Hedge funds are luring bankers with prospects for better pay and will probably benefit as stricter capital rules push lenders to give up some businesses, Deutsche Bank AG Chief Financial Officer Stefan Krause said.
“There are businesses based on our capital regulation we’ll not be able to do” that “hedge funds will be able to,” Krause, 50, said today at a conference in Berlin. “If I had to bet who is going to benefit the most post-crisis from the asset appreciation you have coming, then certainly hedge funds.”
Investment banks are exiting some businesses as they become unprofitable because of planned capital rules designed to avoid a repeat of the taxpayer-funded bailouts that followed the 2007 meltdown of the U.S. housing market. Deutsche Bank is balancing efforts to lift profit by cutting pay and stretching the vesting period of bonuses with its ability to retain staff, Krause said.
“Our business is people-contingent and you’ll never be able to not pay competitively,” he told bankers attending the conference. “What you can do is structure your pay differently so it’s longer-term oriented.”
Most of the bankers that leave Deutsche Bank, continental Europe’s biggest lender by assets, move to hedge funds, according to Krause.
Hedge funds are loosely regulated investment pools usually open only to wealthy individuals and institutional investors.
Pay Limits
The European Union’s version of planned capital rules, known as Basel III, would limit discretionary pay for bankers at twice their annual salary with special treatment applied to parts of the bonus that are deferred for at least five years.
The cap may prompt bankers to move to countries where the rules don’t apply, the CFO said.
Krause’s pay for 2012 fell to 3.1 million euros ($4.1 million) from 4.2 million euros for 2011, Deutsche Bank, based in Frankfurt, said in its annual report published April 15.