The European Central Bank is jostling for staff with Europe’s banks including HSBC Holdings Plc and Deutsche Bank AG as it rushes to hire 1,000 people to start supervising the euro area’s lenders by a November deadline.
While the ECB, which is offering salaries ranging from 54,408 euros ($74,000) to 116,508 euros for analysts, supervisors and division chiefs, may not match the wages banks offer, perks such as tax breaks, subsidized child care and salary-linked pensions make the positions attractive, said Aleksander Montalbetti, a consultant at Indigo Headhunters.
The ECB, led by Mario Draghi, is hiring in Frankfurt after European leaders gave it the power to regulate a banking industry battered by a financial crisis and scandals ranging from manipulation of interest rates to misselling of mortgage products. The recruitment drive may force up salaries as banks hunt for risk and compliance officers to deal with a swathe of new regulations in a year when the European Commission is forcing them to cap bonuses.
“Everybody’s talking about it, banks and consultancies are concerned the ECB will suck up some of their staff,” Montalbetti said by telephone from Frankfurt, Europe’s second-biggest financial center after London. “They’re seen as a very attractive employer. I know several bankers and auditors who are applying.”
Korbinian Ibel, chief of group risk control and capital management at Commerzbank AG, was among people hired to head the four divisions of the new supervisor, the ECB said today. Stefan Walter of Ernst & Young LLP, Ramon Quintana, director general of banking supervision at the Bank of Spain, and Jukka Vesala of the Finish Financial Supervisory Authority filled the other three positions, it said in an e-mailed statement.
The bank needs to be successful in hiring as it bids to restore confidence in the European financial system, said Martin Hellmich, a professor of risk management and regulation at the Frankfurt School of Finance & Management.
Banks are recruiting hundreds as they face new regulation designed to avert a repeat of taxpayer-led bailouts that followed the 2008 collapse of Lehman Brothers Holdings Inc. The rules include re-defining the cost of risk to make riskier investments more expensive to an overhaul of how banks process trades and transactions in order to protect clients.
Deutsche Bank, Europe’s largest investment bank by revenue, is spending 1 billion euros on increasing its headcount and improving its control systems. HSBC, Europe’s biggest bank by assets, added 1,600 risk and compliance staff in the first nine months of last year. Spokeswomen for the two companies declined to comment on whether ECB hiring is hurting recruitment now.
European banks stand to lose people to the new regulator, Udo Braun, head of compliance at Commerzbank in Frankfurt, said in November. Nils Happich, a spokesman for Commerzbank, which is Germany’s second-largest lender, declined to comment further yesterday.
Qualified risk managers are in short supply, said Rabobank Groep Chief Financial Officer Bert Bruggink.
“It’s not so easy to find tens of people walking round in the street,” Bruggink said in an interview in Utrecht, the Netherlands, this week. “They’re simply not there.”
ECB staff benefit from lower taxes. Just like officials of other European institutions in Brussels and elsewhere, workers pay tax to the European Union rather than their country of residence at rates between 8 percent and 45 percent. In the U.K., the starting level is 20 percent and the top band was higher than 45 percent in 11 of the euro area’s 18 countries last year, EU data show.
A spokeswoman for the ECB declined to say exactly how much tax its staff are required to pay.
“Any employee is going to look at take-home pay and cost of living,” Tim Thompson, a partner at auditor Deloitte LLP’s risk and regulatory analytics department, said in a telephone interview from London this week. “If you’re paying less tax, then clearly that’s advantageous.”
Banks in London pay annual salaries averaging 62,586 pounds ($103,000) to credit and risk managers, while compliance staff can earn 74,332 pounds, job description data compiled by Reed Specialist Recruitment Ltd. show. Bankers in Germany earned an average 57,634 euros in 2013, according to StepStone GmbH, a recruitment website operator based in Berlin.
Banks also pay bonuses which typically vary based on the performance of the individual, the unit they work for and the company as a whole. Bonuses will be capped at twice annual salaries starting this year, according to the European Banking Authority, and many bankers are already paid less than that amount.
The ECB pays annual bonuses of between 1 percent and 8 percent of salaries to a maximum of 35 percent of its staff, the bank said in an e-mailed response to questions.
Draghi, 66, a former Goldman Sachs Group Inc. banker who earned 374,124 euros at the ECB in 2012, is overseeing the establishment of the banking regulator after fighting fallout from a sovereign debt crisis by providing more than 1 trillion euros in emergency loans to Europe’s lenders.
In December, the ECB began working with national regulators and consultants to conduct a three-stage assessment of the financial health of about 124 of the euro area’s biggest banks before taking over supervision.
Perks at the ECB also include free schooling for employees’ children at the European School in Frankfurt and daycare partly financed by the city, its website shows. Pension plans pay as much as 70 percent of final salary, should employees make voluntary contributions in addition to a required 6 percent of their wage. The ECB makes payments equal to 18 percent of annual salaries.
“We are well aware of the heavy competition for good supervisors,” Steven Keuning, the central bank’s head of human resources, budget and organization, said in an e-mailed response to questions. Many applications are coming from bankers with experience in risk management or compliance, as well as people from national supervisory bodies and specialized consultants and lawyers, he said.
The ECB is seeking to attract staff as U.K. financial firms including Barclays Plc, Royal Bank of Scotland Plc and Lloyds Banking Group Plc cap or close final salary-indexed pensions to reduce expenses.
ECB workers also receive all pension contributions as a lump sum, plus interest, should they leave before completing five years of service. All or part of the savings can be transfered tax free to another approved plan should they depart after five years, according to the ECB’s website.
The new supervisory authority will take over the ECB’s current headquarters at the Eurotower in central Frankfurt. Draghi and other officials responsible for monetary policy will move to new 185-meter twin towers in the east of the city.
Daniele Nouy, a 63-year-old Bank of France official, will head the new regulator. Her five-year term began this month.
Keuning said the hiring process at the ECB is well underway. The appointment of deputy heads for the regulator’s four directorates is “imminent” and the first middle management positions should be filled by early next month, he said.
About 770 of the 1,000 employees will be responsible for supervision while the remainder act in support functions such as providing legal advice or translation. The analysts will examine banks’ financial accounts, supervisors will assess risk models and solvency and more senior supervisors will discuss findings with executives at the banks, according to the job descriptions.
The ECB was established in 1998, 2 1/2 years after Europe’s political leadership set a start date for the euro. It employed about 1,638 people in 2012.
The ECB may end up recruiting a large number of people from national regulators, particularly from Germany’s Bundesbank, Markus Rudolf, a professor of banking and finance at the WHU Otto Beisheim School of Management in Vallendar, Germany, said by telephone.
While governments will jostle for control at the new supervisor, just as they do at other European institutions, Germany may be at an advantage as “candidates in Spain, Italy or elsewhere may want to stay at home,” Rudolf said.
Frankfurt, a city of 685,000 people, is a quarter the size of Rome and about five times smaller than Madrid. Rents there average 12.50 euros per square meter per month for apartments of 80 square meters to 120 square meters, according to Nuremberg-based Immowelt AG, which provides information technology services to the real estate industry.
The ECB will probably need to hire external consultants because bankers are sometimes held to notice periods of several months, said Thompson at Deloitte.
The job market is “extremely tight,” he said.
Supervision may be one of the few areas of the finance industry’s job market where demand for staff is higher than supply. Financial companies in western Europe have eliminated more than 140,000 positions in 2012 and 2013, data compiled by Bloomberg show.
Diminishing employment prospects have also increased interest in risk management among university students, Hellmich of the Frankfurt School of Finance & Management said.
“A lot of the jobs that have gone at the banks are in the front office and these people won’t be able to retrain all that quickly,” he said. “Students are still keen to learn about finance and investment banking fields such as M&A but there’s a lot of interest among people looking to add risk management to their qualifications.”