Deutsche Bank employees who were found to have inappropriately used messaging services for business communications will receive a cut in their bonuses as part of repercussions from a sweeping U.S. probe across the industry.
The new development
Employees whose usage of unauthorized devices or messaging apps was found to be in breach of policies will see a huge cut in variable pay.
The cuts affect pay still to be awarded for last year.
Context
The bank joins several other global lenders that have paid fines of more than $2 billion to the Securities and Exchange Commission and the Commodity Futures Trading Commission in settlement for an industry-wide investigation into whether bank staff made use of unauthorized communication channels.
The top execs in DB in particular took a pay cut last year over the issue, and the bank has rolled out new software as it seeks to address the issue.
“We have a consequence management framework in place,” Deutsche Bank said in a statement.
“Depending on the quantity and quality of violations this will also impact performance evaluation, individual compensation and promotion and can lead to disciplinary measures.”
Barclays
Meanwhile Barclays docked 500 million pounds from its 2022 bonus pool, in part to punish staffers involved in messaging by WhatsApp and other services.
It was also in the cohort that had to settle with U.S. regulators last year.
SEC probe and requirements
The U.S. probe has ripple effects across this sector.
Citigroup Inc., Goldman Sachs Group Inc. and Morgan Stanley have each promised to hire a compliance consultant to review how they monitor and archive any work-related communications, including on employees’ phones or other personal devices.
The SEC probe is active and has expanded it to include hedge funds and asset managers.
It also involved Societe Generale’s U.S. unit, indicating that smaller broker-dealers may also be targets now.
In numbers
Some of DB’s investment bankers are already set to receive the bonus cut this year.
Variable compensation in the division that is involved in advising companies on deals and issuing debt and equity may plunge by 40 percent.
The trading unit, which performed much more strongly, could see a bump in bonuses of about 10 percent.
Why the crackdown?
Industry rules have long required banks to archive business communications to ensure regulators can check them if necessary at a later stage.
However, the wildfire spread of private messaging tools, WhatsApp in this case, are outside of banks’ controls, which have harmed the regulatory efforts.
