Investment banks have been liberal with guaranteed bonuses this year. They could come back to bite if conditions deteriorate.
"Banks have built a huge cost base," says one headhunter. "A number have created problems by allocating their bonus pool in guarantees. If activity subsides next year as expected, we could see a return to the job cuts of 2001 and 2002."
Which banks have been the most lavish with guarantees this year? Headhunters point to relative newcomers like Bear Stearns, Wachovia and Bank of America, an allegation unconfirmed by the banks concerned.
Established players are also said to be guilty, with Deutsche Bank said to have paid hefty guarantees in sales and trading and Morgan Stanley reportedly paying up to add heads in investment banking. Most monstrous of all, Barclays Capital is rumoured to have paid three-year guarantees to boost its US high yield and leveraged finance business.
Good if you've got one, bad if you haven't
While two-year guaranteed bonuses are definitely a good thing for the individuals, they're less edifying for their team members - who see bonus pots diverted towards colleagues with guarantees. Guarantees also make costs less flexible during a downturn, paving the way for redundancies.
In 2001, for example, the problem was particularly acute at the Credit Suisse First Boston, where 60% of remuneration in 2001 was guaranteed at the heady levels of 2000 - despite a loss of nearly US$1bn. The company subsequently embarked on a programme to axe 2,500 jobs.
Not everyone's concerned about today's state of affairs, however. Alan Johnson, Wall St. pay consultant and venerable expert on banking compensation issues, says the big banks may be showing a bit of leg to the cost monster, but that's about all.
"The financials have been so good, that banks haven't really had to expose themselves," he told us. "If business were to go down moderately next year I don't think it would be a problem."