Britain’s biggest retail bank is to retain a £2,000 cap on cash bonuses even after being freed from the shackles of partial state ownership last year.
Sky News has learnt that Lloyds Banking Group is expected to continue with the limit on cash payouts, nearly a decade after it was imposed by the then-Labour government.
The decision, which is provisional and remains subject to change, reflects a desire within Lloyds’ boardroom to demonstrate restraint on staff pay against a backdrop of improved financial performance, according to insiders.
“There are no plans to change it,” said one insider.
Sources said that remuneration committee members had not yet agreed on proposals for senior executives’ bonuses for 2017, with announcements on payouts likely to be made alongside the bank’s full-year results next month.
Last year, Lloyds awarded £393m in bonuses, a sum that for the first time since the financial crisis was higher than the variable pay pool handed out by Royal Bank of Scotland (RBS).
While Lloyds has the option of removing the cash bonus cap following the sale of the Government’s remaining shares last year, RBS is likely to be forced to keep it in place until it is back in private ownership.
Sweeping reforms to the structure of banking pay since the crisis of 2008 have forced lenders to pay the majority of bonuses to senior executives in deferred shares.
Under Bank of England rules, deferred bonus awards are subject to clawback provisions for at least seven years from the point at which they are granted, with that period extendable to ten years where there is an ongoing internal or regulatory investigation.
The expectation that Lloyds will retain a low ceiling on cash bonuses could put pressure on other privately held banks to consider implementing similar policies.
It may also disappoint some Lloyds employees who hoped that being liberated from the shackles of state ownership would lead to a more relaxed approach to the payment of cash.
Lloyds resumed paying dividends in 2014, which was a key milestone on its return to private hands.
Next month, Antonio Horta-Osorio, the bank’s chief executive, will set out a new three-year strategic plan that will involve billions of pounds of investment in new technology and systems.
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Investors will be watching closely for any clues about the future of Mr Horta-Osorio, who has won plaudits for his stewardship of the company, which owns the Halifax branch network.
Lloyds declined to comment.