Barclays becomes first UK bank to abolish EU bonus cap

Barclays has become the first British bank to tell staff it will scrap its bonus cap, a post-Brexit victory.

In a bid to boost financial services in the country, the City giant has ditched previous rules introduced by Brussels in 2014 that capped bonuses at twice an employee’s annual salary.

The idea was to put an end to the risky behavior of traders and bankers after the 2007-2009 financial crisis and prevent a repeat of that crisis.

But Barclays’ top bankers have been told their bonuses will be increased to as much as ten times their fixed salary, in a major Brexit boon for the Square Mile.

Around 1,600 employees, mainly based in the UK and US, will benefit, including Barclays’ lucrative investment banking division.

Executives at the bank, led by CS Venkatakrishnan (known as Venkat), which employs about 9,000 people in the UK, believe the move will help retain and attract top talent.

The announcement follows similar reforms by Wall Street banks JP Morgan and Goldman Sachs.

Barclays said the move would “give us greater flexibility to differentiate individual bonuses within a small and defined group of colleagues”.

And a spokesperson added that the bank can “continue to compete effectively to retain and attract the best talent globally”.

However, the update does not apply to bankers in Ireland or Monaco, as they are still subject to EU rules.

The Conservatives last year lifted the long-standing cap on bankers’ bonuses as part of a post-Brexit overhaul of rules in the City.

But until now, only major US banks with significant operations in the UK had indicated they would increase potential bonuses for their top dealmakers and traders in Britain.

In May, Goldman Sachs announced that its senior employees in the UK could earn bonuses of up to 25 times their fixed salary.

The following month, JP Morgan raised its limit to ten times.

Critics argue that the bonus cap makes it harder to attract top talent to London, causing bankers to flock to New York, Singapore or Zurich.

Former Chancellor of the Exchequer George Osborne failed in 2014 to overturn what he described as “ill-conceived rules” at the European Court of Justice. Bank of England Governor Andrew Bailey previously called the cap “misleading” and “the wrong policy”.

Former Chancellor of the Exchequer Kwasi Kwarteng also proposed abolishing the cap on bankers’ bonuses in Liz Truss’ government’s mini-budget in September 2022.