In theory, it’s easy. The region has not witnessed the invective against financial industry compensation that has been unleashed against the likes of Goldman Sachs in the US and the UK’s Royal Bank of Scotland.

Asian banks did not receive gargantuan taxpayer bail-outs, having largely stayed clear of subprime mortgages and exotic financial instruments.

But foreign banks operating in the Asia-Pacific region have a balancing act to perform. How do they keep top performers in the region happy while avoiding antagonizing global colleagues or their regulator?

These issues are being played out in early sparring over pay and bonuses in financial centres including Hong Kong, Singapore and Sydney.

Economies across the region quickly shrugged off the financial crisis, and Asia remains awash with liquidity.

Many bankers in the region have had a bumper year, and expect to be well compensated when bonus decisions start to be made from next month.

Hong Kong is the leading global centre for initial public offerings this year, raising combined $27bn, mainly for mainland companies.

On deals, China Investment Corp, the country’s sovereign wealth fund, has kept investment banks busy with countless energy-related outbound investments.

Asia-based bankers who specialize in financial sector mergers and acquisitions have worked overtime on deals, mainly related to regional divestments by troubled western financial institutions including ING Group, AIG and RBS. In Australia, record amounts of equity issuance by companies and financial institutions made it a lucrative year for investment banks.

Many executives of investment banks in the region fear losing key staff to ambitious regional rivals if their paymasters in New York, London or Zurich clamp down indiscriminately on compensation.

“This time last year it seemed the world was about to end, and pay discussions in Asia were short and sharp,” one regional executive at a global investment bank said.
“This time round we can’t expect staff to remain here simply because our balance sheet is stable,” he said. “This region is booming, and unless we pay well, our rivals will pick them off.”

Australia’s Macquarie and Japan’s Nomura are among the regional banking groups that have hired aggressively in Asia and beyond this year.

The UK’s Barclays and HSBC, which emerged relatively, well placed from the crisis, expect to poach talent in the region from weakened global rivals.

Executive of some investment banks are privately scathing of rivals, some of them beneficiaries of government support, which have allegedly offered large pay packages to poach staff.

“We have recently lost people to rivals guaranteeing two-year bonuses and can’t compete with that,” another regional banking boss said.

“But the cost structure they are accruing will blow up in their faces because it won’t be easy to generate sufficient revenues.” That is unlikely to deter those groups keen to bulk up headcount.

Economic growth in China and India has rebounded strongly and is forecast to strengthen again next year, fuelling fears of a renewed war for talent for proven staff.