Timmy elsewhere

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.

5 thoughts on “Timmy elsewhere”

  1. Can’t a bank sue them if they’ve screwed up/misbehaved? It is (or was) quite common for law firms to sue their employees for the uninsured portion of negligence claims.

  2. Let’s make sure we have a level playing field here. Apply the rule to politicians. Apt it to Mr Carney – miss your inflation target, clawback.

    Lots of fun to be had here.

  3. The scandal with Lloyds’ retail bonuses a year or so back was largely because they had a system of negative bonuses: i.e. they could reduce your pay if you didn’t hit your targets. This meant that staff were over a barrell: mis-sell this stuff that you know is unethical, or lose your house.

    It’s taken surprisingly little time to go from that being punished by the largest fine ever issued by the regulator to it being proposed as a model for the whole sector. Weird.

  4. alright, but amenable to a little legal finessing? define variable pay as related to performance in year, fixed pay is not, but paid out using an instrument that may subsequently decline in value depending on subsequent performance of bank. Should be possible to write laws that distinguish between two?

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