Standard Chartered will this week cut both its group-wide bonus pool and the payout for its chief executive despite a record trading year buoyed by continued economic growth in its core markets.
I understand that London-headquartered Standard Chartered will announce alongside its annual results on Tuesday that it will pay out around $1.4bn (£930m) in bonuses, down from $1.535bn (£1.02bn) last year.
Peter Sands, the bank’s chief executive, will see his own award reduced from $3.5m (£2.3m) for 2011 to less than £2m, according to insiders.
The reduced payouts will reflect a $667m (£443m) settlement struck late last year between the bank and US regulators over failings in the disclosure of transactions with entities in countries including Iran.
The smaller bonus pool will come despite analysts’ expectations that Standard Chartered will announce underlying profits for last year of approximately $7.5bn (£5bn). Including the US fines at a statutory level, earnings are expected to be flat compared to last year’s $6.8bn (£4.5bn).
People close to the bank said the bonus reductions were not only an acknowledgement of the Iran episode. They were, they said, also a reflection of demands for banks to hold more capital and for Standard Chartered’s board to continue delivering its commitment to a progressive dividend policy.
More detailed disclosure about pay for top executives will not emerge until Standard Chartered’s annual report is published next month.
People close to the bank said it would not be able to reclaim past bonuses in relation to the US settlement because the staff involved in the erroneous processing actions were too junior and because the errors took place before clawback was an established feature of bankers’ employment contracts.
Standard Chartered, which declined to comment on its bonus plans, is also expected to criticise the deal proposed last week by the European Commission to cap bank bonuses at the level of a year’s salary, or two years’ with the consent of shareholders.
The rules, which if ratified will come into effect next year, would apply to the global operations of any bank domiciled within the European Union.
Standard Chartered would be at a particular disadvantage from these rules because, although it is based in London, it does little business within the EU. The bank’s operations are focused on Asia and Africa, having positioned itself to benefit from the emerging trading blocs of the next few decades.
Mr Sands is thought to be particularly annoyed by the EU proposals after several reviews of Standard Chartered’s domicile concluded that the UK continued to offer the most appropriate base for the bank.