Finance, Markets & Investing
Deutsche Bank Spreads Cost of UK Bonus Tax
(Bloomberg) — Deutsche Bank AG (DB), Germany's biggest bank, plans to spread the costs of the U.K. bonus tax to all employees worldwide, risking a backlash from bankers outside of London.
Chief Executive Officer Josef Ackermann, in an interview with the Financial Times, said the bank wouldn't restrict the cost of the tax to the U.K. bonus pool.
"We will clearly globalize it," Ackermann said. "If parts are paid out of the bonus pool, we would seek to globalize it. It would be unfair to treat the U.K. bankers differently."
The U.K. on Dec. 9 announced a one-time 50 percent tax on bonuses of more than 25,000 pounds ($40,800) to be paid by the banks, and France followed suit as politicians try to assuage voter anger about government bailouts. Germany has a "comparative advantage" over other financial centers because it doesn't plan to tax bonuses, Ackermann said Dec. 11.
Ackermann and German Finance Minister Wolfgang Schaeuble said last week that Germany's largest financial institutions, including Deutsche Bank and Commerzbank AG, both based in Frankfurt, signed an agreement to comply with the Group of 20's compensation proposals, rather than resort to a new tax.
The German guidelines are based on those suggested in September by the Basel, Switzerland-based Financial Stability Board, which discourage bonus guarantees for more than one year, encourage companies to defer bonuses for senior executives and other key employees and enable pay to be clawed back if losses occur at a later date.
Ackermann told the Financial Times today that governments shouldn't interfere in setting pay, saying bonuses should be the result of "supply and demand for skilled people."
Governments worldwide provided $5.3 trillion of aid to banks during the credit crisis. Britain and France are the first nations since the outbreak of the crisis to target bonuses with a tax. German Chancellor Angela Merkel said Dec. 11 she won't seek a bonus tax, partly because it might be unconstitutional.
To contact the reporter on this story: Aaron Kirchfeld in Berlin at email@example.com.