HSBC is to adopt a complicated new way of paying the cash part of its staff’s bonuses after pressure from the Bank of England and FSA.
The bank is set to unveil a system to pay for the up-front cash chunk of bonuses (20 per cent of the total) for senior UK staff by issuing new shares and instantly selling them.
HSBC hopes to stop bonuses from diminishing its capital base, with the rest of the awards to be paid out in deferred shares due to EU rules.
It is not clear what value of pay will be accounted for in this way but the bank believes it will be a negligible amount in terms of affecting shareholder value.
The FSA said it was doing the bidding of the Bank of England’s Financial Policy Committee by telling firms they must not allow bonus pay-outs to hit their capital base. Other banks could also adopt a similar plan.
However, if only applied to HSBC’s UK staff, the overhaul will not affect most of the bonuses the bank pays.