The Banking and Strategy Initiative

Chillin' out till it needs to be funded

Limiting Banker compensation in Europe, US and Asia | Bonus Insight

The church ( which manages $8 bln in investments) may have proposed a conservative limit of upto 3 times a baners ssalary as bonuses while global winners like HSBC had voluntarily proposed slightly higher limits at 10 times salaries as bonuses. Howevr the weekend asaw, Europe responding to the public criticism and budgeting holes with hard slapped limits on bonuses including 75% cuts in Spain for a hard $600k for executives and $300k for non executives, RBS engenders a redefinition of bonuses with Stephen Hester and Goldman Sachs President Lloyd Blankfein choosing to take a higher Cash salary to avoid the bonus debate and banks from Deutsche Bank and JP Morgan to embattled Credit Suisse and JP Morgan cutting cash compensation and packaging bonuses in bad securities for an innovative solution.

The different responses show an eagerness to operate as private companies and avoid taxpayers’ bailout cash yet recognise that bankers comp is probably cost of goods sold in their business esp for laud off dealmakers and investment bankers cooling their heels because there was no deal business. Structured Finance has its own challenges and with no p[rofits in the business, bonuses are out of question only in these segments. Where there are profits to be shared, bankers’ compensation limits will not serve their purpose as the profits will be shared between investors and bankers themselves and hard limits hardly seeming fair.  A probable answer could be a 30% -50% bonus and compensation  pool from the profits like almost practised at Goldman Sachs leeping salary and bonus expenses capped at 40-45%

The weekend did not produce the closure of Greek crisis deals as was expected and the bonus discussions are likely to continue till bankrupt governments and bank management find a money making business to divert everyone’s attention.

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