HSBC shifts to Wall Street-style bonus system, slashes fixed-pay agreements

SINGAPORE, 12 OCTOBER 2026 —

HSBC Aligns with Wall Street: Phasing Out Fixed-Pay Allowances in Global Shift to Performance-Based Remuneration

The move follows recent regulatory changes in the UK that allow higher variable pay, enabling British banks to better compete with their US counterparts. HSBC’s decision comes as the lender accelerates its restructuring agenda, which has already seen the sale or closure of multiple business units and hundreds of job cuts since Elhedery assumed leadership in September 2024.

The shift in compensation philosophy is expected to strengthen the bank’s ability to attract top talent while better linking executive pay to performance—a strategy increasingly adopted by global financial institutions.

The decision was outlined in an internal memo obtained by Bloomberg News, which states that HSBC will phase out fixed-pay allowances in favor of a greater proportion of bonuses tied to performance. A spokesman for the bank confirmed the change, emphasizing that the new approach would “strengthen our ability to pay for performance, better differentiate, attract the best talent, and recognise” top performers.

This aligns with broader industry trends, particularly after Barclays announced in July 2026 that it would shift more of its employees’ compensation toward variable pay following the UK’s 2025 regulatory reforms. Those reforms relaxed restrictions on variable compensation, allowing banks to offer more performance-linked bonuses to enhance domestic competitiveness.

Fixed-pay allowances at HSBC, introduced over a decade ago as a response to EU rules capping banker compensation, had taken the form of immediately vested share awards subject to a retention period. These payouts were non-pensionable and capped at a maximum of 150% of an individual’s base salary. However, the UK’s updated regulations have reduced the necessity for such allowances, enabling HSBC to realign its compensation structure more closely with global standards.

In its 2025 annual report, HSBC disclosed that variable pay amounted to US$3.93 billion (S$5.03 billion), a 10% increase from the previous year, while gross compensation and benefits totaled US$21.5 billion. The bank’s decision reflects a strategic pivot toward greater flexibility in remuneration, particularly as it seeks to enhance its appeal to high-performing executives in an increasingly competitive financial services landscape.

Elhedery’s leadership has been marked by aggressive restructuring, including the sale, closure, or merger of several business units and a significant reduction in headcount. His cost-cutting initiatives have also extended to long-standing employee benefits, such as education allowances and private club membership subsidies—particularly in HSBC’s Hong Kong operations. In September 2026, the bank ended a long-standing policy covering 95% of school fees for the children of new hires and senior staff relocating to Hong Kong.

Existing employees in the "band-three" category and managing directors who already received the benefit were grandfathered into the arrangement. Additionally, HSBC has discontinued a perk worth up to HK$200,000 (S$32,645) that subsidized private club access for its bankers in the city, further trimming costs in one of its most expensive operational hubs.

The restructuring has not been without impact on HSBC’s financial performance. Since Elhedery took over as CEO, the bank’s share price has more than doubled, reflecting investor confidence in his turnaround strategy. The compensation overhaul is a key component of this effort, positioning HSBC to remain competitive in a region where talent retention and attraction are critical.

The move also signals a broader industry trend, as European banks increasingly adopt US-style remuneration models to mitigate the effects of regulatory constraints and better align incentives with long-term performance.

Regional implications of HSBC’s decision extend beyond compensation structures, particularly in Asia, where the bank operates a significant portion of its workforce. The elimination of fixed-pay allowances could influence labor dynamics in hubs like Hong Kong and Singapore, where financial institutions compete fiercely for top talent.

For Malaysian investors and financial professionals, the shift underscores the growing pressure on regional banks to adopt more flexible and performance-driven compensation models, potentially setting a precedent for other institutions in the ASEAN region. The move may also prompt discussions about the broader impact of regulatory changes in the UK on global financial markets, particularly as other jurisdictions consider reforms to their own compensation frameworks.

Stakeholders within HSBC have not yet publicly commented on the specifics of the compensation overhaul, though the bank’s internal communications suggest a focus on transparency and alignment with performance metrics. Employees in affected roles may face adjustments to their remuneration packages, with bonuses becoming a more prominent feature of their earnings.

The transition to the new system is scheduled to begin in January 2028, allowing for a phased implementation that minimizes disruption while ensuring compliance with regulatory requirements.

The timing of the announcement coincides with ongoing discussions in Malaysia and other Southeast Asian markets about the need for financial institutions to balance regulatory compliance with the ability to attract and retain skilled personnel. As HSBC navigates this shift, its actions could serve as a case study for how global banks adapt to changing compensation landscapes, particularly in light of evolving regulatory environments.

The bank’s decision to prioritize performance-based remuneration may also resonate with Malaysian policymakers and industry observers, who are increasingly attentive to how compensation structures influence financial stability and market competitiveness in the region.

Related: HSBC Holdings Plc · Georges Elhedery