BKM202100 | Bank compensation restriction: definitions: meaning of compensation

CTA09/S133K

Compensation is defined in CTA09/S133K(2) as any form of redress, whether monetary or non-monetary. It therefore includes compensation which is paid in kind rather than in cash, and also includes interest paid on compensation.

The compensation expense must relate to a service provided by the company and does not include amounts paid under a contract when that service was entered into, even if that payment is described as compensation.

Compensation also includes amounts which are paid in anticipation of, or to forestall, a claim by a customer. This is to ensure that a bank cannot avoid the legislation by pro-actively making payments to customers.