Bloomberg and the Financial Times report that Deutsche Bank’s bonus plans for 2020 had been downsized by the ECB, citing internal sources. Before, it had been expected that bonus payments at Germany’s largest lender could rise compared to the previous year. For 2019, Deutsche Bank had paid out around 1.5 billion euros to employees, despite an annual loss of 5.7 billion euros. At the time, almost 600 employees had received a total annual compensation of more than 1 million euros. The bonus pot for 2020 was expected to rise to more than 2 billion euros after the bank made a profit of 113 million euros, the first profit since 2014. After strong headwinds from the ECB’s banking supervisors, the bank will apparently refrain from the bonus increase. However, the exact amount of the bonus payments is still unclear, as it will only be announced on 12 March 2021. At the same time, Deutsche Bank call centre staff have been on strike for higher salaries since 30 January 2021.
In a letter dated 15 December 2020, the ECB’s banking supervisors had called on institutions to exercise “extreme moderation” with regard to variable remuneration in view of potential credit losses due to the Covid-19 crisis. Bonus payments not only reduce the banks’ equity capital, but could also mean considerable reputational damage for the banks in the midst of a crisis, the supervisors said at the time.
MEP Sven Giegold, financial and economic policy spokesperson of the Greens/EFA group commented:
“Capping the bonuses paid by Deutsche Bank is the right thing to do, but the ECB does not go far enough. Salaries and bonus payments must be in a reasonable proportion to earnings. This has not been the case at Deutsche Bank for years. As long as the effects of the Covid-19 crisis on the banking sector are not yet fully clear, institutions should not jeopardise their equity capital through excessive remunerations. Supervisors must put the breaks on this. Admittedly, banks did not cause the crisis this time. But they owe their successful year 2020 less to the genius of their managers than to the massive state support measures for the entire economy. Moreover, big banks like Deutsche Bank still benefit from implicit state guarantees because they continue to be ‘too big too fail’.
Excessive remuneration in the financial sector is an unresolved problem. Nothing eats into the capital of big banks as much as the excessive remuneration expectations of their highly paid employees. Galactic salaries are still being paid from middle management upwards, and lavish bonuses are taken for granted. Meanwhile, the trade union ver.di has to strike against Deutsche Bank for decent pay in its call centres. After the financial crisis, the chance was missed to end the disastrous self-serving mentality. Although we Greens were able to push through a cap on bonuses, the basic problem of excessive salaries at the top was not solved. The ECB should be tougher on variable remuneration. It is not convincing that employees would flee in droves to London or overseas if more down-to-earth salaries were paid in Europe. The banks have been spreading this diffuse warning for years without ever providing any robust evidence.”
Report on Bloomberg (Paywall):
Report in the Financial Times (Paywall):
Letter by ECB Banking Supervision to supervised institutions from 15 December 2020:
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