Morning Coffee: What the new banking bonus bashing means really. JPMorgan’s faux-promotions
Bashing banking bonuses is back in vogue. It's been a bit more than a year now since the European Union's roster of CRD IV legislation restricting bonuses as a proportion of total compensation came into effect, so it's clearly time to introduce something else to render bonuses illegitimate or ineffectual. The Bank of England has kindly obliged.
As of January 1st 2015, banking bonuses in London will be subject to clawbacks for up to seven years. This applies equally to bonuses that have been spent already. Reuters reports that the Bank of England also wants to enforce a more punitive system of clawbacks, with bonuses deferred over seven years for 'senior managers' and only available for payment between years three and seven. Those same senior managers will be made to sign a long statement detailing their responsibilities so that they can more easily be prosecuted when things go wrong. Meanwhile, junior banking staff will be made to wait until at least a year before any of their deferred bonuses are available.
The potential repercussions are several:
- People will not want to work in London unless their salaries are increased to compensate for the uncertainty surrounding bonuses.
- Bonuses will be psychologically discounted to almost nothing by their likely recipients, who will see them as a pleasant surprise rather than a reliable income stream.
- Junior bankers will have cash-flow problems in the first year unless their salaries are increased to compensate for the newly deferred bonuses. London is an expensive place to live. See Morgan Stanley for an example of how this will pan out.
- If senior managers' bonuses are deferred over seven years and senior managers are made more prone to prosecution, no one will want to be a 'senior manager'. Bankers are very good at playing the system. Expect jobs that fall into the 'senior manager' category to be avoided. By the same token, senior managers will want to limit their list of responsibilities in order to reduce their exposure to prosecution.
- Everyone in London will want to work for non-banks. Think hedge funds. Think private equity funds. Think trading your own account.
Separately, JPMorgan has possibly found a new way to persuade its under-worked FICC traders to do jobs they might not otherwise want to do - call them 'promotions'.
Bloomberg reports that Andrew Ferry has been 'promoted' to become head of a new FX and rates-focused compliance team at the bank. That sounds exciting, except that 46 year-old Ferry was only recently head of JPMorgan's swaps trading business for EMEA. His new job looks more like step down than a step up - although in light of compliance's increasing importance Ferry and JPMorgan would undoubtedly argue otherwise.
As we reported yesterday, JPMorgan is making redundancies (in technology) and some staff there are reportedly accepting lower ranking jobs in order to save the bank money.
Antony Jenkins says he hasn't made a terrible mistake by cutting Barclay's FICC business just as it might have been about to bounce back: “Our view and our strategy are predicated on the fact that these changes [in investment banking] are mostly structural.” (Financial Times)
Yesterday, Barclays said that July had been the worst month of the year so far for the investment banks. Other firms agree that June's improvements haven't endured. More redundancies are coming soon. (Bloomberg)
Comments from Barclays finance director Tushar Morzaria suggest the headcount in the investment bank has dropped by about 2,000 to just over 24,200. The average payout per head would thus be £75.6K against £98k last time. (Financial Times)
Moelis is doing well and it's hiring. It's recruited five managing directors since the end of the first quarter and expects to hire four to six in a typical year. (Bloomberg)
Lloyds just suspended traders Clive Jones and John Argent in London as part of its LIBOR enquiry. Argent had been suspended in 2012 but had come back to work again. Never assume you're safe. (Bloomberg)
Ex-Credit Suisse banker Salmaan Siddiqui avoided jail by testifying against his bosses after his team inflated the value of CDOs so that they got bigger bonuses. “He was a very valuable witness from the start, giving full and complete cooperation which resulted in the conviction of his superiors,” said the judge. If you're involved in a court case, take note. (Bloomberg)
Forget Pimco: Jupiter has had strong inflows and wants to diversify its product offering. It's already been hiring in the Nordic region, Spain and Austria, while expanding existing offices in Germany and Hong Kong. (Financial Times)
RBS's head of North American sales is off to a hedge fund. (Bloomberg)
Carlyle is doing very well indeed. (Financial Times)
How to deal with terrible colleagues. (Guardian)
How not to overdress for an interview. (Daily Muse)
Ace Greenberg, parsimonious to the end: “I think spending money on an expensive casket is a waste of money, if you can’t find one cheap enough, let me know and I will build one in my workshop in the Hamptons,” (Buzzfeed)