Morning Coffee: Actually, the EU wants a hard limit on bankers' pay. The FICC revenue horrors
What would it take for banks to appease lawmakers in the EU who don't like the way they pay their staff? The true intentions of Philippe Lamberts, the Belgian Green MEP, who helped devise the restrictions stating that European banking bonuses can never be more than 200-250% of fixed pay, are made very clear in today's Guardian. What it comes down to is that Lamberts wants banks to pay less. Period.
"What we are witnessing now is an attempt by the major banks, with the support of the British government, to circumvent the [EU bonus] rules and that is to compensate what we did on terms of structure, by just raising the fixed rate of remuneration," says Lamberts, who advocates that the European Union take the British government to court over its willingness to sanction such salary hikes. However, Lamberts (who has his own banker bashing website) seems to be missing the point of the EU rules: they dictate the structure of banking compensation not the level. If Lamberts wants to limit the level of banking pay, new legislation will be needed. Fortunately for high earning bankers, a hard limit on compensation would seem to be outside the purview of the EU's remit: Stephen Mavroghenis, a lawyer at Shearman & Sterling pointed out last year that the Lisbon Treaty which underpins the EU prevents it from meddling in the level of pay in any member states.
Separately, 2014 is shaping up to be another dreadful year for fixed income currencies and commodities (FICC) bankers. Following warnings by Citigroup and JPMorgan that FICC revenues fell by 15%+ year-on-year in the first quarter, Jefferies yesterday revealed a 17% slump in first quarter fixed income revenues and Tullett Prebon said its broking revenues fell 12% year-on-year as regulatory changes took hold in fixed income trading. The latest declines follow a 20% reduction in FICC revenues in 2013. At this rate, the market could shrink by nearly 40% in two years. That's surely not good for anyone who works there.
The European Commission has come out with a warning to banks and national regulators to implement fully new rules limiting variable pay to twice the level of salaries. (Financial Times)
It may now be possible to earn €1m and avoid the EU bonus restrictions. (Bloomberg)
The Bank of England is about to start consulting on harsher bonus clawbacks and longer deferrals. (Financial Times)
Moelis pays 60%-75% of its revenues in pay and is now about to make its employees richer still. (Quartz)
@GSElevator man offers lesson in annoying UBS. (IFR)
Tom King, co-CEO of corporate and investment banking at Barclays, says people have been saying that M&A is getting better for three years running: “All the conditions are there: high cash levels, low interest rates, low inflation.” (Bloomberg)
One man may have stolen $400m from Citigroup. (Daily Mail)
Another Goldman lifer is retiring aged 42. (Bloomberg)
The pitiful incomes of hedge fund managers. (Bloomberg)
Nepotism in the City: Barclays very excited to hire Robert Mayhew, the corporate broking son of banking legend David Mayhew. (Financial News)
The higher an individual’s status, the greater the drop-off in performance when their pay is reduced. (HBR)