Carney faces BOE pay tension
Bank of England officials absorbing an influx of Financial Services Authority staff face potential tensions on pay thrown up by the merger of their institutions.
The management is confronting a heightened challenge in maintaining morale as employees of the UK’s banking regulator join an organization where colleagues tend to be paid less, according to two people with knowledge of the matter. For example, FSA department heads earn up to 200,000 pounds ($297,600) a year, compared with a 158,108-pound maximum for an equivalent job at the BOE.
The pay disparity presents incoming Governor Mark Carney with a potential headache as he prepares to take on Mervyn King’s decade-long struggle to retain staff whose earnings can easily be topped in London’s financial industry. The central bank is taking on part of the FSA’s responsibilities and about 1,300 of its staff as it assumes new powers to oversee banks in a revamp of regulation. Within the FSA, the salary range for a head of department is between 95,000 pounds to 200,000 pounds, data on its website show. The central bank is taking on part of the FSA’s responsibilities and about 1,300 of its staff as it assumes new powers to oversee banks in a revamp of regulation. The pay disparity presents incoming Governor Mark Carney with a potential headache as he prepares to take on Mervyn King’s decade-long struggle to retain staff whose earnings can easily be topped in London’s financial industry. “It’s a challenging aspect of reintegration,” said Simon Wells, who led an economics team at the Bank of England before becoming chief UK economist at HSBC Holdings Plc in 2011. “All the BOE noises have been to soothe and reassure, but how you can do that, faced with the cold hard numbers, is another matter.”
Within the FSA, the salary range for a head of department is between 95,000 pounds to 200,000 pounds, data on its website show. For a BOE division chief, that range is 86,689 pounds to 158,108 pounds, according to a 2012 document. At FSA director level, staff earn up to 281,000 pounds, almost as much as the 305,000pound salary commanded by King. Salaries of BOE executive directors, the level that includes Chief Economist Spencer Dale, go from 160,983 pounds to 209,967 pounds, according to the central bank’s annual report.
A Bank of England spokesman declined to comment on pay disparities and the effects of the merger. An official said in January that the Bank of England intends to limit the increase in its wage bill to 1 per cent after two years of frozen pay. That restraint contrasts with the increase in remuneration for Carney compared with King. The Bank of Canada governor, who takes over in July, is getting a 480,000-pound base salary — about 57 per cent more than King’s pay — as well as a 250,000-pound housing allowance.
“Integrating a whole new directorate at a time when pay is frozen presents some challenges,” said Robert Wood, an economist at Berenberg Bank in London who replaced HSBC’s Wells at the BOE before he too left last year. “There’s no guarantee they’ll be paid a comparable amount, as you can’t adjust it.”
The transfer of staff to the BOE is part of an overhaul of bank regulation in the aftermath of the financial crisis driven through by Chancellor of the Exchequer George Osborne. The FSA was originally established by Gordon Brown when he was finance minister in 1997 as an organization to consolidate regulation of Britain’s banking and insurance industries. The change will see the FSA dissolved and its powers transferred to the Prudential Regulation Authority, which will be a unit of the BOE, and the Financial Conduct Authority, an agency to regulate consumer financial services and markets.