HSBC is urging shareholders to back a vote at its annual meeting that would open the door to bigger bonuses for its highest-earning bankers.
The London-headquartered lender wants to take advantage of the UK’s decision to scrap the banker bonus cap, which was introduced after the 2008 financial crisis and limited bonuses at twice an individual’s base salary.
But although regulators have given the green light to higher payouts, HSBC needs to overturn the cap in its own corporate rulebook, which was changed shortly after the EU law was implemented in 2014.
Shareholder approval would open the door for much larger bonuses for HSBC’s executives and hundreds of its most highly paid bankers, who are referred to as “material risk takers” and earn more than €1m (£860,000).
An annual general meeting (AGM) notice published on Friday claimed HSBC would benefit from the “flexibility” of weighting payouts more heavily towards bonuses rather than fixed salaries. It said it would allow the bank to reduce fixed-pay costs over time, clawback more pay in cases of future misconduct, and help HSBC compete for global staff.
“Increasing flexibility in the structure of reward is important to HSBC,” the bank said. “Approval by shareholders of this new resolution will increase our ability to recruit and retain key employees in competitive talent markets.”
The lender added: “A significant number of our material risk takers are based outside the EU where most of our international peers and domestic competitors do not have to comply with similar pay restrictions.”
HSBC already pays millions of pounds to its biggest earners. Its latest annual report revealed that 512 of its bankers earned more than €1m, 18 of whom were paid more than €5m. One unidentified banker, and its highest earner, was paid between €12m and €13m. HSBC said its chief executive, Noel Quinn, was paid £10.6m – or about €12.4m – in 2023.
The bank needs at least 51% of voting shareholders to back its resolution at its AGM, which will be held at the InterContinental Hotel at London’s O2 on 3 May.
However, the change would not apply to HSBC’s EU-based bankers, who are still bound by the cap, potentially creating pay discrepancies between its international hubs.
Plans to scrap the banker bonus cap were initially announced by the former chancellor Kwasi Kwarteng, during the Truss government’s disastrous mini-budget in September 2022, though most big UK lenders indicated they were not consulted on the proposals. They were later approved by the chancellor, Jeremy Hunt, and UK regulators including the Bank of England.
The cap was originally part of changes introduced after the 2007-08 banking crash, and aimed to stamp out a bonus culture blamed for encouraging short-term profits over longer-term stability. The hope was that, with less of an individual’s pay riding on performance, there would be a lower incentive for risky behaviour.
UK politicians and regulators broadly opposed the rules, arguing that the clampdown would make it harder to attract skilled bankers, who would instead flee to rival hubs in New York, Singapore or Zurich. The then chancellor, George Osborne, tried to overturn the measure at the European court of justice in 2014.
The Bank of England was also concerned at the time that the cap would lead to a rise in fixed salaries and squeeze bank finances. While the rules did, in fact, raise fixed pay, the extra costs have rarely been blamed for causing any financial distress for lenders.
