Bankers will be able to get to their bonuses in half the time allowable previously, thanks to a rule change announced by Bank of England regulators.

But the shift has attracted criticism, with one think tank arguing it is a “poor reading of the public mood,” as the cost-of-living crisis continues.

The Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) announced this week that the waiting time for bankers to receive the full amount of their bonuses would be cut from eight years to four. Part payment of bonuses will be available after one year instead of three.

Sam Woods, the Bank of England’s deputy governor of prudential regulation and chief executive of the PRA, says: “These new rules will cut red tape without encouraging the reckless pay structures that contributed to the 2008 financial crisis.

“These changes are the latest example of our commitment to boosting UK competitiveness.”

‘Slippery slope’

However, at least one think tank said the rule change would see the removal of a safeguard put in place after the world went through the 2008 crisis.

Andrew Speke, spokesperson for the High Pay Centre, said the rule change would not represent a return to pre-2008 conditions, but it was nevertheless a “slippery slope”.

“The changes are likely to mostly benefit a very small number of high-earning bankers while having little positive impact on the real economy.

“For a government that has criticised its predecessors for believing in trickle-down economics, this looks more of the same.”

The eight-year rule was introduced in 2015 as part of the PRA and FCA’s Remuneration Code and was intended to “further delay risk and individual reward” in the banking sector.

It also came with clawback rules and a prohibition on variable pay for non-executive directors.

A bonus cap was also introduced, consistent with EU law, but that has since been removed in 2023 as part of a post-Brexit shake up.

The current government has pushed the idea that regulators should be cutting back rules to help stimulate economic growth. Chancellor Rachel Reeves famously said regulation was a “boot on the neck of businesses”.

The pay debate

The broad issue of executive pay has proved controversial in the UK, particularly during the cost-of-living crisis.

However, key figures in the City have campaigned for higher executive pay. London Stock Exchange CEO Julia Hoggett argued higher pay levels were needed or there was a risk of seeing “skills, talent, tax revenue and the companies that generate it” leave the UK.

This year, however, has seen investors in the FTSE 100 stage a number of shareholder revolts —“votes of 20% or more”—against remuneration reports.

One commentator said they were indicative of an “increasingly activist shareholder culture”.

Pay remains a sensitive issue in the UK. But this week’s changes show the Bank of England believes relaxed pay rules, and therefore a shift in governance, for bankers may help with growth.