Banking pay is a complex business nowadays. It's not just about amounts, it's about deferrals. It's not just about the percentage of pay that's deferred, it's about the time that pay is deferred for. It's also about deferral thresholds, claw-backs and how widely banks are implementing regulatory pay requirements.
On this basis, we've taken another look at the remuneration reports of Deutsche, Credit Suisse and UBS. When everything is taken into consideration, which leading European investment bank really offers the best pay structure? It looks like Credit Suisse...
If you're a material risk taker and you want to get paid well, regardless of how that pay is structured, you might want to work for UBS.
In 2014, UBS paid each of its material risk takers an average of CHF1.9m ($2m). Deutsche paid an average of €1m ($1.1m) to material risk takers in its corporate and investment bank. Credit Suisse paid a mere CHF859k ($880k).
Credit Suisse paid its average material risk taker a salary of CHF614k ($636k) last year. UBS paid CHF571k ($591k). Deutsche Bank paid an average €476k ($516k) in its corporate and investment bank.
If you want to get paid in an investment bank, you don't want to be classified as a 'material risk taker'. Material risk takers are subject to all sorts of regulatory interventions and must have at least 50% of their compensation deferred.
The best bank at regulatory avoidance looks like UBS: it only designated 625 people material risk takers in 2014. This is compared to 801 at Credit Suisse and a horrible 2,903 at Deutsche Bank. It's worth bearing in mind that Deutsche's massive number of material risk takers may have negatively impacted the figure for average pay per head (see point 1) - Credit Suisse is including all UK managing directors, but UBS is likely only including very senior staff.
Employees who are awarded shares at Credit Suisse are able to access them within three years of the grant date. - Credit Suisse shares vest equally on each of the three award anniversaries. Credit Suisse also offers its higher paid employees contingent capital awards, which vest on the third anniversary of the grant date and pay an interest rate of 4.85% per annum over LIBOR on awards denominated in Swiss francs and 5.75% over LIBOR on awards denominated in US dollars.
Deutsche Bank shares also vest equally over three years. However, if you're one of 139 employees in Deutsche's 'senior management' group, your stock will be subject to a 4.5 year 'cliff vesting' schedule: you won't get anything until 54 months after the stock was awarded.
At UBS, stock vests in years two and three after it was awarded. However, when UBS employees earn more than CHF300k, they're paid in contingent capital which vests in year 5. In the intervening years, UBS pays an interest rate of 7.125% for awards denominated in US dollars and 4% for awards denominated in Swiss francs.
UBS also comes out best in terms of the amount you have to earn before your bonuses start to be deferred.
At UBS, deferrals kick in at total compensation of $300k, beyond which 'a significant amount' of bonuses are deferred. At Credit Suisse, deferrals start from $250k in total compensation, beyond which 100% of all share awards are deferred. At Deutsche Bank the deferral threshold is €100k ($108k), beyond which at least 50% of bonuses are deferred.
Credit Suisse has long had one of the most favourable clawback regimes for banks in Europe. The Swiss bank starts to claw back share bonuses if a division makes a loss or a 'negative strategic return on equity' - whichever leads to the greatest forfeiture. However, the divisional loss has to be CHF6.7bn before the entirety of a bonus is clawed back.
Deutsche's clawback system is far more punitive by comparison. Any loss at a group-wide level leads to the entirety of that year's vesting tranche to be clawed back.
At UBS, 100% of bonuses are also clawed back the moment the return on target equity turns negative.
Finally, bankers in London whose pay is regulated will find a proportion of their compensation is paid in 'role-based allowances' or top up payments which come with the job. At Credit Suisse and UBS, role based allowances include a deferred element which vests on each bank's share vesting schedule (see 4), making Credit Suisse best.
Deutsche Bank doesn't pay fixed allowances. It does pay 'Additional Fixed Pay Supplements.' However, these aren't the same - they're 'ancillary benefits' related to pensions.