Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Bonuses at specialist investment firms in the EU have shot up since they were exempted from the bloc’s bonus cap rules three years ago, lifting variable pay for many top traders to more than €1mn, according to new data.
The European Banking Authority, the EU’s banking regulator, said the average bonus for key staff at EU investment groups doing proprietary trading, underwriting or placement activities was €1.5mn in 2022 and €1.15mn in 2023, more than six-times their fixed pay.
That is a big jump from 2021, when bonuses at EU investment firms were capped at two-times fixed pay, unless shareholders gave approval for this to rise to three-times fixed pay.
The EBA also published data for the first time on the gender pay gap for staff at the companies it regulates. It found women were paid 24.5 per cent less than men on average at deposit-taking banks in 2023, and 32 per cent less than men at investment firms.
The data “raises concerns about the application of the obligation to ensure equal opportunities for staff,” the EBA said, urging companies and regulators to do more to analyse and address the causes of the gender pay gap.
The EU figures are similar to those published recently by UK banks, which showed an average gender pay gap of 26 per cent in 2023, according to research by the Ethical Consumer website.
There is less data available from US banks, although Citigroup said in 2021 that the median pay of its female employees worldwide was 26 per cent less than their male colleagues.
The EBA said EU banks’ gender pay gap was “mainly caused by the underrepresentation of women in higher paid positions”. It found women held slightly more than half of all jobs at EU banks but only a third of their highest-paid quarter of jobs. At EU investment firms, it found women had 35 per cent of all jobs but just 13 per cent of the highest-paid ones.
The EBA collected pay data from 58 investment firms, which include high-frequency traders, brokers and hedge funds. These groups were given an exemption from the EU’s bonus cap in 2022 after Brussels changed the rules in response to lobbying by the sector.
Despite the jump at some specialist trading firms, the regulator found overall bonuses at investment firms remained below the cap, at 47 per cent of fixed pay in 2023, which was down from 81 per cent in 2022.
Investment firms had lobbied Brussels to exempt them from the bonus cap because their capital requirements are partly calculated based on their fixed costs, making it more attractive for them to pay higher bonuses rather than fixed salaries. They also feared being put at a disadvantage compared with rivals in the UK, which ditched the bonus cap completely after leaving the EU.
The EBA on Tuesday published separate data for deposit-taking banks that are still subject to the bonus cap rules, showing their overall bonuses for key staff remained relatively stable, averaging slightly less than 60 per cent of fixed pay.
The highest bonuses were paid at investment bank divisions, where they averaged €342,773, followed by an average of €126,843 at asset management units. Retail banking bonuses averaged €102,908.
In total, the 131 EU banks surveyed by the regulator paid €18.6bn in bonuses and €116.2bn in fixed pay to their 2.2mn staff in 2023.
https://www.ft.com/content/48b26db0-99d7-4ee5-9ceb-e7154a1fd067
