Regulators step back from bonus ‘buyout’ ban

The FCA and PRA are set to bow to pressure from the banking industry over the way bonuses are treated when bankers leave their employer to join a rival, Sky News reports.

According to the report, the regulators have backed away from plans to ban so-called bonus ‘buyouts’, and will instead adopt less strict measures to monitor the practice.

Under a bonus buyout, an employer will offer to purchase the shares or options a prospective employee has accumulated under their current employer’s bonus scheme.

The widespread use of the practice was criticised by the Parliamentary Commission on Banking Standards in 2013. At the time, the PCBS warned employees were able to use bonus buyouts to distance themselves from their own bad conduct by switching to a new employer and dodging any potential cut in unvested bonuses.

The announcement on bonus buyouts, expected today, will be coupled with confirmation of new rules requiring the deferral of variable pay for seven years for senior managers and five years for “material risk-takers”, the report says.