Number of newly-minted millionaires at Europe's big banks is shrinking

Fri Mar 24, 2017 1:03pm EDT
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By Jamie McGeever and Anjuli Davies

LONDON (Reuters) - 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.

The 2016 MRT figures for Europe are skewed by Deutsche Bank (DBKGn.DE: Quote), where a massive restructuring has seen 9,000 job cuts announced and the freezing of bonuses for many staff.

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: Quote) and Morgan Stanley (MS.N: Quote) 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.   Continued...

File photo of the skyline of the banking district in Frankfurt, September 18, 2014. REUTERS/Kai Pfaffenbach /Files