Commerzbank loses landmark bonuses dispute

COMMERZBANK HAS lost a landmark case in the English High Court that means it has to pay about €50 million in bonuses to 104 bankers.

The German bank, which plans to appeal against the decision, was sued by the investment bankers, who claimed they were entitled to a share of bonuses from a €400 million pool set up in 2008 to help retain staff.

The case is one of the biggest bonus disputes to come out of the credit crunch and is being closely watched by the banking sector.

The bankers claimed they were promised bonuses ranging from €15,000 to €2 million but were later awarded a 10th of the bonuses they expected.

The bankers were all employed by Dresdner Kleinwort in 2008, which was later taken over by Commerzbank at the height of the credit crunch.

DkW had told staff in a so-called “town hall” meeting in 2008 that a €400 million bonus pool had been set up to retain staff ahead of the Commerzbank takeover and would be allocated on a discretionary basis.

Handing down his ruling, Mr Justice Owen said bankers bonuses remained “a subject of intense public interest” but this dispute “arose within a narrow ambit” and concerned “the nature of contractual obligations owed to claimants by their employer” and “did not concern wider issues” or the “structure of remuneration in the banking industry”.

Commerzbank said in a statement: “We are disappointed with the court’s decision and will seek leave to appeal. The bank believes the decision to reduce discretionary bonuses in light of €6.5 billion of losses at Dresdner Kleinwort for 2008 was responsible and justified.”

The case has attracted huge interest, pitting public anger about bankers’ bonuses against Commerzbank’s legal obligations.

In Germany it is politically sensitive, as taxpayers helped Commerzbank twice at the height of the crisis.

Separately the German bank said it had met European stress-test requirements early but fell short of expectations for its first-quarter earnings.

Commerzbank said it had surpassed a goal of plugging a €5.3 billion capital gap that was identified by the European Banking Authority last year.

Net income of €369 million in the three months to the end of March was lower than analysts had expected and compares with €985 million in the same period last year. The bank’s net interest, fee and trading income were all lower than in the first quarter of 2011.

– Copyright The Financial Times Limited 2012