U.S. investment banks in London have just been handed an important bonus concession. U.K. banks haven't
It's already a tautology to say that Goldman Sachs pays very well and Royal Bank of Scotland doesn't. In 2012, the average banker at Goldman Sachs International (the London-based arm of Goldman Sachs) earned $676k (£412k). Meanwhile, average pay (globally) at RBS's investment bank is on track to reach £108k for 2013.
As of today, the gap between pay at U.S. banks like Goldman and U.K. banks like RBS is likely to widen further - particularly when it comes to bonuses.
The British Prudential Regulation Authority (PRA) has confirmed what banks will need to do if they want to increase the European Union's bonus cap from the mandated 100% of salary to the maximum 250%. The playing field is not entirely level.
If you're a U.S. bank, the PRA says you will simply need to get approval for the increased cap from an internal group that holds the shares of your UK subsidiary, says Sam Whitaker, counsel at law firm Shearman & Sterling.
However, if you're a U.K. bank, the PRA says you'll need to get approval for the increased cap from a public shareholder meeting.
"For U.S. banks getting permission to lift the cap is a relatively rubber-stamp internal process, but UK banks will have to hold a vote at a public shareholder meeting, with all the publicity that entails," says Whitaker.
This almost certainly bodes ill for bonuses at both RBS and Barclays.