The chief executive of Lloyds Banking Group, Charlie Nunn, could see his maximum potential pay package soar by 45% to £13.2 million, as the lender prepares to join rivals in exploiting the UK's scrapped banker bonus cap.
Banking Rivals Set the Precedent for Soaring Pay
The bank's remuneration committee is drafting a new three-year pay policy that will, for the first time, utilise looser post-Brexit remuneration rules. This move follows similar decisions by other major UK banks, where shareholders have already approved substantial hikes for top executives.
Last year, Barclays granted its CEO, C.S. Venkatakrishnan, a 45% increase in his maximum pay, putting him in line for up to £14.3m. HSBC offered a 43% rise to boss Georges Elhedery, for a potential £15m payout, while NatWest Group's Paul Thwaite can now earn up to £7.7m annually after a 43% increase.
If Lloyds proposes a matching 45% rise, Nunn's maximum pay would jump from the current ceiling of £9.1 million to £13.2 million. This proposal will be put to a shareholder vote at the bank's annual general meeting this spring.
The End of the Bonus Cap and Its Controversial Legacy
The significant shift follows the controversial decision by UK regulators to repeal a cap on banker bonuses in 2023. The cap, introduced in 2014 in the wake of the financial crisis, limited bonuses to twice a banker's salary in an attempt to curb excessive risk-taking.
Critics argued the rule was counterproductive, leading banks to inflate fixed salaries instead. The former Conservative chancellor, Kwasi Kwarteng, championed its removal in 2022, using post-Brexit freedoms. Proponents, including City lobby groups, claim higher, more flexible pay is essential to attract top global talent and compete with financial hubs like Wall Street, where pay packets are far larger.
Like its peers, Lloyds indicated last year that any new policy would likely feature a lower fixed salary for Nunn, offset by a much higher variable, performance-related reward.
Shareholder Scrutiny and Wider Impacts
While shareholders have largely approved the recent wave of big pay rises, the UK's largest asset managers warned pay committees in November against simply matching rivals' increases, which may give Lloyds investors pause for thought.
The effects of the rule change are already filtering down below the CEO suite. Top bankers at Barclays and HSBC received their biggest payouts in a decade for 2024. At both banks, the highest-paid staff member received between €17m and €20m (£16.6m), surpassing even their chief executives' total pay for the year.
A Lloyds Banking Group spokesperson stated the new pay policy would be presented to shareholders later this year, aligning with regulatory changes and aiming to offer competitive remuneration that rewards the delivery of long-term value.
All eyes will now turn to the annual reports of NatWest, HSBC, and Barclays, due in late February, to see the full impact of the scrapped cap on their CEOs' 2024 pay packets.
