The new banking bonus caps in London: 6-25x salary
The banking bonus cap might still be alive and well in the EU, but in the UK – a place it was never really welcome – it’s starting to disappear. But it's not disappearing equally.
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Most UK and Wall Street banks have already announced the end of the EU bonus cap in London, which restricted bonuses to 2x salaries. In the new world, London bonuses will be a higher proportion of salaries. How much higher will depend upon where you work.
The chart below shows what banks have said so far about their plans for bonuses after the cap.
The highest bonuses as a proportion of salary will be on offer at Goldman Sachs, where future London bonuses will be up to 25x recipients' salary. The lowest will be at NatWest, where they will be just 2x of salaries, up from 1x.
NatWest and Goldman will (mostly) be outliers. Most new bonuses will be up to 8x salaries (as at Jefferies and Lloyds) or 10x salaries (as at Barclays, HSBC, and JPMorgan). Citi, in a quest to be different, will offer bonuses up to 6x salaries.
Not every bank has announced the decision that it’s made. For example, Morgan Stanley’s Pillar 3 disclosures for 2023 called the new ratio “an appropriate internal bonus cap,” although an exact number was not given. Its Pillar 3 disclosures for 2024, which may provide more clues, have yet to be released.
Bank of America has yet to announce what its new bonus regime will be - or if the bonus cap will change at all (it almost certainly will). Its Pillar 3 disclosures for 2024, which will probably provide the answer, have also yet to be released.
Most bonus caps are still in place for the time being, outside of UK and US banks. Financial News said in November that BNP Paribas, Deutsche Bank, and UBS are still undecided on what their new ratios could be. However, it's not entirely clear if banks regulated in the EU are allowed to lift the bonus cap for their UK operations. Nomura, Mizuho, and MUFG are also yet to declare an end to the 2:1 ratio.
The bonus cap was viciously opposed by UK regulators when proposed by the EU in 2014, and the UK’s financial services sector was disproportionally impacted by its implementation. It was scrapped on 31 October 2023. However, most banks didn't lift in their recent bonus rounds. 2025 will be the year everything changes.
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