Canadian Bankers' Pay Under Review

Mindful of controversy in the U.S. surrounding the pay of Wall Street bankers, Canadian regulators are examining whether compensation practices at financial services firms here are encouraging excessive risk taking.

Jean Paul Duval, spokesman for the Office of the Superintendent of Financial Institutions, took pains to put out this review isn't necessarily going to lead to mandates to cut pay at Canadian banks, which so far have weathered the economic downturn better than their U.S. counterparts.

"There is general agreement regarding this whole issue that boards of directors are responsible for their compensation policies and monitoring their effectiveness," Duval tells eFinancialCareers News.

The government's review, part of an international effort on executive pay, comes as Canadian bankers face unprecedented challenges even though they have been held up as a model for others to emulate. Officials from the Canadian Bankers Association and the Investment Industry Association of Canada declined to comment on the pay review.

International Pressure

Though Canadian banks pride themselves on not having needed a government bailout, the industry is finding itself under the same level of scrutiny as its counterparts in other parts of the world. Bankers are facing calls for increased regulation at next month's G20 meeting. Canadian officials will be part of those discussions, Duval says.

Canada's economy is being dragged down by the declines in the U.S., its largest trading partner. The number of Canadians receiving employment insurance surged 22.8 percent in January, while consumer bankruptcies rose 14.9 percent year-over-year in January, according to the Globe and Mail. Meanwhile, Bloomberg News notes financial services jobs are disappearing. Toronto-based recruiters have said hiring by Canadian banks has been lackluster, and those getting hired should set their expectations low.

To be sure, hiring is continuing for some jobs, such as financial advisers. Toronto-Dominion Bank plans to hire 80 net new advisers in Canada, 40 of whom will focus on the affluent market, while the rest will be financial planners and rookies, Dow Jones reports.

Money Flat to Down

A recent survey by recruiting firm Vlaad & Co. found Canadian investment bankers took pay cuts of 50 percent last year and may see their salaries slashed another 15 percent in 2009. Vlaad & Co. polled 453 investment bankers, traders and research analysts and found some workers received no bonuses in 2008 while others got multi-million dollar payouts, which indicates more layoffs may be coming, says Bloomberg News.

Vlaad President Bill Vlaad expects average pay for senior bankers to range from unchanged to a decline of 15 percent this year. That's better than the 45 percent cut Wall Street bonuses have seen, and the 70 percent reduction in pay senior management saw last year, according to Johnson Associates, a New York-based consulting firm.

"Bill Vlaad knows his business well, so I would not challenge his conclusions," says Barrie Carlyle, vice president with David Alpin Recruiting, who focuses on the Canadian banking sector. "I would suggest that compensation packages in a wide-variety of sales roles have become somewhat more conservative as our clients look to reduce risk in challenging times."

Non-Sales Impacts

For non-sales roles, salaries at financial institutions are holding relatively flat compared to last year, though the level of hiring has declined, he says. That view has been echoed by other recruiters in the Toronto area.

"One interesting tidbit, however, is we are still seeing multiple offers for the best candidates in the marketplace - an unusual occurrence in a slowing economy," Carlyle adds. "This would indicate that although overall hiring has slowed, many companies are still committed to acquiring top talent when they have the chance."