JPMorgan Chase and Citigroup Contemplate Pay Reductions for Senior Executives in the UK
Two banking giants, JPMorgan Chase and Citigroup, are considering reductions to fixed pay for their senior executives in the UK, according to a report by Bloomberg. These reviews come in the wake of recent changes to local remuneration regulations.
The Impact of the Regulatory Adjustments
The changes under consideration by both JPMorgan and Citigroup involve the potential to cut or entirely remove fixed allowances for employees categorised as “material risk takers.” This category includes senior traders, investment bankers, and compliance executives. These adjustments are a direct response to modifications made by UK regulators.
In October, the authorities made amendments to the rules on banker compensation, easing bonus deferral requirements and reducing the waiting period for executives to receive discretionary pay from eight years to four years. Consequently, these changes have reduced the necessity for fixed allowances that previously constituted a larger proportion of pay packages.
Aligning Pay Structures with Global Standards
One person familiar with JPMorgan’s review stated that the aim is to align UK pay structures more closely with global standards, emphasising merit-based compensation. While the overall level of remuneration may remain unchanged for most individuals, its composition could be altered.
Regulatory reforms have also prompted a number of major banks operating in London to restructure their remuneration policies. This followed a government decision last year to lift a cap on bonuses, a restriction that had been in place since 2014 by the European Union, which limited bonuses to twice an employee’s base salary.
The Effects on Other Global Banks
Other global banks have also made adjustments in response to the regulatory changes. In 2024, Goldman Sachs Group confirmed that it was lowering fixed allowances for its material risk takers following the removal of bonus restrictions. HSBC Holdings has also ended fixed-pay allowances for its executive directors and plans to outline remuneration arrangements in its upcoming annual report.
Meanwhile, Citigroup is focusing on maintaining competitiveness within the firm’s global framework while taking advantage of the new rules’ flexibility in structuring executive pay. JPMorgan is similarly motivated by the regulatory changes to review its fixed allowances. However, other banks such as Bank of America, Barclays, and Morgan Stanley have refrained from commenting on their pay structures.
Future Implications for Employees
In terms of future implications for employees, it is understood that a larger share of compensation at JPMorgan will be made available as cash and immediately-vested stock if fixed allowances are scaled back. Employees are not expected to lose access to cash under this possible adjustment. However, BNP Paribas, headquartered in France, stated it will not be making any changes to its allowance policy.
While these changes are currently under review, both JPMorgan and Citigroup declined to provide comments when approached by Retail Banker International. The full report by Bloomberg can be accessed Here.
