Many European banks are likely to limit the cash portion of this year's staff bonuses as rocky markets, tighter capital rules and costly scandals take their toll.
Under pressure from politicians, regulators and shareholders, firms are shifting further away from the big upfront handouts of the boom years. Some are expected to opt for a mixture of shares and risky assets - the kind which provoked the global financial crisis in 2008 but in some cases are now regaining value.
Britain's Barclays already capped cash awards at 65,000 pounds ($105,000) for 2011 payouts, and those types of limits will feature again at several firms, bankers and headhunters said.
In total, 2012 bonuses could be down by as much as 30 percent on 2011 levels, senior managers believe, and the structure of awards is changing as regulators press the banks to clamp down on short term rewards.
"I'm sure there will be lots of different structures this year with different products, and attempts to cap the cash element. Either way bonuses will be down," said Stephane Rambosson, managing partner of executive search firm Veni Partners.
In the past year the industry has been caught up in a series of scandals ranging from mis-selling of financial products and a failure to prevent money laundering to the rigging of the Libor interest rate. Regulators have slapped heavy fines on a number of banks and disgruntled customers are following up with civil law suits.
All this is affecting the size and shape of bonuses.
"It's a mix of politicians and regulators wanting (pay) to be down and wanting to see an impact in the media, and also banks' new business models, which will mean that people will get paid less in future," Rambosson said.
During the crisis, many assets such as sub-prime mortgages became essentially worthless as no one would buy them, fearing that the borrowers would default. But as the crisis eased, some have begun to regain value - albeit from near zero levels - and banks are now using these assets and other risky type of bonds to reward their staff.
Credit Suisse is examining yet more ways to include different types of products as part of its 2012 bonus round, according to two sources familiar with the matter. The bank declined to comment.
As long as four years ago, the Swiss bank paid a group of employees with some of the riskiest assets on its balance sheet as their bonus, and unveiled a similar programme for 2011 awards. Know as PAF2, the plan linked bonuses for 5,500 senior bankers to about $5 billion in illiquid assets that fell in value in the crisis.
This form of payout can be attractive, and the value of some of the assets has grown again, netting paper gains for the bankers - some of whom even jumped at a chance to buy more of the risky assets in the past year.
But this programme and others like it, where bankers are paid in shares, make it harder to cash in straight away, with stock rewards for instance deferred for several years, or in some cases such as at HSBC, until certain employees leave or retire.
European Union rules force banks to defer at least 40 percent of a bonus for at least three years, though many firms are now going further than this, partly trying to counter the public outcry over big bonuses after the crisis.
NO EXCITEMENT THIS YEAR
Expectations over bonuses are already low as banks put the final touches to bonus pots and decide how they will be allocated in the first quarter.
Only at a handful of firms are some bankers hopeful of doing slightly better. Goldman Sachs, for instance, put aside more money for pay in the first nine months of 2012 than in the year before. Staff there are due to find out about rewards at the end of January.
But most top investment banks have been cutting back drastically this year to cope with stricter capital rules and weak revenues, leading to mass layoffs this year and prompting some such as UBS and Royal Bank of Scotland to ditch entire businesses.
That will force pay levels down too, as well as bring more changes to bonus structures, while many banks will also be concerned about appeasing shareholders who rebelled against reward plans for 2011.
"No one is very excited this year," said one banker in London, who wished to remain anonymous. "Bankers still do a lot better than most people but pay is very different today than it was five years go. It is not as attractive career as it was."
Germany's Deutsche Bank decided earlier this year to defer any part of an employee's bonus above 200,000 euros, and further restricted how much of that payout would be in cash.
Since then, its new chief executives Anshu Jain and Juergen Fitschen have warned that pay will drop as they crack down on a risk-taking culture driven by short-term gain - possibly signalling further tweaks to pay structures.
Others like Barclays, fined in the Libor rate rigging scandal this year which forced the departure of boss Bob Diamond, will also be keen to show a fresh attitude to pay.
Few bankers are likely to collect their 2012 rewards and jump ship as they might have in fatter years, however, or quit if they don't get what they had hoped for as more job cuts loom.
"We are just expecting zeroes," said another investment banker in London. "But this doesn't make me rethink my career as there is nowhere else to go right now." ($1 = 0.6190 British pounds) (Additional reporting by Katharina Bart in Zurich; editing by David Stamp)
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