The proposal is one of the preliminary findings of a government-commissioned review led by Jayne-Anne Gadhia, chief executive of Virgin Money. The recommendations were presented to and discussed by senior representatives of the financial services industry at a summit this week, the UK Treasury said.
The review, which will be published in full next year, will also say that financial services firms should report publicly on their gender diversity and an executive should be appointed to be responsible for gender, diversity and inclusion, the Treasury said.
Harriett Baldwin, economic secretary to the Treasury said: "I know that there are a lot of brilliant, talented women out there whose skills would be an enormous asset to any firm. We should be making the most of that talent as all organisations work better when they benefit from a range of perspectives."
"Financial services is at the centre of driving productivity in the UK, but it’s also a sector where the problem of gender diversity is particularly marked – especially in senior management. That is why Jayne-Anne Gadhia’s review is so important, and it is a key strand of the work towards achieving gender parity," Baldwin said.
Cochrane said: "The policy goals these proposals pursue are entirely laudable, and indeed we have all seen compelling statistical evidence to support the thinking that workforce diversity has a tangible, positive impact on the bottom line. But the proposals will need careful consideration and, if adopted, very careful implementation."
"The bonuses of senior executives in financial services firms, especially banks and large, systemically important investment firms, are already highly regulated under both EU and UK law. Senior managers have seen increased regulatory limitations on their variable pay, both in terms of the value of bonuses and also the conditions attached to payment and retention," he said.
"There has been much debate about the impact of this from a recruitment and retention perspective, particularly regarding the fact that many senior employees are globally mobile and could choose to relocate to less regulated shores. So there may be concerns about adding an additional layer of complexity and exposure to senior managers' variable compensation when the issue is already a particularly sensitive one," he said.
"The more complex remuneration arrangements and conditions become, the less clarity executives have about the objectives they should focus upon and the less they value their incentive awards, especially if complex targets are combined with deferral, as is required under the existing remuneration regulations," Cochrane said.
"At the same time, as the number of performance measures increases, it becomes more difficult for shareholders and regulators to determine whether the desired alignment between pay and performance is genuine and sufficiently strong," Cochrane said.
Diversity expert Linda Jones, also of Pinsent Masons, said: "There is no doubt that financial services firms will be focusing already on gender balance in their senior ranks, not least because of the forthcoming gender pay gap reporting requirements for larger employers, which the government has recently confirmed will cover bonuses. Financial services firms will be acutely conscious of their potential exposure on gender pay gap reporting, as their sector makes the highest proportionate use of variable remuneration in all its forms, both short term bonuses and longer term incentive awards."
"That is why many organisations are already reviewing their pay policies so that they are prepared for the new regime. In addition, EU legislation already requires financial services firms to have policies to monitor and improve the gender balance of their management bodies. The sector’s regulators pay careful attention to their duty as public bodies to address relevant issues of diversity and inequality, and have been collecting detailed data on remuneration from regulated firms for some time," Jones said.
The review's proposal that firms should appoint an executive to oversee these matters is more straightforward and easily adopted, Jones said.
European Banking Authority (EBA) guidelines on how firms' remuneration policies should comply with the requirements of the EU's Capital Requirements Directive (CRD IV) are due to be revised with effect from next year, and a draft was published for consultation in March 2015.
The draft guidelines require banks and investment firms to change the way they classify 'role-based allowances' paid to senior staff for the purposes of the Credit Requirements Directive (CRD IV) bonus cap.
The CRD IV is an EU legislative package covering prudential rules for banks, building societies and investment firms.
However, the European Banking Federation (EBF) is believed to have written to the European Commission asking for more flexibility in the proposed rules on bonuses for financial services companies.
Prime minister David Cameron said last month that bonus payments will be covered by new rules requiring large UK organisations to publish the difference between the average pay of their male and female employees.
The Gadhia review, which was first announced by the government in its Productivity Plan in July 2015, will shortly publish a call for evidence on these recommendations, and will publish a final report ahead of Budget 2016.
In its 2014 Global Gender Gap report the World Economic Forum estimated that it will take until 2095 to achieve global gender parity in the workplace.