Dresdner bankers suing for £50m in City bonuses

Around 250 staff at Dresdner Kleinwort are taking legal action after their bonuses were slashed during the takeover by Commerzbank.

At least one is believed to be demanding over £10 million while others are claiming at least £1 million each.

The cost of the overall payout could hit £50 million, a sum that will trigger a new row over "rewards for failure". Dresdner posted a 6.3 billion (£5.6 billion) loss for 2008.

The bank's previous owner, Allianz, set aside 400 million in its annual bonus pot for global staff last summer. But the new parent company Commerzbank, which took over last autumn, slashed the payouts by 90% in January, invoking a "material adverse change" clause after an 18.2 billion bailout from the German taxpayer.

Angry staff at Dresdner have instructed two leading law firms, Manches and Mishcon de Reya, to claw back the cash.

The case has sparked a political storm in Germany, where Chancellor Angela Merkel said: "It is incomprehensible that banks helped out by the state in many cases pay out huge sums in bonuses."

Daniel Naftalin, partner at Mishcon de Reya, said: "We can confirm Mishcon de Reya is acting for a large number of Dresdner Kleinwort employees."

About 130 bankers are also being represented by Manches partners Clive Zietman and Andrew Shaw.

The group believe they have a strong claim because they were notified in writing around 19 December about the size of their individual 2008 bonuses.

A legal source said: "What is unusual about the bonus pool in this case is that it was put in a separate account by Allianz ,who then sold it on to Commerzbank last autumn.

"The Financial Services Authority [in London] were fearful of the operational risk to Dresdner if staff quit before the takeover. The FSA were given assurances that Dresdner staff would be staying on board as a result of the guaranteed bonus pot."

Neither Mishcon nor Manches has yet notified Commerzbank about their intention to sue but a source close to the Dresdner employees said legal action was imminent and the solicitors are likely to collaborate.

Michael Diekmann, chief executive of Allianz, confirmed last week that he told Dresdner staff in August that the bonus pot had been set aside: "The FSA approached us and asked us to ensure personnel stability."

Commerzbank declined to comment. But those close to the bank point out the December letters contained a lengthy "material adverse change" clause, warning that the Dresdner payouts could be changed because of economic circumstances.

Dresdner's biggest investment banking operation outside Germany was in Gresham Street, where its City HQ employed more than 2000 staff.