Top British banker savages EU over ‘grotesque’ bonus rule rewarding laziness

Banking chief Bill Winters has launched a scathing attack on the European Union’s now-defunct bonus cap, branding it “grotesque” and claiming it encouraged laziness among senior British bankers.

The cap, introduced by the bloc in 2014 in a bid to curb excessive risk-taking in the wake of the financial crisis, created the “wrong incentive” for bank managers, said Mr Winters, who is chief executive of Standard Chartered.

The pay arrangements limited bonuses to twice an employee’s salary, but the UK scrapped them last year in a post-Brexit overhaul.

Mr Winters said: “Europe imposed a two-times fixed pay bonus cap several years ago, the effect of which was that everybody that was subject to that cap got a grotesque increase in fixed pay.

“I say grotesque because it was exactly the wrong incentive. It was a bad policy.

“It incentivised managers in my position to hang around clipping coupons and not do a very good job for their company.”

“Clipping coupons” is an American expression similar to “pen-pushing”. It refers to the act of clipping and cashing coupons attached to investment bonds. It is frequently used to describe someone as idle.

Since the UK abolished the regime last year, banks including HSBC, Barclays, JP Morgan, and Goldman Sachs have raised the cap on bonuses for their top bankers.

Standard Chartered, worth £30bn, is a FTSE 100 giant headquartered in London. Despite making all its money overseas in regions such as China and Africa, it was ensnared by the bonus cap because it is regulated by UK authorities.

Mr Winters will benefit from the bonus cap overhaul after Standard Chartered proposed a pay shake-up.

Under the new plan, the 63-year-old will earn £1.5m in salary – down from £2.5m currently—but he will earn more in bonuses and share payments.

Mr Winters stands to gain a maximum pay packet of £13.1m. His total pay package for 2024 rose 46pc to £10.7m.

He told the Telegraph: “I’ll have to explain to my mother why my salary has been cut by half. If we perform well, I’ll earn more money. If we perform poorly, I’ll earn quite a bit less. That’s exactly as it should be.”

His comments came as the bank reported an 18% rise in full-year pre-tax profits to (£4.7bn ($6bn) last year compared with the prior 12 months. Operating income, a measure of turnover, rose 8% to £15.60 ($19.7bn).

The lender’s turnover was a record and reflected a jump in earnings from its wealth management business, which increased income 29pc to £1.9bn ($2.4bn). The bank also announced a £1.19 bn ($1.5bn) buyback to reward shareholders.

Executive pay has served as a lightning rod for criticism at Standard Chartered.

After a significant investor pay rebellion, Mr Winters blasted shareholders as “immature” six years ago.

Almost 40% of shareholders refused to back the policy in 2019 after the bank raised Mr Winters’ pension to £474,000 to boost his overall pay package.

On Friday, he said the new plan was “extremely aligned with our shareholders” and a “huge step in the right direction”.

Britain agreed to impose bonus caps in 2014 in response to the “casino banking” fears blamed for the financial crisis.

A key parliamentary report at the time warned that “the design of bonus schemes in the banking sector were flawed” and encouraged excessive risk-taking.

Top banking figures such as Bob Diamond, the former head of Barclays, were also embroiled in bonus rows after he was told to forfeit £18m of share payments in 2012.

Policymakers hoped the move would force traders to dial back the riskiness of their bets – but banks were forced to pay larger fixed salaries to compensate bankers for lower bonuses.

Under pressure from the Chancellor, Rachel Reeves, to boost risk-taking, regulators have unveiled more plans to relax the UK bonus regime.

The Prudential Regulation Authority last year announced it would shorten the deferral period for bonuses paid to senior bankers from eight years to five years.