The Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) have announced changes to banker bonuses, set to take effect on October 16, 2025. These changes aim to increase flexibility in senior banker pay and improve the connection between bonus awards and responsible risk-taking.
Under the new rules, the bonus deferral period for senior bankers will be reduced from eight years to four years. Additionally, part-payment of bonuses for the most senior bankers will now be allowed from year one instead of year three. The regulators hope these adjustments will align UK practices with those of other major jurisdictions.
Sam Woods, Deputy Governor of Prudential Regulation and CEO of the PRA, said: “These new rules will cut red tape without encouraging the reckless pay structures that contributed to the 2008 financial crisis.” Sarah Pritchard, Deputy CEO at the FCA, added: “Streamlining our remuneration rules by 70% will cut unneeded complexity and make them simpler to follow.”
The FCA’s remuneration Handbook rules will see a significant reduction as firms will mainly need to refer to the PRA’s remuneration guidelines. This change is expected to eliminate unnecessary duplication between regulatory bodies.
The new regulations also include lifting restrictions on deferred bonuses. Previously, 60% of any bonuses above £660,000 had to be deferred; now only amounts above this threshold are subject to deferral. Moreover, firms can allow a greater share of cash bonuses upfront while deferring more shares or instruments.
These reforms coincide with broader efforts by UK regulators like Bank of England to enhance competitiveness in financial services by simplifying mortgage rules and reforming regimes for alternative asset managers.
Overall, these changes seek not only to support safety and soundness but also address trends where banks have increased fixed pay proportions due to stricter bonus regulations.
Information from this article can be found here.
