As the end of year approaches, more banks are divulging bonuses. The latest to go is Berenberg in London. As at RBC last week, Berenberg's London bonuses seem surprisingly acceptable (given dire predictions for the sell-side). They are also paid entirely in cash, but... there's a sting in the tail.
German-based Berenberg is a partnership 30% owned by the Berenberg family. The bank employs around 300 people in London across equities and corporate finance and has been growing in both the U.K. and the U.S. (where headcount is up nearly 50% this year to close to 50 people). Berenberg's people have been informed of their bonuses on a rolling basis since last Wednesday and some London equities staff say they received substantial increases on 2016.
However, Berenberg's generosity comes with a catch. Because the bank only pays cash and doesn't have restricted stock bonuses as a retention mechanism, it operates a claw back. If you leave Berenberg within six months of receiving the bonus, you will have to pay it back in its entirety. Including tax.
The clawback is nothing new. Nor is Berenberg the only bank to use one. Jefferies also pays in cash and its clawback is notoriously punitive. If you leave Jefferies within 12 months of taking delivery of your bonus, you have to pay 100% of the gross amount back. If you leave Jefferies within 25 months, you have to pay back 50%. Leave within 36 months and you'll pay back 25%.
Berenberg's six month bonus claw back looks timid by comparison. It's mitigated by the fact that senior Berenberg staff have a three month notice period which counts as ongoing employment when the activation of the clawback is being considered. However, while this might seem to imply that senior Berenbergers can hand in their resignation in March and leave in June without having to pay back a penny, insiders say the bonuses aren't actually paid until April. "The clawback period ends at the end of October," complains one. The clawbacks don't apply at Berenberg in the U.S..
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