The UK is set to keep the EU’s cap on bankers’ bonuses, with the Treasury instead focussed on a range of other measures to shake up financial services regulation post-Brexit.
Treasury sources say the measure is not even being discussed by chancellor Rishi Sunak and that it will not be scrapped any time soon.
The cap, which was introduced by Brussels after the 2008 financial crash, sees bankers’ bonuses limited to no more than 100 per cent of their fixed pay or double that with explicit shareholder approval.
Some in the City claim the measure hurts London’s ability to attract the best global talent and that it should be eased now the UK is free of Brussels’ regulatory shackles.
There have also been a number of press stories this year suggesting the cap could be scrapped.
Tory MP Jesse Norman, who was sacked as Treasury minister last month, is thought to have been very enthusiastic about scrapping the cap while he was on Boris Johnson’s frontbench.
“It’s just not a priority and the chancellor isn’t looking at it,” a source close to Sunak said.
The cap on banker bonuses is overseen by the Prudential Regulation Authority, an arm of the Bank of England, but the Treasury is working closely with the body on changes to financial services regulation.
Myles O’Grady, chief financial officer at the Euronext-listed Bank of Ireland, last month left the banking industry due to restrictions on remuneration.
Veteran City commentator David Buik said any decision to not scrap the bankers’ bonus cap was “political” and could lead to a similar loss of talent from the UK’s financial services sector.
“It’s disappointing and I highly disapprove of the idea that people shouldn’t be paid for what they deliver,” he said.
“If you don’t allow the City to engage with the best people internationally, you’re in danger of not allowing businesses to be created.”
Matthew Lesh, head of research at the free market Adam Smith Institute think tank, said: “We’re repeatedly witnessing a failure of imagination, aspiration and ambition.
“Scrapping the bonus cap would immediately attract thousands of highly paid financial sector workers, boosting our economy and Treasury receipts.”
Two government reviews this year have outlined a series of recommended regulatory changes to enhance the City’s competitiveness post-Brexit.
Among the recommendations are changes to the share listings rules to attract more tech unicorns to go public in the UK, allowing blank-cheque Spacs to list in London and reducing capital requirements for insurance firms.
The Treasury also launched a review this week into how to make it easier for publicly listed firms to attract secondary capital through rights issues.
Sunak said at Conservative party conference last week that he was “going on all of those things” outlined in the regulatory reviews “to deliver the reforms that the industry can now benefit from post-Brexit”.
It is widely thought in the City that the government’s changes to financial services regulation means Brussels will not grant the UK equivalence – a designation that would give the financial services sector widespread access to EU markets.
However, a Treasury source was more upbeat about the prospect.
“We’re still keen for the EU to accommodate some form of equivalence,” they said.
“We’re really not tearing up the EU’s regulations and if we stay within the spirit of what Brussels is doing then there are still opportunities for equivalence.”
Bank of England governor Andrew Bailey said in July that there were no signs Brussels would grant equivalence to the UK.
The Treasury was contacted for comment.