3 - The Regulation of Bankers’ Remuneration in the UK

Summary

This chapter analyses the regulatory framework of bankers’ remuneration in the UK in response to the problems in the pre-GFC practice. It first summarises the ideological change among regulators and academics with respect to the regulation of bankers’ remuneration and concludes that maintaining financial stability and protecting the public interest are the primary objectives. The chapter then discusses the initiatives implemented by the UK banking regulators, including deferral, clawback, malus and risk-adjusted performance metrics, which are aimed at guiding banks to reform their incentive mechanisms by extending the assessment period of performance assessment and applying risk-adjusted and stability-oriented indicators. It also discusses the EU bankers’ bonus cap and the opposite stance of the UK regulators to its implementation.