With the latest cut he has announced on his salary , Jean Pierre Mustier, the Chief Executive of UniCredit, Italy’s largest bank, will have shrunk his total compensation this year by 75%. Mustier is no newcomer to the practice, having already cut his pay when he embarked on a thorough restructuring of the bank’s business, which he has since made a much-lauded success story. Mustier also chairs the European Banking Federation, the trade body. The least that can be said is that he is leading by example. The question is whether he will now be followed by others.
So far, bankers haven't seemed eager to rush into taking the same kind of decisions. One exception is Ana Botín, the executive chairman of Santander /zigman2/quotes/205677933/delayed ES:SAN +2.50% , who had already announced that half her total pay this year would go to the Spanish bank’s medical coronavirus fund. Mustier’s own would-be pay is being donated to his bank’s foundation.
UniCredit /zigman2/quotes/200769686/delayed IT:UCG +4.74% certainly operates in an economic environment that is unique in Europe. Italy has been the EU country worst-hit by the crisis, but it could also be Europe’s most-hit by the recovery, if the rebound comes at the price of a heavier debt load. EU leaders will discuss on Thursday ways to devise a recovery fund that would spread the cost among them. But no one is holding his breath, and it could take months before a compromise is reached among divided governments.
Meanwhile, yields on Italy’s 10-year bonds /zigman2/quotes/211347230/realtime BX:TMBMKIT-10Y -1.87% are back above the 2% level they last reached just before the European Central Bank launched its mammoth pandemic-related bond buying program . And just as it was announcing Mustier’s pay cut, UniCredit also said it would boost its provisions for bad loans by another €900 million, because it now forecasts Italy’s gross domestic product to shrink by 13% this year , bringing bankruptcies and unemployment.
Of course, some will note that Mustier will still take €75,000 a month after his pay cut, and that he is nowhere near the kind of stress experienced by so many. But he is showing that at least some bankers have understood the message from the financial crisis 10 years ago. Banks were then bailed out at taxpayers’ and central banks’ expenses, while bankers and their lifestyles remained largely untouched. Mustier’s today is more than just a symbolic gesture. It is a step toward restoring a modicum of trust in the financial system and the way it works. His colleagues and rivals would be well inspired to follow suit.