Remember January 2017? If you work for Deutsche Bank, you probably will. - This was when then-CEO John Cryan announced a plan to shelve individual performance related bonuses for all but the most junior staff in Deutsche's investment bank. Uproar ensued and Deutsche was effectively obliged to make amends at the bonus round at January 2018, a beneficence which possibly cost Cryan his job.
We're now approaching January 2019 and Deutsche's bankers are already starting to feel a bit sweaty about their bonus prospects for this year. A brief look at today's changes to Commerzbank's bonus scheme could make them sweatier still.
As Handelsblatt first reported earlier today, Commerzbank has decided to do away with individual bonuses for most employees in Germany, starting from now. Going forward, bonuses will instead be set by department or group. They will therefore depend on the performance of the group and the bank, not of the individual. If this sounds familiar, it's because this is pretty much what John Cryan implemented at Deutsche Bank nearly two years ago.
There are mitigating factors. Commerzbank's performance bonus elimination doesn't apply to employees outside Germany or to risk takers - meaning that most people in its investment bank will be spared. Even so, many will still be subject to additional new restrictions on performance related bonuses, set at 25% of annual salaries (for risk takers) in Germany and 42% in London.
There are three reasons why this matters if you're at Deutsche Bank.
Firstly, Commerzbank is Germany's second biggest bank (behind Deutsche). While Deutsche has a far larger investment banking and global markets operation, Commerzbank and its pay system remain a local Germanic benchmark - particularly as Deutsche refocuses on its home market.
Secondly, there have been suggestions - repeatedly shot down and potentially spurious - that Deutsche Bank and Commerzbank could one day become one. One senior Deutsche MD tells us he feels this is an inevitability as Deutsche loses large numbers of key staff: "We're just sitting here, waiting to merge with Commerz," he says despondently. Merging with a bank that restricts its bonuses to 42% of salaries may not be to everyone's liking.
And thirdly, Deutsche's newish CEO, Christian Sewing, is a German retail banker by trade. As such, it seems likely that he has a natural affinity for Commerzbank and its modus operandi given that Commerzbank is closer to his comfort zone than - say - Deutsche Bank's office on London Wall. If John Cryan (who had an investment banking background) found it possible to do away with individual performance bonuses when the need arose, Sewing is likely to find it easier still. - Especially now that Commerzbank has set a recent precedent. Watch this space.
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