Morning Coffee: RBS may be hiking up pay, the inadequacy of today's investment bankers

UK banks are rather hamstrung by the bonus cap, despite the recent loosening of the rules. While U.S. investment banks simply need to get approval from an internal group that holds shares of its UK subsidiary, the likes of RBS and Barclays face the more daunting prospect of gaining approval at a public shareholder meeting if they want to pay their staff more.

For RBS, which faces both pressure from the government and the baying public to cut pay, suggesting that they need to bypass the bonus cap to pay their investment bankers more will not sit well. Not surprisingly, therefore, it’s looking for other means to incentivise its staff. The Sunday Times suggests that this will come in the form of a big salary hike for some senior investment bankers.

Yesterday, however, the bank issued a statement denying the report, saying that: “There are no plans to implement widespread base salary increases across our markets division and we are not consulting with shareholders on any such moves.”

RBS has, of course, been struggling to hold on to its staff in the markets division. Nomura is the latest bank to have taken advantage of the exodus by hiring a number of senior sales staff.

Most banks have been increasing base salaries over the past few years to contend with regulatory intervention on bonuses, but it’s a strange tactic to start doing so now. Instead, more firms are introducing ‘allowances’, where individuals are paid extra on a monthly basis according to their duties. This isn’t considered part of the salary and can be withdrawn according to performance.

Nonethless, RBS remains among the most miserly of investment banks. This year, it’s on course to pay out an average of £108k to its investment bankers, compared to £412k at Goldman Sachs.

Separately, investment banks may now be finding themselves short of the-smartest-guy-in-the-room types. According to Reuters the shortage of M&A activity in Europe over the past few years has left investment banking teams woefully short of people with experience of truly big deals. Part of this is also down to the fact that many of the more experienced, and therefore expensive, people have been let go in favour of keeping on cheaper juniors. The result, say bankers, is a talent gap.

Meanwhile:

On Jamie Dimon’s Christmas card: “The holiday season is the traditional time of year for incendiary family rows and to send out a picture of your domestic bliss not only tempts providence but is unkind to friends preparing for their annual domestic Armageddon.” (Financial Times)

Junior bankers may be asked to work fewer hours, whether junior bankers take the offer is another matter entirely (Financial News)

Ex-HSBC banker Roshan Padamadan is starting his own hedge fund in Singapore (Bloomberg)

U.S. hedge funds are expanding in Europe (Financial Times)

Classic Wall Street films to watch if you want to avoid The Wolf of Wall Street (Dealbook)

Highlight of Wolf on Wall Street will surely be Stratton Oakmont’s Friday dwarf-tossing competitions (Independent)