The UK's financial services watchdog is to hit bankers earning more than £1m a year with a new tax that will apply to this year's bonuses, as it emerged that the US investment bank JP Morgan Chase is to defy calls for restraint by paying out bumper bonuses for 2009.
The revelations are likely to further ensure that lucrative rewards for bankers remain in the political spotlight ahead of the UK general election before the end of June. Over the weekend, Boris Johnson, the Mayor of London waded into the ongoing row by saying in a letter that up to 9,000 of the UK finance industry's top brass could flee these shores because of taxation on bonuses.
Last year, the Chancellor, Alistair Darling, unveiled plans to a windfall tax of 50 per cent on bankers' bonuses over £25,000 in the pre-Budget report. The Financial Services Authority is thought to have up to 5,000 City bankers in its sights with the new restrictions that will apply to bonuses being paid in the coming weeks for 2009. The FSA declined to comment yesterday. But under its remuneration code proposals, any employee of a UK bank that who earns a seven-figure package will be forced to defer 60 per cent of their bonus for three years – with shares being a key way of doing so.
The financial watchdog first published details of its remuneration code in August. But the FSA's guidance was reported to have applied only to employees of a bank involved in the direct running of the financial institution. This would have covered those earning more than £500,000 a year, but not high-flying traders and other senior executives.
It is thought that some banks have tried to circumvent the FSA's intention for the code to apply to "people with significant influence" and the regulator has now tightened it up to cover individuals earning more than £1m in salary and bonuses.
Meanwhile, JP Morgan – which is forecast to report annual pre-tax profits of about $15bn on Friday – is reported to be set to deliver compensation, benefits and salary of $29bn for 2009. But any such payment will include payouts and benefits to all staff, including those in its retail branches. The jump in total remuneration at JP Morgan, which declined to comment yesterday, reflects a 50,000 increase in staff.Reuse content