"A generation of very average MDs in banks will be wiped out in London"

Posted by Ed 2 days ago
For most people in the UK, the removal of the EU cap on banking bonuses is a signal that bankers' pay is being unleashed to levels last seen over a decade ago. "It feeds into a clear them-and-us narrative," says Larry Elliott in the Guardian. "Bankers will be whooping it up in the champagne bars of Canary Wharf."

Actually, it's far more nuanced. For a generation of senior bankers who've got used to collecting the enormous salaries associated with the bonus cap, its demise will mark the end of an era.

"Banks now have some very average people sitting on very high salaries who don't really do much except clip the coupon and collect their high base pay," says one headhunter with a previous career in trading. "If salaries are reduced, banks will be able to get rid of this entire generation of overpaid MDs that emerged since the crisis."

The EU bonus cap was introduced in 2013. It restricts bonuses for regulated staff ('material risk-takers') to no more than twice salaries. Before the cap was introduced, bonuses for managing directors in investment banks were typically in the region of £250k ($283k) Within three years, they'd risen to up to £550k. In 2020, average salaries for material risk-takers at JPMorgan in London were £667k ($756k at the current exchange rate) and £638k at Morgan Stanley. Managing directors and material risk-takers are typically synonymous, and headhunters say salaries can be higher still: "A few MDs are getting north of £700k sterling," says one senior fixed income headhunter in London.

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