JPMorgan joins Goldman Sachs in axing cap on bankers' bonuses in the UK so it can 'appropriately' reward its highest performers
JPMorgan Chase & Co. joined rival Goldman Sachs Group Inc. in scrapping a cap on London bankers’ bonuses, paving the way for the firm’s top staffers to potentially earn even fatter paychecks.
The move will allow JPMorgan’s bankers to earn a bonus that’s as much as 10 times their base salary, according to a person familiar with the matter. That’s up from a current limit that restricts certain employees’ bonuses to two times their fixed pay and comes after the UK government last year lifted its longtime cap on bankers’ bonuses.
“We believe we have developed one of the most attractive and balanced pay structures in the industry,” a JPMorgan spokesman said in a statement. “Fixed pay will remain very competitive, and we will have ample room to reward the highest performers appropriately.”
JPMorgan’s move, which was first reported by Sky News, is the latest sign that London’s finance industry has begun the process of rejiggering bonuses for legions of top traders and investment bankers, moves that could soon mean they’ll have paychecks that look more like the bonus-heavy packages of their New York counterparts.
Banks have warned that there will be challenges in adapting to a world without the bonus cap because many financial firms had already upended their compensation structures and handed their bankers higher fixed salaries to accommodate the limit.
For now, JPMorgan isn’t planning to materially change UK staffers’ fixed pay, the person familiar with the matter said, who asked not to be named discussing personnel matters. Employees at the bank prefer that structure because it gives them more stability to manage their monthly expenses, the person said.
That differs from executives’ plans at Goldman, which warned bankers last month that ditching the EU-era cap on bonuses would mean lower fixed pay, according to Sky News. But the New York-based bank is now allowing its top UK traders and dealmakers to earn bonuses that are as much as 25 times their base salary, the report said.
The bonus cap was introduced by the European Union in 2014 and limited the bonuses of so-called material risk takers to twice their annual salary. It was intended to curb excessive risk-taking in the banking sector after the 2008 financial crisis.
When UK officials abandoned the cap last year, it was part of a broader push to make post-Brexit Britain more attractive as a financial center. Bloomberg first reported in April that JPMorgan and Goldman Sachs were reviewing their pay policies for their London staffers as a result of the government ditching the limit.
