One of the most influential politicians in Britain has lent support to the Bank of England's Governor Mark Carney's calls to regulate fixed pay as well as bonuses.
Andrew Tyrie, former chairman of the Parliamentary Commission on Banking Standards and now the chairman of the Treasury Committee, said in a statement that more needs to be done to rein in hefty banker salaries, which have been rising since the European Union (EU) installed new bonus cap rules.
"The Governor [Mark Carney] has acknowledged that full implementation of a number of the fundamental reforms proposed by the banking commission is essential—a regulatory and supervisory framework strong enough to ensure that senior individuals can be held to account, remuneration structures that adequately align risk and reward, and reforms to address 'too big to fail' and the implicit taxpayer subsidy," said Tyrie.
"The Governor has also agreed with the banking commission that the EU's crude bonus cap has the absurd and counterproductive consequence of limiting the scope for remuneration to be cut back. It is a fundamentally flawed tool that may serve only to push up fixed pay.
"As the banking commission said eighteen months ago, improving standards in banking is a big job. There's a lot more to do. The Bank of England, as well as the Financial Conduct Authority and the banks themselves, have crucial work ahead in implementing the banking commission's reforms."
The EU Council pushed through the plan earlier this year to cap bankers' bonuses at a maximum of double their salary from 2015. The measure will come in on 2014's bonuses that will be paid out at the start of 2015.
However, under draft guidelines produced by the European Banking Authority (EBA), lawmakers are debating whether to permit a bonus cap of 250% of bankers' salaries.
It also appears that pay rules could be relaxed to allow deferred payments over five years.
However, Carney revealed that regulators are looking at ways to regulate fixed pay, after salaries rose dramatically following new curbs on bonuses.
Carney said in a speech in Singapore that new ways to regulate fixed pay may include ways to claw back salary in the event of wrongdoing.
Last month, Andrew Bailey, the chief executive of Britain's Prudential Regulation Authority, launched a raft of criticism over lawmakers and enforcement agencies in clamping down on banker bonuses.
Speaking at Mansion House in London, Bailey, who is also the deputy governor of the Bank of England, said that the EU's new rules to cap banker bonuses is the wrong route to go, if authorities want to prevent "reckless behaviour" in the financial markets.
"We need a system where senior people who are responsible for the performance of their firms understand that for a reasonable period of time a meaningful proportion of their remuneration is at risk of being taken away," said Bailey.
"Let me be blunt, the bonus cap is the wrong policy, the debate around it is misguided."