After the United Kingdom (UK) removed local pay restrictions for bankers last year, investment bank Goldman Sachs was the first to remove its bonus cap for its bankers.
Goldman Sachs Removes Bankers' Bonus Cap
In a statement released on Thursday, Goldman Sachs said this would give them more flexibility in managing costs and compensate employees based on their performance. The bank further noted that this move also supports the UK as an attractive venue for talent.
Banks previously argued that the cap on bonuses makes it harder to attract talent from the US and other countries to the UK, BBC reported.
Abolishing Bonus Cap Imposed by EU Since 2014
Caps on bonuses were imposed by the European Union in 2014, limiting them to twice basic pay. Despite resistance from the British government, the bonus cap was imposed to curb the excessive risk-taking that played a part in the 2008 great financial crisis.
Former UK finance minister Kwasi Kwarteng first announced the decision to remove the bonus cap in 2022 to make London a more competitive financial hub.
According to critics, banks simply increased bankers' base salaries after the bonus cap was imposed. However, this made it harder to reduce wages when they performed poorly or if misconduct came to light.
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