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Goldman Sachs has informed staff in its London office that it will remove limits on bank bonuses, becoming the first major bank to take advantage of controversial changes to UK pay rules.
The Wall Street lender informed its staff of the change in a video on Thursday, in a move that is expected to be copied by its rivals.
“This approach gives us greater flexibility to manage fixed costs throughout the cycle and pay for performance.” Man of gold he said in a statement. “It brings the UK closer to practice in other global financial centres, to support the UK as an attractive location for talent.”
Last October, the UK removed the cap on legacy bank bonuses from its EU membership period. The decision was part of the UK government’s post-Brexit push to boost the City of London, although pay consultants have been skeptical it will lead to a significant change in wages.
“We are a global company and, to the extent possible, we take a consistent global approach to everything we do,” Richard Gnodde, chief executive of Goldman Sachs’ international arm, said in a video message to staff. , of which parts were seen. by the Financial Times.
“Bonus cap rules were a major factor preventing us from being consistent on the compensation front.”
The EU introduced the limit in 2014 after the global financial crisis. It limited bonuses to twice an employee’s base salary.
Critics of removing the cap argue that the fixed salary has already increased over the past decade to compensate bankers for their smaller bonuses. Allowing bonuses to increase, they say, will lead to wage inflation.
But bank executives responded that the bonuses would only increase over time, leading to incentives more aligned with the bank’s performance.
Goldman’s decision, which was first reported by Sky News, is expected to lead to similar changes at other global banks. Barclays has already said it will continue operate under the coverbut will “consider this further” for the next financial year.
Goldman had been one of the most aggressive lobbyists in trying to remove the bonus cap since Britain voted to leave the EU in 2016.
when the plan was discussed for the first time For the short-lived UK chancellor Kwasi Kwarteng in 2022, Gnodde told the Financial Times that removing the cap would make “London a more attractive safe haven”.
He said that under the current system, “if I move a high-ranking person between New York and London, I am raising the fixed cost of our operations.” And he added: “If that rule doesn’t exist, I don’t have to think about it.”
Other Wall Street banks the Financial Times spoke to said they expected Goldman to be the first to formally remove the cap and planned to take similar steps later this year.
At last year’s FT Global Banking Summit, bosses of several of Europe’s biggest banks – including Deutsche Bank and Santander – said the EU should consider scrapping the cap as it put them at a disadvantage when hiring. personnel compared to its rivals in the United States and the United Kingdom.