Under new rules issued this week, top UK bankers will be required to wait 10 years before they can collect their annual bonus payments, according to The Wall Street Journal.
All employees working in the financial sector will have to wait at least three years before they receive a pay-out. Top bank executives have a 10 year wait to ensure that they do not take part in any misconduct after being awarded the bonus and will be required to return the extra pay if they do. Alongside this, risk managers have a five year wait and traders have three years.
Tens of thousands of UK banking employees are will be forced to comply with these rules that apply to Britain and the rest of the European Union, which further regulates an already heavily controlled pay system.
Earlier, more lenient, rules resulted in some global bank executives changing careers or work locations.
The announcement also revealed that bonuses for managers at a bank that had previously been bailed out, as well as nonexecutive directors of any bank, are banned from getting a bonus.
These rules have been put in place to avoid future financial crises and scandals. “The Financial Conduct Authority said the rules are needed to prevent the excessive risk-taking and poor conduct that led to the financial crisis of 2008 and scandals, including traders’ attempted manipulation of global interest rate benchmarks,” according to The Wall Street Journal.
Martin Wheatley, FCA chief executive added to this comment by saying that this is a crucial step in order to rebuild public trust in the financial services. This is also important as new scandals, like the FX market wrongdoing, are still coming to the surface despite banks promising to change the way they operate.
CEO of the Prudential Regulation Authority and a Bank of England deputy governor, Andrey Bailey, believes that these rules will change how people are rewarded for their good work. “People in positions of responsibility are rewarded for behaviour which fosters a culture of effective risk management and thus promotes the safety and soundness of individual institutions,” Bailey said.
The Wall Street Journal also reported that in addition to these authorities, the UK government are in support of these rules because they are still owed £100 billion by the banks that it helped.
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