(Adds details of Morgan Stanley's financial performance)
NEW YORK, Dec 5 (Reuters) - Morgan Stanley said on Friday it will pay more of its bonuses to employees upfront and defer less, because the bank is on a better financial footing and can move its pay practices more in line with those of competitors.
The step will increase its fourth-quarter compensation by roughly $1.2 billion.
The bank said in a filing with the U.S. Securities and Exchange commission that only around 50 percent of the bonuses Morgan Stanley employees are due in 2015 for their performance in 2014 would be deferred on average, down from about 80 percent previously.
"Now that our business strategy is in place and the firm's performance has stabilized, it is time to bring our deferral policy to an appropriate long-term level, in line with the rest of the industry," Morgan Stanley Chief Executive James Gorman said in a memo to employees that was reviewed by Reuters. Its contents were confirmed by a Morgan Stanley spokesman.
Morgan Stanley also said in the filing that the board's compensation committee approved a proposal that allowed outstanding cash bonuses that had been deferred to vest as of Dec 1.
After coming close to failure during the financial crisis, Morgan Stanley has rebounded. The bank earned $4.9 billion in the first nine months of 2014, compared with a loss of $599 million in the same period of 2012.
"The period of fragility Morgan Stanley faced from 2008 to 2012 has, thankfully, ended," Gorman said in the memo.
(Reporting by Peter Rudegeair; Editing by Bernard Orr and Steve Orlofsky)