Bonus Watch '11: European Banking Authority Is Keeping An Eye On Everyone

Author:
Publish date:

Europe has big plans to micromanage bankers' bonuses and the first step of those plans is to figure out how big those bonuses are. And here is the answer! For 2011, anyway, and for bankers who made more than €1mm. It's a report from the European Banking Authority based on their data collection project, in which national regulators were asked to collect data on all bankers within their borders who made more than €1mm.

I've had a go at putting it into a spreadsheet, which you should play with; you might find more interesting things than I did. But given that fixed vs. variable comp for high earners is the main focus, here's the fixed/variable breakdown in various countries:

A primary focus of new European regulation is to shift banking comp away from variable comp (evil bonuses!) and into fixed comp (sober salaries!). One thing you might ponder, looking at this chart, is: do the left-hand countries (France, UK, Germany) have generally riskier banking systems than the right-hand ones (Spain, Italy, Cyprus, Belgium, etc. etc.)? I suppose the answer is maybe, though it's hard to discern a pattern of bankers in countries with a more fixed-comp-based system covering themselves in glory. In any case the effect of the bonus caps seems likely to be increasing fixed comp to at least 50% of a roughly constant total comp, meaning I guess making everyone look more like Italy.

Also perhaps of interest is the breakdown of what businesses the high-paid bankers work in. The answer is mostly investment banking (including private equity and sales & trading), with "Other" being a healthy, somewhat unclear, runner-up. But there is some variation, with Spain and Italy being particularly full of well-paid retail bankers:1

Otherwise, I dunno. Outside of the 2,400ish million-euro-earning bankers in the UK the numbers aren't that big; only 737 bankers in Europe-ex-UK made over a million euros in 2011, with the top countries being Germany (170), France (162), Spain (125), Italy (96), the Netherlands (36), Denmark (33), and a bunch of countries with under 20. Slovakia and Greece had two apiece, and Cyprus had four; one of the Slovakians appears to have made €1.6mm in bonus on a €0 base, which I submit to you is not a sustainable way to live your life though I suppose it beats many alternatives. (Zero bonus on zero base, for instance.2) I feel like if you're a banker in, like, Norway (N = 19), or Poland (N = 4), you're spending today guessing the names of all of your country's €1mm bankers. Tell us in the comments!

The EBA's press release is ... sort of brisk. It concludes:

The EBA will publish, at the end of the year, a more detailed report on an analysis of remuneration practices in the EU; this will be based on a remuneration benchmarking exercise which will also comprise a more detailed analysis of the data presented today.

One criticism you might make of Europe's bonus-crimping plans is that they're based on a lot of pretty arbitrary numbers: the €1mm total comp cutoff, or the cap on bonuses at 1x or 2x base salary. Arbitrary numbers like that work okay as expressions of stern disapproval, but they can look sort of weird when subjected to statistical analyses. So you have to look forward to the EBA's take, no? Like, do your own mini-benchmarking exercise on that first chart above: do Spain's recent banking troubles suggest that a high ratio of fixed comp to bonus is not all it's cracked up to be? Or just that high comp by itself is a negative signal?

EBA presents data on high earners in EU banks [EBA & report]
European Bankers Earning Over €1 Million Revealed [MoneyBeat]
Some numbers [Google Docs]

1.Some industry fixed vs. variable breakdowns - IBD:

And retail:

2.Or: blogging. Also it's "fixed" and "variable" comp, not "base" and "bonus," so I don't know how the Slovakian authorities did the math. Maybe he worked on commission, who knows.

Related