Bonuses are being announced at U.S. banks in London. We understand that some of Bank of America's people got their numbers today and that there's disappointment in the ranks: the bank has allegedly requisitioned something employees thought they had coming their way.
The issue in question is the exchange rate upside from the falling pound. U.S. banks like BAML denominate pay in dollars, and given that the dollar is up 20% against the pound since the Brexit referendum in June, some BAML staff had dared to hope their compensation would be recalibrated accordingly.
Needless to say, this hasn't happened. BAML staff are allegedly being paid as if the dollar/sterling exchange rate hadn't changed, meaning that the bank itself is the sole beneficiary of any positive exchange rate effects. Even worse, some are being down. "I would not expect this to be the case at other U.S. banks," complains one London banker.
Actually, it seemingly is the case. As we noted a couple of weeks ago, J.P. Morgan CFO Marianne Lake suggested that J.P. Morgan will be keeping the exchange rate bounty too. Banks are effectively taking advantage of the exchange rate changes to reset pay (lower) in dollar terms in the City of London.
Headhunters say U.S. bankers were foolish to assume they'd benefit. "If you're working in London and living in the UK, your costs of living are accounted for in pounds. Why would you be given a 20% pay lift for no reason?"