First bonuses, now salaries could be at risk for bankers

Transcripts of currency traders boasting in online chatrooms about their bonuses while they tried to manipulate benchmark rates have put regulators under renewed pressure.

Europe has already agreed to curb bankers’ bonuses, but the Bank of England has said that policy will not tackle the problem as lenders can dodge it by paying allowances and hiking fixed pay.

The Bank is bringing in its own regime which will see bonuses deferred for years and allow them to be clawed back if wrongdoing emerges - even if the money has already been spent.

Yet with Europe’s bonus cap cutting the pool of money that the Bank of England can target, Governor Mark Carney said salaries, or fixed pay, could also be in its sights.

“Standards may need to be developed to put non-bonus, or fixed, pay at risk,” he said in a speech in Singapore.

“European rules create a situation that makes the case for additional reforms to ensure that the burden of excessive risk taking and misconduct by staff can still be borne by those staff.”

Given that the Bank of England’s new regime is not yet in place, remuneration experts said Mr Carney’s speech was a tap on the shoulder rather than a plan for immediate action and underlined the political pressures at play.

A group of MPs brought together to look at ways of improving behaviour in the wake of banking scandals has said pay is at the heart of the problem.

“Mark Carney is firing a warning shot. He is putting the industry on notice that if they just increase fixed pay and take employees out of bonus schemes that is not going to work for him,” said PwC.

International regulators may yet introduce reforms that would require banks to pay part of their senior staff bonuses in bonds connected to the performance of the bank.