December is always a month of suspense on Wall Street

December is always a month of suspense on Wall Street, as dealmakers, traders and money managers at big U.S. banks wait to find out how much they will receive in bonuses.

But this year is more fraught than usual, industry sources said, because executives are waiting until the last minute to allocate bonuses, worried that market volatility could hit earnings.

Those awards typically account for one-third of compensation for employees who receive them, so they are important.

By now, division heads usually have a sense of what a bonus pool will look like and what portion their divisions will get. Although formal bonus communications can happen as late as March, executives and consultants start working on decisions after Labor Day and tend to give unofficial guidance to staff before year-end, sources said. 

But because there is so much uncertainty about what might happen in overnight lending in late December, and the ripple effects it could have on other markets, many executives are taking the unusual step of waiting to divvy up bonus pools until the year is completely finished.

“There may be people working New Year’s because they’ve got to finalize this January 10 or 15,” said compensation consultant Alan Johnson. “People are going to be particularly vigilant to make sure that they’re going to be paying the right amount, figuring it out right up to the end of the year.”

At one bank last year, trading heads were told in late-December that millions of dollars needed to be shifted from their bonus pool to other divisions, a source familiar with the matter told Reuters on the condition that the bank and person not be named. The industry is trying to avoid situations like that again this year, Johnson said.

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