Employees Misusing WhatsApp Will Have Their Bonuses Cut by Deutsche Bank

After a sweeping probe by the US government found that staff used messaging services for business communications inappropriately, Deutsche Bank AG is cutting bonuses for employees who misused such services.

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Employees who were found to have used unauthorized devices or messaging apps in a particularly severe breach of company policies will see a substantial reduction in their variable pay, according to people familiar with the matter. There are cuts affecting last year's pay that are yet to be awarded, according to the people, who asked not to be identified as they discussed private information.

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An industry-wide investigation into whether bank employees made use of unauthorized communication channels resulted in fines of more than $2 billion being paid by several global lenders to the Securities and Exchange Commission and the Commodity Futures Trading Commission. Deutsche Bank is among the lenders that paid the fines. Top executives at the German lender took a pay cut last year due to the problem, and the bank has rolled out new software to address the problem as part of its efforts to resolve it. 

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Deutsche Bank said in a statement that they had in place a framework for managing the consequences of their actions. There will be an impact on performance evaluations, individual compensation, and promotion as well as disciplinary actions depending on the quantity and quality of the violations."

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It was reported earlier on Thursday that Barclays would dock 500 million pounds from its 2022 bonus pool, in part in order to punish staff members involved in the use of WhatsApp and other messaging apps. Earlier this year, the British bank also reached a settlement with US regulators.

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There have also been other changes in the industry as a result of the US investigation. Citigroup Inc., Goldman Sachs Group Inc., and Morgan Stanley have each promised to hire a compliance consultant to help them review how they monitor and archive any work-related communications, including on employees' mobile phones and other personal devices, as part of their compliance audits.

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Trade Algo reported on Wednesday that the SEC probe is still underway and this probe has now been expanded to include hedge funds and asset managers. The probe has also been extended to Societe Generale's US unit, which indicates that smaller broker-dealers may also be targets.

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In some cases, Deutsche Bank investment bankers are already on course to receive a smaller bonus pool than they did last year. Trade Algo has reported that variable compensation in the division that advises companies on acquisitions and issues debt and equity could drop by 40%. A bonus boost of around 10% would be likely for the trading unit, which performed much better than the other units.

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Historically, banks have insisted on archiving their business communications as part of their compliance with industry standards to ensure regulators will be able to access them at a later date if necessary. However, the rapid spread of private messaging tools outside of banks' control has undermined this effort.