CIBC and Bank of Montreal prescribe new pay rules for investment bankers

The Canadian Press ~ The News
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TORONTO - Canadian Imperial Bank of Commerce (TSX:CM) and Bank of Montreal (TSX:BMO) have changed the way they pay their investment bankers.
"We believe it is important for the Canadian banking industry to take a leadership position in establishing compensation standards that reinforce the continued health of the Canadian financial services sector," Richard Nesbitt, the head of CIBC's wholesale banking business, said in a memo to employees Wednesday.
"At the same time, we need to ensure we continue to align incentive compensation with CIBC's risk appetite and our goal of delivering consistent, sustainable earnings over the long term."
The changes that the banks are making to their compensation structures will apply beginning this financial year. BMO reviewed the compensation practices in its capital markets division, and has been updating its employees on changes to its pay schemes since the summer.
The changes the banks are making generally put an emphasis on deferred compensation and introduce new share ownership requirements for certain high-level employees. CIBC is also introducing a new clawback provision that would see unvested shares forfeited if an employee engages in misconduct that results in a significant loss or restatement.
Royal Bank of Canada (TSX:RY) made similar changes to its pay schemes last month, following on the heels of Bank of Nova Scotia (TSX:BNS), which was an early mover in this area because Scotiabank chief executive Rick Waugh is part of a global industry committee that is recommending such pay reforms. The G20 is now also pushing financial institutions to make such moves.
Bankers' pay has become a hot topic following the financial crisis. The reforms that Canadian banks are making are not designed to decrease the amount that investment bankers are paid, but rather to ensure that they are not spurred by their bonus structures to take excessive risks.

Organizations: Canadian Imperial Bank of Commerce, TSX, Bank of Montreal BMO Bank of Nova Scotia Royal Bank of Canada Scotiabank

Geographic location: TORONTO

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