Morgan Stanley is planning to follow its Wall Street rivals in scrapping an EU-imposed cap on bonuses for its top UK bankers.
The US titan said in a regulatory filing that it would replace its existing limits on UK bonuses with “an appropriate internal bonus cap”.
It did not announce any further details on its new bonus structure. The bank employs around 5,000 people in London.
“We continue to pay competitively and reward strong performance,” a Morgan Stanley spokesperson commented. The cap still applies to the bank’s EU-based staff.
The news, first reported by the Financial Times, comes after rivals Goldman Sachs and JPMorgan Chase also scrapped existing limits on bonuses in the last two months.
Top UK performers at Goldman, which was among the strongest opponents to the cap, will now be able to earn up to 25 times their annual salary, while JPMorgan is limiting payouts at a ratio of 10:1.
Last October, UK financial regulators announced they would remove the requirement for banks to cap variable pay at 100 per cent of base salary for so-called “material risk-takers” (MRTs), or up to 200 per cent with shareholder approval.
Shareholders of HSBC and Barclays, which had around 1,600 MRTs last year, approved proposals to set new bonus caps at the banks’ annual meetings in May.
Big banks responded to the EU’s limit with so-called role-based allowances – de facto bonuses that gave MRTs a higher proportion of fixed pay.
However, many bankers have come to rely on these lucrative payments for obligations like mortgages and school fees. JPMorgan is maintaining fixed allowances for MRTs in the UK, while Goldman is reducing these payments with a more flexible bonus structure.
The EU’s cap was introduced in 2014 as part of efforts to limit excessive risk-taking following the 2008 financial crisis.
Banks still face other measures to ensure their pay policies do not reward risk-taking, including the Financial Conduct Authority’s remuneration code.