March 6, 2013
By Stephanie West
Cash bonuses paid to New York City securities industry employees are forecast to rise by 8 percent to $20 billion during this year's bonus season, according to an estimate released today by State Comptroller Thomas P. DiNapoli.
"Wall Street is still in transition, but it is slowly adjusting to changes in its economic and regulatory environment," DiNapoli said. "Profits and bonuses rebounded in 2012, but the industry is still restructuring. Despite its smaller size, the securities industry is still a very important part of the New York City and New York State economies."
The industry reports that profits for the broker/dealer operations of New York Stock Exchange member firms, the traditional measure of profitability for the securities industry, totaled $23.9 billion in 2012. Such a level of profitability is three times the $7.7 billion earned in 2011 and is among the most profitable years on record. Other activities of the large bank holding companies, however, were less profitable than last year.
The securities industry has changed dramatically since the 2008 financial crisis. Before the crisis, seven separate firms dominated the industry. Since then, Lehman Brothers went bankrupt and Bear Stearns and Merrill Lynch were sold to banks. The industry is also smaller, with 10 percent fewer jobs in New York City.
Regulatory reforms are changing the way the industry does business by requiring larger reserves, limiting proprietary trading and imposing other changes intended to reduce unnecessary risk and to enhance transparency. In response to compensation reforms, firms now pay a smaller share of bonuses in the current year and a larger share is deferred to future years. Overall, the deferral of bonuses will help reduce volatility in tax payments from the industry. In response to the fiscal cliff, a larger share of bonuses were paid in December 2012 to avoid higher federal tax rates scheduled to take effect in 2013.