Bank bonuses backlash leads to higher fixed pay
By Denny Thomas and Rachel Armstrong |
March 3, 2011, Thursday
|
Print Edition
Print Edition
THE rancor over bank bonuses means investment bankers across the globe are now getting a higher level of fixed pay but industry groups in Europe still feel their financial sector is facing much tougher rules than the rest of the world.
In response to the political outrage and regulatory scrutiny, many global banks have drastically restructured investment bankers' pay packets with a large portion of their overall compensation now being in deferred form. Bankers, regulators and industry lobby groups that attended the Reuters Future Face of Finance Summit this week were of the view that the industry has turned more realistic after getting blinded by excessive greed during the heady days of pre-crisis.
"To my mind, we are kind of getting back to a sensible place," John McCormick, Asia-Pacific CEO of RBS, said.
"There is no right to a bonus, these are all discretionary," he added.
Industry groups in Europe, however, feel that their banks are now facing a much harsher set of rules for bonuses than their US and Asian counterparts, raising the risk that they lose their strongest talent.
In the industry, bonuses now account for just about 20 percent of the overall compensation, a far cry from the pre-crisis days when up to 80 percent of the total pay was in cash and stock bonuses.
But bonus curbs seen as the toughest in the world took effect in the 27-country EU bloc last month. They go further than the G20 principles by setting in law specific limits for cash elements and periods for deferral.
America has been slower to impose new standards. And in Asia, the major financial centers such as Singapore and Hong Kong have moved to be in line with the G20's benchmark standards but gone no further.
"The US is very broad brush, much less tight targets and clawback arrangements and in the Far East they wonder what on earth the issue is all about," said Angela Knight, CEO of the British Bankers' Association on bonuses.
In response to the political outrage and regulatory scrutiny, many global banks have drastically restructured investment bankers' pay packets with a large portion of their overall compensation now being in deferred form. Bankers, regulators and industry lobby groups that attended the Reuters Future Face of Finance Summit this week were of the view that the industry has turned more realistic after getting blinded by excessive greed during the heady days of pre-crisis.
"To my mind, we are kind of getting back to a sensible place," John McCormick, Asia-Pacific CEO of RBS, said.
"There is no right to a bonus, these are all discretionary," he added.
Industry groups in Europe, however, feel that their banks are now facing a much harsher set of rules for bonuses than their US and Asian counterparts, raising the risk that they lose their strongest talent.
In the industry, bonuses now account for just about 20 percent of the overall compensation, a far cry from the pre-crisis days when up to 80 percent of the total pay was in cash and stock bonuses.
But bonus curbs seen as the toughest in the world took effect in the 27-country EU bloc last month. They go further than the G20 principles by setting in law specific limits for cash elements and periods for deferral.
America has been slower to impose new standards. And in Asia, the major financial centers such as Singapore and Hong Kong have moved to be in line with the G20's benchmark standards but gone no further.
"The US is very broad brush, much less tight targets and clawback arrangements and in the Far East they wonder what on earth the issue is all about," said Angela Knight, CEO of the British Bankers' Association on bonuses.
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