The truth about salaries and bonuses at U.S. and European banks

Can you afford to work for a European investment bank? The prevailing wisdom would suggest you maybe cannot. - After all, top-tier U.S. investment banks are generally considered to be far more generous than their European counterparts.

The reality, however, is rather more complex.

No bank willingly divulges how much it pays individual people. However, thanks to the European Union, banks with EU operations are now compelled to release information on average compensation for their so-called 'material risk takers' either globally (for European-based banks) or in the EU (for U.S. banks). Swiss banks have a similar version of the same thing.

Material risk takers are typically managing directors or senior traders who take big risks on behalf of the bank they work for. They're split across investment banking divisions and sales trading functions, but are predominantly salespeople and traders, simply because trading floors tend to have more people. 

Figues for material risk taker pay, shown in the chart below, disprove the blanket rule that U.S. banks pay well and Europeans don't. 

As the chart shows, Credit Suisse, Deutsche Bank and Barclays seem to pay their material risk takers more than Goldman Sachs, Citi and Bank of America. Based on public filings, only J.P. Morgan really stands out as a massive payer. By comparison, French banks - BNP Paribas and SocGen - fit the lower pay stereotype.

Material risk taker pay numbers aren't infallible. They're skewed towards markets divisions and every bank defines its material risk takers slightly differently. U.S. banks' figures are also always a year in arrears and apply mostly to London, where pay is usually lower than in New York. 

Pay for investment bankers at European and U.S. banks

Salary surveys from investment banking recruitment firms provide an alternative point of comparison. However, these too suggest that the rule of thumb that U.S. banks pay well and Europeans don't is a simplification. The reality, suggested by Arkesden's most recent compensation survey (shown in the charts below for second year analysts, associates and VPs who aren't affected by stub bonuses), is that UBS and Credit Suisse also rank among the top payers and that Goldman Sachs pays well at the start, but implements a kind of 'Goldman discount' as investment banking careers progress. 

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