Goldman Sachs is removing the cap on bonuses paid out to London-based staff in a move that could see the bank’s highest earners receive millions in extra pay.
The move, which will bring the bank’s remuneration policy in line with its operations elsewhere in the world, was first reported by Sky News.
“We are a global firm and to the extent possible, we adopt a consistent global approach across everything we do,” Richard Gnodde, chief executive of Goldman Sachs Internationals said in a video message to staff, cited by Sky.
“The bonus cap rules were an important factor preventing us from being consistent in the area of compensation,” he continued.
According to Sky news, several hundred staff will now be eligible for variable pay worth up to 25 times their base salary.
Regulations on the bonus cap were imposed by the EU in 2014 after the financial crisis. It caps bonuses at 100 per cent of annual pay, or 200 per cent with shareholder approval.
The cap was removed last year as part of a broader post-Brexit push to reinvigorate the City of London amid growing concerns that the Square Mile is losing out to other international financial centres.
Banks complained that the cap actually increased their costs by forcing them to offer higher levels of fixed pay. Gnodde confirmed that the shift would “mean lower fixed pay, but a higher proportion of discretionary compensation”.
The changes reflect “the prudential objective of our regulators,” he added.
When it announced the changes last October, the Prudential Regulation Authority said it would enhance the safety of the financial sector by giving firms “flexibility” to deal with downturns. By allowing more variable pay, banks will have lower costs going into downturns.
A spokesperson for Goldman Sachs said: “This approach gives us greater flexibility to manage fixed costs through the cycle and pay for performance. It brings the UK closer to the practice in other global financial centres, to support the UK as an attractive venue for talent.”