Nery Alaev writes about bankers‘ bonuses in Europe.
Research by Barclay’s, reported by Reuters, has shown that bonuses paid to bankers in Europe are less than bonuses in other parts of the world.
I’ve decided to look into the news and address why bonuses are such a contentious issue.
The history of bonuses
Wikipedia states that the practice of awarding bankers bonuses for their work has become contentious due to the Great Recession of 2008 – a result of this, in Europe at least, was a cap introduced by the EU in 2014 that in itself has been controversial among European nations.
For example, the United Kingdom sued the European Parliament in 2013 over the cap. The claim from the UK was later withdrawn, but proves the contentious nature of the bonuses and the caps surrounding them. At the beginning of this year, measures were introduced by the European Banking Authority that crack down on alleged attempts to circumvent the cap.
In summary, bankers’ bonuses in Europe have become a much more scrutinised element of the sector, so it may be no surprise that they are lower in Europe when considering this.
Alongside negative attention from the EU, European banking institutions are deferring basic and bonus pay to staff, which “became commonplace soon after the crisis as regulators wanted to make sure bankers whose high-risk trades went sour would not be rewarded with cash bonuses.” According to the report
This process has come to haunt the institutions because “pushing the expense into the future has become an unwelcome accounting inflexibility.”
The two issues are clearly effecting bonuses paid to bankers in Europe, although some institutions such as UBS are bucking the trend and increasing their bonus payments – the picture is mixed.
Nery Alaev is the current Director of ESN Investments GmbH, which engages in acquisition and development of commercial and residential property in Germany and Austria.