they traditionally cut costs by slashing bonuses.