At City AM:
On Mark Carney’s idea of clawing back fixed pay.
Usefully, I make the point that has appeared elsewhere in the papers today:
Mr Carney said: “Standards may need to be developed to put non-bonus or fixed pay at risk. That could potentially be achieved through payment in instruments other than cash.” But the European Banking Authority, the EU’s banking regulator, has said pay that can be clawed back would count as a bonus. It would therefore be subject to the cap on variable pay that was recently introduced by Brussels.
Currently, bank bonuses are restricted to no more than twice an individual banker’s fixed salary. If a portion of an employee’s salary were to become retrievable, and thus constitute variable pay under EU rules, banks may be forced to breach the cap or readjust pay levels.
Alice Greenwood, a senior associate at Freshfields, said: “At the moment you have a tension with the EU rules on the bonus cap.”
Pay that can be clawed back is variable pay, not fixed pay. And variable pay may only be a multiple of fixed pay under EU rules. Meaning, that if all pay is now variable pay then bankers cannot be paid anything.