LONDON (Reuters) – Major international banks may still pay out big bonuses to high flyers this year even as the pandemic saps the global economy, as fears of losing talent to rivals during a trading boom trump worries of a big compensation bill.
While the likes of HSBC HSBC.L and Deutsche Bank DBKGn.DE are making redundancies to trim costs, other banks are taking a more relaxed approach to job, salary and bonus cuts across their workforces, remuneration consultants say.
A poll in June of 75 financial firms by Pearl Meyer, a global remuneration consultant, showed 63% have neither made nor contemplated changes to bonus structures in the face of the pandemic, even though 70% expect COVID-19 to have a moderately or slightly negative impact on their businesses.
Bonus plans also come despite a regulatory frown in Britain and elsewhere on bumper cash payouts in the early days of the pandemic, as banks were urged to conserve capital.
“These banks move broadly in lockstep, no one wants to cut anything first,” said Simon Patterson, managing director at Pearl Meyer, which advises more than 1,000 companies on employee compensation structures annually.
Sources at two global banks said it was too early to speculate on bonus outcomes for specific units, though many traders will expect big payouts after a surge in revenue at market divisions propped up investment bank profits in the first half of the year.
Research from compensation consultant Johnson Associates this month suggested 2020 bonuses for fixed-income traders for instance could rise by more than 30% from last year.
But that will need to be balanced against performances in other units, with low interest rates and an expected rise in defaults set to hit earnings in retail and corporate banking.
“Financial markets are cyclical but what we face is so unprecedented, no one truly knows whether next year is a feast or famine,” Patterson said.
Britain’s Prudential Regulation Authority (PRA) banned bonus payments to top management and material risk takers at the UK’s biggest deposit-taking banks when Europe’s COVID-19 crisis escalated in March, meaning some top traders could miss out.
But the PRA has not made clear how long the ban will stay in place and some banks are already planning for future payouts, the Financial Conduct Authority (FCA) noted last month, though it urged them to align payouts with long-term business plans.
The PRA said it will reassess firms’ distribution plans beyond 2020 in the fourth quarter.
Its assessment will be based on the current and projected capital positions of the…