In a move that has sparked controversy, the UK’s largest banks are set to offer their top executives staggering pay increases, with Lloyd’s Banking Group CEO Charlie Nunn potentially in line for a 45% rise in his maximum annual pay packet, potentially reaching over £13 million.
This comes as the UK government’s decision to scrap the cap on banker bonuses, introduced in 2014 to curb the kind of risky behaviour that contributed to the 2008 financial crisis, has opened the floodgates for lucrative pay packages at the country’s leading financial institutions.
Barclays, HSBC, and NatWest have already received shareholder approval for significant pay rises for their chief executives, with Barclays’ CS Venkatakrishnan seeing a 45% increase in his maximum pay, potentially earning up to £14.3 million if he meets key business targets. HSBC’s George Elhedery and NatWest’s Paul Thwaite have also been granted 43% increases in their maximum pay, allowing them to receive up to £15 million and £7.7 million, respectively, for a single year’s work.
The move to lift the bonus cap, which was intended to discourage the kind of risky behaviour that destabilised the financial system and led to a near-decade of economic austerity, has been criticised by some as merely leading to inflated salaries to make up for lost earning potential. However, proponents argue that higher pay is necessary to attract top talent and keep the UK’s financial services industry competitive with the exponentially larger pay packets offered in the US.
While some of the UK’s largest asset managers have warned pay committees against simply matching their rivals’ pay rises, the industry’s influential lobby groups have claimed that the increased pay is crucial for luring top talent and US businesses to Britain.
As the annual reports of NatWest, HSBC, and Barclays are eagerly awaited in the coming weeks, the true extent of the scrapped bonus cap’s impact on executive pay will become clearer. However, the trend of soaring executive payouts at the UK’s leading banks is already evident, with lower-level bankers also benefiting from the loosened bonus rules, with some receiving payouts exceeding £16.6 million in 2024.