Bank of England deputy governor, Sam Woods, expressed his views on the impact of limiting banker bonuses on UK growth during an annual City event at London’s Mansion House. He highlighted that scrapping the bonus cap has been recognized by major international banks and emphasized that it was a positive move for the country’s competitiveness. Woods argued that the cap was unnecessary and counterproductive, as it led to higher base salaries that were difficult to adjust in response to economic shocks.
Moreover, Woods mentioned that the Prudential Regulation Authority (PRA) is focused on making the UK’s financial sector more competitive and less bureaucratic. He revealed that the PRA is considering shortening the deferral period for bonuses for senior managers from eight years to five years. Deferrals allow bonuses to be paid out in the future and can be cancelled if the business performance changes.
In addition to discussing the impact of banker bonuses on growth, Woods also talked about the balance between managing financial risk and avoiding excessive regulations that could hinder growth. He acknowledged that there is room to simplify the regulatory regime and reduce unnecessary bureaucracy to promote investment and economic growth in the UK.
The deputy governor’s remarks coincided with Prime Minister Sir Keir Starmer’s pledge to cut red tape during an international investment summit. Starmer emphasized the importance of economic growth and wealth creation for the country’s future stability. The government’s focus on reducing regulations and encouraging investment aligns with the Bank of England’s efforts to create a more competitive and dynamic financial sector.
Overall, the discussion on limiting banker bonuses highlights the complex interplay between regulation, competitiveness, and economic growth. By addressing these issues effectively, policymakers and regulators can foster an environment that supports sustainable growth and prosperity for the UK economy.
