{"id":120562,"date":"2023-10-25T10:09:38","date_gmt":"2023-10-25T10:09:38","guid":{"rendered":"https:\/\/cottontailsonline.com\/?p=120562"},"modified":"2023-10-25T10:09:38","modified_gmt":"2023-10-25T10:09:38","slug":"brexit-dividend-with-scrapping-of-banker-bonus-cap-set-to-strengthen-uk","status":"publish","type":"post","link":"https:\/\/cottontailsonline.com\/politics\/brexit-dividend-with-scrapping-of-banker-bonus-cap-set-to-strengthen-uk\/","title":{"rendered":"Brexit dividend with scrapping of banker bonus cap set to \u2018strengthen UK"},"content":{"rendered":"

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Scrapping the bonus cap for bankers has the potential to deliver a shot in the arm for the UK which goes far beyond the Square Mile, an influential economist has said.<\/p>\n

Julian Jessop, Economics Fellow at free-market think tank the Institute of Economic Affairs was speaking after the Financial Conduct Authority (FCA) and Bank of England’s Prudential Regulation Authority (PRA) confirmed the decision yesterday.<\/p>\n

Mr Jessop said: \u201cScrapping the bankers’ bonus cap is common sense. It is a clumsy rule whose costs far outweigh any potential benefits.<\/p>\n

\u201cIts removal will further strengthen the competitiveness of the UK financial sector and increase tax revenues, so it is not just bankers who will benefit.\u201d<\/p>\n

The cap has led firms to increase basic pay and made it harder for them to adjust variable pay, Mr Jessop pointed out.<\/p>\n

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He continued: \u201cThis has added to fixed costs and reduced the flexibility to respond to different financial conditions and to reward outstanding individuals appropriately.<\/p>\n

\u201cThere are also now many more effective ways to prevent excessive risk-taking, including the \u2018Senior Managers Regime\u2019 (which makes top staff directly accountable to regulators) and deferred bonus schemes (which allow excessive payments to be clawed back later).\u201d<\/p>\n

The move is aimed at making the UK a more attractive financial hub post-Brexit, the PRA said.<\/p>\n

Current rules limit bonuses to 100 percent of the salary for employees of banks or building societies, or double with shareholder approval.<\/p>\n

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The regulations were introduced by the European Union in 2014 as part of efforts to avoid the 2008 financial crisis.<\/p>\n

But other leading financial centres outside the EU do not impose a cap, therefore making the UK a less competitive place when it comes to attracting top talent, the PRA found after consulting on the rule.<\/p>\n

It concluded: “The bonus cap has been identified as a factor in limiting labour mobility.\u201d<\/p>\n

The decision, announced a day before Rishi Sunak marked his first anniversary as Prime Minister, comes a year after Kwasi Kwarteng, Liz Truss\u2019s Chancellor first revealed plans to change the bonus rules, which he said would encourage global banks to create jobs, invest and pay taxes in the City.<\/p>\n