The cap limiting bankers’ bonuses to 200 per cent of annual salary has been scrapped by chancellor Kwasi Kwarteng in his mini-budget.
The EU-wide cap was imposed in 2014 to discourage the type of profit-chasing that some critics said triggered the financial crash of 2008.
It limited annual bonuses to 100 per cent of salary – or 200 per cent if shareholders approved – in order to give less of an incentive for risk-taking.
But Mr Kwarteng said its impact had never capped total remuneration, as banks had simply shifted payments from bonuses to salary.
“The strong UK economy has always depended on strong financial services sector,” he told MPs.
“We need global banks to create jobs here, invest here and pay taxes here in London, not in Paris, not in Frankfurt, not in New York.”
According to the jobs website Prospects, the average starting salary for a corporate investment banker is between £30,000 and £40,000.
This rises to between £50,000 and £70,000 after three years, although those with significant experience may earn a base salary of up to £165,000.
Within the old rules, a banker on £165,000 could in theory be given a bonus of £330,00 on top of their base salary.
Some top bankers, however, earn far bigger salaries and get much larger bonuses. Fred Goodwin, the former Bank of Scotland chief executive, was paid £4m in 2006 – £3.8m of which was from a bonus and an increase of 38 per cent from the previous year.
In 2011 – just three years after the financial crash – Bob Diamond, the former Barclay’s chief executive, got a pay packet worth £11m.