Bankers’ Pay Drops By 10% Amid Investor and Regulatory Pressure
The average pay of top bankers in the United States and Europe fell by 10 percent in 2012, according to a report by the Financial Times, after a series of high-profile revolts and legal scandals forced banks to place caps on executive remuneration.
Studying the total pay awarded to the chiefs of 15 leading U.S. and European banks, Equilar, a U.S. executive compensation research firm, found that top banking executives took home an average $11.5 million in 2012, 10 percent less than in the previous year.
The analysis by Equilar adds up base salaries, cash bonuses and certain other benefits. It also includes option and stock awards that were granted in 2012, some of which were to reward performance in previous years.
The report's findings reverses a previous trend that saw the industry's top managers enjoy two consecutive years of double-digit pay gains, and the decline comes amid a series of investor revolts over bankers' pay and tightened regulatory pressure last year prompted bank boards to rethink executive pay awards.
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In March, banking remuneration data compiled by PwC found that the executive pay premium that was built up amid the deregulation wave since the 1980s and the debt-fuelled bonanza in the past decade is waning six years after the financial crisis.
"Bank pay has fallen further and faster than many people think, and 2012 has seen a material reallocation of returns from employees to shareholders," said Tom Gosling, a partner at PwC's rewards practice.
The decline in bankers' rewards foreshadows a cap on bonuses that will come into effect across the European Union next year.
Backed by a majority of nations including Germany and France, the bonus caps will limit banks to a 1:1 bonus to salary ratio and are part of a drive to implement the so-called Basel III rules aimed at preventing a repeat of the 2007-08 financial crisis.
The ratio can be raised to 2:1 if the supported by a supermajority of shareholders, and will apply to EU-based employees of any bank, as well as to staff of EU banks wherever they are based.
Economy Watch