HSBC to become latest major bank to remove bonus cap for UK staff

HSBC is set to become the latest major international bank to remove the European Union-imposed bonus cap that had applied to its UK-based workers.

The London headquartered lender's shareholders voted in favour of scrapping the limit at its Annual General Meeting (AGM), the company said.

The move was recommended by the board after the UK government ditched the cap following Brexit.

HSBC, which announced this week the imminent retirement of its chief executive on the back of better than expected profits, had argued that removing the cap would reduce its fixed costs.

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The bank also said that higher share-based awards for its biggest earners would be easier to cancel or clawed back in any potential misconduct cases.

The cap had been introduced by the European Commission in 2014 to try to deter bankers from the kind of excessive risk-taking that was blamed for the global financial crisis of 2008.

The curbs, which limited bonuses to twice basic pay, have proved controversial with banks blaming them for creating a brain drain in Europe - forcing up salaries in the process to retain talent.

Influential critics of the cap have included Andrew Bailey, the Bank of England governor.

He said in 2014, before he took the top job in Threadneedle Street, that it was "the wrong policy" and the debate around it "misguided".

HSBC's vote took place less than 24 hours after Sky News revealed that US investment bank Goldman Sachs had become the first major operator in London to ditch the EU-imposed cap.

A spokesman said of the government's decision to overturn it: "This approach gives us greater flexibility to manage fixed costs through the cycle and pay for performance.

"It brings the UK closer to the practice in other global financial centres, to support the UK as an attractive venue for

Mark Tucker, HSBC's chair, told the AGM: "We're seeking shareholder approval today for the group remuneration committee to use its discretion to set an appropriate variable to fixed pay ratio, where regulations allow, for those colleagues deemed to be material risk takers.

"The committee will take into account all relevant factors when setting the ratio, including the firm's business activities and associated prudential and conduct risks.

"What this does is it allows us to have flexibility to reduce fixed pay costs over time and increase the amount of pay that is variable and subject to the delivery of performance. It also strengthens our ability to recruit and retain people in competitive markets, where many of our international competitors do not have similar restrictions."