GERMAN investment bank Dresdner Kleinwort scrapped plans to pay €50m (£42m) in bonuses to its London traders even though the City regulator had been “breathing down its neck” over the loss of staff, a court has heard.
Bankers were jumping ship to Goldman Sachs, Citigroup and Unicredit/HVB and the Financial Services Authority had become concerned about the effect of a possible disorderly breakdown of Dresdner Kleinwort, as the markets worsened in late 2008, it is alleged.
“The FSA, if I could put it colloquially, were breathing down the bank’s neck to do something,” said Andrew Hochhauser QC yesterday.
A group of 104 former Dresdner bankers claim “binding and enforceable contractual promises” mean they are owed €50m from a guaranteed minimum retention pool of €400m for 2008. They say the introduction of a clause to reflect worsening performance, was a “moving of the goalposts”.
The claim, against Dresdner Kleinwort and Commerzbank, now the parent firm, covers sums ranging from €15,000 to €2m which were due to have been paid in January 2009.
Stefan Jentzsch, then chief executive of Dresdner Kleinwort Investment Bank, said in 2008 the cash would be paid “no matter what” as part of efforts to retain staff amid a re-organisation of Dresdner group. This had sparked anxiety over job security, said Hochhauser, who is representing 21 of the bankers.
Allianz – which owned Dresdner’s investment bank before it was sold to Commerzbank in January 2009 – feared a mass exodus of staff could have “disastrous consequences”.
Commerzbank, which had to be bailed out by the German government after buckling in the credit crisis, has long argued that discretionary bonuses were dependent on the bank’s performance and said it is mounting a “vigorous” defence. Its rebuttal is expected to begin today.