Standard Chartered Plc’s chief executive officer wants more clarity from the Bank of England on cutting bonuses for top bankers as the coronavirus upends economies.
“It’s not very clear actually from their statement what they intend,” Bill Winters said in a Bloomberg Television interview yesterday. StanChart intends “to be completely responsible about the way that we pay our colleagues, and first and foremost is to see what the performance is of the business,” and then to consider conditions for “all of our stakeholders.” Winters said the bank plans to assess bonuses at the beginning of next year.
The BoE’s bank supervision arm this week warned the country’s lenders against paying cash bonuses to top executives during the current crisis, joining with other European regulators in a call to urge the industry to conserve funds that can be used to support lending. The Prudential Regulation Authority also pushed the banks to cancel dividends, and they complied with that request, sending their shares plunging on Wednesday.
None of the banks have so far said what they plan to do on bonuses, however. The PRA’s letter to lenders said it “expects banks not to pay any cash bonuses to senior staff, including all material risk takers, and is confident that bank boards are already considering and will take any appropriate further actions with regard to the accrual, payment and vesting of variable remuneration over coming months.”
Bonuses for this performance year have already been paid, Winters said. “Deferred awards, typically for people who joined us in the middle of the year from some other company,” some of those awards will vest in the course of this year, and according to the PRA, “it looks like cash payments should not be made. Once it’s clear what the rules are, we will comply with them.”
StanChart shares dropped 2.2% as of 12:33pm yesterday, adding to the previous day’s 7.3% slump.
Elsewhere in Europe, Deutsche Bank AG is said to be reviewing bonuses for its senior managers, while executives at Spain’s Banco Bilbao Vizcaya Argentaria SA are waiving bonuses.
The British central bank’s unprecedented interventions on dividends and bonuses have divided opinion.
Banks have been a focus of response to the pandemic as European governments aim to keep credit flowing to the economy, while seeking to avoid some of the perceived wrongs in how the 2008 financial crisis was handled. The lenders have been at the front end of massive government support, including relief on some capital buffers and more time to tackle soured loans.
Given that support to the banks, Tim Bush, head of corporate governance at Pensions & Investment Research Consultants, one of Europe’s largest independent shareholder advisers, backed the BoE’s stance. He said banks shouldn’t pay any bonuses at all to their senior executives.
“We’d say the Bank of England has done the right thing on dividends and expecting significant restraint on variable pay,” Bush said.
Several investors disagree, and say the interventions have been too heavy-handed. HSBC Holdings Plc, whose shares have sunk more than 12% over two days, could renew its past threats to move to Asia, according to Colin McLean of SVM Asset Management in Edinburgh. Some of the bank’s board members and executives were angered by the BoE’s move, and want the bank to ditch its British domicile, the Financial Times reported late on Wednesday. An HSBC spokesperson told the FT the bank had no plans to reopen the issue.
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