HSBC has revealed is plans to sidestep a new cap on bonuses across the European Union that other global banks are likely to follow in the coming years, according to the Financial Times.
HSBC’s annual results published yesterday (24 February), revealed the bank’s top three executives will receive ‘fixed allowances’ worth about 130 per cent of their salaries this year. Stuart Gulliver, chief executive, will be given a £1.7m allowance on top of his £1.25m salary, the results revealed.
The changes, which will affect 665 staff, are intended to sidestep new EU rules that limit bonuses to no more than 200 per cent of salary from this year. Other global banks, including Barclays, Bank of America and Goldman Sachs, are also drawing up plans to award the so-called allowances for their European staff.
The fixed pay increases at HSBC came as the bank warned that payouts to investors would be flat for the first nine months of this year, the FT says.
Andrew Tyrie MP, chairman of the Treasury Select Committee, said the rules highlighted the problem of seeking to implement a “crude bonus cap” that would ultimately do “nothing to incentivise higher standards”.
He said: “What we need is a fundamental reform of the bonus culture - including much longer deferral and much greater scope for clawback, as the Banking Commission proposed.
“Rewards need to be much better matched to the maturity of the risk. People should receive rewards only when it is clear that they have been earned. Higher salary and lower bonuses take bank remuneration in the opposite direction.”
FCA poised to levy heavy Libor penalties
The Financial Conduct Authority is preparing to levy heavy penalties for manipulating the London interbank offered rate scandal, with one individual facing enforcement action being warned of a possible £2.5m fine, the Financial Times reports.
On 3 February, FTAdviser reported that the watchdog has issued two warning notice statements against individual bankers connected to the manipulation of interest rate benchmarks.
Although the FCA has not named the individuals, it did say one was responsible for submitting interest rate benchmarks and another was a bank manager.
The FT states a person familiar with the situation said the fine in one of the warning notices was for £2.5m, but they stressed it could yet be raised or lowered.
FTSE hits 14-year high
The FTSE 100 has risen to its best level in 14 years and is almost at a record high, the Telegraph reports.
The LSE finished up or 0.4 per cent higher at 6,865.86, taking the blue-chips to their highest close since 30 December 1999, when the FTSE 100 finished at a record 6,930.2 at the height of the dotcom bubble.
According to the Telegraph, yesterday’s (24 February) close was the second-highest ever recorded by the index and leaves the FTSE “well-positioned to push on to a fresh peak”.
Salmond’s plan will endanger Scot’s economy
Alex Salmond, Scotland’s first minister, has argued that an independent Scotland could continue to use the pound even if Westminster refused to enter a currency union, the Financial Times reports.
According to the FT, Mr Salmond’s stance has prompted accusations he was “endangering the country’s economy and financial sector”.
Speaking a week after chancellor George Osborne appeared to all but scotch Mr Salmond’s ‘plan A’ – keeping the pound in a monetary union with the rest of the UK – the Scottish National Party leader said Scotland could continue using sterling because it was an “internationally tradeable currency”.
However, opponents said his ‘plan B’ would leave Scotland with no control over its monetary policy, meaning there would not be a central bank to lead the country’s banking and pensions industry.
Britain told to force alliance with China
According to The Telegraph, Britain must forge an alliance with China that is as strong as its ‘special relationship’ with the US, or it could miss out on China’s huge consumer boom.
Michael Fallow, minister for business and enterprise, said the world’s second largest economy was slowly moving away from its reliance on manufacturing and becoming “increasingly advanced and consumer led”.
Sir Martin Sorrell, chief executive of advertising services group WPP, warned Britain and many other western countries had not yet “got to grips” with the fact that global power and influence was shifting away from developed economies, the Telegraph says.
