Overview of Bonus Trends in the EU

In recent years, bonuses for specialists in investment firms across the European Union (EU) have witnessed a remarkable rise. This shift has occurred following their exemption from the EU’s imposed bonus cap regulations three years ago, marking a significant change in the compensation structure for many high-performing traders.

According to new findings from the European Banking Authority (EBA), the average bonus for top employees within these firms soared to €1.5 million in 2022 and slightly adjusted to €1.15 million in 2023, representing more than six times their fixed salaries.

Comparison with Previous Regulations

This surge stands in stark contrast to 2021, when EU investment firms were restricted by a two-to-one bonus cap relative to fixed pay, which could only be exceeded with shareholder consent up to three times fixed salary.

Gender Pay Gap Findings

The EBA also released gender pay gap statistics for the first time, revealing a concerning disparity in compensation. In 2023, women at deposit-taking banks earned, on average, 24.5% less than their male counterparts, with a more pronounced gap of 32% at investment firms.

The EBA highlighted these figures, indicating that they raise legitimate concerns regarding the compliance with equal opportunity mandates for employees. The organization advocates for more comprehensive analyses and solutions to tackle the underlying issues contributing to the gender pay gap.

Benchmarks from the UK and the US

The situation within the EU reflects similar trends observed in the UK. Recent research by the Ethical Consumer website indicates that UK banks reported a gender pay gap averaging 26% in 2023. While data from US banking institutions is less comprehensive, Citigroup noted in 2021 that female employees globally earned 26% less than their male colleagues.

Insights from the EBA’s Analysis

The EBA attributed the gender pay gap in EU banks primarily to the underrepresentation of women in higher-paying roles. Their analysis revealed that while women constituted slightly over half of the workforce in EU banks, they held only one-third of the highest compensated positions. At investment firms, this discrepancy was even more pronounced, with women occupying 35% of all roles but only representing 13% of the top earners.

The recent data compilation encompassed 58 investment firms, including high-frequency traders, brokerage services, and hedge funds, which sought an exemption from the EU’s bonus cap following lobbying efforts to remain competitive with UK firms, which eliminated the cap post-Brexit.

Continued Observations on Bonuses

While bonuses at select specialized trading firms have climbed sharply, the overall bonus landscape within investment firms remains below the cap, averaging 47% of fixed pay in 2023, a decline from 81% in the prior year.

For reference, the EBA’s separate analysis of deposit-taking banks, still adhering to the bonus cap, indicated that bonuses for key personnel maintained stability at just under 60% of fixed salaries. The highest bonuses across investment banks averaged €342,773, with €126,843 in asset management and €102,908 for retail banking.

In total, the 131 EU banks included in the survey distributed €18.6 billion in bonuses alongside €116.2 billion in fixed salaries among their 2.2 million employees throughout the year 2023.