Morning Coffee: Why we shouldn't care about the 100% RBS bonus cap. Top banker weeps at work

RBS is not going to be paying bonuses worth more than 100% of salaries after all. As per EU rules, the British bank had intended to ask investors to sanction bonuses worth up to 200% of salaries, but now it won't be. The British government, RBS's biggest shareholder (still), has vetoed the vote. Cue a tsunami in a teacup. Any bonus pain at RBS will, in fact, be highly localized and heavily palliated

Firstly, the new rules won't affect many people. In 2013, RBS employed only 342 code staff who would fall under the remit of the EU pay dictum. Any non-code staff at RBS should still be eligible for bonuses in excess of 100% of salaries. Secondly, RBS was already close to adhering to the 100% bonus cap anyway: RBS paid its code staff total of £214m last year, of which only £114m were bonuses. In other words, RBS's overall bonus pool was already little more than 100% of its salary payments for code staff in 2013.

A very few RBS bankers will be affected, however. In its 2013 remuneration report, RBS revealed that it employed 1,730 people who earned over £250k. Most weren't code staff, but of these people, 77 earned more than £1m and 15 (of them) earned more than £2m. Those £1m+ men and women and a few other high earners are most likely to fall under the new bonus cap. Bernstein analyst Chirantan Barua reportedly estimates that 100 will be caught.

Fortunately, for these senior bankers, RBS plans to palliate their pain. In line with rival banks in the City of London, the BBC says RBS plans to pay 'fixed allowances' to its highest paid staff. These allowances will reportedly, "be the highest amongst their peers in the UK," and will be equivalent to 100% of salaries. RBS doubled salaries for its investment bankers back in 2010 and two years ago some senior RBS investment bankers were said to be on salaries of £400k. Salaries are likely to be higher now. When 100% bonuses and 100% allowances are factored, it should still be very possible to earn seven figures working for RBS's investment bank in London.

Separately, let it not be said that weeping at work, over work, is a bad thing. The Wall Street Journal reports that Edward ('Ted') Pick, Morgan Stanley's global head of equities, couldn't hold back the tears when he addressed a roomful of clients who'd stuck with the bank after the financial crisis. Five years later, a favourite of Morgan Stanley CEO James Gorman and a former equity capital markets banker, is credited with turning Morgan Stanley's equities business around. Pick, who is 'fiercely devoted to the firm', "bleeds Morgan Stanley blue," according to one of his clients. It's not clear whether he weeps blue tears too.

Meanwhile:

Semantics at RBS: Ross McEwan and Nathan Bostock will not receive bonuses from 2014, but they will receive share-based "long-term incentive awards" that vest in five years. (Sky)

The RBS investment banking bonus pool in 2013 was a mere £237m. (BBC)

Senior RBS investment banker says: “There’s been a huge effort to stop this from happening. Nobody thinks this is the right thing from a business point of view. Up to now we’ve always been in the pack – at the bottom of the pack but in it. Now we’re firmly out of the pack.” (Financial Times)

Barclays shares have risen 8% in the past month. (Sunday Times)

Bank of America, Citigroup, JPMorgan, Goldman Sachs and Morgan Stanley are changing the terms of their swaps agreements so that any liability for them lies entirely with their subsidiaries in Europe. That way they don’t get caught by US regulations. (WSJ)

Banks keep losing researchers to the buyside and this is a problem: where will the replacements come from? (Financial News)

Research by The City UK shows that leaving the EU would seriously damage economic growth and jobs in the UK. (Reuters) 

Post-bonuses, London bankers are spending less on houses. They used to account for 30% of one estate agent’s clients, now they account for 5%. (Financial Times) 

When he was a high-flying executive at Deutsche Bank, high flying Conservative MP Sajid Javid was among a group of senior staff who were paid bonuses worth at least £50,000 each through shares in a Cayman Islands company – to lower the company’s total tax bill. (Daily Mail) 

How to write a cover letter really. (Harvard Business Review) 

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