Despite all the outrage about large bonuses, cash compensation was always going to be compromised this year. Just how compromised is now becoming horribly clear.

As we reported yesterday, Credit Suisse will pay unrestricted cash bonuses up to only £60k. Beyond this level, a variable proportion of remaining compensation will be paid in deferred stock instruments subject to a table (which hasn't been made public).

Following the intervention of US pay Czar Kenneth Feinberg, cash compensation at BofA Merrill and Citigroup is also set to shrivel.

In a possible attempt to evade restrictions on bonuses at TARP banks, both BofA Merrill anbd Citi dramatically increased salaries for senior staff earlier this year. Some UK-based MDs at Citigroup are now rumoured to be on on £300k. Their counterparts at BofA Merrill are said to be on £250k.

Feinberg is tackling this with reductions in cash salaries of up to 90% for the most highly paid staff. Instead, the Wall Street Journal says employees will receive, ‘"salary stock" - long-term stock grants that can't be touched for at least four years.

Most ominously, the Telegraph reports that total compensation at AIG will not be above $200k, implying that the US government is veering towards pay caps.

50% comp ratios RIP

Regardless of government intervention, and with the obvious exception of Goldman Sachs, which is still accruing compensation at around 48% of revenues, there are also signs that banks are reining in pay of their own accord.

In yesterday’s conference call, Morgan Stanley said the full year comp ratio at the investment bank is likely to be 40%.

Today’s 3Q results from Credit Suisse reveal a similar trend. Compensation fell to 42% of income at its investment bank. Nomura analyst Jon Peace says this was the main reason for Credit Suisse's higher than expected investment banking profits.