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Lloyds Banking Group boss, Charlie Nunn, could be in line for a maximum annual pay packet worth more than £13m, as he becomes the latest boss to benefit from the UK’s controversial decision to lift a cap on banker bonuses.
The bank’s remuneration committee has begun drafting a new three-year executive pay policy that, for the first time, will take advantage of looser pay rules that have sent potential payouts soaring at rival banks.
That includes Barclays, where chief executive, CS Venkatakrishnan, was handed a 45% rise in maximum pay last year, giving him the chance to be paid up to £14.3m if he hits important business targets. HSBC similarly offered a 43% increase to boss Georges Elhedery, for a maximum payout of about £15m. Meanwhile, NatWest Group chief, Paul Thwaite, can now receive up to £7.7m for a single year’s work after shareholders approved a 43% increase in his maximum pay package last year.
If Lloyds follows suit and proposes a 45% rise in maximum pay for Nunn, he will be in line for a potential pay package worth up to £13.2m. The prospective sum, which would be put to a shareholder vote at its annual general meeting this spring, would be up from a current maximum pay offer of £9.1m.
Like rivals, Lloyds hinted last year that its pay policy would probably entail a “significantly reduced” fixed salary for Nunn, to make up for a “higher performance-related variable reward opportunity”, after the government’s decision to lift the banker bonus cap.
The cap, which was introduced in 2014, limited bonuses to two times a banker’s salary, was meant to stamp out the kind of risky behaviour that was blamed for causing the 2008 financial crisis. The hope was that, with less of an individual’s pay riding on performance, there would be fewer incentives for risky behaviour that ultimately destabilised the financial system and led to a near-decade of economic austerity.
But critics, including some cost-conscious banks, complained that banks merely ended up inflating salaries to make up for lost earnings potential. They also said it gave banks less control over pay, meaning they had fewer levers to hike or slash bonus pots based on financial performance each year.
The former Tory chancellor Kwasi Kwarteng used post-Brexit rules to call for the banker bonus cap to be scrapped in 2022. UK regulators, under pressure to make the City more attractive to financial services firms, repealed the cap as part of post-Brexit rules a year later.
The London Stock Exchange and City lobby groups including the influential UK capital markets industry taskforce have claimed higher pay is important for luring top talent and US businesses to Britain. Advocates have pointed to the exponentially larger pay packets offered in the US, including on Wall Street, where JP Morgan paid its chief executive Jamie Dimon, $39m (£29m) last year.
And shareholders have largely heeded the call, approving big pay rises that would have been unheard of in the 2010s, when shareholders rebelled over pay and called for a more measured approach by company executives after the 2008 financial crisis.
However, the UK’s largest asset managers in November warned pay committees against simply matching rivals’ pay rises, which may give Lloyds shareholders reason to pause.
A Lloyds Banking Group spokesperson said the lender would present its new pay policy proposals to shareholders later this year: “As set out in our annual report last year, the proposals will reflect market developments and regulatory changes, maintaining an approach that reinforces the connection between performance and reward.
“Overall, the new policy will align with new regulatory requirements, while offering competitive remuneration that appropriately rewards delivery of long-term value for customers and shareholders.”
All eyes will now turn to the annual reports for NatWest, HSBC, and Barclays – due in the final weeks of February – to see how the scrapped bonus cap will have fed through to their chief executives’ pay packets after last year’s policy changes.
Lower ranks have already started to benefit from looser bonus rules, with top bankers at Barclays and HSBC receiving their biggest payouts in a decade. Payouts for their most expensive staff surged more than 50% to nearly €20m (£16.6m) in 2024, which marked the first year after the cap was lifted.
One HSBC banker was paid between €19m-€20m in 2024, much higher than the £5.4m paid out to HSBC’s chief executive. There was a similar jump at Barclays, with the lender having paid €17m-€18m to a single banker in 2024, higher than the £10.5m paid to boss CS Venkatakrishnan for 2024.
