Bank of America Corp. plans to trim the cash component of investment bankers' bonuses to about 15% as politicians seek to rein in the payouts, four people familiar with the matter said this week.
Senior bankers will get 5% to 15% of their bonus in cash, compared with about 50% at Bank of America last year, said the people, who declined to be identified because the talks are private. Junior bankers may get 25% of their bonus in cash, two of the people said. The rest will be paid in shares and cash over time depending on the stock's performance, the people said.
Bank of America repaid its $45 billion of government rescue funds in December, freeing it from federal pay restrictions. The Charlotte banking company said last week that it expects to pay record bonuses to some employees while keeping the overall cost of compensation below that of previous years.
"Many of the banks would love to pay more in stock and less in cash as it ties bankers in for the long term," said Philip Keevil, a senior partner at the Compass Advisers LLP investment bank in London and a former head of Citigroup Inc.'s European mergers team. "It causes no pain to senior guys at the top of the banks. They have had many years of very high earnings, so they don't need that cash."
Bank of America will determine how much cash to set aside to cover bonuses at the end of this month and pay them in February, one of the people said. A spokeswoman for the company declined to comment.