Now that we know for sure that JPMorgan and Goldman Sachs are jettisoning the EU bonus cap, inflating London bonuses and cutting salaries with varying degrees of enthusiasm, we can make informed assumptions about what happens beyond pay for their most senior staff.
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The bonus cap, which limited bonuses to no more than twice salary, only applied to material risk takers (MRTs). We know what Goldman and JPMorgan paid to MRTs in the past because banks were required by European regulations to disclose the average salaries and average bonuses for their MRTs.
Not everyone is an MRT: the term only applies to people who are in a position to take significant risks with a company’s capital, or to avoid taking those risks. At JP Morgan Securities, which covers JPMorgan’s corporate and investment banking business in the UK, there were 587 identified staff (MRTs) in 2023; at Goldman Sachs Group UK, Goldman’s UK entity, there were 569 MRTs in 2022 (the latest year for which figures are available). Both form a small part of the total. – JPMorgan Securities employed 2,159 people; Goldman had 3,800 employees.
Therefore, when we talk about remuneration for people who take material risks, we are only talking about a subset of the people at the top – most of whom will be directors (MDs).
Under the old bonus cap system, people in these segments received salaries and fixed allowances that were higher than bonuses.
For example, JP Morgan Securities paid its 587 London MRTs an average of $1.6 million in combined salary and bonus in 2023. Of that $1.6 million, $877,000 was salary (and fixed benefits) and ‘only’ $754,000 was bonus.
Goldman Sachs International paid total compensation for 569 MRTs averaging $1.4 million in 2022, consisting of an average salary + allowance of $847,000 and an average bonus of $635,000.
Now that Britain has freed itself from the EU’s bonus orders, times are a changing.
JPMorgan declined to comment for this article. However, it is understood that JPMorgan now plans to pay bonuses of up to ten times MRT salaries in London, while fixed pay (salaries and allowances) will remain the same for most people. If salaries remain at $874,000, it means that top performers at the London bank could receive bonuses of………..$8.74 million. This is unlikely to be true for many people: in its latest regulatory filing, JPMorgan revealed that 14 people in Britain earned more than $6.4 million last year.
What about Goldman Sachs? In its unfettered post-bonus cap existence, Goldman plans to pay out bonuses up to 25 times higher than London salaries. If salaries in London remain the same, it means Goldman will pay individual bonuses of…$21 million in London. This is not unthinkable: ten people would earn more than eleven million dollars there in 2022. However, Goldman has also indicated that it is cutting salaries in the new wage reality, so this could be wishful thinking. If Goldman’s London salaries are cut to the New York average of $400,000 and bonuses are 25 times salary, then London’s bonuses will be a cut instead. up to $10 million in the future. It’s not $21 million, but okay. Goldman Sachs also declined to comment.
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