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Investment banks are once again luring top rival talent with generous guaranteed pay packages that may convince a top banker to jump ship, while also inviting scrutiny from regulators across the globe.
Paying a banker multi-millions regardless of performance flies in the face of the global regulatory effort aimed at reining in mega packages and discouraging excessive risk-taking in the post financial crisis world.
In Asia, where M&A, stock and bond activity is heating up, several big-name poaches have occurred lately, with industry sources pointing to guaranteed pay packages said to be worth more than USD 10 million a year.
"I am against guaranteed bonuses," US 'pay czar' Kenneth Feinberg told Reuters on Wednesday, when asked about the latest wave of these on offer. "We have said guaranteed bonuses are a bad idea so we'll see what those banks do."
Shareholders of certain banks such as HSBC have fought against executive pay, and regulators have taken steps to bring compensation more in line with long-term performance. But so far, guaranteed pay packages have largely stayed out of the radar of the public.
The banking industry says that guarantees are necessary to attract and retain top talent, and may even reduce risk-taking. Proponents say in many cases they are used sparingly and only for top executives.
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