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07 December 2023

Still have a job? Say bye to perks, bankers told

Stephen Hester (L), the Chief Executive of the Royal Bank of Scotland, arrives at the Houses of Parliament in London.  (GETTY IMAGES)

By Reuters
"How about McDonald's for lunch?" Only a year ago top London restaurants buzzed with high-earning bankers but the money-saving quip from one financial recruiter sums up the new mood of austerity.

His client at a large investment bank replied: "It would probably have to be if we were paying", the recruiter told Reuters.

The near-limitless expense accounts of the boom years have been replaced by a new probity and the banking industry's survivors are cutting costs, as they seek to adjust to a slump in business and multi-billion dollar state bailouts which have made them pariahs. "There is a new austere mood that you can't be seen being too loud and too brash for fear of people having a go at you," said a senior investment banker in London. The frugality is hitting jobs, bonuses and perks for banking employees such as free fruit at work and taxis home.

Only two years ago, bankers could commonly spend £3,000-4,000 just on lunch, and sometimes that much on wine alone, in a Michelin-starred restaurant like Pied a Terre in west London. Now the restaurant, along with other upmarket London eateries, is taking part in a promotion offering huge discounts to clients.

Banks, insurers and asset managers have announced around 300,000 layoffs since August 2007. Wall Street firms slashed cash bonuses for New York City staff by 44 per cent in 2008, according to a state report last week.

In London, investment bankers' bonuses will likely be down 60 per cent, while many will receive no end-of-year award at all, said Sophie Black, a remuneration consultant at accountancy firm Ernst & Young. Asset managers' bonuses will be down 30 to 40 per cent, she added. In Europe, UBS, which received a Swiss government bailout last year, said it is reducing 2008 bonuses for its investment bank by more than 80 per cent.


Examples of pressure on all expenses at banks are plentiful.

Royal Bank of Scotland has cut the hospitality budget for the Six Nations rugby championship it sponsors by 90 percent, said spokeswoman Linda Harper. "We are, of course, reviewing all our sponsorship activity as we look to cut costs across our businesses," she added.

Many bankers attending the World Economic Forum in Davos last week switched from vintage Dom Perignon champagne to ordinary champagne and white wine, caterers told one television channel.

US bank Goldman Sachs is keeping in place its policy on free taxis home for employees but they are available only from 10 pm, an hour later than was allowed a year ago, a spokeswoman said.

Last year, rival J.P. Morgan considered reducing the evening meal allowance for staff, according to an internal email seen by Reuters. The bank declined to comment.

The head of Russia's second-largest bank VTB said in October the company would freeze costs for at least a year, starting with his decision to forego flowers on his desk.

Banks are cancelling newspaper and magazine subscriptions, encouraging staff to fly economy rather than business class and putting a limit on spending on lunches with clients, bankers said. And public outcry forced Citigroup, which received bailout funds, to scrap plans to buy a $50 million jet last week.

And in another sign of the zeitgeist, former Merrill Lynch Chief Executive John Thain said in an internal memo he will reimburse Bank of America, which now owns Merrill, for the $1.2 million spent to renovate his office a year ago.

Thain, ousted from Bank of America this month, called the expenses "a mistake in the light of the world we live in today".