Barclays becomes first UK bank to scrap EU bonus cap

Barclays has become the first British bank to tell staff that a cap on bonuses will be scrapped in a post-Brexit victory.

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

The idea was to curb the risky behaviour of traders and bankers in the aftermath of the 2007-2009 financial crisis and prevent a repeat of that crisis.

But top bankers at Barclays have been told their bonuses will be set at up to ten times their fixed salary in a major Brexit benefit for the Square Mile.

Around 1,600 employees, mainly based in Britain and the United States, will benefit, including those in Barclays’ lucrative investment banking division.

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

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

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

A spokesman added that the bank will be able to “continue to compete effectively to retain and attract top talent globally.”

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

Last year, the Conservatives lifted a long-standing cap on bankers’ bonuses as part of a post-Brexit shake-up of City rules.

But until now, only big US banks with significant operations in the UK had said they were increasing potential bonuses for their top traders and dealers in Britain.

In May, Goldman Sachs revealed that its UK-based senior staff could earn bonuses worth up to 25 times their fixed salary.

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

Critics have argued that the cap on bonuses made it harder to attract top talent to London, with bankers flocking to New York, Singapore or Zurich.

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

Former Foreign Secretary Kwasi Kwarteng also proposed removing the cap on bankers’ bonuses during the Liz Truss government’s mini-budget in September 2022.