HSBC is preparing to issue and sell new shares in itself to fund the bonuses of its highest-paid staff working in the UK.

Under a new pay structure designed in consultation with the British authorities, HSBC will sell new shares to pay the non-deferred component of bonuses worth more than £50,000.

The pay deal has been agreed with the Financial Services Authority, which likes the structure as it views it as a way for banks to bolster their capital base at the same time as continuing to pay staff bonuses.

The amount of new shares issued will cause a "miniscule" amount of dilution, according to one source with knowledge of the pay deal, who said it would equal less than 0.1pc of the bank's outstanding share capital.

Under the arrangement, an executive director HSBC employee earning worth £1m will receive 60pc of the payout in the form of share deferred over three years. The £400,000 non-deferred component will be paid for by HSBC selling shares worth an equivalent amount with the proceeds handed on to the employee.

Staff bonuses worth less than £50,000 will be paid entirely in cash.

While other British banks such as Barclays and Royal Bank of Scotland have put in place cash bonus caps of £65,000 and £2,000 respectively, they are also understood to be using similar share proceeds arrangements to pay their staff.

HSBC will announce its full-year results on February 27, where it will give a further update on compensation arrangements.

In the wake of the financial crisis UK authorities have been pushing banks to come up with new ways to pay their staff after widespread criticism of industry practices in the lead up to the downturn.

Caps on cash bonuses have become routine at many major banks since the crisis. However, several large Wall Street banks, including Citigroup, JP Morgan and Goldman Sachs, have continued to pay a large proportion of staff bonuses in cash.