The world's biggest financial firms have announced more than 100,000 job cuts since the summer, so banking has already got leaner. Now it is about to get meaner. It's bonus season on Wall Street, and bankers are bracing for disappointment, after a sharp downturn in activity and profits that could lead to cuts of one-third or more to their take-home pay.
They will get the first indication of how savagely the pay axe is falling tomorrow, when JPMorgan Chase announces what it has set aside for its bonus pool, and bankers in the City of London will watch the unfolding revelations on the other side of the Atlantic with alarm. Their pay packets, too, will be cut, and if the giant American players tighten the screws, London firms will be emboldened to follow suit.
In good times, a bank's biggest fear is that an under-bonused employee will march right out to another firm. That is less the case now than for many years, says Alan Sklover, a New York employment lawyer.
"I am in my sixties and I have never seen the level of fear that I see now. There are no pockets of positive this year, there are cuts going on in every line of business and a lot of people fear losing their positions."
Options Group, the most respected researcher of Wall Street pay, found in November that banks expected to pay bonuses on average 35-40 per cent lower than last time, with almost all their areas of business affected. Investment bankers who advise on takeover deals and fundraisings would suffer a 14 per cent cut, it found. In equity trading, pay was expected to shrink 29 per cent, and the epicentre of the cuts would be in bond trading, which has faced the most upheavals since the credit crisis. Only wealth managers, who act as investment advisers to the very rich, could expect to see their compensation climb overall, by about 8 per cent.
Rising base salaries offered some compensation, but overall pay for the year was expected to be down 27-30 per cent, Options Group found. Except that survey was in November. Now, it looks worse.
"What we are hearing from various places is that things are not a pretty sight," Michael Karp, managing partner at Options Group, told The Independent, moments after getting off the phone with a global head of prime brokerage at one of the banks. "The last quarter was not great, December was not good, so our prediction may have to be ratcheted down a bit.
"It shows the effect of all the new financial regulations and regulatory concerns across the globe. Banks are still working out what the new paradigm is, and if things don't turn a corner by March, everyone essentially has to go back to the drawing board. That could mean another round of headcount reductions, perhaps as much as 10 or 15 per cent."
As well as the ongoing nervousness caused by eurozone turmoil, there has been a wider drop in trading activity that reflects the lessons learned from the credit crisis. "And when it's tough to make money, it is tough to pay your people," Mr Karp says.
After JPMorgan Chase tomorrow, Citigroup and Goldman Sachs follow next week, building up the picture of how much Wall Street has put into its bonus pools.
If bankers are crying into their beer next week, they will find little sympathy among the general public. It may be half what they got before the credit crisis, but the average Goldman partner could still be taking home between $3m and $6.5m (£1.9m and £4.2m).
The word inside Goldman is that it plans to focus the pain higher up, and some partners in fixed income trading may get no bonuses at all. But even low-ranking junior analysts at some banks are worried about being hit.
Whatever the size of the bonus pie, don't expect it to be apportioned equally. Managers will be making harsh judgments about which employees they most certainly want to retain and which they can risk upsetting. They may be bolder this year than ever, since the risks of walk-outs is low. Mr Sklover, the employment lawyer, is not expecting to be deluged by unhappy bankers planning to sue over a paltry bonus, as he has been in better years, and is advising his clients instead to try to steer their bonus negotiations to what they promise to achieve for their firm in the coming year.
"Most people think that bonuses are rewards for work done, but that is a fallacy," Mr Sklover says. "They are about retention for the future. Think about it from the employer's side: they already have your work in the bank. They make payments to someone that they want to retain."
Options Group's Mr Karp says the days of outlandish payouts are over. "Superstars always get compensated, but this is a new world. It is not 2006. Even superstars hit their limits, especially because banks don't want to be in the public eye and therefore don't want to overcompensate their people."
Business and political leaders gathering for the World Economic Forum in Davos, Switzerland later this month are being told they must address the "seeds of dystopia" which threaten to destroy years of globalisation and plunge the world into an era of conflict.
The chilling assessment of the risks facing the world was presented yesterday by the WEF, as a framework for debate when the global elite gather in the exclusive ski resort on 25 January. At the top of its list of concerns was the issue of inequality, which it says has already sparked political backlashes from the Arab Spring to the Occupy movements of the West.
"Dystopia, the opposite of a utopia, describes a place where life is full of hardship and devoid of hope," the WEF explains, adding that it sees "a constellation of fiscal, demographic and societal risks."