You may be in a rocking chair when you receive your next deferred bonus payment
Amidst all the chaos following the financial crisis, an odd game has broken out among regulators on either side of pond. Who can dream up the most painful compensation plan for bankers?
The leader in the clubhouse was the European Banking Authority, which helped sculpt the EU bonus cap at 100% of fixed salary and then threw a bucket of cold water on banks’ plans to pay out monthly or quarterly allowances to make up for some of the losses. That second move at least made sense. You can’t allow a vehicle to circumvent a rule you just put in place.
Either way, New York Federal Reserve Bank President William Dudley is giving the EBA a run for its money. In a closed-door speech on Monday with Wall Street executives, Dudley said that banks should defer bonuses for a decade. Ten years!
Not only that, he suggested that bankers get bonuses paid in debt securities rather than in equity, allowing any future fines to be scooped off the top of the bonus pool. Imagine having a good year, waiting another nine to cash in, only to find out some bozo on a different continent colluded with some other bozos from different banks and, poof, your bonus – one you’ve been waiting on for a decade – is gone.
Dudley, an ex-Goldman banker, has a different take though, suggesting that the industry is corrosive at its core, rather than recent legal actions being the fault of a select few.
"I reject the narrative that the current state of affairs is simply the result of the actions of isolated rogue traders or a few bad actors within these firms," he said.
I don’t know. Dudley may be right in part. Incentivized comp needs to be attached to provisions that ensure bankers acted ethically to earn that money, and banks and regulators need tools to take back any compensation that was earned through illicit means. But that’s what clawbacks are for.
Maybe Dudley is posturing. Maybe he’s not. They served chicken and salmon for lunch, so the meeting wasn’t all bad.
Landing a Tech Job at Goldman (eFinancialCareers)
Here are a few suggestions from Goldman Sachs on what you'll need to score a tech job at the firm.
How to Get a Graduate Job at Morgan Stanley (eFinancialCareers)
Want to earn an analyst or associate job at Morgan Stanley? We sat down with the firm’s global graduate recruitment and program management head to offer up some tips.
Ex-BofA Execs Launch Market Maker (Bloomberg)
Bank of America’s old electronic market making unit is coming back together, just not at BofA. The head of the unit, which was disbanded earlier this year, is launching an independent firm called Arxis Capital and hiring up all his former colleagues.
Fed Failed in ‘London Whale’ Case (WSJ)
The whale may have been in London, but it was New York regulators who failed to investigate J.P. Morgan’s 2012 trading debacle that cost the firm $6 billion, despite the fact that other Fed supervisors suggested they look into unit responsible for the trades.
When a Harvard MBA Is Not a Conversation Point (Bloomberg)
When interviewing at a hedge fund, be succinct, never gloat over any vanilla long investments that you’ve made and don’t brag about what business school you attended. In fact, some hedge funds prefer you don’t even have an MBA, according to one recruiter.
Safer Means Less Profitable (Bloomberg)
If you work in the thriving CLO business, yesterday wasn’t your best day. Regulators released a final rule stating that banks are required to hold on to at least 5% of the debt they package or sell as collateralized loan obligations. That will make them more expensive to put together, bankers say, which is never good for business.
Costly Restructuring (Bloomberg)
Building firewalls to help ring fence HSBC’s securities arm and its consumer unit may cost $3.2 billion. To do so, they’ll need to hire plenty of directors to oversee the transition.
Buzz Around the Office
Actress Rene Zellweger may have had some work done. Or someone stole her identity. Those are the only two options.
Quote of the Day: "How will a firm know if it is making real progress? Not having to plead guilty to felony charges or being assessed large fines is a good start." – New York Federal Reserve Bank President William Dudley