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Morning Coffee: The most cost-efficient way to get out of Credit Suisse. Barclays switches up its investment bankers for a down market

It might have been the worst possible nightmare in banking – to find that not only had you been made redundant going into a difficult labour market, but that because your last two bonuses plus income tax were subject to clawback and dependent on continued employment, you now had to write a substantial cheque to thank your bank for sacking you.  Fortunately, Credit Suisse has confirmed that this will not be happening.  If you are laid off without cause, or if you retire, the cash paid out in the 2022 and 2023 bonus rounds will not be subject to the clawback.

This might raise a few eyebrows for risk-loving bankers.  It suggests that if you want to leave CS to go to another job, it’s much cheaper to do so by getting fired than by resigning.  Over the course of the next twelve months, there may even be people who make this strategy work.  But it’s by no means as easy as it looks.

Among a number of problems, being “terminated for cause” will still trigger the clawback.  So anyone holding a competing offer who has daydreams of punching an MD or flour-bombing the compliance department should hold off – this would still be a very expensive thing to do.

It might be tempting to try and stretch out the recruitment process, encouraging a new employer to wait before making an offer to see if the job move can be made more cheaply.  But that’s a high risk strategy; there’s always a significant chance that if you delay by a few weeks, then something might happen in the market to make a new offer disappear.

One thing that anyone sensible should definitely avoid would be the seemingly innocuous strategy of hinting to a senior manager that you might not really mind being made redundant, if they need to meet a headcount target.  Asking someone to undermine the purpose of the clawback system is a horrible conflict of interest at best, and could even be illegal.

The difficulty in finding a reliable way to exploit this loophole is probably why Credit Suisse staff are, apparently, still more likely to just ask their new employers to buy them out of the scheme.  This is going to be expensive, though.  Not only would a new employer have to buy out cash from past years (as well as normal deferred compensation), they would need to float the employee a loan to cover the requirement to return the cash gross of tax (until that tax could be reclaimed).

Consequently, it actually looks as if a significant proportion of CS employees who leave the bank over the next twelve months will end up just saying goodbye to some of their money, and treating it as a long term investment in their career. The purpose of the clawback scheme is to make it more difficult to leave CS, and it works.  So the question people need to be asking themselves, unless they’re very lucky with the redundancy program, is how confident they feel about their future elsewhere, compared to their perception of how likely Ulrich Körner is to be able to turn things around.

However, one Credit Suisse banker who has made the move is Cathal Deasy, who left just under three weeks ago and who is now being announced as the new global co-head of investment banking at Barclays, along with Taylor Wright.  Unusually, although Deasy and Wright are taking over, the incumbent co-heads, John Miller and Jean-Francois Astier, aren’t necessarily leaving the bank – the memo says that they are “in active dialogue about how they will continue to help guide us in senior roles in the organization”.

This isn’t as uncommon at Barclays as at other firms – Stephen Dainton stayed around when CS Venkatakrishnan was promoted into his Head of Global Markets job, and now he’s back as Co-Head while Venkat is the CEO.  Miller and Astier were both promoted into the jobs by the Global Head of CIB Paul Compton and although he’s on his way out, it seems he still likes them.

It might be that Miller and Astier are being moved into non-management roles where they can concentrate on doing deals.  Or it might be a new geographic focus. The previous co-heads were appointed in July 2021, and both were based in New York.  Taylor Wright will continue to work out of the USA, but Cathal Deasy will be in London; one possible interpretation of the change is that although the previous team did well to grow Barclays’ market share in good markets, the industry is now playing defence rather than offence.

Meanwhile …

People who kept faith with Hamza Lemssouguer have been rewarded – after a drawdown of as much as 16% earlier in the year, his Arini fund has finished strongly and is up 5% for 2022, against a peer group down 5%.  A specialist side-pocket of structured credit did even better. (Bloomberg)

In the Tesla lawsuit, Elon Musk has reiterated his perception that “JP Morgan hates me”, and that Jamie Dimon specifically has declined to provide support for Tesla when asked.  The ill feeling appears to date back to a lawsuit over a derivatives trade in 2021, and an attempted reconciliation meeting between the two big dogs, which apparently did not go well. (MarketWatch)

“How are we supposed to ever feel safe again?”  Stunned Googlers try to come to terms with the idea that in a big layoff program, even high-performing employees who really didn’t deserve it still get fired.  (Business Insider)

There’s a peculiar kind of fear associated with being a trader and not feeling that you can trust the prices on the screen.  The NYSE is investigating why so many stocks failed to open, spooking a lot of people quite badly. (Bloomberg)

Working at Jane Street and then setting up your own shop is a common career path.  If one of your managers is only two years out of college, though, and the other one is an ex of Sam Bankman-Fried, then people are going to be asked questions about SBF’s $400m investment. (NYT)

Lazard is investing countercylically, setting up a team of six venture banking specialists in LA and Austin at a time when VC deals themselves are at multi-year lows. (FT)

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AUTHORDaniel Davies Insider Comment

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