Bankers and the super-salaries criticised by the Spanish government

The ECB has limited power to control salaries in large banks

3 min
The vice-president of Economic Affairs, Nadia Calviño

BarcelonaCaixaBank and BBVA have announced massive layoffs in the last few days and the Spanish government has asked the financial institutions to take responsibility. In addition, the vice-president and Minister of Economic Affairs, Nadia Calviño, has introduced a new element into the debate: she has contrasted the layoffs with the high salaries of bankers, who, by the way, are part of a sector that was largely bailed out with public money during the previous crisis.

Calviño was clear. She said that the salaries of bank managers "are unacceptable" and that the government is concerned about the high fixed salaries and bonuses earned by these executives. In fact, she said, the government of Pedro Sánchez has transferred this concern to the Bank of Spain. "They are remunerations that do not correspond, at all, with the economic situation of our country, and even less so in entities that are announcing heavy staff cuts and the closure of offices", she argued.

Bankers have already defended themselves. The year 2020 the vast majority earned less than in 2019 because of the pandemic. The CEO of Santander, José Antonio Álvarez, has come out in defense of the sector. His arguments are based on the fact that the remuneration scheme in banking is the most regulated there is, with an EU directive that establishes deferrals of up to five years in variable remuneration. A measure that tries to avoid taking too much risk to trigger profits or short-term share price, to which the variable part of the salary is usually connected.

Álvarez, as an executive of the most internationalised Spanish bank, gave another argument: this deferred remuneration scheme is only valid for European banks. Therefore, Santander has to apply it in markets where it is present, such as Mexico, Brazil or the United States, where its competitors do not have this limit, which makes it difficult for them to recruit good executives in the markets of these countries. He also argues that Spanish banks have a strong governance system and that remuneration "ends up being established by the governing bodies according to what the market says".

A year of losses

The boards of directors of the banks that form part of the Íbex-35 - the big six - shared out just over 66.4 million euros in 2020, 5.6% less than in 2019. In total, there are 96 people. At the head of the list is the chairwoman of Satander, Ana Botín, who earned almost 8.1 million euros, 5.3 million in cash and the rest in other items. Among the chairmen of Ibex-35 companies, she does not occupy the first place. She is ahead of José Manuel Entrecanales of Acciona (35 million) and Ignacio Sánchez-Galán of Iberdrola (11.8 million). Botín occupies the third step of the podium. Despite the reduction in remuneration compared to the previous year, the fact is that the directors of the big banks together received more than 66 million in a year in which Spanish banks recorded overall losses of 6,955 million euros, according to data from the Spanish Banking Association (AEB), as opposed to 2019, when they earned 11,547 million.

Nadia Calviño appealed to the Bank of Spain, but the supervision of large banks corresponds to the European Central Bank (ECB). The body chaired by Christine Lagarde has the competence over remuneration policies and can limit the variable part in certain situations, but not the fixed. It exercised this power in 2020 in the form of a recommendation on the occasion of the pandemic, calling for the abolition of dividends and the reduction of variable remuneration (or deferring its collection over time).

However, the government's legal capacity to limit bankers' remuneration is doubtful. The PP executive exercised it in the case of the rescued entities -that is why the representatives of Bankia come out last in the ranking-, but it would be difficult to put a limit by law to the rest. The limit of the rescue limited the salary of José Ignacio Goirigolzarri as president of Bankia to half a million. As president of CaixaBank, he will multiply by more than three his annual remuneration, up to 1.65 million (plus 200,000 euros in variables according to the fulfillment of the objectives), if approved by the shareholders' meeting.

However, apart from the boards of directors, banking also pays other professionals well. The European Banking Authority (EBA) makes a study every year. The last one, with data from 2018, indicates that in Spain there were 167 bankers who were paid more than one million, when in 2017 there were 161, and in 2016, 152. The average remuneration of these 167 people in 2018 was 2.09 million, the fifth highest in Europe.

The CCOO union studied the pay gap in the sector in 2018 and concluded that the highest paid bankers were paid on average 179 times more than the lowest paid employees and 37 times more than the average staff.