Cash payouts to fall as banks squeeze bonus pots

Mon Dec 31, 2012 1:57pm EST
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By Sarah White and Anjuli Davies

LONDON (Reuters) - Many European banks are likely to limit the cash portion of this year's staff bonuses as rocky markets, tighter capital rules and costly scandals take their toll.

Under pressure from politicians, regulators and shareholders, firms are shifting further away from the big upfront handouts of the boom years. Some are expected to opt for a mixture of shares and risky assets - the kind which provoked the global financial crisis in 2008 but in some cases are now regaining value.

Britain's Barclays (BARC.L: Quote) already capped cash awards at 65,000 pounds ($105,000) for 2011 payouts, and those types of limits will feature again at several firms, bankers and headhunters said.

In total, 2012 bonuses could be down by as much as 30 percent on 2011 levels, senior managers believe, and the structure of awards is changing as regulators press the banks to clamp down on short term rewards.

"I'm sure there will be lots of different structures this year with different products, and attempts to cap the cash element. Either way bonuses will be down," said Stephane Rambosson, managing partner of executive search firm Veni Partners.

In the past year the industry has been caught up in a series of scandals ranging from mis-selling of financial products and a failure to prevent money laundering to the rigging of the Libor interest rate. Regulators have slapped heavy fines on a number of banks and disgruntled customers are following up with civil law suits.

All this is affecting the size and shape of bonuses.

"It's a mix of politicians and regulators wanting (pay) to be down and wanting to see an impact in the media, and also banks' new business models, which will mean that people will get paid less in future," Rambosson said.   Continued...