Jumping Ship

Masters of the Universe Seek New Worlds

Hongkong - Wirtschaftszentrum
Could I have more fun out there?
  • Why it matters

    Why it matters

    Many investment bankers are now leaving for hedge funds and new ventures, where they feel they will not be held back by the new regulations.

  • Facts

    Facts

    • Deutsche Bank’s Colin Fan told staff in an internal video that being “boastful, indiscreet or vulgar is not ok.”
    • He shot to fame after the video went viral.
    • Deutsche Bank insists it has changed its culture at all levels.
  • Audio

    Audio

  • Pdf

They were once known as the Masters of the Universe: Investment bankers who were brash, buccaneering, with a casual disregard for rules. They made money for the institutions they worked for. In return, they were rewarded with high salaries and even higher bonuses.

But now, after a series of financial scandals, lawsuits and losses, investment banks including Deutsche Bank  are reining in their staff in, ordering them to become team players and stick rigidly to the regulations they once flouted. To earn the highest bonuses, traders will have to deliver high returns but also be good corporate citizens and able to work with colleagues and managers.

Unsurprisingly, some are leaving.

Colin Fan, the co-head of investment banking at Deutsche Bank, said in an interview with the Financial Times that some “purely financially driven” staff is moving to less regulated spaces, including hedge funds.

Bill Woodley, deputy head of the bank’s U.S. operations, told Handelsblatt that the bank is occasionally losing good employees on the other side of the Atlantic, too.

Deutsche Bank is currently in the midst of a wide-ranging program to restore its battered reputation in the wake of several scandals.

Deutsche Bank is unrepentant. The bank is currently in the midst of a wide-ranging program to restore its battered reputation in the wake of several scandals, ranging from accusations that some of its traders, like many in other banks, colluded to fix the Libor exchange rate to charges that it broke U.S. sanctions to do business in Iran. One ongoing lawsuit accuses one of its chief executives Jürgen Fitschen of lying in court. Deutsche Bank had to pay €3 billion, or $3.7 billion, in legal costs last year, and has been setting money aside to deal with ongoing claims. It now has a legal war chest of around €2.2 billion.

The bank’s executive and the supervisory board, which oversees senior managers, are keen to make it clear that the bank’s culture is changing, and its legal problems are all due to mistakes of the past.

Mr. Jain and his co-chief executive Anshu Jain have given seminars to staff around the world, warning employees not to ignore the company’s corporate and ethical values. Otherwise, their bonuses and promotions could be affected.

Mr. Fan said he gave his best wishes to anyone who left, adding that “these people probably won’t fit into the new banking environment anyway.”

A bank spokesman added that only a handful of staff had left due to unhappiness over the new culture, and insisted that the changes would not affect its competitiveness.

Deutsche Bank is not the only institution to openly overhaul its culture. In January 2013, Antony Jenkins, the new chief executive of Barclays bank, said his staff had to sign up to a new code of conduct or leave. His predecessor Bob Diamond had quit over Barclays’ role in rigging the Libor rate, and Mr. Jenkins was brought in again to change the bank’s risk-taking culture. He said in the future, bonuses would be assessed “not just on what we deliver, but on how we deliver it.”

Those who chafe under the new regulations are moving to smaller boutique houses, hedge funds, and to start-ups where their individualism is still seen as an asset.

Old-style chief executives, who tended to be brash, confident and expansive, are making the same move. Mr. Diamond, who was ousted from Barclays, is planning to launch a merchant bank to invest in Africa. Vikram Pundit, who left Citigroup in the wake of its financial crisis, has invested in an Indian financial services group and is launching a fund to invest in distressed assets. The respected Bill Winters, former deputy head of JP Morgan, is now running a private equity-driven fund manager.

Deutsche Bank has, in many ways, gone further than its peers in changing the way it pays top staff.

Earlier this month, the supervisory board at  Deutsche Bank said it is withholding bonus payments for several senior executives, including Mr. Jain and Mr. Fitschen until several legal disputes engulfing the bank are resolved.

The decision was unprecedented for the banking industry. Several banks have cancelled bonus payments for bankers who have failed to hit targets or been found guilty of misconduct, but Deutsche Bank has held back bonuses as a precautionary measure.

 

Meera Selva is an editor at Handelsblatt Global Edition and has reported on banks in London and Berlin. Laura de la Motte and Frank Wiebe from Handelsblatt also contributed to the story.  To contact the author: selva@handelsblatt.com

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!