HSBC becomes latest major bank to lift bonus cap for UK employees | Business News

HSBC is set to become the latest major international bank to lift the European Union-imposed bonus cap that applied to its UK-based workers.

Shareholders of the London-headquartered lender voted to scrap the limit at its annual general meeting, the company said.

The board recommended the move after the British government abandoned the post-Brexit cap.

HSBC, which this week announced the upcoming Resignation of its CEO had argued that lifting the cap would reduce its fixed costs based on better-than-expected profits.

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The bank also said higher stock-based awards for its biggest earners would be easier to cancel or claw back in cases of potential misconduct.

The cap was introduced by the European Commission in 2014 to deter bankers from the kind of excessive risk-taking that was blamed for the 2008 global financial crisis.

The restrictions, which limited bonuses to twice base salaries, proved controversial as banks accused them of causing a brain drain in Europe while increasing salaries to retain talent.

Among the cap’s influential critics was Andrew Bailey, the governor of the Bank of England.

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He said in 2014, before taking up the top job at Threadneedle Street, that it was “the wrong policy” and the debate about it was “misguided”.

HSBC’s vote took place less than 24 hours later Sky News revealed that US investment bank Goldman Sachs was the first major operator in London to abandon the cap imposed by the EU.

Commenting on the government’s decision to lift it, a spokesman said: “This approach gives us more flexibility in managing fixed costs across the cycle and paying for performance.”

“It brings the UK closer to the practice of other global financial centers and supports the UK as an attractive location for.”

Mark Tucker, chairman of HSBC, told the AGM: “We are seeking shareholder approval today for the Group Remuneration Committee to use its discretion to set an appropriate ratio of variable to fixed remuneration for those colleagues who are deemed to be material risk takers, subject to the regulations allow this.” .

“The committee will consider all relevant factors when setting the quota, including the company’s business activities and the associated regulatory and conduct risks.”

“This allows us the flexibility to reduce fixed costs over time and increase the level of compensation, which is variable and dependent on performance. It also strengthens our ability to recruit and retain employees in competitive markets. Many of our international competitors do not have similar restrictions.”

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