Gov. Andrew Bailey called the restriction “wrong.” Photo: Pool/REUTERS
Bankers generally prefer to have most of their salaries fixed rather than dependent on bonuses, as this helps cover regular expenses such as mortgage payments and private school fees.
< Canice Hogan, chief executive of executive search firm Shadowhound, said: “London has higher fixed salaries than New York and this is becoming a big advantage for bankers. If you have a high fixed salary, there is much less risk for you, and much more risk for the investment bank.”
But the banks themselves didn't like the policy because executives were less able to cut pay during downturns, when employees would normally be forced to accept a zero donut bonus.
The changes, announced by Goldman Sachs on Thursday, will mean that bankers' salaries will be reduced as the company takes a larger share of performance rewards. link.
The adjustment will be gradually introduced from July 1, Richard Gnodd, head of Goldman Sachs International, told employees.
The Telegraph previously reported that some top bankers were unhappy at the prospect of their base pay being cut.
Mr Hogan said: “The first bank to turn around and say we're cutting salaries across all banks by 25% , will be the one to take the bold step. This is more likely to cause conflicts and staff reductions.”
Other investment banks are reviewing their bonus policies, and a source at one said they may have to speed up their decision in light of Goldman's announcement.
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They called Goldman's decision to cap bonuses at 25 times base pay “drastic” but suggested rivals will now have to offer similar levels of compensation to remain competitive.
It is expected that HSBC will refuse the decision. bonus cap later this week. Chief Executive Noel Quinn said on Tuesday that ending the policy was an “opportunity” to achieve a better balance between wages and bonuses for the bank.
Barclays declined to lift the cap.
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