Barclays turns into first UK financial institution to scrap EU bonus cap

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Barclays has turn out to be the primary British financial institution to inform employees it’ll scrap the bonus cap imposed by the EU, following the UK’s post-Brexit determination to take away the bounds final yr.

The lender follows the UK operations of JPMorgan and Goldman Sachs in telling employees it’ll elevate bonuses. Morgan Stanley’s UK enterprise has advised regulators it intends to take action.

Barclays will use the mannequin employed by JPMorgan in setting bonuses for its most senior employees, so-called materials danger takers, at as much as 10 occasions their fastened pay, whereas maintaining base pay the identical, in keeping with an inside memo seen by the Monetary Occasions.

Bonuses had beforehand been capped at two-times base wage, a restrict that was launched in 2014 throughout the EU in response to the worldwide monetary disaster. However the UK eliminated the cap final yr as a part of a post-Brexit push to spice up the Metropolis of London.

Most US and British banks working within the UK are anticipated to vary their pay insurance policies, which can alter the competitors dynamics for hiring high bankers in London.

“It can enable us higher flexibility to distinguish particular person bonuses inside a small and outlined group of colleagues, enabling Barclays to proceed to compete successfully to retain and appeal to the most effective expertise globally,” the financial institution stated in a press release.

Goldman has taken a totally different strategy of slicing base pay however growing the bonus ratio to 25 occasions.

The change to the Barclays pay construction will have an effect on the group’s round 1,600 materials danger takers, which incorporates bankers outdoors the UK however not in Eire or Monaco as they’re underneath the EU limits.

The heads of some European banks have complained that they’re nonetheless held again by the EU guidelines limiting bonuses to two-times fastened pay. They’ve argued that the change within the UK guidelines will make it more durable for them to compete on hiring.

Because the cap was launched within the EU, fastened pay has risen considerably as bankers have demanded that their total bundle stay the identical, main critics of eradicating the cap to query whether or not it’ll have a lot influence on pay ranges.

Shareholders permitted a movement at Barclays’ annual assembly in Might to permit higher flexibility in setting bonuses, in acknowledgment of the elimination of the UK’s cap.

“At a person degree, complete compensation will proceed to be performance-based and market-informed,” the Barclays memo stated.

“Usually, the revised bonus cap shouldn’t change colleague expectations round complete compensation.”