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Near total refusal to pay guarantees is hampering hiring

Burnt by their generosity with guaranteed bonuses in 2008, banks are now virtually refusing to pay them at all. According to headhunters, this is contributing to the hiatus in hiring.

“After 2008, when already small bonus pools were depleted by guarantees, banks are paranoid about offering guaranteed bonuses to new hires,” says one headhunter. “It’s making it difficult to bring in new talent.”

Banks like RBC Capital markets are rumoured not to be paying guarantees at all (something unconfirmed by RBC). However, ICAP, the inter-dealer broker which is building its equity sales presence, is understood to be offering guarantees.

The absence of guarantees is making people reluctant to leave the security of an existing position for something new. But some bankers appear willing to take the risk.

“I am dealing with a very senior ex-MD from a US bank,” says the head of a derivatives search firm. “He resigned last year because he wanted a new challenge and is now looking for a new position without a guarantee. He is getting interviews: in a normal market he would be a high-spend hire. Without the guarantee you’re looking at an upfront cost of only around 200k in base salary.”

Another search consultant says banks’ will suddenly whip out guarantees if desirable candidates receive a competing offer. “Banks aren’t volunteering guarantees in this market, but I’ve been in a situation where a candidate received another offer from elsewhere and the bank suddenly offered a guarantee to match it,” he says.

Comments (14)

  1. Also….. banking isn’t the only suitor in the room at the moment. Other industries have caught up in total comp terms and the Banks were left with bonuses being the only sweetener they could offer. No bonus …… then the 20% drop in total comp but working in a pleasant culture, sociable hours, reasonable commute, with affordable housing and a lack of knife crime somewhere in Gloucestershire, starts to look really appealing. As I have predicted, talent drought in 12 months and the banking industry only has itself to blame – what else do you expect from an industry led by accountants with a 3 month vision? Attracting the lost talent back will be harder than convincing those that remained in the industry to move.

  2. I hope guaranteed bonuses become a thing of the past. Why should a banker get such a guarantee? If he or she were confident in his/her abilities, they would win the deals, and earn the cash.

    I assume the guarantee is a hedge against volatile economic conditions. But if that is the case, why should a bank pay them. If the bank is suffering, an employee should not be given a bonus. What is a bonus for except as a reward for doing something exceptional, and against the prevailing winds of fortune.

    There is a tendency to believe the financial community is something special. It is not not.

    Bankers are like anyone else in any other industry. The notion of talent scarcity is used to try to scare banks to pay more. Come on, these jobs are not rocket science… and if we leave a job, does the bank collapse?

    No. You’ll be doing a good job if anyone even notices.

    Bankers made fortunes for banks during the good times. But frankly an idiot would have lost money during this time.

  3. Other industries have caught up in total comp terms? Which ones? Do enlighten us.

  4. David you must never have had the luxury of a guarantee… ‘m assuming you aren’t good enough…

  5. Curious – some public sector consulting jobs are paying 20-30% off what the IB industry is paying their change folks. Let’s faceit, the public sector budgets were locked in at least two years ago. Not talking Front Office here. Add to that the quality of life dimension and things start to even up, especially as a large proportion of comp goes in tax anyway. Look at some public sector comp packages and work out how much their non taxable benefits are really worth ( like continuation of education allowance i.e. paying the kids school fees for some public sector workers – tax freee allowance). How much would you be prepared to forgo in order the avoid the peak hour Jublieee Line to CW !!!

  6. Very clever Jay. Boom boom. Well done.

    I am just making the point that bankers have got used to what would be considered gross excess in any other industry.

    Is there something special about us? Have we got a higher IQ. Do we have more qualifications?


    We get this money because we went into this industry. That’s pretty much it.

    It is unhealthy, and it attracts people into the industry for the wrong reasons… Moreover, if we were honest, banks do not need to offer these guarantees. Most of us are just glad to still just have a job…

  7. With so many leaving the industry we are going to see a repeat of what happened in 2004. After the Dot Com bubble burst in 2000 banks just stop hiring and let 000’s go. Then, once things picked up in 2003/04 they had to pay people more and more to come back (it was great if you were a grad as banks were just hiring everyone and paying loads)!! In the next 18-24 months when banks start hiring like mad we will see the circle come round again! They will start hiring 000’s and will have to pay more and more. In another 5-7 years the next bubble will burst and we are back to square 1!! People have got a little more cleaver now though and more leaving IB (and moving out of London)… will they ever want to come back to this vile industry??

  8. I thought these days you don’t need to guarantees to pull good people away from the likes of Citi, UBS and RBS, to say the least.

  9. Incorrect. Banks are still giving out guarantees. They’re just being more discriminate in who they’d give them to. I’ve been offered guarantees in the last 6mths by CITI, BOA-ML and HSBC.

    You just need to be good enough then you can still laugh all the way to the bank…

  10. Truth is the banking community were recruiting too many dumb privately educated Oxbridge candidates who didn’t know anything, hence they collapsed the financial system, its time to give the jobs to those that know the educated people from the streets that know about real life, understand how the world works and haven’t grown up in a box, these are the ones that will succeed, and help the banks succeed, companies should not pay bonus guarantees, it is not a bonus if its guaranteed, stupid dumb bankers! If you perform you are paid, if not you go, somehow bankers think they are better than the rest, just because they are public schoolboy ghray suits backwards thikning people, its time you get your justice.

  11. Banks of course still need to offer guarantees to get the superstars… If you’re up $10 YTD & are on 3 months notice why oh why would you leave without a guarantee? You’d start in August, take a few months to get integrated & then get paid based on your performance – all 2 or 3 months of it! The only reason to go would be if you’re at a sinking ship & the job is at a far better platform.

  12. If you’re that good, why do you need a guarantee?

  13. You guys want to know the real reason banks don’t want to pay guarantees? It’s because they have to pay us (the recruiters) on the guarantee too. Usually, this doubles our fee. (I am not proud of this, just stating a fact.)

  14. “I am dealing with a very senior ex-MD from a US bank,” says the head of a derivatives search firm. “He resigned last year because he wanted a new challenge and is now looking for a new position without a guarantee”

    Jumped before he was pushed I’d wager – and a Derivatives MD, we can have a guess how the P&L may have looked. Very senior MD in US investment bank resigns with nowhere to go in a search of a ‘new challenge’ (in the same industry apparently?!). If you believe that then I’ve got a great bridge for sale.

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