Source: Sharecast
Following a consultation by the BoE’s Prudential Regulation Authority and the Financial Conduct Authority, the amount of time senior bankers must wait before receiving their full bonus - known as the bonus deferral period - has been halved to four years.
The regulators had initially proposed a smaller reduction, to five years for the most senior executives.
Part-payment of bonuses will also be allowed from year one for the most senior bankers, down from year three.
The new rules will come into effect on Thursday, in time for 2025 pay awards.
The City’s rampant bonus culture was seen as a contributing factor the 2008 financial crisis, as bankers took ever more risks to secure higher bonuses. Faced with widespread public anger following the crash, the rules surrounding the payments were tightened significantly.
However, in recent years the sector has lobbied hard for change, arguing that they are out of step with guidelines elsewhere in the world.
They also led to a hike in fixed salaries, as the proportion of pay senior staff received as performance-based bonuses was reduced.
A cap imposed by Brussels after the financial crisis was scrapped post Brexit in 2023.
Sam Woods, deputy governor of prudential regulation at the BoE, said: "These new rules will cut red tape without encouraging the reckless pay structures that contributed to the financial crisis.
"These changes are the latest example of our commitment to boosting UK competitiveness."
FCA deputy chief executive Sarah Pritchard said the streamlined rules would cut "unneeded complexity and make them simpler to follow", but ensure senior managers "remain on the hook where poor decisions affect consumers and markets".
