Barclays has taken a decisive step in revising its compensation structure, announcing the removal of the EU-imposed cap on bonuses for its senior bankers. This change, detailed in an internal memo seen by Reuters, allows top executives to earn bonuses up to 10 times their base salary. Previously, the European Union introduced a regulation in 2014 that restricted these payouts to a two-to-one ratio as part of broader measures to curb excessive risk-taking in the banking sector after the 2008 financial crisis.
A Barclays spokesperson, confirming the contents of the memo, emphasized that this adjustment would not impact the bank’s overall approach to determining its incentive pool, which remains firmly based on the Group’s overall performance.
“The revised bonus cap will not alter the way Barclays sets its incentive pool,” the spokesperson noted. “However, it will allow us greater flexibility to differentiate individual bonuses within a small and defined group of colleagues.”
This policy change specifically applies to material risk takers (MRTs), a category of employees whose roles involve significant decision-making power that could substantially affect the bank’s risk profile. However, it is important to note that the new bonus structure does not extend to MRTs in Barclays’ Irish-based entity, which oversees its European operations. These employees will continue to be governed by the EU’s stringent bonus regulations.
The decision by Barclays follows similar moves by other major financial institutions such as Goldman Sachs and JPMorgan, which have also adjusted their bonus structures for senior UK-based executives. Barclays’ shareholders approved the removal of the cap earlier this year, reflecting a broader trend among UK banks to enhance their competitiveness in the global financial sector.
The EU implemented the original cap on bonuses to discourage the risky behavior that contributed to the global financial meltdown. However, with the UK’s departure from the EU, Britain’s financial regulators have been keen to provide banks with greater latitude in their compensation strategies. Last October, these regulators confirmed that they would allow banks more freedom to offer higher bonuses, as part of efforts to boost the competitiveness of the UK’s financial services industry.
