Commerzbank, Germany's second-biggest lender, must pay more than €50m in promised bonus and performance payments to more than 100 London-based traders after a High Court decision Wednesday.
Judge Robert Owen ordered the Frankfurt-based bank, which received more than €18bn in German taxpayer support to prevent its collapse in 2008, to pay bonuses guaranteed by its former investment banking unit, Dresdner Kleinwort, the very same year.
The bankers claimed the promise, made by Dresdner's former CEO Stefan Jentzsch, to pay bonus and incentive payments were legally binding and that Commerzbank's decision not to honour the agreements earlier this year amounted to a breach of contract. Commerzbank arugued it was justified in rescinding the payments due to the massive scale of losses at Dresdner, which amounted to more than €6bn in 2008.
"I have come to the conclusion that the claimants are entitled to payment of bonuses provisionally awarded to them," Judge Owen said in a statement following the verdict. Commerzbank said it plans to take the ruling to the UK Court of Appeal.
The trial, which included testimony from Commerzbank CEO Martin Blessing, and the subsequent verdict is likely to reignite the global debate over pay and performance in the financial sector. The European Parliament is currently drawing up plans to link bank capital requirements to limits on banker's bonuses while shareholders of Barclays and Aviva have voted against pay awards to their top executives.
Commerzbank reported a 56 percent drop in first quarter profits earlier Wednesday, thanks in part to a steep 88 percent drop in investment banking earnings. Shares in the bank rose 0.8 percent in Frankfurt to change hands at 1.5390.