You may not believe this, but a few weeks ago I spoke to a business school class about the financial industry, and a student asked me “what would you say to someone who’s considering a career at an investment bank?” Somehow it did not occur to me to congratulate her on her humanitarian impulses. Instead, I suggested that there are two possible futures for the big banks. In one, the various efforts to “make banking boring” – more onerous capital and liquidity regulation, clearing and futurization of derivatives, bans on prop trading, calls to break up big banks, and so forth – would create amazing opportunities for people with the intelligence, motivation, and shall we say aesthetic sensibilities to find new ways to accomplish their non-boring goals within a shifting framework. Just like changes in the tax code create work for smart tax lawyers, so changes in banking regulation and structure create opportunities for smart bankers to steal a march on their competitors.1
Swiss bank annual earnings are here so we might as well check in on what they’re up to with comp. You and I may think of comp in pretty straightforward ways – if you did good, and your employer did good, you get paid well, and if not not – but Credit Suisse and UBS take a delightfully arcane wheels-within-wheels approach, constantly changing how they pay employees to send signals, fine-tune incentives, and optimize regulatory capital. I suppose if I worked there I’d be so pleased by the complexity of the edifice that I’d be okay with otherwise disappointing pay. Current employees may disagree.
Anyway we talked about UBS the other day; per the FT they are handing out bonuses in the form of high-trigger CoCo bonds that get written down to zero if UBS’s regulatory capital falls below 7 percent. The bonds “will pay a market-based interest rate” though that’s not saying much; any interest rate is “market-based” in the sense that it can be decomposed into, like, Treasuries plus a number. Presumably the number here is high.
Bonus Watch ’13: Not Everyone Is Satisfied With The Number Credit Suisse Wrote Down And Slid Across The TableBy Bess Levin
And here’s what he’s doing about it! Read more »
Recent events might have had you thinking otherwise, but Credit Suisse does more than just layoff its employees– sometimes it promotes them, too! Earlier this morning, in fact, the Swiss bumped a whole bunch of guys and girls up to managing director. And even though it’s not grundle-to-face level exciting, it’s still something. Read more »
Light your candles, hang some mistletoe, ring in 2013, and then come back January 2 prepared to clear out your desk. Read more »