Britain’s Barclays is to give senior bankers additional monthly payments next year to counter the industry cap being introduced by the EU to curb the excessive risk-taking it says helped to trigger the 2008-2009 financial crisis.
Under the plan, Barclays is to introduce a “role-based pay” element — on top of base salary and variable bonuses — for employees occupying specific risk-taking roles.
Other banks are expected to consider adopting a similar structure as a way to keep some flexibility on pay and still come in under the EU bonus rules, which come into effect in January and affect all staff for EU banks and the European staff of those outside the trading bloc.
An internal memo sent to Barclays investment bankers on Thursday said that the new element of fixed pay would be set at the start of the year for any employee affected by the EU’s new rule, which caps bonuses at double base salary.
“The introduction of role-based pay allows Barclays both to comply with the legislation and offer market-competitive compensation to employees,” a copy of the memo seen by Reuters said.
“This outcome has been reached following consultation with our regulator and major shareholders,” it added.
The British government and many banks in London have opposed the cap, saying it will force up fixed salaries, provide less scope to claw back pay and could result in staff joining rivals not constrained by the rules.
Barclays is expected to be affected most among Britain’s lenders because it has the biggest investment bank. However, EU rivals such as Deutsche Bank and other overseas banks with big London operations, such as JPMorgan, Goldman Sachs and UBS, will also be affected.
Authorities have not said how many staff will be affected. It could be all those earning more than 500,000 euros (US$676,200) a year and is expected to extend beyond the current definition of “code staff” in Britain, which covers all people in significant risk-facing positions.
Barclays’ new plan is expected to affect hundreds rather than thousands of staff, a person familiar with the matter said.
Last year the bank had 393 code staff and 1,338 staff earning more than ￡500,000 (US$810,350) a year.
The new “role-based” payment will not be included in pension calculations and could rise or fall depending on demand for a particular role, or it could be removed if the employee moves to a different role, the Barclays memo said.
The bank will ask for shareholders to approve paying the maximum bonus of two times fixed pay at its annual shareholder meeting in April, the note added.
The EU is also considering allowing bonuses of 250 percent of salary, provided much of it is deferred.