HSBC pay overhaul sparks industry-wide reset, pressuring peers including Barclays plc

HSBC’s pay overhaul signals wider bank pay reset, putting pressure on peers

LONDON — HSBC is moving to award little or no bonuses to some investment banking and wealth management staff as it adopts a tougher, performance‑driven pay model akin to US rivals, a shift that is reverberating across Europe’s banking industry and drawing attention from competitors such as Barclays. Underperforming employees, including some managing directors, are being identified and may be encouraged to leave after bonuses are paid in the coming weeks as CEO Georges Elhedery tightens compensation to match Wall Street practice while reshaping the bank following his September 2024 appointment.

HSBC is keeping its 2024 bonus pool flat at $3.8 billion but warns that awards will be lower for some corporate and institutional bankers, reflecting a sharper link between pay and performance. The revamp aims to deliver about $3 billion in savings but is driving up short‑term costs, lifting HSBC’s cost‑to‑income ratio to 49.9% in the first half of 2025 from 43.7% a year earlier. Executives describe the push as part of a broader strategy to refocus capital allocation, tighten risk controls, improve returns on tangible equity and raise productivity while maintaining competitiveness in Asia and the Middle East.

For Barclays and other large banks, HSBC’s approach is a cautionary example of balancing pay discipline, talent management and regional strategy. Banks face competing pressures to offer market‑competitive compensation to retain front‑office staff while also cutting costs and improving returns demanded by investors and regulators. The use of tougher bonus criteria and potential forced exits highlights human‑resource and succession challenges that could reshape deal teams, client coverage and product lines across European banks as they adapt to a more performance‑linked model.

Macroeconomic backdrop tightening pressure on margins

Global macro developments are adding strain to bank planning. Rising US Treasury yields, shifts in dollar flows following reports that China is limiting US Treasury exposure, and a heavy US data calendar — including January employment and CPI — influence funding costs, interest margins and risk appetite, factors that directly affect retail and wholesale banking revenue models for institutions such as Barclays.

Near‑term operational focus and regulatory scrutiny

Banks are also watching corporate earnings and regional data — notably the UK’s Q4 GDP — as they update capital allocation and guidance. Ongoing restructuring, asset disposals and reviews of non‑core units at rival lenders underline the operational adjustments and regulatory scrutiny that Barclays and peers must manage while pursuing efficiency and growth.