Deutsche Bank Tightens Bonus Rules

Deutsche Bank has become the first global bank to introduce rules that would allow it to claw back staff bonuses earned at previous companies. While the move is unusual and unprecedented, pay consultants say it could turn into a blueprint for rival banks.

The new rules would apply to unvested stock from previous appointments converted into shares of Deutsche Bank and affect only senior bankers who joined the bank in or after January.

Deutsche Bank has become the first global bank to introduce rules that would allow it to claw back staff bonuses earned at previous companies. While the move is unusual and unprecedented, pay consultants say it could turn into a blueprint for rival banks.

The new rules would apply to unvested stock from previous appointments converted into shares of Deutsche Bank and affect only senior bankers who joined the bank in or after January.

The announcement comes at a time when European banks are under immense pressure from investors and regulators to hold its employees accountable for illicit or loss-making behaviour.

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Deutsche Bank co-Chief Executive Officer Anshu Jain had said in July that the banking industry needs an overhaul of its compensation model and wanted to position the bank “at the forefront” of a cultural change that includes reforms to investment bankers’ pay.

Speaking to CNBC, John Singer, an employment attorney at Singer Deutsch hailed the move as a “game changer” for the industry. He said:

[quote] The more draconian compensation policy they can enact will certainly placate and mollify the regulators. [/quote]

He explained that “clawbacks in and of themselves were problematic because they weren’t just clawing back money from the perpetrators of the illegal or losing trades.” Instead, there was “collateral and ancillary damage as well because traders on the desk were getting their bonuses clawed back on the actions of their superiors.”

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However, not everyone agrees that Deutsche’s leadership is sufficient to reform an industry known for its risk appetite and extravagant rewards.  

Christian Hamann, an analyst with Hamburger Sparkasse said:

[quote] The sector will have to move in unison for a plan like this to work for Deutsche Bank. They also have to address their total levels of compensation so that more money goes to shareholders and less to staff. [/quote]

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