Bloomberg News

HSBC Said to Fund Bankers’ Cash Bonuses by Issuing New Shares

February 22, 2012

Feb. 22 (Bloomberg) -- HSBC Holdings Plc, Europe’s largest bank, will use new shares to help fund cash bonuses this year as three U.K. competitors impose limits, according to a person with knowledge of the situation.

The bank will fund cash bonuses exceeding 50,000 pounds ($78,600) by issuing stock rather than eroding capital, said the person, who declined to be identified because the matter is private. The plan doesn’t limit cash bonuses, the person said.

The U.K.’s Royal Bank of Scotland Group Plc, Lloyds Banking Group Plc and Barclays Plc have placed limits on cash bonuses after Prime Minister David Cameron urged lenders to show restraint. Barclays set a 65,000 pound limit on cash bonuses on Feb. 10 and cut remuneration for its top executives by almost half. Lloyds and RBS have cash limits on bonuses of 2,000 pounds.

The U.K.’s Financial Services Authority introduced stricter bonus guidelines in 2010, which implement European Union rules, and must approve pay plans before they are announced to staff. The rules limit the amount of cash senior executives at banks can receive up front.

Bank of England Governor Mervyn King in December urged banks to enhance efforts to bolster their defenses against the euro area’s debt turmoil. The Financial Policy Committee recommended the Financial Services Authority encourage banks to disclose leverage ratios to investors by the start of 2013, and said that if banks’ earnings aren’t enough to build capital, they should limit payments of bonuses and dividends.

Sky News reported HSBC’s plan earlier.

--With assistance from Gavin Finch in London. Editors: Jon Menon, Francis Harris

To contact the reporter on this story: Howard Mustoe in London at hmustoe@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net


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