Managing directors in investment banks are making a lot of money, but not that much

Being a managing director (MD) in an investment bank is a pivotal moment in a banker’s career. It’s the point at which they firmly go from operator to asset, and the promotion usually comes with some hefty perks. Pay is one of them – but not as much as it used to be.

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Actually, it is still as much as it used to be, but that’s not a good thing. Salaries haven’t really budged for banking MDs. Almost four years ago, we said that $500k was the new $400k (AKA, the industry standard). But $400k is still, roughly, the industry standard.

Analysis of data from our the H1b database showed that the average managing director in investment banking (where identifiable) made an average salary of $400k or so. That was across a sample that included both bulge bracket banks and elite boutiques.

Basically, salaries are the same as 2022. And even if you acknowledge that it’s been a tough four years, that doesn’t say much – in 2012, we said that the salary of an MD should be around £300k. That’s $395k at today’s exchange rate. Salaries for MDs have therefore stagnated for over a decade.

However, there was significant variation across global regions. Data from our last two salary and bonus reports found that the worst paid MDs were in North America, where salaries were around $347k, and the best paid were in Europe and the UK, where salaries were around $435k per head. The reason for the discrepancy is simple: salaries are not an MD’s entire compensation package. Bonuses make a huge difference.

It’s because of those bonus dynamics specifically that we found that European bankers are paid such high salaries: the bonus cap for bankers, introduced after the 2008 financial crisis, limited bonuses for even the most senior bankers to twice their salaries. Those salaries went up as a result, and the net effect was that bankers received roughly similar compensation as before, but with a much larger weighting towards salaries.

The UK has since gotten rid of the bonus cap after leaving the European Union, and internal bonus caps are now set by banks – and can go all the way up to 25x salary (at Goldman Sachs). As a consequence, we have observed that average banker salaries in the UK have declined.

For the table below, we delved into the Pillar 3 disclosures of the main investment banks in Europe. These disclosures oblige them to state the average fixed compensation (aka salary) of their “investment bank” material risk takers (MRTs). MRTs are regulatorily defined as important people in a firm, and automatically includes everyone earning over £660k ($869k). The banking MRT category includes regional heads and other more senior roles and should not be taken as a “benchmark” for MD pay. The category also includes sales & trading professionals, despite the name.

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