Wall Street banking giant Citigroup is poised to eliminate the EU-imposed bonus cap for hundreds of its top London staff.
This decision follows similar actions by other leading financial institutions in response to changes in regulatory requirements. While the precise figures remain undisclosed, Citigroup’s top investment bankers are expected to see a substantial increase in their potential earnings relative to their base salaries.
Citi’s Response to Regulatory Changes
A spokesperson for Citigroup said:
“We have been looking at compensation ratios following the removal of the bonus cap and we will communicate any proposals to our employees in due course.”
This statement underscores the bank’s commitment to aligning its compensation practices with the latest regulatory adjustments.
Industry-Wide Shift in Compensation Structures
Citigroup’s move is part of a broader trend among major financial institutions to revise their compensation structures. Last week, Barclays announced to its staff that its material risk-takers (MRTs) could now earn bonuses up to 10 times their base salary, a significant increase from the previous 2:1 ratio.
Need Career Advice? Get employment skills advice at all levels of your career
Similarly, JPMorgan Chase and Goldman Sachs have removed their existing limits on bonuses in recent months. Goldman Sachs has set a new benchmark, allowing top staff to earn bonuses up to 25 times their annual salary. Morgan Stanley is also planning to introduce a new cap but has yet to disclose specific details.
Regulatory Background and Implications
The UK financial regulators’ decision last October to lift the requirement for banks to cap variable pay at 100 percent of base salary for MRTs—or up to 200 percent with shareholder approval—has paved the way for these changes. The EU introduced this cap in 2014 to curb excessive risk-taking following the financial crisis.
Banks initially responded to the EU’s cap by introducing role-based allowances, effectively increasing the fixed pay component for MRTs. However, UK regulators expressed concerns that these allowances could hinder banks’ ability to control costs during periods of weaker financial performance.
Ensuring Responsible Compensation Practices
Despite the removal of the bonus cap, banks continue to face stringent measures to ensure their pay policies do not encourage undue risk-taking. The Financial Conduct Authority’s remuneration code remains a critical regulatory framework for maintaining responsible compensation practices within the financial sector.
