By Mark Kleinman, City Editor
HSBC is to hand new share awards to around 1,000 of its top managers as Europe's banks finalise plans to cope with new rules that will restrict the level of bonuses they can pay to senior staff.
Sky News has learned that HSBC is putting the finishing touches to a scheme that will oblige employees to retain the share allocations, which will be paid in quarterly instalments, for five years in order to align their interests more closely with those of external shareholders in the bank.
Fund management sources said that HSBC had been discussing the proposals in recent weeks with leading shareholders including Blackrock, Legal & General Investment Management and Standard Life Investments.
HSBC's plans come in the wake of proposals drawn up by Barclays to pay monthly cash allowances to hundreds of senior staff.
Sky News disclosed at the weekend that it is considering modifying the scheme so that more of the eligible executives receive the payments in stock following complaints from some investors.
Banks are attempting to work out how to deal with rules that will cap variable pay at a maximum of twice an employee's fixed salary.
City insiders said that HSBC's plans had been well-received by shareholders.
Managers included in the scheme will only be able to immediately sell the component of the share awards which allow them to meet personal tax obligations.
One investor added that he was satisfied that the proposals would not lead to significant inflation in the overall sums HSBC paid to top managers.
He pointed to the paradox of the new rules which meant that because the new allowances were fixed and were part of employees' basic pay, they would not be subject to clawback provisions.
Douglas Flint, HSBC's chairman, has spearheaded the development of the initiative, having warned last year that the European rules would damage the bank's competitiveness in countries where non-EU rivals will not be subject to the ratio restrictions.
Mr Flint had said last summer that increasing the salaries of its bankers was under consideration, but another investor said the proposals eventually settled upon by HSBC were preferable to a straight increase in salary.
One insider said that changes by European banking regulators to the definition of risk-taking staff had reduced the number of employees who would be affected from 3,500 to approximately 1,000.
HSBC is Europe's largest and most profitable bank, with a strong footprint in faster-growing markets in Asia and Latin America. It has, however, encountered significant headwinds in the form of a multi-billion pound fine from US regulators over sanctions breaches, while it remains under investigation by Brussels over alleged interest rate-rigging.
The pay of UK-based bankers is already subject to rules relating to the proportions that can be paid in cash and shares, and much of it has had to be deferred for at least three years under reforms introduced in the aftermath of the financial crisis.
Last summer, the Parliamentary Commission on Banking Standards proposed a 10-year deferral period for senior bankers' pay in order to encourage a greater focus on City long-termism.
The Treasury, which last autumn mounted a legal challenge to Brussels' efforts to impose a maximum two-for-one ratio between variable and fixed pay, is being kept informed about the plans of each of the major lenders.
HSBC, like other UK banks, will ask shareholders to vote at this year's annual general meeting on a resolution to allow it to pay up to twice the level of base salaries to senior staff as annual bonuses.
HSBC declined to comment on Tuesday.
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