Barclays was first to formally lift the cap imposed by the EU but the balance between fixed and variable pay has to be addressed
The EU cap on bankers’ bonuses – now ditched in the UK – was misnamed because it didn’t actually limit the size of anybody’s bonus. Rather, it capped bonuses as a ratio of an individual’s fixed pay – at 1:1, or 2:1 with the approval of shareholders. The response of banks back in 2014 was entirely predictable: they simply whacked up relevant salaries to “compensate” recipients for their loss of their bonus-earning potential.
It was why the policy always smacked of headline-seeking posturing by Brussels, rather than being a serious attempt to tackle the short-term risk-taking that was deemed to have contributed to the 2007-09 financial crisis. The banks themselves were transparent about their manoeuvre. The chief executives of most big banks saw their salaries roughly doubled overnight; the extra £1m-plus annual payments were dressed up as “role-based allowances”.
