LONDON — Britain will accelerate moves to bolster the City of London’s competitiveness as a global financial center by scrapping the cap on banker bonuses, finance minister Kwasi Kwarteng said on Friday.
The cap limits bonuses to twice a banker’s basic salary, with shareholder approval, and was introduced in the European Union to curb excessive risk taking after taxpayers had to bail out lenders in the global financial crisis.
Britain and the Bank of England have always opposed the cap, saying it simply bumps up basic pay.
“We need global banks to create jobs here, invest here and pay taxes here in London, not in Paris, not in Frankfurt and not in New York,” Kwarteng told parliament.
“All the bonus cap did was to push up the basic salary to bankers or drive activity outside Europe, it never capped total remunerations… As a consequence of this … we are going to get rid of it.”
Britain has already set out a draft law before parliament to make its capital market and system of financial rulemaking more efficient as the City faces added competition from Amsterdam, Paris and Frankfurt now that Britain has left the EU.
Britain’s new Prime Minister Liz Truss has signaled she wants to go further to “unshackle” the City from remaining rules inherited from the EU.
“To reaffirm the UK’s status as the world’s financial services center, I will set out an ambitious package of regulatory reforms later in the autumn,” Kwarteng said. (Reporting by Huw Jones; editing by William James and Kim Coghill)