JPMorgan <JPM.N>, Goldman Sachs <GS.N>, Bank of America <BAC.N>,
Barclays <BARC.L> and Credit Suisse <CSGN.VX> paid bonuses to
leading staff which ranged from 3.3 to 5.4 times their fixed pay for
2012, according to data disclosed by the banks and Reuters
Big changes will therefore have to be made to meet the European
Union rules which cap bonuses at the same level as fixed pay, or
double if the bank's shareholders approve.
Bankers' bonuses remain a hot topic among politicians and the
public. Many blame their high levels for encouraging reckless
risk-taking that led to the 2008/09 financial crisis and a series of
mis-selling and misconduct scandals.
Banks usually pay staff bonuses in January or February based on
their performance the previous year. So while the EU curbs came into
force this month, they will be applied first to bonuses for 2014 to
be handed out early next year.
Major banks continued to reward their top risk-taking staff heavily
on performance in bonuses for 2012, their regulatory disclosures
have showed in the last few weeks.
Goldman Sachs paid its top 115 UK staff an average of $4.67 million
each for 2012, an increase of three-quarters from the average for
2011 and the highest of the major banks. The bank's earnings and
revenues jumped in 2012 from 2011.
About $350 million of Goldman's total salary bill for these bankers
was paid in bonuses, or 5.2 times what it gave in fixed pay — jumping from a ratio of 2.2 times in 2011 — according to Reuters
Banks are expected to increase fixed pay and reduce bonuses to meet
the new rules, although Barclays <BARC.L>, HSBC <HSBA.L> and others
are coming up with innovative ways to cope.
Barclays plans to give its senior bankers additional monthly
payments. The new "role-based pay" element — on top of base salary
and variable bonuses — will be for employees occupying specific
Most of this will be in cash, although top-up payments to members of
its executive committee may be in shares, following discussions with
shareholders, a person familiar with the matter said.
HSBC plans to hand new share awards to about 1,000 of its top staff,
an industry source said, adding that the plan would have
characteristics of variable pay but qualify as fixed pay.
"A LOT OF CREATIVITY"
JPMorgan and others are considering similar shifts to Barclays and
HSBC to keep some flexibility on pay and meet the bonus rules,
industry sources have said.
"It appears there's a lot of creativity going on," said Peter Hahn
from London's Cass Business School.
About 10,000 staff are expected to be covered by the rules. Bankers
earning more than 500,000 euros a year will be affected, although
the EU banking watchdog watered down requirements last month and
said some staff earning that amount could be excluded.
[to top of second column]
A number of other banks also bust the new rules for 2012, according
to data released for their UK "code staff," which covers all people
in significant risk-taking positions.
JPMorgan paid 126 code staff an average of 2.09 million pounds ($3.4
million), and variable pay was 5.4 times fixed pay. Bank of America
paid its code staff an average of 1.5 million pounds, with variable
pay 5.4 times fixed pay. Its senior managers received 12 times more
in variable pay than salary.
The British government is fighting the rule in Europe's highest
court and many banks in London have opposed the cap, saying it will
force up fixed salaries, provide less scope to claw back pay and
encourage staff to move to banks in the United States or Asia which
are not constrained.
Among other leading banks, top UK staff at Credit Suisse earned an
average of $2.28 million in 2012, up 8 percent from 2011, and
bonuses were 3.3 times fixed pay, according to data released just
The figure for British-based Nomura <9716.T> bankers was an average
of $2.37 million each in the year to March 2013, and bonuses
amounted to 3.1 times fixed pay.
Barclays had previously disclosed it paid its 393 code staff an
average of 1.37 million pounds each in 2012, and variable pay was
4.3 times fixed pay, while HSBC paid its code staff an average of
$1.68 million each in 2012, and variable pay was 2.7 times fixed
Hahn at Cass said it was "disappointing" that overall pay levels
were not coming down, as returns for shareholders at many banks are
still lagging the cost of equity.
"This is an industry that still needs to deal with cost
cutting...it's still an industry that appears to be paying as if
it's a high return business, and it isn't," Hahn said.
Banks either declined to comment, could not immediately be reached,
or said they were considering their options in regard to future pay
The new rules cover pay for 2014, but will not affect bonuses for
2013 that will be handed out in the next two months. Bonus details
will start coming out from U.S. banks reporting results from next
week, and are expected to be flat to slightly higher across the
Just over 3,500 bankers in Europe earned 1 million euros or more
last year, and more than three-quarters of those were based in
Britain, partly reflecting London's dominance as a financial hub and
the European hub for global banks.
(Editing by David Stamp)
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