Commons Sense

House of Commons · Ministers' Questions

Bankers’ Bonuses: Removal of Cap

Tuesday 6 February 2024 · 2 questions

Summarised by AI from the official record, so it can contain mistakes.

Read the full transcript on Parliament.uk

At a glance

Answered 0 Partly answered 2 Not answered 0

Key points

  • The decision to remove the cap on bankers' bonuses was made by the independent Prudential Regulation Authority.
  • Financial institutions adjusted their remuneration packages to circumvent the effects of the bonus cap.
  • The Chancellor supported the removal of the bonus cap, contrary to expectations, citing its ineffectiveness.

Topics (select to filter)

Questions & Answers

Q1 Sam Tarry
Economy Business & Trade
Context

The question arises from concerns about the effectiveness of a cap on bankers' bonuses in regulating risk-taking behaviour within financial institutions.

Question

If he will make an assessment of the potential impact of removing the cap on bankers' bonuses on the financial sector. The cap on bankers' bonuses might have been a great newspaper headline, but it did little to tackle the City's excesses. Financial institutions quickly changed remuneration packages and structures so that risk takers still receive substantial pay-offs, sometimes even taking them through offshore mechanisms.

Answer from Jeremy Hunt

Removing the bankers' bonus cap was a decision made by the independent Prudential Regulation Authority, which has long said that the cap was completely ineffective; it did not limit pay or make banks safer. I suspect that when the hon. Gentleman tabled his question, he was not expecting that the biggest supporter of abolishing the bankers' bonus cap was not the Chancellor but the shadow Chancellor.

Partly answered

Not addressed: The specific ask about enhanced regulation to mitigate risk-taking behaviour and align interests through bonuses, share allocations, deferred amounts, and robust clawback mechanisms was not addressed directly.

How: Redirected Question Back At The Opposition

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Q2 Sam Tarry
Economy Business & Trade
Context

Concerns persist about how removing the cap on bankers' bonuses impacts risk-taking behaviour in financial institutions.

Question

Does the Chancellor agree that what we need is enhanced regulation to mitigate excessive risk taking in the square mile? That could require, beyond merely capping bonuses, a move toward an alignment of interests focused on the form of bonus payments, share allocations and deferred amounts, and robust clawback mechanisms for those who have behaved maliciously, in order to deter misconduct in the square mile more effectively?

Answer from Jeremy Hunt

I suspect that when the hon. Gentleman tabled his question, he was not expecting that the biggest supporter of abolishing the bankers' bonus cap was not the Chancellor but the shadow Chancellor. I hear what he says, and indeed those are some of the reasons we abolished it, because it was not working.

Partly answered

Not addressed: The specific ask about enhanced regulation to mitigate risk-taking behaviour and align interests through bonuses, share allocations, deferred amounts, and robust clawback mechanisms was not addressed directly.

How: Redirected Question Back At The Opposition

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