The cap on bankers’ bonuses is to be abolished, financial regulators have announced.
From Tuesday 31 October, EU rules that limit bonus payments to twice a banker’s salary will be removed in the UK, the Bank of England’s Prudential Regulatory Authority (PRA) said.
The policy change was initially announced by former chancellor Kwasi Kwarteng in the infamous September 2022mini-budget of the Liz Truss premiership.
It was one of the few announcements to be retained when Chancellor Jeremy Hunt took charge of the Treasury.
City executives had complained that the cap was a barrier to recruiting and retaining quality workers, and London was losing out on talented staff as a result.
The head of the London Stock Exchange had in May called for company bosses to be paid more.
“The alternative is we continue standing idly by as our biggest exports become skills, talent, tax revenue and the companies that generate it,” Julia Hoggett said.
More on Banking
Related Topics:
From next week, there will be no legislative barriers on bonus payments for employees of banks, building societies and major investment firms that are regulated by the PRA.
The move is being made to deal with what the PRA and Financial Conduct Authority (FCA) said are “unintended consequences” of the cap, namely that salaries have been increased as a workaround.
Advertisement
Having high fixed yearly payments, rather than variable bonus sums, makes it harder for firms to adjust to times when financial performance is poor or to react to potential misconduct by a senior executive, a statement by the bodies said.
Spreaker
This content is provided by Spreaker, which may be using cookies and other technologies.
To show you this content, we need your permission to use cookies.
You can use the buttons below to amend your preferences to enable Spreaker cookies or to allow those cookies just once.
You can change your settings at any time via the Privacy Options.
Unfortunately we have been unable to verify if you have consented to Spreaker cookies.
To view this content you can use the button below to allow Spreaker cookies for this session only.
The announcement follows a period of consultation conducted by the PRA and will apply to the current and future financial years.
The cap was imposed in 2014 in the wake of the 2008 global financial crash. It was associated with incentivising bankers to take outsized risks, which the EU sought to discourage.
Not everyone has welcomed the removal of the cap.
“This is an obscene decision,” the Trades Union Congress (TUC) said.
“City financiers are already enjoying bumper bonuses. They don’t need another helping hand from the Conservatives,” TUC secretary general Paul Nowak said.
“At a time when millions up and down the country are struggling to make ends meet – this is an insult to working people.”
A spokesperson for the Treasury said: “Decisions on remuneration in the banking sector are for the PRA as the independent statutory regulator.”
The threat from Reform in Wales is “very serious”, the country’s Labour leader said as exclusive polling revealed Nigel Farage’s party is the first choice for Welsh voters.
Speaking to Beth Rigby on the Electoral Dysfunction podcast, Welsh First Minister Eluned Morgan said: “We think the threat from Reform is a very serious threat.
“I think it is important people recognise that things that we see every day in our lives in Wales may be snatched away from us, and the kind of stability that we’ve had for a long time.”
Image: Eluned Morgan spoke to Beth Rigby on the Electoral Dysfunction podcast
Ms Morgan admitted “we’ve got a lot of work to do to get voters back” ahead of the May 2026 Senedd (Welsh parliament) elections – something backed up by exclusive polling that reveals Reform is beating Welsh Labour, who have been in power in the Senedd since 1999.
A More in Common poll for Sky News found 28% of people in Wales would vote for Reform if an election for the Senedd was called tomorrow.
That was followed closely by nationalist party Plaid Cymru on 26%, Labour with 23%, the Conservatives on 10%, Lib Dems with 7%, the Green Party with 4% and 2% for other parties or independent candidates.
Image: Eluned Morgan said she would never go into a coalition with Reform
Of those who voted for Labour at last year’s general election, less than half (48%) would vote for them again, while 15% would go to Plaid Cymru and 11% to Reform – although 13% were undecided.
A total of 883 people representative of the Welsh population were asked from 18 June to 3 July.
Last month, Mr Farage told an event in the steel town of Port Talbot, he would reopen Welsh coal mines to provide fuel for blast furnaces.
Image: Beth Rigby spoke to Welsh First Minister and Welsh Labour leader Eluned Morgan
Ms Morgan said she will not be “chasing Reform down a path… because those aren’t my values”.
“What we’ll be doing is offering a very clear alternative, which is about bringing communities together,” she said.
“I think it’s really important that we’re authentic and we’re clear with people about what we stand for.
“I think we’ve got to lead with our values so we’re about bringing communities together not dividing them and I do think that’s what reform is interested in is dividing people and people do need to make choices on things like that.”
She admitted “there is a possibility” Reform could be the largest party in the Senedd “and that is really concerning”.
Image: Nigel Farage in Wales
However, she said the way voting in Wales works means it would be “difficult for them to rule by themselves”.
Would she go into coalition with Reform?
“I wouldn’t touch Reform with a barge pole,” she said.
Sophisticated drones sending “overwhelming amounts” of drugs and weapons into prisons represent a threat to national security, according to an annual inspection report by the prisons watchdog.
HMP chief inspector of prisons Charlie Taylor has warned criminal gangs are targeting jails and making huge profits selling contraband to a “vulnerable and bored” prison population.
The watchdog boss reiterated his concerns about drones making regular deliveries to two Category A jails, HMP Long Lartin and HMP Manchester, which hold “the most dangerous men in the country”, including terrorists.
Please use Chrome browser for a more accessible video player
2:28
Ex-convict: Prison is ‘birthing bigger criminals’
Mr Taylor said “the police and prison service have in effect ceded the airspace” above these two high-security prisons, which he said was compromising the “safety of staff, prisoners, and ultimately that of the public”.
“The possibility now whereby we’re seeing packages of up to 10kg brought in by serious organised crime means that in some prisons there is now a menu of drugs available,” he said. “Anything from steroids to cannabis, to things like spice and cocaine.”
“Drone technology is moving fast… there is a level of risk that’s posed by drones that I think is different from what we’ve seen in the past,” warned the chief inspector – who also said there’s a “theoretical risk” that a prisoner could escape by being carried out of a jail by a drone.
He urged the prison service to “get a grip” of the issue, stating: “We’d like to see the government, security services, coming together, using technology, using intelligence, so that this risk doesn’t materialise.”
Image: The report highlights disrepair at prisons around the country
The report makes clear that physical security – such as netting, windows and CCTV – is “inadequate” in some jails, including Manchester, with “inexperienced staff” being “manipulated”.
Mr Taylor said there are “basic” measures which could help prevent the use of drones, such as mowing the lawn, “so we don’t get packages disguised as things like astro turf”.
Responding to the report, the Prison Advice and Care Trust (PACT) said: “The ready access to drugs is deeply worrying and is undermining efforts to create places of rehabilitation.”
Mr Taylor’s report found that overcrowding continues to be what he described as a “major issue”, with increasing levels of violence against staff and between prisoners, combined with a lack of purposeful activity.
Some 20% of adult men responding to prisoner surveys said they felt unsafe at the time of the inspection, increasing to 30% in the high security estate.
Andrea Coomber, chief executive of the Howard League for Penal Reform, said: “This report is a checklist for all the reasons the government must prioritise reducing prison numbers, urgently.
“Sentencing reform is essential, and sensible steps to reduce the prison population would save lives.”
Please use Chrome browser for a more accessible video player
0:51
May: Male prison capacity running at 99%
The report comes after the government pledged to accept most of the recommendations proposed in the independent review of sentencing policy, with the aim of freeing up around 9,500 spaces.
Those measures won’t come into effect until spring 2026.
Prisons Minister Lord Timpson said Mr Taylor’s findings show “the scale of the crisis” the government “inherited”, with “prisons dangerously full, rife with drugs and violence”.
He said: “After just 500 prison places added in 14 years, we’re building 14,000 extra – with 2,400 already delivered – and reforming sentencing to ensure we never run out of space again.
“We’re also investing £40m to bolster security, alongside stepping up cooperation with police to combat drones and stop the contraband which fuels violence behind bars.”