Morgan Stanley's euro bonus plan
MORGAN Stanley is considering ditching the dollar in favour of the euro for continental European bonuses amid intensifying worries over rivals poaching staff as the weakening US currency continues to undermine the payouts.
A currency change is one of a series of strategies under review at the US investment bank after a year that has seen rises in annual bonuses - worked out in dollars - wiped out in real spending terms after a 20% fall in the value of the dollar against the euro.
A senior source at the bulge-bracket bank said his Continental counterparts had been hit particularly hard by the greenback's decline.
'The real worry is for all of our European equity sales force. Our bosses are looking at a number of ways of addressing the problem,' he said.
The US bank, under chief executive Philip Purcell, is understood to have recently moved equities staff from London to Milan, Madrid, Paris and Frankfurt in an attempt to protect its market share from European competitors.
Rivals such as UBS and Deutsche Bank work out their profit-and-loss accounts in euros. 'Their pay is in euros so they are effectively getting more in many cases. But it would not be hard to change to a local euro P&L account at each Morgan office,' the source added.
UBS and Deutsche, like Morgan, this month paid bumper bonuses to their fixed income bankers. Their equities bankers are understood to have received bonus rises of up to 30% after a recovery in investment banking revenues.
European bankers at all the big US houses including Morgan Stanley, Goldman-Sachs, JP Morgan and Lehman Brothers are now wondering how to work out the best rate for calculating their pay and bonuses for the coming year.
Several bankers said they lost out on their 2003 bonus by taking the spot rate on the exchanges when payments were set, rather than an average over the whole year.
Morgan Stanley paid its bonuses on 10 December when $1.74 was needed to buy £1, a fall of 14 cents since the start of last year. By the time JP Morgan allocated its bonuses earlier this month, the dollar had declined to about $1.85. One euro buys $1.25 today against only $1.04 at the beginning of last year.
