RPT-Goldman, JPMorgan and peers must rethink pay to meet EU cap

* Top banks paid up to 5.4 times fixed salary in bonuses

* EU to cap bonus at maximum two times fixed salary

* Top Goldman staff paid $4.67 million each for 2012

* Some banks seek "creative solutions"

By Steve Slater

LONDON, Jan 7 (Reuters) - Investment bankers working inLondon for many top U.S. and European groups face a majoroverhaul of their pay structure, as their recent bonuses havefar exceeded new EU rules which will curb payouts to be madethis time next year.

JPMorgan, Goldman Sachs, Bank of America, Barclays and Credit Suisse paidbonuses to leading UK staff which ranged from 3.3 to 5.4 timestheir fixed pay for 2012, according to data disclosed by thebanks and Reuters calculations.

Big changes will therefore have to be made to meet theEuropean Union rules which cap bonuses at the same level asfixed pay, or double if the bank's shareholders approve.

Bankers' bonuses remain a hot topic among politicians andthe public. Many blame their high levels for encouragingreckless risk-taking that led to the 2008/09 financial crisisand a series of mis-selling and misconduct scandals.

Banks usually pay staff bonuses in January or February basedon their performance the previous year. So while the EU curbscame into force this month, they will be applied first tobonuses for 2014 to be handed out early next year.

Major banks continued to reward their top risk-taking staffheavily on performance in bonuses for 2012, their regulatorydisclosures have showed in the last few weeks.

Goldman Sachs paid its top 115 UK staff an average of $4.67million each for 2012, an increase of three-quarters from theaverage for 2011 and the highest of the major banks. The bank'searnings and revenues jumped in 2012 from 2011.

About $350 million of Goldman's total bill for these bankerswas paid in bonuses, or 5.2 times what it gave in fixed pay -jumping from a ratio of 2.2 times in 2011 - according to Reuterscalculations.

Banks are expected to increase fixed pay and reduce bonusesto meet the new rules, although Barclays, HSBC and others are coming up with innovative ways to cope.

Barclays plans to give its senior bankers additional monthlypayments. The new "role-based pay" element - on top of basesalary and variable bonuses - will be for employees occupyingspecific risk-taking roles.

Most of this will be in cash, although top-up payments tomembers of its executive committee may be in shares, followingdiscussions with shareholders, a person familiar with the mattersaid.

HSBC plans to hand new share awards to about 1,000 of itstop staff, an industry source said, adding that the plan wouldhave characteristics of variable pay but qualify as fixed pay.

"A LOT OF CREATIVITY"

JPMorgan and others are considering similar shifts toBarclays and HSBC to keep some flexibility on pay and meet thebonus rules, industry sources have said.

"It appears there's a lot of creativity going on," saidPeter Hahn from London's Cass Business School.

About 10,000 staff are expected to be covered by the rules.Bankers earning more than 500,000 euros a year will be affected,although the EU banking watchdog watered down requirements lastmonth and said some staff earning that amount could be excluded.

A number of other banks also bust the new rules for 2012,according to data released for their UK "code staff", whichcovers all people in significant risk-taking positions.

JPMorgan paid 126 code staff an average of 2.09 millionpounds ($3.4 million), and variable pay was 5.4 times fixed pay.Bank of America paid its code staff an average of 1.5 millionpounds, with variable pay 5.4 times fixed pay. Its seniormanagers received 12 times more in variable pay than salary.

The British government is fighting the rule in Europe'shighest court and many banks in London have opposed the cap,saying it will force up fixed salaries, provide less scope toclaw back pay and encourage staff to move to banks in the UnitedStates or Asia which are not constrained.

Among other leading banks, top UK staff at Credit Suisseearned an average of $2.28 million in 2012, up 8 percent from2011, and bonuses were 3.3 times fixed pay, according to datareleased just before Christmas.

The figure for British-based Nomura bankers was anaverage of $2.37 million each in the year to March 2013, andbonuses amounted to 3.1 times fixed pay.

Barclays had previously disclosed it paid its 393 code staffan average of 1.37 million pounds each in 2012, and variable paywas 4.3 times fixed pay, while HSBC paid its code staff anaverage of $1.68 million each in 2012, and variable pay was 2.7times fixed pay.

Hahn at Cass said it was "disappointing" that overall paylevels were not coming down, as returns for shareholders at manybanks are still lagging the cost of equity.

"This is an industry that still needs to deal with costcutting...it's still an industry that appears to be paying as ifit's a high return business, and it isn't," Hahn said.

Banks either declined to comment, could not immediately bereached, or said they were considering their options in regardto future pay structures.

The new rules cover pay for 2014, but will not affectbonuses for 2013 that will be handed out in the next two months.Bonus details will start coming out from U.S. banks reportingresults from next week, and are expected to be flat to slightlyhigher across the industry.

Just over 3,500 bankers in Europe earned 1 million euros ormore last year, and more than three-quarters of those were basedin Britain, partly reflecting London's dominance as a financialhub and the European hub for global banks.

PAY FOR UK BANK STAFF

BANK NO. OF UK AVG CODE VARIABLE

CODE STAFF STAFF PAY VS FIXED Goldman Sachs* 115 2.87 5.2x JPMorgan 126 2.09 5.4x Citigroup 190 1.53 2.0x Bank of America 121 1.5 5.4x Credit Suisse 165 1.4 3.3x Nomura** 94 1.46 3.1x Barclays 393 1.37 4.3x StanChart 113 1.23 2.8x Morgan Stanley 113 1.07 2.2x HSBC 314 1.04 2.7x UBS 188 0.8 1.9x RBS 368 0.7 1.3x