With many thousands of London banking jobs expected to disappear on the back of the Brexit vote, now may not be the time to start thinking about pay. But if you work in finance, thinking about pay is probably second nature. And given that the pound is now worth a lot less than it used to be, you might start thinking about being paid in something other than sterling.
Senior non-British bankers working in London, tell us the plummeting pound is making the prospect of being paid in dollars distinctly appealing. “I wouldn’t want to be paid in euros now as they’re no better than the pound,” says the global head of markets at one international bank in London. “Being paid in dollars would be better. The dollar is going to be even more relevant as the most important currency in the world now.”
If you work in banking and want to mitigate your sterling exposure, it’s not as simple as receiving dollars directly into your bank account, however. The reality is that many US banks in the City effectively already compensate in dollars – pay is denominated in dollars and then converted into pounds. In this sense, all other things being equal, a collapse in the pound against the dollar should be a good thing for anyone working for a U.S. firm in London.
“US banks generally think about their compensation in dollar terms,” says Chris Wheeler at Atlantic Equities. “They’ll assign compensation in dollars and then convert it into pounds.”
The downside is working for a British bank that doesn’t do this. “A dollar/euro contract that’s paid in pounds is very different to a contract in pounds that’s paid in pounds,” says a US-born senior ETF professional in London.
If the pound maintains its current lows, US and Swiss banks which offer contracts denominated in their home currencies look to be at an advantage. British banks – like Barclays – which offer contracts denominated in pounds, look to be a bit stuffed. – Especially on Wall Street, where Barclays’ ex-Lehman bankers have long been querulous about pay anyhow.
Not everyone agrees that sterling’s fall is another blow to bankers’ pockets, though. “This will blow over,” says Michael Karp, the New York-based CEO of search firm Options Group. “Sterling might be an issue for the next two weeks, but then it will settle. Let’s just see how it goes.”
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