Removing the cap on bankers' bonuses could bring back 'greed is good' attitudes, warns the TUC.
Bankers can earn unlimited bonuses again from Tuesday, following a change to rules brought in following the financial crisis.
"It will probably be at least a year before things start filtering through," she said. "Bankers going out, spending their money and doing those lavish things - we probably will not see that until 2025." But regulators and banks said it had not had the intended effect because firms simply switched to paying higher basic salaries to compensate for lower bonuses. Higher basic salaries are harder to reduce during a downturn, or take back if performance has been poor.
But higher bonuses would have a positive impact on the market overall, she said, drawing in more "superbankers" from overseas.The TUC, the umbrella body for the UK's trades unions, described the move back to bonuses as "obscene". The original decision to scrap the cap on bonuses was announced by former chancellor Kwasi Kwarteng in his September 2022 mini-Budget. His successor Jeremy Hunt subsequently referred the decision to the regulators, the Prudential Regulation Authority and the Financial Conduct Authority.
Anne Sammon, a partner at law firm Pinsent Masons, said she thought "superstar" traders would see higher bonuses fairly quickly. But rules requiring a portion of the bonus to be deferred, and making it easier to claw back payments in the event of wrongdoing, meant there may not be quite the same big payday feel to bonus seasons in future, she said.
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