European banks pay staff by performance

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European banks are using performance-related pay for 74% of their employees, a survey by JP Morgan Securities shows.

The performance-related amount represented 12% of all staff compensation on average, the survey of 20 banks revealed.

UBS, of Switzerland, relied on performance more than any other bank, using it to determine 48% of staff compensation.

JP Morgan said it believed that many banks had been rapidly increasing the performance-related element, even where they traditionally had egalitarian pay structures.

Share and share option programmes reached 51% of the workforce on average. But there were big differences between the banks.

At the bottom level, BPI of Portugal and Banco Popular of Spain had no plans for such a programme, while at San Paolo IMI and Banca Intesa of Italy, only 1% of staff received shares or options.

UBS, together with Royal Bank of Scotland and Halifax, of the UK, were the most 'sophisticated human resource planners,' JP Morgan said. They had multiple performance-related programmes catering to all levels of staff.

Overall, UK banks had led the pack in introducing or overhauling performance-related schemes in the past few years, JP Morgan said.

Their widespread use of option schemes put their directors' interests in closer alignment with those of shareholders than was the case at non-UK banks.

At all banks covered by the survey, senior executives on average received just under 50% of their pay from incentive compensation schemes.

Performance-related cash bonuses formed 31% of their total pay, share options 11% and shares just 2%. &quotOptions seem to have acquired a growing importance in pay packages,&quot JP Morgan said.

It added that US banks still offered options more widely than their European rivals, but that the gap might narrow in the next few years.

Other types of compensation, such as cars and housing allowance, were more common at UK banks than other European ones.