The world of compensation in risk management at investment banks is diverging into the haves and the have nots.
This year's eFinancialCareers salary survey, which covered more than 2,000 people working in the financial services industry globally, found that on average bonuses for 'middle office professionals' (typically people in compliance, finance, or risk) fell everywhere last year. This seems surprising to the extent that risk, control and compliance are areas of hot hiring.
What's going on? We surmise that declining bonuses for middle office professionals may have something to do with their rising numbers. At Deutsche Bank, for example, middle and back office staff account for an increasing proportion of total headcount. In 2010, 62% of Deutsche’s corporate and investment bankers were in the back office. In 2011, 65% were. In 2012, this proportion rose to 68%. It's conceivable that banks are playing middle office staff smaller bonuses as their population rises.
Equally possible is that banks are reducing middle office bonuses to take account of higher middle office salaries. In its recent salary survey, recruitment firm Robert Walters found that salaries for compliance and risk professionals in investment banks rose by 6.4% and 3.2% respectively last year. By comparison, salaries for operations staff rose by just 0.7%.
Gail Danvers, managing consultant of recruitment firm PSD Group, said bonuses for some risk professionals in investment banks have fallen very dramatically. "I know of some people in operational risk whose bonuses have gone from £15k in 2008 to around £2k now," she told us.
On the other hand, Danvers said a new breed of elite risk professionals is emerging from graduate training programmes. These people are being paid better, with even junior-level hires receiving bonuses in excess of salaries.
One risk recruiter, who requested that he remain unnamed, said graduates with two years' experience are being bought back when they try moving jobs and being offered packages of £100k. "These are people with excellent academics and top class degrees from leading universities. A far high calibre of person has gone into risk in recent years," he added.
Gavin Bonnet, managing director at Correlate Search, said US banks tended to pay risk bonuses more often than European banks for 2012. "Risk bonuses were very varied, but a gulf is definitely emerging between US and European banks, with US banks paying and European banks not," he said.