London: HSBC Holdings is cutting the base pay it offers some newly-promoted senior investment bankers in the UK by a quarter, ahead of a rule change that would allow higher bonuses.
In some areas, new managing directors are now typically offered a salary of about 225,000 pound ($273,380), compared to 300,000 pound paid to bankers that already hold the same position, people familiar with the matter said.
A spokesperson for the bank declined to comment. The lender’s decision comes as the British government plans to abandon bonus caps.
Variable pay is currently capped at two times salary for “material risk takers” under rules introduced almost a decade ago when the UK was a member of the European Union. A Bank of England study found that the cap led banks to restructure, rather than reduce, overall pay for staff in the region.
Rishi Sunak’s government plans to make changes as part of a broader attempt to boost the City’s competitiveness following Brexit “- though finance firms have responded warily so far. A consultation is due to close on March 31.
Variable pay
HSBC has said it expects the reforms to lead to a greater focus on variable pay. The bank plans to also review the remuneration arrangements for executive directors in due course in light of the proposals, and will consult with shareholders on any potential changes, according to its annual report published last month.
Relaxing the rules would allow banks to tie more pay to performance “- a metric that can fall as well as rise, as highlighted by the grim 2022 bonus season across Wall Street.
The lender’s total bonus pool fell by nearly 4% to $3.36 billion last year as income from businesses such as dealmaking and fundraising declined globally.
HSBC said at that time it protected junior banker bonuses, which rose on average in recognition of high inflation over the past year. Payouts were differentiated by business performance and the strongest outcomes were for commercial banking, followed by wealth and personal banking.
It comes at a time when financial services firms are lowering pay for senior executives and trimming jobs globally. Citigroup Inc. is cutting hundreds of jobs across the company, with the Wall Street giant’s investment banking division among those impacted. Goldman Sachs Group Inc., for its part, embarked on one of its biggest rounds of job cuts ever in January and reduced Chief Executive Officer David Solomon’s compensation by about 30% to $25 million for 2022.
Credit Suisse Group AG said in its compensation report released Tuesday that Chairman Axel Lehmann is forgoing a payment of 1.5 million Swiss francs for his first full year on the job, following the Swiss lender’s worst annual performance since the 2008 financial crisis.
