Investment bankers at the Royal Bank of Scotland don't have much to look forward to come bonus time this year. As we reported earlier this week, their compensation per head is on track to decline by 30% (based upon accruals in the first nine months) year-on-year. This is steep, especially when most other banks are expected to shave off just 5%. It also follows a 40% reduction in the bonus pool for code staff in RBS's markets business in 2012.
RBS investment bankers' pay is therefore being squeezed already. However, for political purposes it is not being squeezed enough. The Financial Times reports that RBS bonuses are back in the British political spotlight and that the Labour Party is demanding that RBS pay should be immediately curtailed to meet the European Union's bonus cap, due to come into force for next year's bonus round. “At a time when families face a cost-of-living crisis, it cannot be right for George Osborne to approve a doubling of the bank bonus cap,” said Chris Leslie shadow chief secretary to the Treasury. Leslie has tabled a Commons motion seeking to restrict bonuses later today. The British government owns 81% of RBS.
Whether it passes or not, Leslie's motion is unlikely to have much effect. Across RBS as a whole, bonuses were a mere 1.3x fixed pay last year and therefore already conformed to the new EU rules restricting bonuses to 2.5x salaries. The biggest outliers to the EU's rule were U.S, banks like Goldman Sachs and JPMorgan, where bonuses were more than 5x fixed pay for 2012. So far, there's been no indication that US banks' bonuses will be anything different for 2013....
Separately, it seems that Morgan Stanley banker Scott Matlock has given up waiting for European M&A to make its comeback. Dealogic reported that European M&A revenues fell 7% last year to their lowest level since 2003. 48 year old Matlock, who who worked on some of the largest telecoms deals in recent history and spent 25 years at Morgan Stanley, has decided to retire.
European Parliament promises to search for loopholes in its bonus restrictions. (Bloomberg)
Goldman Sachs and Morgan Stanley will inform their staff of bonuses before the week is out. (Financial News)
Ex-Morgan Stanley M&A banker Paul Taubman says he probably won’t be starting his own advisory boutique. (Bloomberg)
It's ok: other banks won't be affected like JPMorgan, they have already made their funding valuation adjustments. (Financial Times)
If this is the best that JPMorgan can do in fixed income then the rest of the street is in trouble. (William Wright, Twitter)
Barclays traders accused of LIBOR manipulation have been asked to report to the UK Serious Fraud Office for interviews. (Bloomberg)
Why hedge funds are hard places to work. (NY Post)
Moelis might IPO very soon. (Bloomberg)
Rare is the Analyst or Associate in Corporate Finance or M&A who rolls into the office before 9:30 or 10:00 am on a workday, and rarer indeed is the one who actually starts to do anything really productive prior to the time senior bankers begin streaming out of the office at 7:00 pm. (EpicureanDealmaker)
Let junior bankers sleep on Tuesdays. (Bloomberg again)