The claws are coming out. Three more U.S. banks have agreed to expand their bonus clawback provisions to make it easier to recover compensation from executives – and their superiors – who take part in misconduct that hurts the firm.
The new policies, which essentially lower the threshold for what is considered misconduct, are being adopted by Citigroup, Wells Fargo and Capital One. The three banks are joining Goldman Sachs, Morgan Stanley and J.P. Morgan Chase, which all agreed to implement similar clawback policies last year.
In a real coup for New York Comptroller John C. Liu, the official who brokered the deals with the banks, Capital One has agreed to reveal the amount of executive pay clawed back, as long as the event that triggered the bonus recoveries is publicly disclosed. Citigroup and Wells Fargo only went as far as to say they will consider such a disclosure policy.
While the agreements provide banks with ample room to recover bonuses – all they need to do is prove that employee misconduct led to serious financial or reputational harm – it’s fair to question how often banks will attempt to recoup money from their executives.
Clawbacks are, for all intents and purposes, an admission of guilt that would shine light not only on misconduct, but also on the inability of the firm to prevent breaches of compliance or ethical standards.
The two notable examples of bonus clawbacks occurred at UBS and J.P. Morgan, which each recently dealt with highly-public, multi-billion dollar trading scandals. Not exactly blips on the radar. Smaller events, like Morgan Stanley’s botched handling of Facebook initial public offering, have yet to result in the recovery of bonuses.
Banks still appear resistant. They now have more rope to hang irresponsible employees, but we’ll have to wait and see how tempted they really are to use it.
Average earnings in the U.S. financial services sector were down 18% in 2012 compared to the previous year, with the sell side of Wall Street taking the brunt of the punishment, according to the eFinancialCareers 2012 Compensation Survey.
Roughly 53% of financial services employees are confident in their ability to find a new job, a 15 percentage point increase from the third quarter of last year. Only 16% say they are not confident that they could find a new job.
A jurisdictional dispute has broken out between U.S. and U.K. officials over Tom Hayes, the former UBS trader facing charges for his involvement in the Libor rate-fixing scandal.
The European Central Bank hopes to hire roughly 800 workers over the next year as it transitions into its new role as supervisor of the Eurozone’s banking union. The hiring goal is said to be just a “starting part,” with the target expected to grow over time.
If you want a banking job at UBS, good luck. Not only is the Swiss bank in the process of cutting 10,000 jobs, but the bank’s annual report, out yesterday, shows that a large proportion of its hires come from among the people working there already.
Another interesting tidbit included in the UBS report: Andrea Orcel, chief executive officer of UBS Investment Bank, was given $26.1 million to defect from Bank of America last year.
Nearly 900 hedge funds closed their doors in 2012. The number of funds shuttered has now risen for the third year in a row.
Goldman Sachs and J.P. Morgan received conditional approval for their plans to return capital to shareholders. The two banks will need to address “weaknesses” in their capital planning processes, and must submit new plans by the end of the third quarter. The Fed objected to the capital plans of Ally Financial and BB&T, but gave passing grades to the 14 other largest U.S. banks.
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