Morgan Stanley is scrapping a cap on bonuses for bankers in the City of London, underlining the shift among US and UK lenders toward paychecks that look more like the bonus-heavy packages of their New York counterparts.
The Wall Street bank said in a regulatory filing that it was replacing the current limit that restricts certain employees’ bonuses to two times their fixed pay with “an appropriate internal bonus cap.”
The US bank didn’t detail how it might adjust pay structures for material risk takers beyond noting a need for compensation that “is appropriately balanced between the fixed and variable compensation elements.”
Morgan Stanley, which didn’t immediately respond to a request for comment, said that it continues “to pay competitively and reward strong performance” in a statement to the Financial Times, which reported the decision earlier.
Banks are understood to be implementing a range of new pay structures. At JPMorgan Chase & Co., bankers could earn a bonus that’s as much as 10 times their base salary although for now the firm isn’t planning to materially change UK staffers’ fixed pay. Goldman Sachs Group Inc. is planning to lower fixed pay while allowing top UK traders and dealmakers to earn bonuses of as much as 25 times their base salary, Sky News has reported.
The bonus cap was introduced by the European Union in 2014, limiting the payout to so-called material risk takers to twice their annual salary. The move was intended to curb excessive risk-taking in the banking sector after the 2008 financial crisis.
When UK officials abandoned the cap last year, it was part of a broader push to make post-Brexit Britain more attractive as a financial center.
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