Merrill Lynch has taken the unusual step of freezing the salaries of all its 65,000 staff, until at least the middle of next year.
A spokeswoman said the firm was aiming to cut costs in a difficult period, following the terrorist attacks on September 11th and the downturn already affecting its business. Its employees normally receive a salary rise at the beginning of each year.
Jon Terry, a human resources specialist at PricewaterhouseCoopers, said the move was extremely rare in investment banking, but that other banks were likely to impose salary freezes as well because of poor market conditions.
Morgan Stanley is understood to have done so already, though a spokesman declined to comment.
Merrill Lynch said about 2,600 staff were taking up its offer of voluntary redundancy made to all staff in October. They include a number of senior figures. Staff numbers at the firm are already down by about 7,000 from a year ago.