A banker on a €375,000 ($404,000) salary plus bonus was allegedly given a job title for a job he didn’t really do.
Based in Frankfurt, the senior banker joined Morgan Stanley in April 2021, when he was given the high-powered role of executive director under the title “head of loan trading,” sources told the Financial Times,
But now the employee has appealed his dismissal from the bank, claiming that he was explicitly asked by an executive not to use the title he was given.
A senior staff member told him at the time that the title was a mere formality that “only existed on paper” just to comply with regulatory requirements, the FT reported, citing the banker at a Frankfurt court hearing in December.
So, what spurred this convoluted string of events? Post-Brexit EU regulations.
The European Central Bank has urged big banks to handle European business with local staffers to cut their reliance on London-based decision makers. That’s meant moving “sufficiently senior key risk-takers and proper reporting lines into the European entity,” the outlet reported. The ECB has been clear about not accepting empty titles for people based in the EU who are given instructions by London bankers.
“Since the very beginning of the Brexit process, the ECB… has been very clear about the supervisory expectations regarding the relocation of international banks that can no longer rely on passporting for their UK legal entities, whether via the free provision of cross-border services or the freedom of establishment through branches,” chair of ECB’s supervisory board Andrea Enria said in a report last year, adding that it’s tried to maintain flexibility where possible. “For the foreseeable future the UK will be a third country with respect to the EU.”
The real role
The banker said his role involved the origination and sale of distressed loans in Germany, Austria and Switzerland as opposed to on a trading desk with a high risk profile.
Morgan Stanley is believed to be the bank in question, based on FT’s sources, but hasn’t been named in court documents. For its part, it has contested the banker’s statements about being told not to use the title as it’s just a placeholder, sources told the FT.
The Frankfurt judges rejected the argument that the banker had a so-called material risk-taking role as the bank said he did. The panel also said it wasn’t “obvious” that the banker had wider managerial duties and that the banker’s position in the organizational hierarchy wasn’t enough to prove his role involved taking on risk—his competencies and responsibilities needed to align with that. The court ultimately ruled in the banker’s favor, according to the public verdict published earlier this month.
The bank is appealing against the court’s decision.
Representatives at Morgan Stanley declined Fortune’s request for comment.
Editor’s Note: This article has been updated with Morgan Stanley’s response to Fortune.
