Investment bankers are renowned for their ability to be paid large sums of money. But perhaps the tide is turning against a culture that puts the investment banking bonus pools ahead of all other stakeholders in a bank’s profits. This week the Financial Times reported that for several large universal banks with large investment banking operations there will be pressure to be conservative in the payment of bonuses, even if portions of the investment bank have made record profits.
Universal banks provide a strong balance sheet, reputation and client access to support the work of their investment banks. But that strength comes in part from the build up of capital in these banks. And the shareholders as well as other stakeholders for these large banks also have expectations. As noted in the article, one “bank (is trying) to balance paying people for results with their need to be “good citizens”. This is in an environment where regulators and politicians have curbed shareholder payouts so they will have a cushion for potential loan losses.”
It could indeed be a sign of the end of the “heads I win/tails you lose” culture that has predominated within the investment banks of the large banks. A culture where losses are always absorbed by the bank and not by the individuals and teams that may have been responsible for them. It is not clear that this positive development will be realised but the fact that it is being discussed is clearly a very first step in the right direction.
