HSBC ready to up pay to fight bank bonus cap
HSBC is preparing to lead from the top by hiking pay for chief executive Stuart Gulliver, it emerged yesterday.
The boss is expected to see a pay rise of up to 100 per cent, to compensate for incoming EU rules restricting bank bonuses, the Sunday Times reported.
European rules will restrict bonuses to the same level as a banker’s salary, or twice that level if shareholders agree.
Previously Gulliver has been eligible for a bonus of up to three times his £1.25m salary, meaning his compensation package could bump up against that limit.
The UK-based lender has enormous operations around the world, but its headquarters are in the EU all of its staff will be covered by Brussels’ bonus cap.
As a result the bank is expected to introduce a new system of quarterly payments to staff.
These payments will be made in shares and count as a part of salary, thus avoiding the bonus limits.
The shares will be paid out gradually over a period of five years in a bid to maintain incentives for staff to behave well and act in the long-term interests of the bank and its investors.
Since the financial crisis bank bonuses have increasingly been paid in shares and deferred over five years.
The aim is to allow the long-term impact of bankers’ actions to become clear, so the firms can claw back the payments if conditions take a turn for the worse.
British regulators were happy with the new arrangements and have opposed the bonus cap on the basis that it would push banks to pay bigger salaries, which cannot easily be clawed back – as is expected to happen with Stuart Gulliver.
HSBC declined to comment.