This chapter investigates the practice of bankers’ remuneration in the UK after the GFC and analyses the effectiveness of the regulatory initiatives. To track the changes, the investigation is also based on the UK ‘Big Four’ banks. It is found that the focus of performance-based remuneration has shifted from short-term incentives to long-term incentives. Complying with deferral, clawback and malus, the period of performance assessment has been significantly extended. Banks have also adopted risk-adjusted and stability-oriented indicators to link bankers’ remuneration to the sustainability and risk management of banks. However, to circumvent bankers’ bonus cap, banks have introduced role-based pay – a new form of fixed remuneration. Role-based pay is counterproductive, as it may reduce pay-performance sensitivity while encouraging bankers to take excessive risks. This chapter also argues that bankers’ bonus cap is conflicted with other initiatives, the implementation of which relies on performance-based remuneration constituting a significant portion of the total remuneration.

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.