U.K. Pushes Pay Changes on Foreign Banks Treasury Threatened to Pull Busines

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* OCTOBER 15, 2009

U.K. Pushes Pay Changes on Foreign Banks
Treasury Threatened to Pull Business From Firms That Refused to Join British



By SARA SCHAEFER MUñOZ

LONDON -- Eleven foreign banks that operate in the U.K. agreed to change their pay in line with their British peers after a tense meeting in which the U.K. Treasury warned that non-compliance would result in the banks losing government business.

In a meeting Wednesday with U.K. Financial Services Secretary Paul Myners that was described by participants as "contentious" at times, the banks agreed to pay changes based on those outlined by the Group of 20 nations. The changes include allowing a cut in bonus payouts for poor performance and deferring part of compensation for some over three years.

The banks are Citigroup Inc.; Goldman Sachs Group Inc.; J.P. Morgan Chase & Co.; Deutsche Bank AG; Nomura Holdings Inc.; UBS AG; Morgan Stanley; Bank of America Corp.'s Bank of America-Merrill Lynch unit; BNP Paribas SA; Credit Suisse Group AG; and Société Générale SA.


U.K. Prime Minister Gordon Brown's Labour party faces an election that must be called by spring, and stemming banker pay has been a key message of his party. Tensions erupted in the meeting when some of the banks learned that the rules, which take effect in 2010, would apply to bonuses related to 2009 performance. A representative from J.P. Morgan, for example, said he wasn't authorized to sign off on rules relating to 2009, according to people familiar with the matter, but later got permission to do so.

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Many of the banks said they already employ such measures in their remuneration policies. Some were rankled by the meeting and the agreement, which they saw as a political stunt, say people close to the matter. Lord Myners told the banks that refusal to comply would mean the government could cease to do business with them. He also said if any tried to take advantage of "wiggle room" in the requirements, the Treasury would push for legislation to strengthen them.

Write to Sara Schaefer Muñoz at sara.schaefer@wsj.com
Treasury Threatened to Pull Business From Firms That Refused to Join British Peers