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It's Official: Deutsche Bank Scraps Cash Bonuses

October 28, 2016

Deutsche Bank CFO Marcus Schneck told investors Thursday that the bank has scrapped its cash bonuses for the year and is looking at tying compensation of senior employees to share price development. However, this may be contradictory to CEO John Cryan's thinking that the share price does not impact the daily functioning of the bank.

 

One alternative is for the bank to issue deferred stocks as part of compensation.  However, this strategy may be risky.  It exposes the employee to the performance of the DB shares that have been fairly volatile and are down more than 40% since the start of the year. The strategy could also dampen employee morale and lead to staff moving out of the bank.

 

"It is key for investment bank to keep its staff. In any change with what has been agreed with staff will impact morale," Gildas Surry, partner at Axiom Alternative Investments told CNBC Thursday.  She added: "I think it is a very constructive debate because you have got 2.4 billion euros of deferred bonus to be paid under cash. And some other banks have chosen to pay via contingent convertible bonds, especially Credit Suisse with actual equity stakes in portfolios of collateralized debt obligations (CDOs)."