Deutsche Bank AG, Germany’s biggest bank, introduced a sliding scale forcing top bankers to defer a bigger proportion of their bonuses, said two people with direct knowledge of the plan.
The rule applied to 2009 bonuses of more than €100,000 ($136,000), said one of the people, who declined to be identified because the plan was private. Bankers would have to defer at least 25 per cent of bonuses above that amount, the people said. The marginal deferral rate will increase to as much as 90 per cent, as the bonus crosses a series of thresholds.
Governments in Europe and the US are facing pressure to limit bankers’ compensation after financial firms were bailed out by taxpayers during the credit crisis. Deutsche Bank Chief Executive Officer Josef Ackermann, who warned of a regulatory and political “backlash” if his industry didn’t change pay policies, reiterated this month that he would bring the company’s compensation policy into line with the Group of 20’s principles. The plan “is linked to global banking behaviour and not wanting to be out of line with everyone else,” said Chris Roebuck, a visiting professor at Cass Business School in London.
In all, managing directors might have about 50 per cent to 70 per cent of their bonus deferred, one of the people said. About 75 per cent of the deferred compensation will be in stock and 25 per cent in cash. The equity portion will be paid over a period of almost four years, and the cash portion over three years.
Pay deferred
A “significant portion” of pay would be deferred under the new compensation plan, the bank said on February 4. Ackermann said he expected industry pay to decline in coming years. Deutsche Bank, which didn’t need state aid, is increasing employees’ fixed pay by 5 per cent to 30 per cent, in turn reducing bonus payments by an equal amount. The bank may also claw back bonus payments in the event of losses, including from managing directors.
Deutsche Bank spokesman Ronald Weichert declined to comment, referring to the company’s February 4 statement on pay. The lender is scheduled to report more details on compensation, including the amount paid in bonuses, in March. The German bank booked costs of Euro225 million for the UK bonus tax.
Frankfurt-based Deutsche Bank reported this month a fourth straight quarterly profit, a year after posting a record loss. The company set aside about €357,000 last year in compensation and benefits for each employee at the corporate and investment bank, which includes the securities business and transaction banking.