Mark Carney says bonus cap could be among tweaks made to financial regulations when UK leaves in March 2019

The governor of the Bank of England has raised the prospect that, after Brexit, the EU rule which puts a cap on bankers’ bonuses could be scrapped.

Mark Carney, a long-standing critic of the bonus rules, listed the cap as among the tweaks that could be made to financial regulations when the UK leaves the EU in March 2019.

The bonus cap was introduced in January 2014 and was a reaction to the financial crisis when bankers received multi-million payouts despite huge losses. The cap limits payouts to 100% of salary or 200% with explicit approval from shareholders.

Speaking at industry event in London, Carney also insisted that it was important to take a tough regulatory stance towards on the sector because it could double in size to around 20 times GDP in the next couple of decades.

He indicated, though, that some tweaks could be made to EU rules. As well as the bonus cap, he pointed to rules that have an impact on smaller banks and ones which relate to insurance regulation as rules which could be revisited.

“There are areas where we would make changes, but within the context of maintaining overall levels of resilience,” Carney said.

The cap on bankers’ bonuses has caused controversy in the UK from the outset. When George Osborne was chancellor he lodged a complaint in the European court of justice to argue the cap would make the sector more risky but conceded defeat a year later.



At the time Osborne had said “these are badly designed rules that are pushing up bankers’ pay, not reducing it”.

Carney has also warned that the rules make it more difficult to penalise bankers, making it harder to cut bonuses for poor performance or misbehaviour. “It is unfortunate, for example, that new European rules to cap bonuses to half, or with shareholder approval, two-thirds, of total pay have the undesirable side effect of limiting the scope for remuneration to be cut back,” the governor has said.



An analysis in 2015 by the Bank on the bonus cap found that fixed pay – such as salaries and benefits – made up 50% of pay compared with 10% in 2010.

This is because banks responded to the cap by introducing “allowances” alongside salaries and bonuses to compensate for any fall in pay caused by the restriction.

Chief executives of major UK banks now receive an award of shares in addition to bonuses. António Horta-Osório, chief executive of Lloyds Banking Group, receives a “fixed share award” of £900,000 which is released in equal tranches over five years, on top of a £1.2m salary, benefits and bonuses.

Carney did not indicate that any work was underway on reviewing the cap and has taken a stance against watering down other financial regulations. He told the Guardian in August “we’re not going to to go the lowest common denominator” with regulation when the UK had such a dominant financial sector.

There have been suggestions that the UK should roll back City regulation in the wake of Brexit to help retain business that could be lost. Major banks are preparing to implement their Brexit contingency plans if a transition deal is not agreed in the coming weeks. Another Bank official has warned up to 10,000 roles could go initially.