Citigroup is to pay most of its investment bankers in Europe at least half their bonuses in cash this year, underlining how US banks continue to be much more generous than their European rivals.
The news is likely to revive a debate over European banks' loss of competitiveness after they have been hit by stricter rules on pay and a tougher economic environment than their US counterparts.
Scaled back
Investment banks in the UK, Germany and Switzerland have drastically scaled back their cash payments in recent years amid regulatory pressure, lower profits and political criticism over what some have perceived as excessive bonus structures.
Regulators have been pushing for bonuses to be paid mostly in deferred shares to allow for them to be clawed back in the case of losses or wrongdoing.
At Citi's Europe, Middle East and Africa unit, its top rewarded bankers – getting bonuses of $5 million (€3.6 million) or more – will be paid 40 per cent in cash for their 2013 performance, according to an internal document obtained by the Financial Times.
Bankers in line for up to $3.999 million will be paid 60 per cent upfront and anyone with a bonus of up to $499,000 will get three-quarters in immediate cash. Bonuses of up to $100,000 will be cash only.
Goldman Sachs
Such large cash proportions are common at US peers such as JPMorgan and Goldman Sachs. "US banks generally tend to defer less than the European banks," William de Quetteville, partner at Armstrong International, an executive search company, said.
By contrast, Barclays’ remuneration committee is likely to decide in the coming weeks to defer for three years 100 per cent of its managing directors’ bonuses for the second year in a row, people close to the situation said.
Credit Suisse is deferring at least 17.5 per cent of bonuses for lower earners and up to 90 per cent for its top-earning staff, according to a recent internal memo.
Many European banks also cap their cash payments, with Deutsche Bank for example last year limiting its cash bonus to €300,000.
Investment bankers at European banks are waiting to find out how they will fare.
– (Copyright The Financial Times Limited 2014)
