It’s that time of year and bankers’ bonuses are all over the newspapers once again.
Focus on the financial sector has been re-sharpened by the stock market jitters: the EURO STOXX Banking Index is down 22% since the beginning of January and why, what and how bankers are paid has crept back onto the front pages. From the left-wing banker-bashing press proclaiming that bankers should consider themselves akin to civil servants, to the more stoic broadsheets accepting that the boom times are well and truly over; there is plenty out there to read about one of the most polarising topics in the industry.
I’ve read some interesting press releases over recent weeks about bankers expecting higher bonuses this year – I question the validity of this data as that’s not what I’m hearing from my network. I can’t speak for hedge funds / boutiques but the message, almost unanimously across the global banks is that bonus pots are down – again… and in some firms, significantly. It’s worth taking this opportunity to reflect on some of the trends:
US banks are paying better than their European counterparts. Indeed, some of the more notable drops in numbers have come out the UK banks. Whilst the headline figures suggest only a marginal drop from last year (a total pot of £5bn from £5.2bn across the 4 large banks), anecdotal evidence would suggest larger cuts across their investment banking divisions.
If you’ve been at the same firm for longer than 4 or 5 years, I suspect you’re some way off a competitive ‘market rate’ in terms of total compensation. Those who have played the game and moved regularly will have invariably had decent increases on each occasion.
Only very top performers (‘Exceptional’ / AAA etc) are still on an upwards trajectory. Everyone else is doing very well if they are flat, with the vast majority down on previous years. One contact of mine quipped “down is the new flat”!
Higher deferral component – certainly at MD level, 3 or 5 years is becoming the norm. With the implementation of the Senior Managers Regime, responsible persons will have a 7-year deferral with no vesting until 3 years after award. Clawback periods are also being lengthened to 7 years and 10 years for SMR’s. Yet again the unintended consequence will be the inevitable rise in salaries / fixed compensation.
Promotions are increasingly hard to come by. Non-revenue generating MD’s and Directors in high cost locations are continuing to come under scrutiny, with ‘promotion spots’ down once again on previous years. Any efforts to smooth over any disappointments with bonus payments will come out of an already diminished pot.
Not surprisingly, the bonus and promotions season prompts many to have a look around the market; even if just to validate that they are in the right place after all.
It certainly pays to understand your options and know your worth in this market…. As I wrote before, financial recruitment is changing and last year’s hot topic may well turn out to be tomorrow’s Y2K.