As revenues shrink with rising interest rates, Bay Street insiders expect to see some targeted trimming and pay cuts, but widespread staff cuts aren’t expected - at least for now
was higher in the first nine months of this year than the same period in 2021. And while BMO’s recent severance charge fuelled fears of a street-wide staff cull, the bank’s capital markets arm booked $120-million worth of severance just before the pandemic, nearly 2.5 times the current amount.
Canadian capital markets also have some unique characteristics that alter the culling equation. Crucially, employment laws in Canada are much more restrictive about mass layoffs than laws in the U.S., making severance standards higher here and cuts more expensive. Severance standards can also complicate the timing of culls, executives say. One capital markets head stressed that many bankers at his firm doubled their pay in each of the past two years, often to more than $1-million. Because severance paid now would be based on that elevated pay level, investment banks may choose instead to keep staff, but slash compensation to little more than base salaries, which are often around $200,000 for senior people.
While hiring was tough, banks also saw some defections, which created job vacancies. With the tech sector on fire, overworked capital markets employees and lawyers were enticed to leave by stock options handed out by startups.
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