The world’s largest brokerage, Morgan Stanley (NYSE:MS), announced today they will be limiting cash bonuses to $125,000 for senior executives. This decision comes as the banking sector saw one of the worst fourth quarters when it comes to trading and investments.

Morgan Stanley’s decision will increase the average amount of pay deferred to 75%. In 2009 and 2010, the company deferred 40% and 60% respectively.

The banking sector as a whole has been getting hard in recent days starting with JP Morgan Chase & Co. (NYSE:JPM) last week. Last quarter, JPM saw profits dip 23%. Fast forward to today and Citigroup Inc. (NYSE:C) announced its profits fell 11%. There is some good news though, mainly from Wells Fargo & Co. (NYSE:WFC). Wells Fargo saw fourth quarter earnings jump 20% thanks to increases in commercial loans and mortgage demand in the latter half of 2011.

Investors will have a better feel on the sector later this week when Bank of America (NYSE:BAC) and Goldman Sachs (NYSE:GS) report their earnings. Goldman could get hit the worst since Citigroup and JPMorgan earnings disappointed due to weak investment banking and trading results.