Bankers will get monthly 'allowance' to combat new bonus rules
IN the 1990s, London-based investment banks rewarded top employees with gold bars, fine wine and oriental carpets to dent the impact of higher payroll taxes.
Now, with public anger at banking excess near all-time highs, they are looking at less flashy ways to cope with curbs on bonuses, including a new monthly allowance.
European rules due to take force in January say bankers' bonuses cannot exceed annual salary, or twice that if shareholders approve.
Salaries have not dropped in line with banks' revenues since the crisis, consultancy McKinskey said this month.
At least 10,000 bankers, most of them in London, take home more than €500,000, according to industry sources, more than 10 times the average wage in wealthier European states.
With much of pay currently in bonuses, the biggest banks in London look certain to bump up salaries.
Britain and the banks, in what is Europe's financial capital, argue the new rules play into the hands of competing financial centres such as New York, Hong Kong and Singapore.
The cap affects all "risk-taking" staff for EU banks and the European staff of those outside the trading bloc, so all major investment banks are affected, including US lenders such as JP Morgan and Goldman Sachs.
"There's absolutely no question that fixed pay is going to rise," said Jon Terry, partner at PwC. "But the standard response may not be by increases in salary, by far the most common response will be the introduction of allowances."
Britain's Barclays last week said it will increase fixed pay using such a structure. It plans to give bankers an additional monthly payment. (Reuters)