Banking organisation Barclays has removed a European Union (EU) imposed cap on bonuses for some of its bankers and traders.
As part of this change, the bank’s material risk takers (MRTs) will be able to earn a bonus worth up to 10 times their base salary, an increase from a current ratio of 2:1. The 10:1 cap does not impact certain MRTs in the EU, who remain subject to EU 2:1 bonus cap rules. These have had no effect on the bonus determination of most MRTs.
While the new bonus cap does not mean that Barclays will pay more for the same performance, nor does it expect compensation costs to increase, it does provide additional flexibility in individual pay outcomes within any given year.
The bank is not reducing fixed pay as part of the change, as its pay levels are market competitive and performance led. This is in order to attract and retain talent to deliver its strategy and move in line with its peers.
The cap was introduced in 2014 by the EU to limit excessive risk-taking following the financial crisis. The UK’s bonus deferral requirements for banks are still in place.
The announcement follows Goldman Sachs and JP Morgan increasing bonus caps, as well as shareholders in May voting to enable Barclays to allow its remuneration committee to set a new cap on bonuses, if it considered it appropriate.
A Barclays spokesperson said: “The revised bonus cap will not alter the way Barclays sets its incentive pool, which is based on overall group performance. It will allow us greater flexibility to differentiate individual bonuses within a small and defined group of employees, enabling Barclays to continue to compete effectively to retain and attract the best talent globally.”
