As a member of the EU, the British banking industry was subject to EU regulations, including a cap on bonus payments to staff who managed and invested the bank’s money in various financial instruments.
Before the rule was introduced after the 2014 financial crisis, bonus payments to employees were very favorable.
If you did well, there was a juicy bonus. If you lost badly and caused a loss to the bank or did not achieve the expected rate of return, the bonus was reduced.
Increase in basic salary
But the EU rule limited how high the bonus for employees could be, visible in relation to the fixed salary. The idea was to reduce the risk the employees were willing to take with the bank’s money.
In short, the rule stated that you would receive a maximum amount equal to your base salary in bonus. In some cases, if the owners had given their approval at the general meeting, you could receive up to twice the basic salary as a bonus.
But the banks found a way around the EU order.
The fixed salary of the employees who worked with investments was increased. As a result some workers were earning more than before.
Brain drain
At the same time, a challenge arose for the banks. It became more difficult to cut costs in bad times. Another problem was that workers who wanted an uncertain but possibly higher salary based on a bonus belonged to other countries outside the EU. So the banks in London lost skilled people.
After the UK left the Union, the previous government last year removed the bonus cap introduced by the EU.
Now that the spring general meetings in several commercial banks have been completed, and the owners have voted to change the banks’ pay policy, the bonuses are on their way back in.
Ten times basic salary
A few days ago, the commercial bank Citi announced that it will increase the bonuses of hundreds of employees in London, at the same time that their basic salary will be reduced. Barclays staff were recently told the same thing, writes The Times.
Goldman Sachs already changed the salary policy for its employees in May. Morgan Stanley has also introduced new bonus rules, but has not made its model public.
JP Morgan says they are now introducing their own bonus cap, which will be ten times base salary.
HSBC has received the blessing of the owners to change the bonuses policy, but the bank has not yet informed the employees about new payment conditions or when the decision from the general meeting will be implemented.
2024-08-11 07:30:36
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