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JPMorgan Chase has told its employees in the UK that it will remove limits on bank bonuses, making it the second-largest lender. after Goldman Sachs to take advantage of Britain’s decision to lift limits on payments to top performers.
Employees at the Wall Street bank’s UK operations will now be able to earn up to 10 times their base salary in bonuses, while their fixed salary will remain the same. The approach differs from that adopted by Goldman Sachs in May, which opted to reduce the base salary while increasing the bonus ratio to 25 times earnings.
“We believe we have developed one of the most attractive and balanced salary structures in the industry,” a bank spokesperson said. “Fixed pay will remain very competitive and we will have ample room to appropriately reward top performers.”
Banks have been debating how to change their pay structures after the UK removed limits on bankers’ bonuses last October in a bid to boost the City of London and make it a more competitive talent market.
The rule was a relic of the UK’s membership in the European Union, which introduced the cap in 2014 in response to the global financial crisis and capped what banks could pay so-called material risk takers to twice their base salary. . UK regulators had argued against its introduction as they claimed it hampered banks’ ability to address misconduct through strong recoveries.
In response to the cap, many lenders opted to increase fixed pay as a way to remain competitive on pay, a move that has made the new landscape difficult to navigate, with some banks reluctant to cut base pay.
The removal of the bonus cap is seen as a controversial move by those who argue it will unnecessarily inflate salaries because banks have already taken steps to compensate for the existing structure. However, big lenders argue it allows them to keep up with pay packages in other markets like New York.
JPMorgan’s plan aims to provide more stability for regular expenses such as mortgages, and the bank does not expect annual pay levels to change significantly from this year, according to people familiar with the decision.
While other banks have so far made no public announcements about salaries, several are expected to follow Goldman and JPMorgan’s lead in lifting the cap to avoid losing talent.
At the same time, some of Europe’s largest banks have asked the bloc to consider removing the cap so as not to be disadvantaged in hiring compared to the United Kingdom and the United States.