FCA proposes changes to banker bonuses in effort to simplify rules

Senior bankers may soon see shorter bonus deferral periods – reduced from eight to five years – while bonuses could be partially paid from year one instead of year three.

These changes are part of a joint consultation published today by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA), aiming to streamline the banker remuneration regime while strengthening accountability and supporting UK growth and competitiveness.

The consultation proposes reducing the bonus deferral period for the most senior bankers to five years, down from eight for some, while for less senior bankers, the deferral period would decrease to four years.

Additionally, the proposal would allow part-payment of bonuses from year one instead of the current requirement to wait until year three for some bankers.

The consultation also suggested removing several EU-originated guidelines, including restrictions on paying dividends or interest on deferred bonuses awarded in shares or other instruments, and requirements for senior bankers to wait up to a year before selling deferred bonuses.

The changes aim to reduce the number of individuals subject to pay rules, simplify how firms identify employees subject to the regime, and provide firms more discretion in applying these rules.

It also looks to strengthen accountability for risk-taking by encouraging firms to adjust pay for risk-management failures.

The proposals would align bonus payouts with performance against the PRA’s supervisory priorities under the Senior Managers Regime.