Source · Select Committees · Treasury Committee
Recommendation 18
18
Accepted
Paragraph: 105
Require PRA and FCA to review bonus cap removal impact on gender pay inequality.
Recommendation
Given that gender bonus gaps are typically even larger than gender pay gaps, we are concerned that the removal of the bankers’ bonus cap could increase the difference between the overall take-home pay of men and women in financial services, especially given that pay gap reporting appears to provide little incentive against this. We recommend that the PRA and FCA monitor this closely, and formally review the impact of the bonus cap removal on gender pay inequality in two years’ time.
Government Response Summary
The PRA has committed to monitoring the effects of the bonus cap removal on remuneration structures, and the FCA will work with the PRA to review its impact on gender pay and inequality at the earliest opportunity once sufficient evidence is available.
Paragraph Reference:
105
Government Response
Accepted
HM Government
Accepted
The PRA has committed to monitor the effects of the removal of the bonus cap on the remuneration structures in PRA-authorised firms. This is with the intention of monitoring the prudential impact of incentives as well as individual and collective accountability in firms. In addition, in Policy Statement 9/23, the PRA reminded firms that they continue to be required to establish, implement, and maintain remuneration policies, procedures, and practices that are consistent with, and promote, sound and effective risk management. While the removal of limits on the ratio between fixed and variable components of total remuneration gives greater flexibility to firms, we expect firms to take care to avoid adverse impacts on pay gaps when using this increased flexibility. The Government Equalities Office and the Equality and Human Rights Commission are responsible for monitoring compliance with, publishing inquiries on, and enforcing relevant legislation concerning gender pay gap issues for firms, including those in the financial services sector. We would be happy to work with the FCA, GEO and EHRC to assess whether the policy change has affected gender pay gaps. While it will take time for the effects of the policy to be embedded within firms, as for example they may need to change employment contracts, we will seek to review the policy at the earliest opportunity that sufficient evidence is available. We agree it is important to monitor and formally review the impact of the bonus cap on gender pay and inequality. We identified this as a risk in our Equality Impact Assessment when making the relevant rules. In the policy statement that accompanied our final rule changes, we explicitly reminded firms that their remuneration policies and practices must promote sound and effective risk management and be gender neutral. We expect firms to take care to avoid adverse impacts on pay gaps when using this increased flexibility to set more appropriate pay ratios. We will work with the PRA to review the impact of the bonus cap on gender pay and inequality. We will also work with the Government Equalities Office and the Equality and Human Rights Commission as they are responsible for monitoring compliance with, publishing inquiries on, and enforcing relevant legislation concerning gender pay gap issues for firms, including those in the financial services sector. While it will take time for the effects of the policy to be embedded within firms, since they may need to change employment contracts for example, we will seek to review the policy at the earliest opportunity that sufficient evidence is available.