Lloyds CEO Charlie Nunn latest banking boss in line for huge bonus hike | Executive pay and bonuses

Lloyds Banking Group boss Charlie Nunn could have a maximum annual pay package of more than £13 million 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 will be the first to take advantage of looser pay rules that have led to soaring potential payouts to rival banks.

This includes Barclays, whose chief executive CS Venkatakrishnan was given a 45% increase in maximum pay last year and was given the chance to be paid up to £14.3 million if he achieves key business targets. HSBC similarly offered boss Georges Elhedery a 43% increase for a maximum payout of around £15 million. Meanwhile, NatWest Group chief Paul Thwaite can now receive up to £7.7 million for a single year of work after shareholders approved a 43% increase in his maximum pay package last year.

If Lloyds follows suit and offers a 45% increase in Nunn’s maximum wage, he would have a potential pay packet of up to £13.2 million. The potential sum, which will be put to a vote by shareholders at the annual general meeting this spring, would be above the current maximum salary offer of £9.1 million.

Like its rivals, Lloyds hinted last year that its pay policy was likely to require a “significantly reduced” fixed salary for Nunn to compensate for the “opportunity for higher performance-related variable rewards” following the government’s decision to scrap the banker bonus cap.

The cap, introduced in 2014 and capping bonuses at twice a banker’s salary, was aimed at cracking down on risky behavior blamed for causing the 2008 financial crisis. Our hope was that as the impact of an individual’s salary on performance diminished, so would the incentives for risky behavior that would ultimately destabilize the financial system and lead to nearly a decade of economic austerity.

But critics, including some cost-conscious banks, complained that banks were merely inflating wages to lose earning potential. They also said it gave banks less control over fees, meaning they had fewer tools to increase or decrease bonus amounts each year depending on financial performance.

Former Tory Chancellor Kwasi Kwarteng has called for the banker bonus cap to be removed in 2022 using post-Brexit rules. UK regulators, under pressure to make the city more attractive to financial services firms, lifted the cap a year later as part of post-Brexit rules.

London Stock Exchange and London Stock Exchange and City lobby groups, including the UK’s influential capital markets sector taskforce, have argued that higher pay is important for attracting top talent and US businesses to the UK. Lawyers have pointed to the exponentially increasing pay packages on offer in the US, including on Wall Street, where JP Morgan paid chief executive Jamie Dimon $39 million (£29 million) last year.

And shareholders have largely heeded the call, approving huge pay increases unheard of in the 2010s, when shareholders revolted over pay after the 2008 financial crisis and corporate executives demanded a more measured approach.

However, in November Britain’s biggest asset managers warned pay committees against simply matching rivals’ pay rises; This could give Lloyds shareholders reason to pause.

A Lloyds Banking Group spokesman said the lender would present its new pay policy proposals to shareholders later this year: “As we set out in our annual report last year, the proposals will reflect market developments and legislative changes and maintain an approach that strengthens the link between performance and reward.

“Overall, the new policy will comply with new regulatory requirements while offering competitive compensation that appropriately rewards delivering long-term value for customers and shareholders.”

All eyes will now be on the annual reports of NatWest, HSBC and Barclays (to be published in the final weeks of February) to see how the bonus cap, which was removed after last year’s policy changes, will be reflected in senior executives’ pay packets.

Senior bankers at Barclays and HSBC are receiving their biggest payouts in a decade, while junior ranks are already benefiting from more flexible bonus rules. Payments to the most expensive staff have risen by more than 50% to around €20 million (£16.6 million) in 2024, the first year after the cap is lifted.

An HSBC banker was paid between €19 and €20 million in 2024; This is much higher than the £5.4 million paid to HSBC’s chief executive. There was a similar jump at Barclays; the lender had paid 17 million to 18 million euros to a single banker in 2024; This was higher than the £10.5m paid to boss CS Venkatakrishnan in 2024.