Wondering how much ‘risk takers’ are paid at leading banks in the City of London? By virtue of the British BIPRU rules on remuneration disclosure, you need not wonder long. Introduced after the financial crisis, the rules state that all investment banks operating in London must disclose everything from the amounts they pay their risk takers to the structure of that compensation and their efforts to lure new hires with sign-on bonuses.
Most banks provide these disclosures a year after payments were made. Goldman, JPMorgan, Citi, Bank of America and Morgan Stanley have therefore only just provided their disclosures for 2014. Everything you need to know from these disclosures is listed below.
The big things to notice this year are as follows:
- Most banks have substantially increased the numbers of regulated staff they employ in Europe and in London. This is in response to pressure from financial regulators, and has reduced average regulated salary and bonus numbers across the board.
- Goldman Sachs still pays the most. Eight people there earned more than €8m ($8.6m) in 2014. At Citi, only one person did.
- Most banks increased their salaries substantially in 2014.
1. Pay at Goldman Sachs International (in 2014)
Which external pay consultant does Goldman use? Semler Brossy Consulting Group LLC
Criteria used to determine pay at Goldman’s investment bank? At the business area and individual level, Goldman looks at pre-tax income, lost business, revenue and backlog, client team and activity, relationship lending history, ‘principalling’, key transactions, as well as franchise accretion. At the firm-wide level, it takes into consideration ROE, diluted earnings per share, book value per share, net earnings, net revenues, spending on compensation, the proportion of revenues that are spent on compensation, and non-compensation spending.
Deferral policy? Stock bonuses are deferred over three years, with amounts vesting equally on the first, second and third anniversaries of the award date. However, even after stock bonuses have vested, individuals are also required to retain 50% of their restricted stock units for up to five years.
Number of code staff in the UK in 2014: 529 (compared to 121 in 2013 and 115 in 2012).
Average salary (fixed remuneration) paid to each member of UK code staff in 2014: $903k (£611k). This was up from $721k in 2013 and $749k in 2012.
Average non-stock (cash) bonus paid to each member of UK code staff in 2014: $286k (£194k). Down from $879k in 2013 and $1m in 2012.
Average value of restricted stock bonus paid to each member of UK code staff in 2014: $834k (£565k), based on January 2014 share price. Down from $3.4m (£2.2m) in 2013.
Total value of sign-on bonuses paid during 2014: 31,000 restricted stock units were paid to one person. This equated to $5.5m based on the January 2014 share price.
Total average compensation for Goldman Sachs code staff in 2014: $2.3m (£1.6m).
Other items of note: In 2014, Goldman specially asked Semler Brossy to look at pay for its 400 partner MDs.
Distribution of compensation among code staff at Goldman Sachs in 2014:
2. Pay at J.P Morgan in the UK (in 2014)
Which external pay consultant does J.P. Morgan use? Not stated.
Criteria used to determine pay at J.P. Morgan’s investment bank? Financial results, risk and control outcomes, client/customer goals (where appropriate), people and leadership objectives.
Deferral policy? For 2014, Managing Directors at J.P. Morgan were subject to a 35% minimum deferral irrespective of their level of compensation. Restricted stock units vest over three years, but vesting is skewed towards the end – 50% vest in year two and 50% vest in year three.
Number of code staff in the UK: 586 in 2014. Up from 209 in 2013,126 in 2012.
Average salary (fixed remuneration) paid to each member of UK code staff in 2014: $713k (£484k). Up from $455k (£297k) in 2013 and £326k in 2012.
Average non-stock (cash) bonus paid to each member of UK code staff in 2014: $162k. Down from $404k (£264k) in 2013 and £361k in 2012.
Average value of stock bonuses awarded to each member of UK code staff in 2014: $508k.
Total average compensation for J.P. Morgan UK code staff in 2014: $1.4m (£950k).
Distribution of compensation among code staff at J.P. Morgan in 2014:
3. Pay at Citi in the UK (in 2014)
Which external pay consultant does Citi use? Frederic Cook & Co.
Criteria used to determine pay at Citi? At the individual level, Citi rewards staff for ‘common purpose’, ‘ingenuity’ (defined as ‘enhancing clients’ lives through innovation that harnesses the breadth and depth of our information, global network, and world-class products,’) ‘leadership’, and ‘responsible finance’. It’s also updated its evaluation process so that control personnel feed into the performance evaluations of material risk takers.
Deferral policy? Under the bank’s ‘Capital Accumulation Plan’ Citi’s deferred compensation usually pays out over four years. However, Citi also offers ‘Performance Share Units’, which only vest at the end of a three-year period.
Number of code staff in the UK: 612, compared to 182 in 2013 and 190 in 2012. 388 are in Citigroup Global Markets.
Average salary (fixed remuneration) paid to each member of UK code staff in 2014: $601k (£408k), down from $802k in 2013 and $834k in 2012. In Citigroup Global Markets, salaries are slightly higher, at an average of $654k for code staff.
Average non-stock (cash) bonus paid to each member of UK code staff in 2014: $307k across the bank, $342k in Citigroup Global Markets.
Average value of deferred stock and deferred cash bonus paid to each member of UK code staff for 2014 (includes vested outstanding and deferred pay): $283k (£192k). Down from $1m in 2013.
In Citigroup Global Markets, the average stock bonus was $322k for 2014.
Total average compensation for Citi UK code staff in 2014: $1.2m (£810k) across the bank. $1.3m in Global Markets.
Total value of sign-on bonuses paid in 2014: $1.2m (£830k), down from $3.1m (£2.14m) in 2013 and $6.3m (£4.36m) in 2012.
Distribution of compensation among code staff at Citi in 2014:
4. Pay at Bank of America across the EU (in 2014)
Which external pay consultant does BAML use? Farient Advisors LLC.
Criteria used to determine pay at BAML? BAML staff are awarded bonuses based upon their financial performance and non-financial performance. Financial performance includes corporate-wide measures, line of business, product results. Non-financial measures include: quality and sustainability of earnings, successful implementation of strategic initiatives, adoption of risk culture/adherence to risk framework and other ‘core values and operating principles.’
Deferral policy? Longer term equity-based pay awards are deferred over three years and must be retained for a further six months after vesting.
Number of regulated staff across the EU: 389
Average salary (fixed remuneration) paid to each member EU regulated staff in 2014: $636k
Average non-stock (cash) bonus paid to each member of UK code staff in 2014: $80k.
Average value of deferred stock and deferred cash bonus paid to each member of UK code staff in 2014: $526k.
Total average compensation for BAML EU-regulated staff in 2014: $1.2m (£810k) across the bank.
Total value of sign-on bonuses paid in the EU in 2015: $4.2m, spread between two people.
Distribution of compensation among code staff at BAML in 2014:
5. Pay at Morgan Stanley International (in 2014)
Which external pay consultant does Morgan Stanley use? Not stated.
Criteria used to determine pay at Morgan Stanley? On an individual basis, Morgan Stanley looks at contribution to revenue and profitability (whilst taking risk into account), teamwork, management abilities (including the ability to attract and retain core talent), at technical skills, adherence to core franchise values and business principles and policies and at market conditions.
Deferral policy? Morgan Stanley pays deferred cash bonuses spread over three years. It also pays stock bonus awards which vest after six months and Long Term Incentive Programme Awards which vest after four years – but only if minimum performance conditions relating to the company’s stock have been met.
Number of code staff in the UK? 383, up from 116 in 2013.
Average salary (fixed remuneration) paid to each member of UK code staff in 2014: $781k (£530k), up from $600k (£392k) in 2013.
Average non-stock (cash) bonus paid to each member of UK code staff in 2014: $393k (£267k), up from $234k (£153k) in 2013.
Average value of deferred stock bonus in 2014: $297k (£202k)
Total average compensation for Morgan Stanley UK code staff in 2014: $1.5m (£1m).
Total value of sign-on bonuses paid in the UK in 2014: £3.4m spread between eight people, up from zero in 2013.
Distribution of compensation among code staff at Morgan Stanley in 2014:
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