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FINANCE

Top banker urges pay cuts for ‘inflated egos’

One of Germany’s top bankers has blasted senior colleagues around the world with a call to end exorbitant bonuses in the banking industry, business newspaper Handelsblatt reported Sunday.

Top banker urges pay cuts for 'inflated egos'
Klaus-Peter Müller. Photo: DPA

Klaus-Peter Müller, chairman of the supervisory board of Commerzbank – Germany’s second-largest bank – and president of the Association of German Banks, reserved particular disdain for the big banks in the US and Britain, and urged Europe not to go down the same path.

“I really have no sympathy when they say there are big problems with curbing the excessive bonuses of investment bankers,” said Müller, who also heads the German government’s corporate governance commission.

“Worldwide, there are about 10 big investment banks. Why can’t they agree to pay no more excessive salaries?”

He urged his colleagues to think very hard about how much money their skills were really worth.

“Inflated egos are an attitude that a society sooner or later destroys.”

Overpaid workers in the banking sector were “primarily an Anglo-Saxon problem” he said.

He called on Europeans to steer clear of this undesirable trend, saying he was “hoping for a healthy new European self-confidence” on the issue.

Müller’s strong criticism comes at a time when bonuses totalling billions are once again the order of the day, despite the backlash in the wake of the global financial crisis. The three biggest US investment banks, Goldman Sachs, Morgan Stanley und J.P. Morgan, are alone planning for bonuses totalling about €20 billion in 2009.

In Germany, Deutsche Bank is considered the major culprit, setting aside €1.3 billion for its 14,000 investment bankers in the third quarter of this year – more than double what it paid in the same period last year.

Commerzbank recently announced a plan to curb its own bonuses. Executive pay is limited to €500,000 as part of restrictions placed on the bank by the bank rescue fund SoFFin in exchange for an €18 billion bailout.

Political leaders are likely to pay attention to Müller’s call.

Finance Minister Wolfgang Schäuble has told business magazine Wirtschaftswoche that banks “ought to be strengthening their capital resources” rather than paying out huge bonuses.

At a G20 meeting in April, leaders of the most powerful nations discussed the possibility of restricting compensation that rewards short term risk-taking.

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BANKING

German online bank N26 shutters US service

German online bank N26 said Thursday it was closing its operation in the United States next year, as regulators in Europe place the "fintech" start-up under increased scrutiny.

The N26 logo on a bank card.
The N26 logo on a bank card. Photo: picture alliance/dpa | Christophe Gateau

N26’s 500,000 customers in the US would be able to use their services until January 11th, 2022, the bank said in a statement, after which it would cease to operate in a market it first entered in 2019.

Instead the Berlin-based operation would “sharpen its focus on its European business”, where it already operates in 24 countries and is exploring expansion into more eastern European markets.

N26 said it would also look to launch new “investment products in the coming year” to sit along side its current account service.

Founded in 2013, N26 offers free, online-only banking services to around seven million clients and is one of Germany’s most high-profile financial technology or “fintech” firms.

In October, the bank raised $900 million from private investors, and announced a plan to hire a further 1,000 employees to reinforce its product development, technology and cybersecurity teams.

READ ALSO: German online bank N26 to create 1,000 jobs

At home, N26 has been in the crosshairs of the German banking watchdog BaFin since 2018 after a local news media investigation found that it was possible to open account with forged IDs.

Earlier in the month, the regulator said it was upping its oversight operations at N26, appointing a special representative to monitor the bank’s progress towards solving issues in “risk management with regard to IT and outsourcing” identified by BaFin.

The regulator also limited the number of new customers N26 could take on to 50,000 a month until the shortcomings were addressed.

N26 was already being monitored by BaFin over failures in the start-up’s anti-money laundering system.

BaFin issued N26 with a 4.25-million-euro ($4.8-million) penalty earlier this year in connection with around 50 “suspicious transactions” the bank failed to report promptly enough.

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