Financial Bonuses Poised to Wither Following Stock Plunge

Its not even September and year end bonuses are already looking scant after stocks for leading banks such as Barclays Plc, Credit Suisse Group AG, Deutsche Bank AG and UBS Group AG have been taken to the woodshed in recent months.

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The downturn in banking stocks, instigated by diving profit margins and profitability, have eliminated more than $2.5 billion from the value of deferred shares that were paid as bonuses in the past few years, according to a recent Bloomberg report.

The grim outlook for executive bonuses at banks follows after recent news of ambitious cost cutting measures at leading institutions in Europe, with the epicenter of this trend being London. Mainstays such as Deutsche Bank, Standard Chartered, and Barclays have collectively jettisoned thousands of workers, ranging from back office and IT personnel to scuttling FX and fixed income desks.

Ongoing Downtrend

The past few years have been amongst the hardest for banks in a decade, with billions of fines for misconduct and abuse via Libor Libor Libor stands for London Inter-bank offered rate. It is an industry-specific term which most of us would never have heard of until the "Libor scandal" became popularized in 2012. Libor is considered to be one of the most important interest rates in finance, upon which trillions of financial contracts rest. The Libor rate effects over $800,000,000,000,000 in financial deals. Banks simply cannot lend money to one another whenever they like as there is a system in place. Every day a group of leading Libor stands for London Inter-bank offered rate. It is an industry-specific term which most of us would never have heard of until the "Libor scandal" became popularized in 2012. Libor is considered to be one of the most important interest rates in finance, upon which trillions of financial contracts rest. The Libor rate effects over $800,000,000,000,000 in financial deals. Banks simply cannot lend money to one another whenever they like as there is a system in place. Every day a group of leading Read this Term and FX manipulation bogging down revenues. These issues have only metastasized after the Brexit Brexit Brexit stands for British Exit, or in reference to the United Kingdom’s decision to formally leave the European Union (EU) as declared in a June 23, 2016 referendum. In a more immediate sense, a tight vote and unexpected result helped drive British pound (GBP) to lows that had not been seen in decades.The day following the referendum, former Prime Minister David Cameron resigned from office where he was replaced by Theresa May, who later resigned from office on June 7th, 2019. Active Prime Minis Brexit stands for British Exit, or in reference to the United Kingdom’s decision to formally leave the European Union (EU) as declared in a June 23, 2016 referendum. In a more immediate sense, a tight vote and unexpected result helped drive British pound (GBP) to lows that had not been seen in decades.The day following the referendum, former Prime Minister David Cameron resigned from office where he was replaced by Theresa May, who later resigned from office on June 7th, 2019. Active Prime Minis Read this Term fallout, which also led to a staunch decline in share prices at leading lenders.

The silver lining for European banking employees is rigid bonus caps, which are pegged to a maximum of double an employee’s fixed salary, ultimately leading many banks to increase salaries at the expense of incentive pay. According to data from the European Banking Authority, the average ratio of variable to fixed compensation for high earners plunged to 127% in 2014 from 317% a year earlier.

Its difficult to quantify the reductions of bonuses with over three remaining in the calendar year, however a number of London’s investment banks are poised to slash bonus pools by at least 25%, while other staff members could receive nothing.

According to Jon Terry, partner and pay specialist at PricewaterhouseCoopers, in a recent statement on the bonus scalings: “If the bank is suffering, the system is meant to work so individuals are aligned to the long-term interests of the bank, so suffer alongside it. This is an entirely intentional consequence of new regulations.”