NEW YORK - Winter is usually the best time of year on Wall Street -- that's when bonus season starts. But the key word this holiday season is renunciation. The bonus pool that banks dip into to spoil their employees at this time of year is 20% to 30% smaller than it was in 2010.

That anyway is the result of a poll conducted by the consulting firm Johnson Associates, much respected in banking circles. Those worst hit are investment bankers, who deal with bonds, currencies and commodities. Usually the much-envied "stars' of the system, they are now set to experience a serious reality check.

Big banks are changing their way of doing things. The European debt crisis, worries about the future of the world economy, and US finance reforms are forcing them away from their old remuneration practices. And although the final decision on just how high bonuses will be is only taken when fourth-quarter results are published in January, the austerity trend is already written on the wall.

A few weeks ago, top-of-the-heap Goldman Sachs, JP Morgan, Morgan Stanley, Citigroup and Bank of America presented disappointing performance figures. They must now make savings wherever they can to win back confidence on the stock exchange. They have already started letting staff go: in September, 8,000 jobs were lost in the US financial sector. Bank of America alone plans to eliminate 30,000 jobs by 2014.

No more milk and honey for mediocrity

And the times when mediocre money managers were kept motivated by millions in bonuses aren't going to be returning any time soon. Only top performers can be expected to continue earning high bonuses. Financial advisers and bankers still in the game after the expected round of takeovers, mergers, and IPOs can expect minimal or no increase in their bonus. Most of the others will have to do with a lot less. This is bad news for Manhattan's jewelers, luxury restaurants and top-end car dealerships because their business is heavily dependent on the spending power of the "bonus barons."

Bonuses are the lion's share of most Wall Street bankers' annual income. Base pay for the average banker is $100,000. The rest is paid out in January. In a particularly good year, top Goldman Sachs employees averaged more than $600,000. Wall Street salaries are so much higher than incomes in the rest of the country that even the present correction won't have much of an influence on the salary gap that has grown over the last 10 to 20 years.

Since the financial crisis, Wall Street's bonus practices have been a focal point for criticism around the world. The system encourages traders to take outsize risks to increase profits. Claw-back mechanisms geared to kick in when financial gambles go awry aren't usually applied.

The banking bonus culture is also one of the main bones of contention for the Occupy Wall Street demonstrators who have been camping out in Lower Manhattan since late summer. The outrage is particularly heated over bonuses received by employees of institutions heading for bust, like insurance company AIG and investment bank Merrill Lynch. News that the brokerage house MF Global had paid out bonuses in the UK before declaring insolvency last week could provide new fuel for the debate on the greed of the financial sector.

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