Bank of America pay rise to ease bonus cap blow
SENIOR staff at Bank of America Merrill Lynch (BAML) are getting a 20 per cent pay rise to make sure they do not lose out as a result of the EU’s incoming bonus cap.
Managing directors at the bank’s offices in London and the rest of Europe will now receive a base salary of $500,000 (£307,000) per year.
The bank is understood to be keen to maintain overall take-home pay at its current level rather than being crushed by the bonus cap.
The EU rules will stop bankers receiving a bonus that is greater than their salary, though that can rise to double the salary if shareholders agree.
BAML is also understood to be looking at paying a quarterly allowance of cash or shares to staff to top-up salaries.
The bank declined to comment.
A similar scheme is being considered by banks including Goldman Sachs and Barclays. However, they await the official approval of Brussels in March.
Although the rules affect all bankers in Europe, the firms operate in a global industry and do not want to lose good staff to competitors overseas, or dissuade foreign bankers coming to work for them in London.
There are some variations from bank to bank. HSBC is looking at a share-based scheme where salaries will be topped up with quarterly stock awards.
These will be deferred for five years. The aim is to retain some of the features of the current bonus system, under which payouts are largely or entirely in stock and are not paid for several years.
The system – which regulators, as well as banks, prefer – is intended to make sure bankers have long-term incentives rather than taking dangerous risks for very short-term gains.
By contrast with the bonus cap base salaries are rising and so there is no long-term focus, nor any deferred awards which can be clawed back if something goes wrong.
However, not all banks can raise pay easily. RBS faces a tougher time than most winning approval for 200 per cent bonuses, and is limited to £2,000 cash payouts.