Banking bonuses: The situation in 2025

What is a banking bonus? Why are they paid? Why are they so big? And what does it take to get one?

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Bonuses in banking are not assured. They're announced annually, typically shortly after banks announce fourth quarter results. They vary from year to year and they vary from job to job. For example, 2024 was not a bad year for banking bonuses. Bonuses weren’t as high as people in banks expected, but they were good enough.

Next year, however, things might be different. So far, 2025 has been challenging for investment bankers working in areas like M&A, although traders have benefited from volatility.

It's only if deals pick up that investment banking bonuses recover. Bonuses are driven by two things: performance and revenue.

Performance will pretty much always be high in general, but revenues are outside of bankers’ hands. And revenues are the big question mark this year: will the business environment be stable enough for deals to happen? Will corporates wait for the storm to stabilize before making big moves?

Why do banks pay bonuses?

Banks pay bonuses for a variety of reasons.

The first and most obvious reason is to reward good performance. Front-office, revenue-generating professionals work on big deals (if they're investment bankers), or execute big trades (if they're in sales & trading) that can generate a lot of profit for the bank. Market intelligence provider Tricumen says the average front-office investment banker produces $2.1m of revenue per year; traders can produce $3.3m to $5m per front-office employee, depending on which products they trade. Our own bonus survey says the highest paid traders work with commodities, followed closely by macro products like foreign exchange (FX) and interest rate trades.

Bonuses in banks can be multiples of salary. Jamie Dimon, CEO of JPMorgan, received a bonus 25 times bigger than his salary for 2024, for example. David Solomon at Goldman Sachs received a bonus 19.5 times bigger than his salary for the same period.

Salaries are a fixed cost. Bonuses are variable with performance. Bonuses therefore represent a way for banks to vary their costs. Banking is a cyclical industry, and revenues can change a lot, so cost flexibility helps banks. 

From the perspective of the bankers or traders receiving them bonuses might also be seen as compensation for talent and for long working hours. Support staff in the middle- and back- offices of the bank (such as compliance or operations) also receive bonuses, although much smaller ones than their front-office counterparts.

Bonuses aren't just about rewards, though, they are also a retention mechanism: bankers and traders who might otherwise leave their jobs stay on to receive their annual bonus instead. This retention effect is emphasized by the fact that a portion of bonuses is typically deferred over several years, with a proportion being paid in each year. If the recipient leaves before the deferred bonus "vests", it doesn't pay out.

This is why banks often make large upfront payments to recruit senior bankers: they have to buy out the deferrals that are left on the table when bankers move jobs. Some banks, such as Deutsche Bank, defer 100% of compensation above a certain threshold (in Deutsche's case, €500k), meaning that the most senior bankers are risking huge amounts of variable pay (bonuses) if they move to another bank.

Bonuses are supplementary to normal salaries. They're "discretionary" and can be nothing at all. In banking parlance, salaries are called “base” pay or base salary. In Deutsche Bank’s investment bank, for example, €2611m was paid out in total as compensation in 2024. Of this, €1320m, or 51%, was in fixed pay (i.e., salary/base). 

Different parts of a bank offer different amounts of bonus as a proportion of pay. The table above uses data from our 2024 salary and bonus survey,. It shows how support functions in banks (such as technology, compliance, and operations staff) receive smaller bonuses - both in absolute numbers and proportionally to their salaries. 

How do banks pay bonuses?

Banks pay bonuses in a variety of ways. They typically comprise immediate cash, deferred cash, and deferred stock in the bank or organization that’s paying them. Senior bankers may have their bonuses paid in additional instruments like the AT1 bonds Credit Suisse paid its people in. These were a special class of perpetual bonds that only banks issue to help maintain their stability by being convertible to equity to shore up a bank’s balance sheet. Their downside is that they’re a first line of defense when a bank hits a problem, as Credit Suisse staff who received them as part of their bonus packages, painfully discovered.

The European Union and UK have strict rules for the structure of bonuses paid to material risk takers, a classification of regulated employee "whose professional activities have a material impact on the risk profile of the firm." The more money they earn, the longer you have to wait to receive it.

The exact length of those "vesting periods" varies. The European Union stipulates that at least 40% of remuneration should be deferred for regulated staff. For "particularly high amounts" of variable pay (bonuses), the proportion deferred should be 60%. What makes an amount "particularly high" is up to EU member states' discretion; however, according to a separate remuneration benchmarking report, the European Banking Authority thinks it's around €500k.

Deutsche bank, for example, defers bonuses for between three to five years, depending on seniority, and all bonuses over €500k. By comparison, US banks' deferrals have typically been far less onerous: Jefferies, which is too small to be captured by European deferred bonus requirements, historically paid bonuses entirely in cash but has started to pay a proportion in stock.

Vesting and share-based compensation are a relatively new concept to the banking industry. Before the financial crisis, a smaller proportion of bonuses were deferred and paid in stock. Even so, senior bankers at Lehman and Bear Stearns lost a lot of money from previous year's stock bonuses. 

Who gets the highest bonuses in a bank?

As our salary & bonus report earlier this year showed, the highest bonuses in an investment bank aren’t in investment banking at all, but in sales and trading. Investment bankers got good bonuses, and higher than last year, but far below their past (or current) reputation.

Both sales & trading professionals are investment bankers constitute the front-office or revenue-generating portion of a bank. The bulk of employees in banks are support staff – those who work in areas like compliance, technology, operations. These guys don’t get bonuses as big as front-office staff, and earn the majority of their compensation as fixed pay - better known as salary, or “base [pay]”.

However, the highest paid regulated staff (MRTs) at major banks (in the table above, American) in Europe have publicly-disclosed pay breakdowns. Their pay and bonuses are enormous.

What happens to bonuses if an employee does something bad or a bank fails?

Bankers receive bonuses for three things: their own performance, their team's performance, their employer's performance. Bonuses are based on both financial and fluffy metrics, with fluffy metrics typically based on values. 

However if a bank fails there will be no bonuses to pay. Not only that, but previous year's bonuses - which have yet to be paid and are held as deferred stock, will not be paid after all. 

In some circumstances, bonuses that have already been paid will even be clawed back. 

Claw backs are legal rights for a bank to recover an already-paid bonus if the person it was paid caused the bank some types of harm (through departure, misconduct, or excessive risk-taking). "Malus" is the word opposite to bonus in Latin, and refers specifically to when bonuses are clawed back due to misconduct.

The concept of malus and claw backs are well-established in many jurisdictions: Singapore, Hong Kong, the EU, and the UK all require banks to include provisions in bonus contracts that force bankers to return bonuses if they have committed gross misconduct. Despite some hurdles, the concept is also gaining ground in the US.

In the UK, clawbacks can be particularly nasty. There, the Financial Conduct Authority can claw back bonuses up to 10 years after they've been paid - including bonuses that have already been paid. You could retire from the industry, spend Seven Years in Tibet, and then be slapped with a seven-figure tax bill because a syndicated loan you worked on before you left went bad for the firm that took it.

What happened to banking bonuses last year?

Our 2025 Salary & Bonus Report suggests that the average industry bonus went up by 22% in 2024 versus 2023, to $134k. Investment banking bonuses in particular went up by 25% compared to last year to $173k on average.

The increase was most significant in front-office functions. Investment bankers as a whole saw their bonuses increase by 28%; sales & trading professionals saw their bonuses increase by 33%. Operations and technology people only saw their bonuses increase by 4% and 6%, respectively.

Bonus increases matched higher revenues. Last year, information provider BCG Expand says the M&A fee pool grew by 9%, while equity and debt capital markets revenue increased by 52% and 39%, respectively. Sales & trading fee pools went up too, but not as dramatically – the FICC fee pool was up by 1%, and equities were up by 18%.

How do bank bonuses work in different countries and jurisdictions?

Bank bonuses vary between different parts of the world. Hong Kong and Singapore banker’s bonuses generally follow the same guidelines as the US, while the UK has begun to diverge from legislation it inherited from the EU, such as scrapping the bonus cap - by which the EU limits banking bonuses to not exceed two salaries.

Bonuses in the EU are the most highly regulated. The 121-page Guidelines on sound remuneration policies under Directive 2013/36/EU governs the union’s best practices on compensation. The document is long and complicated, and it generally it applies only to major firms operating in the EU.

The bonus cap existed in the UK until it was scrapped in 2023. Since then, banks in London have begun applying their own cap erratically. Goldman Sachs’ internal bonus cap is 25x salary, while Citi’s is just 6x salary. Most banks have implemented bonus caps between 8x and 10x salary.

Bonuses for 2025 will be announced and paid in early 2026. If the bonus calendar is similar to 2025, most banks will announce their bonuses for the year between mid January and mid March, after their fourth quarter results, with American banks generally earlier than European ones, and Japanese banks last of all.

The bonus outlook for 2025

It’s difficult to predict what banking bonuses will be at the best of times. With erratic tariffs, it's borderline impossible. Compensation consultancy Johnson Associates said in May 2025 that bonuses could swing anywhere from 2.5% up to 20% down across the industry, depending on how Trump feels throughout the year; the most likely scenario was a 5% to 10% decrease.

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