JP Morgan to scrap bonus cap for London staff - report

JP Morgan Chase is to scrap Brussels’ cap on bonuses for its UK bankers, it was reported on Wednesday.

The European Union introduced strict rules on banker bonuses in 2014 in response to the 2008 financial crisis. In particular, it banned material risk takers working in lenders’ EU operations from earning more than twice their fixed pay in variable compensation.

However, according to Sky News, JP Morgan has decided to raise its bonus cap threshold from two times fixed pay to ten times. The UK government announced last year that it would scrap the bonus cap as part of a post-Brexit shake-up of financial rules.

As a result, a UK-based JP Morgan banker or trader earning £2m per year would now be eligible for a bonus of up to £20m, rather than up to £4m, Sky noted.

A JP Morgan spokesperson told the broadcaster: "We believe we have developed one of the most attractive and balance pay structures in the industry.

"Fixed pay will remain very competitive, and we will have ample room to reward the highest performers appropriately."

Sky added, citing an unnamed source, that bonuses would continue to be discretionary and driven by performance on a year-to-year basis.

The move follows a similar one by Goldman Sachs, which last month increased its bonus cap from two times to 25 times. However, unlike JP Morgan, its fixed pay allowances are being largely removed, meaning bonuses will likely be calculated from a lower base than those at JP Morgan.

Sky said JP Morgan had decided to retain a "significant proportion" of the fixed pay allowances that are used to calculate eligible employees’ maximum bonuses.

Fixed pay income is by its nature more reliable than bonuses. Many lenders have also hiked salaries in recent years to ensure UK operations remain competitive despite the cap.

JP Morgan employs around 14,000 in the UK.