Raises Put European Banks in a Bind

When European banks were told by regulators to restrict bonuses, they found an easy way around the rules: raising investment bankers’ salaries, sometimes by as much as 100 percent. Now that decision may force them to step up layoffs and consider eliminating some bonuses entirely as they seek to reduce costs.

With revenue shrinking and expenses rising, banks including UBS, HSBC Holdings, and Credit Suisse Group have announced more than 70,000 job cuts since midyear, compared with 42,000 by U.S. peers, according to data compiled by Bloomberg. More layoffs may be on the way as companies struggle to maintain those higher fixed salaries. The real action of cost-cutting will be around bonus pools and headcount,” says Tom Gosling, a partner in the rewards practice at PricewaterhouseCoopers in London.