First bonuses were paid mostly at the end of the year, in cash. Then a fraction of bonuses was deferred over three years. Then a majority of bonuses was deferred over three years. Then Deutsche decided to make its managing directors wait five whole years until any of their bonuses vest. And now, the Bank of England has said that it makes sense for bonuses to be deferred for up to 30 years.
The suggestion was put about in last week's Financial Stability Report, which points out that points out that bonuses are currently deferred for anything from 3-5 years whilst the estimated length of the credit cycle is 8-30 years. "The period over which executives’ decisions will have an impact on the bank’s performance is typically much longer than the period used to judge management performance as reflected in remuneration," says the Bank. "In particular, deferral of the long-term incentive component of variable remuneration is typically just three years for the major UK banks’ executives, far shorter than the length of the typical business or credit cycle."
There's no indication that 30 year deferrals will become mandatory. However, the Telegraph says 5-8 year deferrals for directors are a possibility.
Separately, the Sunday Times produced the second part of its hedge fund rich list yesterday. Once again, this proves that time spent at Goldman Sachs is particularly conducive to future hedge fund riches. 17 of the Times' richest 100 UK hedge fund managers have worked at Goldman Sachs, 6 at JPMorgan and 4 at Credit Suisse.
Allen & Overy predicts that banks will need to hire 70,000 extra compliance staff. (The Times)
Father of a 34 year old son complains that he still lives at home and won’t work because he only wants to work in an investment bank and can’t get in. (The Times)
Glenn Hadden, head of rates trading at Morgan Stanley, is under investigation by the CME Group, which runs futures exchanges. (DealBook)
Christian Noyer, governor of the Bank of France, says London should be sidelined as the eurozone’s financial hub. (Telegraph)
UK investment advice market is in decline: 25% of new investment advisors haven’t qualified under new regulations taking effect from January. Those have qualified will need to persuade customers to pay for previously free advice. The number of investment advisors is predicted to fall from 30,000 to 20,000. (Financial Times)
Credit Suisse’s investment bankers need to hope that Brady Dougan isn’t ever outmaneuvered by the Swiss. (Reuters)
50 of Citigroup’s 150 redundancies were in its equities business, where it’s been staffed as a top tier firm but has turned in 2nd tier revenues, says an analyst. (The Star)
Recruitment firm Sthree won’ be pushing into new markets, will be consolidating its position in existing locations. (Financial Times)
Combined, Westminster, Kensington and Chelsea, Wandsworth, Camden, and Hammersmith and Fulham pay as much tax as the whole of the rest of the UK. (Telegraph)
SocGen won’t ask Kerviel to repay €4.9 billion after all. (eFinancialCareers)