Now that we know for sure that JPMorgan and Goldman Sachs are ditching the EU bonus cap, thus inflating bonuses in London and cutting salaries with varying degrees of enthusiasm, we can make some educated guesses about what will happen next when they pay their top staff .
Have your morning coffee ☕ in your inbox. Register here.
The bonus cap, which limited bonuses to no more than double salaries, only applied to material risk takers (MRTs). We know what Goldman and JPMorgan have paid MRTs in the past because the banks are required by European regulations to disclose the average salaries and average bonuses of their MRTs.
Not everyone is an MRT: the term only applies to people who are able to take significant risks with the company’s capital or to avoid taking those risks. There were 587 “identified employees” (MRTs) in 2023 at JP Morgan Securities, which covers JPMorgan’s UK corporate and investment bank; at Goldman Sachs Group UK, a UK-based Goldman, there were 569 MRTs in 2022 (the latest year for which data is available). Both are only a small part of the whole. – JPMorgan Securities employed 2,159 people; Goldman employed 3,800.
Therefore, when we talk about pay for material risk takers, we are only referring to a section of people at the top – most of them will be managing directors (MDs).
Under the old bonus cap system, people in these counties 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 bonuses in 2023. Of that $1.6 million, $877,000 was salary (and fixed allowances) and “only” $754,000 was bonus.
Goldman Sachs International paid its 569 MRTs an average of $1.4M in 2022, consisting of an average salary + allowance of $847K and an average bonus of $635K.
Now that the UK has freed itself from the EU’s bonus edicts, times are changing.
JPMorgan declined to comment for this article. However, it is understood that JPMorgan now intends to pay bonuses of up to 10 times MRT salaries in London, with fixed pay (salaries and allowances) remaining the same for most people. If salaries remain at $874,000, it means the bank’s top executives in London could receive bonuses of ………..$8.74 million. That’s unlikely to apply to many people: in its latest regulatory filing, JPMorgan revealed that 14 people in the UK earned more than $6.4 million last year.
What about Goldman Sachs? In its indefinite post-bonus cap existence, Goldman plans to pay bonuses that are up to 25 times his London salaries. If salaries in London remain the same, it means Goldman will pay individual bonuses of…$21 million in London. It’s not unimaginable: ten people there earned over $11 million in 2022. However, Goldman has also indicated that it is cutting pay in the new wage reality, so that could be wishful thinking. If Goldman’s London salaries are reduced to match the New York average of $400,000 and bonuses are 25 times salaries, then London bonuses will a maximum of $10 million future. It’s not $21 million, but hey. Goldman Sachs also declined to comment.
Have an insider story, tip or comment you’d like to share? Contact: +44 7537 182250 (SMS, WhatsApp or voicemail). Telegram: @SarahButcher. Click here to fill out our anonymous formor email editortips@efinancialcareers.com. There is also a signal.
Be with us if you leave a comment below this article: all our comments are moderated by human beings. Sometimes these people may be sleeping or away from their desk, so it may take a while for your comment to appear. Eventually it will—unless it’s insulting or offensive (in which case it won’t be.)