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14 Feb 2008
City bonuses flat-line but risk professionals win out

Despite the notorious secrecy of London’s investment banks, a detailed picture of the 2008 bonus season is beginning to emerge, according to international recruitment consultancy GRS. Banks have been cutting bonuses and jobs in areas such as STRUCTURED CREDIT and FIXED INCOME following the credit crunch. Workers’ bonus expectations have adjusted quickly. This time last year City employees would not have been satisfied unless their bonus was significantly higher than the year before. Suddenly, the same people are ecstatic if their 2008 bonus is equal to 2007. David Butters of GRS says: “Some banks have simply paid out meagre bonuses, whilst many others have not paid too badly but have clearly failed to manage expectations. Even top dealmakers and traders have seen their bonuses dented. Generally, staff in investment banking have had a greater proportion of their bonuses paid in shares - cash sums have been capped at a lot of banks.” But other specialisms, such as FOREIGN EXCHANGE and ACCOUNTANCY, are still doing well. The volatility in January was also good for EQUITY DERIVATIVES - and much of 2007 was good for WEALTH MANAGEMENT. But the overriding adjustment has been in banks’ increasing aversion to risk. In the wake of the sub-prime crisis and now the Kerviel scandal, banks have turned to plain vanilla traded products (such as foreign exchange and cash) – they’re going all out to retain their top risk talent. As a result GRS has seen unprecedented demand for RISK EXPERTS. It is becoming clear that even banks that have racked up substantial subprime losses are paying above-the-odds bonuses – but only to retain employees who can help minimise future losses. Citigroup, which wrote off $24bn (£12.3bn), still managed to pay the same size bonus pot as last year.David Butters concluded: “In the wake of the Kerviel scandal, the banks are shifting their priorities. Risk professionals are benefiting. No matter how robust the risk management system in a department, success and failure are reliant on the calibre and integrity of risk professionals. Most importantly, however, success depends on the depth of the relationships between the back-office and trading floor. Banks are beginning to realise there has been too much reliance on controls and not enough on relationships. They are reacting by investing strongly in the highest quality RISK, AUDIT, LEGAL and COMPLIANCE TALENT.”