Lisa Abramowicz is a Bloomberg Gadfly columnist covering the debt markets. She has written about debt markets for Bloomberg News since 2010.

European bankers seem like a beleaguered bunch compared with their U.S. peers.

They work at banks that are losing global market share. Their continent isn’t growing as quickly as the U.S., which means there often aren’t as many opportunities to make money. As if that weren't enough, European bankers received lower 2016 bonuses than the year before. 

Compensation Cuts
European banks cut 2016 bonus pools as they sought to preserve more capital
Source: Company filings, Bloomberg News

At first blush, it seems bonus cuts only serve to make European banks that much less competitive when trying to attract top talent. This potentially could widen the divide between their performance and that of their American rivals going forward.

Leading the Pack
U.S. banks have performed better than European firms in recent years
Source: MSCI Index data, Bloomberg

So far, however, European banks are finding other ways to lure top talent, including boosting their base salaries. In some select cases, European banks have compensated high-earning investment bankers more richly than U.S. banks have.

UBS Group AG, for example, handed out the smallest bonuses in four years when it cut its 2016 pool by 17 percent. But it paid its investment bankers a greater proportion of their unit’s revenues than JPMorgan Chase & Co. did, with a compensation ratio of 40 percent, compared with 27.1 percent at the biggest U.S. bank, according to Bloomberg Intelligence data.

Big Money
While UBS cut 2016 bonuses, its investment bank still paid well versus its income
Source: Bloomberg Intelligence

And while Barclays Plc pared its 2016 bonus pool by 1 percent, it had 11 employees who were paid more than 5 million pounds last year, up from nine in 2015, Reuters reported, based on company filings.

European banks have generally boosted base pay in response to European rules passed in 2014, which sought to cap banker bonuses. As a result, many bankers have gotten more money in cash upfront rather than at the end of the fiscal year based on their (and their firm's) performance. Or else they've gotten big allocations of bank shares.

On average, median compensation across all units of European banks is below that in the U.S. But senior-level base salaries can be bigger in Europe. For example, director level, London-based employees at European banks earned a base salary of 175,000 pounds, compared with 170,000 pounds at American banks, according to Emolument data. As consultant Mercer noted in a 2016 report, "Bonus caps impact pay mix more than total pay."

Certainly, many mid-level bankers are getting stiffed by this year's bonus cuts. But so far, European banks haven't been overly hampered in their recruitment efforts as a result of the 2014 rules, according to Alan Johnson, managing director of pay consulting firm Johnson Associates. This is because there just aren't that many jobs out there. "There are many people who would move if there are jobs they could get," he said in a telephone interview. 

But there are some other significant consequences of this change in pay structure.

First, European firms end up having to guarantee bigger, cash salaries, with less flexibility to reward surprisingly good performances or penalize unexpectedly disappointing ones. And it raises the question of how the firms will continue to compete with U.S. banks as higher benchmark bond yields, fewer legacy loans and more trading activity let American firms boost revenues and pay even bigger bonuses.

Right now, however, just because banks from UBS to Deutsche Bank AG are slashing their pools of variable compensation doesn't mean they're necessarily stiffing their top performers. Some of those employees have already been richly paid.

-- With reporting assistance from Lionel Laurent

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Lisa Abramowicz in New York at

To contact the editor responsible for this story:
Mark Gongloff at