Vikram Pandit

New York, Jan. 1: Wall Street is hitting its bankers where it hurts — in the wallet.

Citigroup’s chief executive and chairman said on Wednesday they would forgo their bonuses for 2008 and slash the amounts paid to other senior bankers, joining a growing list of financial executives who are passing up some pay.

In a memo to bank employees, Vikram S. Pandit, Citigroup’s India-born chief executive who took over in December 2007, said he and Winfried F.W. Bischoff, the bank’s chairman, would not take year-end rewards.

“The harsh realities of 2008, primarily our earnings results, mean that our bonus pool is dramatically lower than last year,” Pandit wrote about a year in which the bank has so far announced more than $10 billion (Rs 48,000 crore) in losses. “The most senior leaders should be affected the most.”

But Pandit’s remarks may strike some as several weeks late, if not a few million dollars short. Citigroup, one of the biggest recipients of taxpayer money, has taken in $45 billion in capital from the government’s bailout funds.

Nearly every chief executive on Wall Street has indicated that he will decline a 2008 bonus, with Kenneth D. Lewis of Bank of America and John Stumpf of Wells Fargo being the holdouts so far.

Other banks have clamped down on pay even more than Citigroup under pressure from Congress, regulators and investors.

Wachovia, for example, said it was slashing compensation not just in the executive suite, but all the way down through its ranks.

“What’s different about this year versus last year is that the US taxpayer is part of the equation, so how things appear is important,” said Rakesh Khurana, a professor at Harvard Business School.

On Wall Street, compensation is always a hot button. But now the tension is heightened: pay too much and risk a political backlash; pay too little and risk losing talented employees. The prospect of losing workers to hedge funds and private equity firms has helped drive up pay in the industry in past years.

“The argument is always made about this excessive compensation, that it’s necessary to keep these people,” said Richard Cellini, a senior vice-president at Integrity Interactive, a consulting firm in Waltham, Massachusetts. “That will now be tested, and I’m not sure if there’s anywhere for them to go.”

Many banks, like Citigroup, are making the biggest reductions to their senior executives’ pay. Bonuses at the top of Citigroup will be down at least 40 per cent for 10 members of its senior leadership team, according to a corporate filing released on Wednesday.