Ushering in good news for hundreds of its senior officials in Europe, Citigroup Inc. ( C ) is in the process of enhancing their fixed pay in order to make up for the European Union's (EU) cap on their bonuses. The news was first published by The Financial Times .
The move aims to compensate the officials for what they lose as a consequence of the latest EU rules. Under such rules banks are restricted to pay employees bonuses over 100% basic annual salary, or 200% after shareholders' approval.
In the recent weeks, Citigroup has forwarded letters to its senior officials in Europe notifying them that in addition to their salaries, they will receive fixed monthly payments. The bonus cap affected over 600 bankers of the company who will be given these allowances. Notably, to address the bonus cap issue, Citigroup has already paid similar allowances in the recent past to around 300 of these employees.
The latest pay amendment of Citigroup's European bankers has been designed to commensurate with the overall remuneration and a similar combination of cash and shares of the U.S. and Asian staff holding similar positions. According to a senior Citigroup banker, "We don't want people to have geographic preferences based on compensation."
Others with Similar Moves
Other financial bigwigs that have initiated such allowances include The Royal Bank of Scotland Group plc ( RBS ), Barclays plc ( BCS ) and Bank of America Corp. ( BAC ). These have paid allowances either in cash or shares.
The European Banking Authority ('EBA') has expressed doubts whether these allowances can come under the purview of fixed pay. The EBA is expected to draft related guidelines later this year.
Bonus payment to key banking staffs has drawn attention of public and the media, particularly following the financial crisis. This perhaps led to the implementation of the latest rules. However, the issue still remains debatable as some argue that the impact of the EU rules would push up bankers' fixed pay, which ultimately will weigh on banks' expense base. Notably, the UK government is contesting the bonus cap rules in the European courts.
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