Morning Coffee: The compliance staff who spied on colleagues' bonuses. Deutsche Bank's most exceptional employees

If you were a senior compliance and controls professional at BNP Paribas in 2020, you would have earned an average of €300k ($341k) according to the French bank's most recently released compensation report. But if you were a salesperson or trader working in BNP's corporate and investment bank, your average would have been nearly triple that, at €858,691. 

This explains, maybe, why some of BNP's compliance staff appear to have had a keen interest in what their colleagues were earning.

Bloomberg reports that members of the Conduct & Surveillance team in the front office of BNP Paribas' London investment bank discovered in 2019 that they were able to see the pay records for thousands of employees in the global markets division, which houses the bank's trading staff. Curiosity got the better of them, and they had a little look at the bonus of a senior member of staff as well as other unspecified "confidential" information like colleagues' shopping habits. Their transgressions were then spotted and their access to the new system ('Red Owl') curtailed. 

BNP Paribas seems to have been very understanding about it all. Bloomberg reports that the errant members of the team are still working for the bank, that none of the information they unearthed had left the building, that they only really looked at pay for their own team, and that the general feeling is that they showed a lack of judgement in testing the boundaries of the new system rather than any malignancy about their comparatively low pay.

Nonetheless, the incident - which was investigated by the regulator and has only just come to light - is a reminder that compliance professionals are only human and that humans are innately curious creatures who like to know where they stand in the hierarchy. This is one reason why humans in compliance are being replaced by artificial intelligence machines. - The machines are ambivalent about the MD with the high pay.

Separately, the clamorous whispering is that Deutsche Bank is back and that Credit Suisse has replaced the German Bank as the problematic institution in Europe. This situation is thanks in no small part to what happened last year with Archegos, and to the fact that Credit Suisse didn't see the risks coming and Deutsche Bank did.

Deutsche Bank's superior foresight is credited to Stuart Lewis, its chief risk officer of more than 25 years, who's retiring soon, and to Peter Yearley, the chief risk officer for its corporate and investment bank. Deutsche's risk-handling in 2021 it was exceptional. Risk.Net outlines why. 

While Credit Suisse was incapable of performing the kind dynamic margining that enables a bank to ask for extra collateral in response to market conditions, Deutsche's risk professionals were making full use of the process. As a result, Risk.Net says Deutsche held an aggregate margin of around 25% on Archegos’s portfolio, but on some positions it was more than a third. This was more than treble what some peers held.

This helps explain why Credit Suisse lost $4.7bn on Archegos and is now trimming its investment bank and cutting its bonus pool, while Deutsche Bank lost almost nothing and is resurgent.  

Deutsche Bank's handling of the Archegos affair was more than just luck. While Credit Suisse's compliance and control staff were overruled by incompetent MDs in the front office, Deutsche's risk function under Lewis is well-respected and at the top of its game. Lewis says he's very closely involved with the hedge fund business and that it's sometimes necessary to have conversations with the prime brokers on the front line where you ask, "Look, are you noticing these little things? Which maybe on their own wouldn’t mean too much – but on a cumulative impact, it’s making us unsettled."

Last year, the average member of Deutsche Bank's control team earned €118k according to the bank's compensation report, while the average person in the investment bank earned €480k. This year, Deutsche might want to pay its risk managers a bit more.

Meanwhile...

UBS has hidden job titles like managing director, director, and associate in the bank's internal directory to 'soften the hierarchy'. (Bloomberg) 

Goldman Sachs is now aiming for a return on average tangible common equity (Rote) of 15 to 17% over the next three years, up from a previous target of more than 14%. (Financial Times) 

Goldman's new target is below the 24.3% delivered in 2021. It's also below the 20% target set by Morgan Stanley and the 17% target at JPMorgan. (Financial Times) 

"We don't believe last year's ROE is sustainable in any way," said Goldman CEO David Solomon. (Financial News) 

A woman is claiming that a portfolio manager raped her in exchange for a job offer. (Business Insider)

Credit Suisse senior staff want to leave, irrespective of their cash bonus clawbacks. (FiNews) 

Credit Suisse is hiring Christian Tiggle from RBC for its FIG group. (Financial News) 

FT Partners, an advisory firm focused on the fintech sector is now paying $140k starting salaries to analysts. (Financial News)

Having more than doubled its assets under management in the past two years, hedge fund Caxton Associates is now raising its management fee from 2% to 2.25%. (Financial Times) 

Mental speed doesn't slow down until 60. Slower decision-making with age isn't due to reduced acuity but to more careful consideration of the options. (Bloomberg) 

You still need a fleece vest if you're male and you work in finance. "It’s the perfect middle-ground piece. You could have a button-up shirt and some dress trousers and throw that on, and it would look appropriate. They absolutely have a place in 2022 menswear." (Bloomberg) 

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