The number of employees earning more than a million euros or pounds at Europe’s biggest banks fell sharply last year, another sign of the clout they have lost to U.S. rivals since the financial crisis.
Early indications from four big European institutions show that the number of “material risk-takers” (MRTs) on their books who earned more than the 1 million threshold last year was 32 percent lower in 2016 than the year before.
Even though the interest rate, economic and trading environment appears to be improving for banks, the trend for lower banker pay seems unlikely to reverse any time soon in Europe, as banks keep a tight grip on costs and have to adhere to a cap which limits bonuses to two times fixed salaries.
Contrasting with that, Wall Street bonuses could climb as much as 15 percent this year, the first meaningful uptick since 2009, compensation firm Johnson Associates Inc estimates.
Deutsche Bank, Europe’s largest investment bank, also said this year that it would stop benchmarking its compensation packages against Wall Street firms Goldman Sachs (GS.N) and Morgan Stanley (MS.N) because they are too “investment banking-centric”.
The post-crisis attrition that has seen tens of thousands of jobs slashed across the industry has further diminished employees’ bargaining power. “Higher earners in the banking world have been there for 10-15 years, so now they are risk-managing their jobs and sacrificing their pay. It’s capital preservation,” said Jason Kennedy, chief executive of recruitment firm Kennedy Group.
The number of front office staff, including trading and investment banking employees, at the world’s 12 biggest U.S. and European banks fell 4 percent last year to 53,200. That’s down 20 percent from five years earlier.
Kennedy says morale among bankers is low, particularly at European firms, so they no longer go that extra mile that might help secure a big bonus, like working weekends. There are also fewer avenues for promotion than there used to be, all of which keeps a lid on pay rises.
“The hunger to push forward is no longer there, the hunger from the employers is no longer there. So it’s ‘steady Eddie’. And steady Eddie doesn’t get an increase in pay. He gets stable pay,” Kennedy said.
According to a Reuters analysis, there were 1,183 million-plus earning MRTs at four European banks – HSBC (HSBA.L), Deutsche Bank (DBKGn.DE), Standard Chartered (STAN.L) and Barclays (BARC.L) – last year, down from 1,740 in 2015.
Those figures comprise the MRTs whose overall compensation packages including fixed pay and bonuses were at least 1 million euros ($1.08 million) or 1 million pounds ($1.25 million).
Deutsche’s bonus pool plunged nearly 80 percent to 500 million euros. But that masked the 1.1 billion euros in special ‘retention packages’ it paid out to more than 5,500 staff.
The biggest single earner at Europe’s biggest bank HSBC, an unnamed senior manager, pulled in 10-11 million euros. The biggest single earner in 2015 at the bank, also an unnamed senior manager, pulled in 9-10 million euros.
The number of MRTs at HSBC raking in between 1 and 2 million euros fell 21 percent to 266.
French banks Societe Generale (SOGN.PA) and BNP Paribas (BNPP.PA) are expected to release their MRT compensation figures by the end of May. Credit Suisse (CSGN.S) published its 2016 annual report on Friday. It said the number of MRTs rose 12 percent to 939 from 856, but it didn’t give any detail on the compensation thresholds.
The minimum threshold for MRTs – or staff whose activities have a material impact on an institution’s risk profile – is 500,000 euros.
In 2015, the number of high earners in banking across the European Union hit 5,142, up from 3,865 in 2014, with 80 percent of those who were paid above a million euros based in London, data compiled by the European Banking Authority (EBA) showed.
EBA banker pay figures for 2016 are due in early 2018 and will likely reflect a slump in sterling in the immediate aftermath of Britain’s vote to quit the EU last June.