ING’s Bonus Pool Cut by 25% After a Year Tainted by Record Fine

(Bloomberg) -- ING Groep NV reduced its bonus pool by 25 percent after a year marred by a record money-laundering settlement and public discontent in the Netherlands over banker pay.

The country’s largest lender paid out 303 million euros ($340 million) in bonuses for 2018, down from 403 million euros the year before, according to its latest annual report, released Thursday. ING said earlier it would scrap the bonus for Chief Executive Officer Ralph Hamers because of the 775 million-euro settlement.

Bonus pools have taken a hit across Europe, for various reasons. Deutsche Bank AG -- plagued by legal troubles and a trading slowdown -- cut variable pay for 2018 by as much as 15 percent. Credit Suisse Group AG’s bonus pool will be “more or less” flat after a bad trading quarter, CEO Tidjane Thiam said last month. In France, both BNP Paribas SA and Societe Generale SA are weighing cuts.

ING said the settlement was an “important factor” in cutting bonuses.

The fine affected variable pay in every department of the bank, not only top executives and compliance officials, an ING spokesman said in January. Dutch bankers saw a greater impact, and senior employees were hit harder than junior ones. For senior management, the year-on-year variable remuneration has been reduced on average by more than 60 percent, according to the annual report. The biggest impact was felt in wholesale banking, where bonuses generally account for a larger proportion of pay, the spokesman said.

Reputation Hurt

Although ING’s financial results were positive, 2018 was disastrous for the bank’s reputation. Local politicians expressed their fury after a prosecutor found that ING fell short in its efforts to prevent clients from laundering money at its Dutch unit from 2010 through 2016. The scandal prompted Hamers to face tough questions in Parliament.

Even before the fine, an earlier pay increase proposal for Hamers sparked criticism, with Dutch Prime Minister Mark Rutte calling the planned 50 percent raise “excessive.” The lender eventually scrapped the idea, and ING Chairman Jeroen van der Veer said he regretted that the supervisory board hadn’t paid enough attention to Dutch public opinion.

Hamers’s base salary was 1.75 million euros in 2018, up slightly from 1.71 million euros the year before, according to the annual report. Former Chief Financial Officer Koos Timmermans, who resigned after last year’s fine, received severance pay equal to 50 percent of his fixed annual pay of 601,800 euros, ING said in the report.

The Netherlands has one of the strictest remuneration laws in the European Union, with bonuses limited to 20 percent of base salary, compared with a European norm of 100 percent. The cap makes an exception for staff who aren’t part of the sector’s collective-bargaining agreement, but the government plans to tighten the law. Bonuses are also prohibited when a bank receives state aid, which is still the case with ABN Amro Group NV.

To contact the reporter on this story: Ruben Munsterman in Amsterdam at rmunsterman1@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Daniel Taub, Dan Reichl

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