Goldman Sachs lifts bonus cap for top London-based staff | Business News

Goldman Sachs is lifting the cap on bonuses for London-based staff, allowing for larger payouts to top traders and dealmakers.

Sky News has learned exclusively that the Wall Street bank informed its UK employees that it is removing the pay ratio imposed under EU rules, which the government recently decided to eliminate.

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In a video message, Richard Gnodde, CEO of Goldman Sachs International, stated that the firm is aligning its UK compensation policy with its global operations.

“We are a global firm and strive for consistency in all aspects of our operations,” Mr Gnodde said in the message, shared with Sky News.

“The bonus cap rules prevented us from maintaining consistency in compensation.”

He added that this change will result in “lower fixed pay, but a higher proportion of discretionary compensation,” in line with regulatory objectives.

The removal of the cap means hundreds of UK-based Goldman staff may now receive variable pay up to 25 times their base salaries, insiders report.

Allowances introduced to offset the cap will begin to decrease from July 1, according to Mr Gnodde.

Bank insiders emphasize that the new approach does not necessarily mean higher pay for senior employees, but rewards for outstanding performance and flexibility in managing fixed costs.

Goldman is among the first major banks to signal a shift in remuneration following the cap’s elimination by UK regulators last year.

Under the cap, firms were restricted from paying senior staff more than twice their fixed salary in bonuses.

Goldman’s move may spark controversy, but the EU bonus cap faced criticism from finance industry figures, including Bank of England governor Andrew Bailey, who called it “misguided” in 2014.

Former Chancellor Kwasi Kwarteng moved to scrap the cap to boost the competitiveness of the UK’s financial sector.

Mr Gnodde supported the cap’s removal, stating in 2020 that it would align the UK with other financial centers.

“Removing the ratio makes London more attractive,” he said.

Goldman is leading the charge in adjusting UK compensation practices following the cap’s abolition.

HSBC is expected to remove the two-to-one pay ratio at its annual meeting.

Many firms are reviewing their practices in light of the cap’s elimination.

Some argue that the cap encouraged risk-taking and inflated salaries and allowances unlinked to performance.

Responding to inquiries, Goldman stated the new approach supports performance-based pay and aligns the UK with other financial centers.

Goldman previously imposed a pay ceiling in response to a bank bonus tax in 2010.

The removal of the ratio coincides with UK regulators considering shorter deferral periods for senior bankers.

Mr Gnodde informed staff that Goldman will continue pushing for global alignment on deferral periods.