Barclays is to become the first UK bank to formally remove the cap on bankers’ bonuses originally imposed by the EU. This move allows for bonuses to potentially reach up to 10 times an employee's salary. The decision was communicated internally to staff, following the approval of this change by Barclays' shareholders at the recent annual general meeting (AGM).
Background And Regulatory Changes
The cap on bonuses, which previously limited payouts to twice the bankers’ salaries, was one of the key reforms introduced by the EU after the 2007-08 financial crisis. This regulation aimed to curb a bonus culture blamed for encouraging risky behavior and prioritizing short-term gains over long-term stability.
However, last year, UK financial regulators decided to lift this restriction. Major UK banks, including Barclays, Lloyds, and HSBC, have been working to remove the cap, reflecting the broader shift in regulatory stance. Barclays has aligned with the approach of US bank JP Morgan by permitting bonuses up to 10 times salaries.
Impact And Company Stance
Despite the removal of the cap, Barclays has tempered expectations. The bank said individual compensation will remain performance-based and market-informed. According to an internal memo seen by the Guardian, the revised bonus cap will not alter general expectations around total compensation but will provide greater flexibility in rewarding individual performance. This change aims to enhance Barclays' ability to attract and retain top global talent in a competitive market.
