And here’s what he’s doing about it! Read more »
Bonus Watch ’13: Not Everyone Is Satisfied With The Number Credit Suisse Wrote Down And Slid Across The TableBy Bess Levin
It’s probably good news that “European Union finance ministers reached a landmark deal early Thursday that would bring many of the continent’s banks under a single supervisor,” but of course it wouldn’t be Europe without some self-evidently bad ideas for financial regulation, so today we also get this:
Bankers’ bonuses in Europe would be capped at two times fixed salary under a tentative EU agreement that would mark the most severe crackdown on pay since the 2008 financial crisis.
The European parliament and negotiators for member states drafted a deal in Strasbourg on Thursday that imposes a 1:1 bonus to salary ratio, which can be increased to 2:1 with the backing of a supermajority of shareholders.
Still being negotiated, can change, etc. One could perhaps imagine that once there’s a single eurozone banking supervisor, the warm glow of supervision will shield eurozone banks from this sort of chaotic meddling from the European parliament. Or not, who knows.1
This is mostly bad for the usual reasons: keying bonuses to base salary, without capping base salary, increases fixed costs and thus risk, while reducing bankers’ incentives to actually do a good job at whatever they’re supposed to be doing. A first-best comp scheme would probably involve huge bonuses to reward bankers for doing the things you want them to do; smaller bonuses is perhaps a better scheme than huge bonuses to reward bankers for doing the thing you don’t want them to do, but it’s not a particularly impressive approach. Read more »
Bankers’ pay needs to be curbed further to reflect the risk of a bank failure many years after a bonus has been awarded, the Bank of England (BoE) said before the annual bonus season begins next month. The European Union has already introduced curbs on bankers’ bonuses after huge payouts were criticized for helping to create the climate that led to the financial crisis in 2008. Bank shareholders, too, expressed dismay at large bonuses for bank employees despite poor returns. Measures taken so far include the requirement for a portion of bonuses to be paid in shares over several years, but the BoE’s Financial Policy Committee (FPC) believes that these do not go far enough. Chunks of a bonus are typically deferred for only three years. The FPC, which takes over British bank regulation next year, said that this is not sufficient to deter bankers from taking risky decisions that can have an adverse impact many years later. [Reuters]
If you’re looking for a cheerleader, go bark up another tree.
“Say you want to be out ahead of it and give a lot of speeches and talk about all the good we’re doing,” Gorman said today at an industry conference in New York. “And then some trader does some stupid thing like this guy at UBS did and he’s in jail and all bets are off,” Gorman said. He was referring to Kweku Adoboli, the UBS AG trader convicted of fraud this month in the largest unauthorized trading loss in British history…Traders at New York-based Morgan Stanley had too much latitude in the past, “what I call having an outsized sandbox,” Gorman, 54, said at the conference, which was sponsored by the Securities Industry and Financial Markets Association. “Until we can be really confident we’ve got discipline around the sandboxes, I think you have to be really careful not to be holier than thou,” Gorman said. “We’re going to be in the doghouse for a while.”
Back in October, new Citi CEO Mike Corbat’s personal trainer predicted that Vikram Pandit’s replacement would waste no time whipping the place into shape, just like he whipped himself into shape in 2010 with the fat-torching Spartacus Workout. Whereas someone else might’ve let the bank have until the new year to get serious, allowing for one last season of pigs in a blanket and egg nog and late night pizza and entire gingerbread houses, Citi’s day’s of “I’ll start the diet tomorrow” are over. Corbat’s transformation plan starts TODAY. Read more »
Bonus Watch ’12: Whole Bunch Of Financial Services Employees Will Get Nothing, May Or May Not Like ItBy Bess Levin
Santa will leave many bankers and traders empty-handed this holiday season. One in five Wall Streeters won’t get a bonus for 2012, according to a closely watched compensation study set to be released next week. That figure is up sharply from last year, when roughly 13% of bonus-eligible employees got no added year-end pay, according to Options Group, a New York executive search and consulting firm that produced the study. In terms of overall compensation, some staff in stocks and derivatives trading are likely to be the hardest hit, as their compensation is set to shrink by at least 20% for the third year in a row, the study found. A stock trader who is a managing director at a securities firm stands to take home as little as $550,000, down 31% from 2011. Sluggish deal activity means investment bankers also could receive a 13% pay cut, the study found. [WSJ]
Uncle Vik may or may not be receiving a little something extra for his trouble, depending on how generous Citi is feeling. Read more »
Now that we’re nearly halfway through October, several items on your to-do list will have undoubtedly been upgraded in urgency: scouring Starbucks near and far for for Pumpkin Spice lattes before it’s too late, and being dead serious in telling the baristas at the various locations claiming unavailability that they’ve ruined your life; coming up with a Halloween costume that’s at once slutty and topical; and discussing bonus expectations. Despite the fact that bank CEOs and people who speak on their behalf have suggested (by saying outright) that pay will come down this year, and that anyone who still has a job in 3-4 months should consider that their bonus, some on Wall Street are apparently predicting they’ll do pretty well for themselves this year and very well circa 2015. Read more »