Morning Coffee: The bank with the best severance payments, the bank with the worst. Intense questions about Jane Street
It's been a good year for investment banks and there haven't been many job cuts. But hot summer is fading and in London there's a nip in the air that reminds of the coming of autumn, and the fourth quarter with its associated cost cutting.
If you think that AI or other humans may displace you before too long, it helps to know what kind of severance payment you might expect. One month per year served was traditionally the norm for severance pay in banking, although Deutsche Bank trimmed this to one week when it culled people in 2018 and 2019. Citi seems to have been paying two weeks more recently.
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At junior ranks, severance pay can be a grey area, but when banks let senior regulated employees go in Europe, European reporting regulations dictate that they must tell all. In this way, we know exactly how much some of the biggest banks have been paying.
The Financial Times has combed through these reports and discovered that the bank with the best severance payments in Europe is SocGen. The bank with the worst is UBS.
SocGen's average severance payment for its 'material risk takers' last year was $1m. UBS's average severance payment for its 'key risk takers' was a mere $263k.
Other banks scrutinised by the FT fell between these poles. HSBC, which dumped 134 material risk takers in its quest for simplification last year, paid them an average of $504k each to go on their way. Deutsche Bank paid $511k. Santander paid an impressive $859k on average, but this seems to have been skewed towards one fortunate person who got $10m. It's not clear whether this went to a former Credit Suisse banker who left, or to someone like Mike Regnier, Santander's former UK CEO, who left nearly a year ago.
SocGen's generosity to departing staff is well known. The French bank famously nudges people into extremely lucrative voluntary redundancy packages, as a result of which it finds firing people prohibitively expensive. Being fired from SocGen will at least compensated for comparatively poor pay while you're employed there.
Separately, since Jane Street lost $15bn in July, people have been wondering about it and asking questions. Some of those questions have been asked by Daniel Davies, writing here for the FT. Some of those questions have been asked by Rupak Ghose, writing here on his Substack. Some of the most awkward questions have been asked Rod Dubitsky, writing here, on his very own Substack too.
The questions asked include:
How is it that Jane Street makes such huge revenues?
Is Jane Street just a capital hungry proprietary trading firm deploying ever increasing amount of capital in search of ever larger returns? Does it compound its returns (prop trading firms apparently don't)?
Does Jane Street get leverage from long term debt, like a prop trading firm? Does it have any collateralised margin loans like a hedge fund? Could Jane Street be a source of financial contagion through liquidity risk?
Has Jane Street migrated from market making and quant arb to more dangerous methods such as large directional bets or poorly hedged arbs?
What might the Indian manipulation allegations and Crypto insider trading lawsuit suggest about Jane Street's modus operandi?
Could US stock market volatility even be the work of Jane Street?
Should Jane Street be doing this given that it is also a systematically important market maker critical component of debt and equity market financial plumbing given its critical role in EFT markets?
TBC.
Meanwhile...
Cathal Deasy and Taylor Wright had different ideas of how to revive Barclays investment bank. Now it's thought that they are leaving. (FT)
Vikram Lamba, a leveraged finance MD at HSBC in Hong Kong, has left. (Bloomberg)
Hamza Lemssouguer’s Arini Capital Management lost 8% in July. It was burned in a bond sell-off involving Aston Martin Lagonda Global Holdings and equity slices of credit default swaps that insured against losses of Virgin Media. The fund returned 1.37% in the year to June but its credit opportunities fund is up 12.5%. (WSJ)
Citadel has offloaded 80% of the aggregate risk associated with Situational Awareness's stock portfolio. “In a matter of hours, our team analyzed and priced their global portfolio.” (Bloomberg)
JPMorgan hired David Fishman from BofA as head of technology M&A in North America. (Bloomberg)
Lord Jim O’Neill, former Goldman Sachs chief economist will not take a formal position in Burnham’s government because it would mean he has to put his financial interests into a blind trust. O'Neill doesn't trust anyone else to manage his money. (Financial Times)
Maybe you should do an apprenticeship? “Apprenticeships are almost AI proof. Companies want to help mold you into the employees they’re looking for.” (WSJ)
People hacked into Apollo and stole employees' confidential information. (TechCrunch)
"There is going to be this short but beautiful golden window from roughly age 3 to roughly age 12 where your kids are not only easy (comparatively to bottles & diapers), but are going to be these beautiful little creatures and it will pain your heart to be away from them for too long. So, prepare in your 20's, financially and career wise, to build that flexibility into that chapter of your life. You don't get another shot at living the "golden window"." (Fundamental Edge on X)
London is built on clay. 100% of houses in areas like Kensington now have subsidence after the hot summer. (Bloomberg)
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