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Why the Treasury won't illuminate 2010 bank pay

Robert Peston | 08:59 UK time, Thursday, 25 November 2010

Over a 10-year period, the share price performance of Britain's banks has been appalling (in the case of Royal Bank of Scotland and Lloyds/HBOS) or lousy (Barclays and HSBC).

Over the same period (you probably won't need reminding) the remuneration of top bankers has soared, both for those who run the banks and for their star traders and advisers; the early part of this millennium was the period when the multi-million pound bonus package proliferated and became entrenched into the system.

As for dividends, after the crash of 2008 banks either eliminated them (RBS, Lloyds, Barclays) or slashed them (HSBC).

So it's been a great time to work for a bank, and simply the worst time to own shares in a bank. Which would look like prima facie evidence that the balance between rewards for bank employees and rewards for the owners have been skewed too far in favour of the employees.

That is bad news for those of us still brave enough to save for a pension, since there'll be a slug of bank shares in our portfolios (whether we asked for them or not).

So why on earth haven't the owners or those who manage big pension and insurance funds on behalf of the ultimate owners (that's us by the way) demanded more for themselves and insisted on less for those who destroyed the value of their (our) banks?

There is another facet to this puzzle. Research by the Bank of England shows that if banks reduced the proportion of their revenues that they pay out in pay and bonuses back to what it was in 2005 (which was a pretty good year for the banks), they would free up £10bn - which could be used to strengthen themselves by retaining it as capital (which is what the Bank of England and FSA would prefer) or to pay higher dividends.

To put it another way, the failure of the owners to insist that this £10bn be deployed to reinforce the foundations of their banks or provide an income to them is one of the great mysteries of our time.

The previous government spotted that when it came to setting pay, shareholders appeared to have abdicated all responsibility. So it took advice from a senior banker and former regulator, Sir David Walker, and decided to help the owners put pressure on banks that were paying too much, by forcing the banks to disclose much more detail about what they pay.

It prepared draft legislation that would have forced bankers to disclose every year how many of their people earned more than £500,000 but less than £1m, how many earned more than £1m but less than £1.5m, and so on, in bands of £500,000, until the threshold of £6m was breached, at which point the disclosure bands would have widened to £1m.

The legislation never made it on to the statute book, because the general election intervened. But both George Osborne, the Chancellor, and Vince Cable, the Business Secretary, always said they were in favour of improved disclosure of bankers' pay, so the widespread assumption was that the statutory instrument would become law in time for the pay information to be included in the banks' next annual reports.

That's not going to happen: the new law on executive remuneration in financial services has been shelved, as the prime minister confirmed during Prime Minister's Questions yesterday.

Why? Well, you probably won't need telling that those who run British banks have for some time been telling me how much they dreaded having to reveal how many of their people earn seven figures and above.

However, in defending the status quo, David Cameron pointed to a public change of heart by Sir David Walker, who earlier this week wrote in the Financial Times [registration required] that he didn't think it was appropriate for UK banks to be forced to disclose more information on what they pay than US banks, or French banks, and so on.

This is what Sir David said:

"[A]ny attempt to require banded disclosure for UK banks in isolation would be commercially sensitive vis à vis their non-disclosing competitors elsewhere. It could also stimulate higher executive turnover, and (as a perverse unintended consequence) lead to higher remuneration as a defensive retention measure."

You'll have to judge whether you think the potential competitive cost to British banks outweighs the potential benefits for the owners of banks in having the information that would enable them to engage in an informed dialogue with bank bosses on an aspect of management with profound consequences for the strength and sustainability of banks.

The Treasury says that Mr Osborne will write to European Union finance ministers, to press for a Europe-wide bank pay disclosure regime. It insists that a light may yet be shined on what bankers are paid.

We'll see. What however is as dead as any dead thing is the notion that British banks could be forced to lead global moves towards greater illumination of bankers' pay.

Comments

Page 1 of 4

  • Comment number 1.

    > those who run British banks have for some time been telling me how
    > much they dreaded having to reveal how many of their people earn seven
    > figures and above.

    So those bigwigs are ashamed of what they are doing, eh? Well, shame doesn't cut it - we want action on wages to stop this ever happening again. The choice is to cut wages, or get out - there is no middle way.

  • Comment number 2.

    There is more to shareholder abdication than the issue of what is paid to bank staff. There is more to bank directors responsibility and the auditing of accounts by independent auditors than appears to have been aired. Just one of this motley crew working alone could not make it through. Whenever the word risk was added to their shortform dictionary they appear to have burst into a rendition of Always look on the bright side of life. Very few bankers around to answer questions lately. Very few bank empolyees saying just how much they have earnt their bonuses etc etc.

    Any chance you coukld break out of the box and write about something other than banking RP. Or does business begin and end with banking.

  • Comment number 3.

    Are the people the biggest shareholder in RBS or is the Govt?
    The people want to exercise their shareholder rights but the Govt does not.

  • Comment number 4.

    "The previous government spotted that when it came to setting pay, shareholders appeared to have abdicated all responsibility"

    In fact it is the big shareholders, those who manage big pension and insurance funds, who have abdicated all responsibility for all aspects of what banks do.

    Since they have abdicated all responsibility of being owners they should lose voting rights. Then the small shareholders who do give a damn about what is happening will be able to call the tune.

  • Comment number 5.

    Robert, time to move on, you have flogged this bank bonus business to death. We are obsessed with banks, we all know the story, we don't like it but surely banks is not the only part of BBC business finance remit. If BBC business blogs have no better subject matter then it might be best if BBC really do move on.

  • Comment number 6.

    Its a pity that the bankers are not as good at running banks as they are at making excuses.
    Its almost as if the Human Rights Act is invoked to prevent any criticism of these untouchables.
    As in other spheres, one could be accused of bankerphobia, the, apparently, irrational fear of the financial mess these supposedly intelligent multicellular organisms have honed to perfection.
    To call it 'the perfect storm', somehow, seems inappropriate as it is the achievement of a fundamentally imperfect system.

  • Comment number 7.

    I'd be curious to know how it is thought disclosure of these very high salaries would be "commercially sensitive" or lead to "greater executive turnover". I can see no obvious mechanism by which disclosure could jeopardise a banks commercial position - nor why executives might change positions more often, other than to avoid disclosure.

    And that, of course, is the obvious reason why this disclosure will not happen. The executives could be embarrassed. Heaven forbid: they might all then act on their threat to leave the UK.

    I stand with those who see this as an empty threat. These geniuses got us into this mess, and have not covered themselves in glory while getting us out. Indeed, they appear to have spent the last couple of years rescuing themselves at our expense. Clever! But no reason to lose any sleep if they up-sticks and move out.

    The problem we have, is that Governments are still in thrall to the Banks - and have been persuaded to do whatever it takes to keep the banks going (including dropping this disclosure requirement) on the promise that the banks will engineer a return to the good times: and in the fear that if they fail then all will be lost.

    The first is not going to happen. The banks built the good times on the back of ever increasing borrowing against ever increasing property prices. That cannot continue and will not happen again - simply because the future income necessary to pay off the borrowing has been exhausted. The only path back to the good times is via a return to long term investment in sensible tangible businnesses that make and sell things. (The German model in fact).

    Equally, bank failure need not be the end of the World provided it is planned for. When, as i seems increasingly likely, the banks do fail for a second time, we should not bail them out. We should put them into liquidation (at 11.00pm on a Sunday - and buy them from the administrators (ie nationalise them) before midnight. We should then keep the retail banking side going while the bad debts, bonds etc are restructured - so that they can be sold back to the private sector as going concerns.

  • Comment number 8.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 9.

    I must take issue with Robert's comment 'it's been a great time to work for a bank' - as someone who has been until recently working for one of the banks in the article I can assure you it has been a truly awful time to work for a bank! The atmosphere has been appalling, job security and job satisfaction levels at an all time low, and as for the assumption that all people working for a bank get huge bonuses - what bonuses? It's only a very few people, mainly those at the top that get the huge bonuses, the rest of us get nothing but have to put up with increasing stress levels and the knowledge that the general public all just think we are a bunch of 'greedy bankers', when nothing could be further from the truth for most of us. I myself, along with many thousands of others have now been made redundant, while having to watch the banks still paying massive bonuses to a very few 'top people'. I am more than glad to be out of there.

  • Comment number 10.

    It's not a mystery Robert.

    It would be a mystery if there was a market for executive salaries in banking, but there isn't a market, there is a cartel.

    The folk who represent the shareholders (ie the executives of the pension funds and not (and this is important) the prospective pensioners) belong to the same clique as the bank executives - so it's more in their interest to promote bigger salaries in finance houses (so they can get them for themselves) than it is to see that £10 billion go to into the pension funds.

    We, the people whose money they are taking, are being shamefully exploited systematically, repetitively and with institutional blessing.

  • Comment number 11.

    Over the past decade the banks appear to have been running a Martingale system. In years of profits they took a healthy cut. To rub salt into the wounds, in the years of loss, they still took a large chunk 'to retain the tallent'. Unfortunately they have not been running a profitable system.

    I'm unconvinced that the talent is worth what the banks are paying, but that's a separate gripe.

    It seems to me that they could resolve some of these issues by paying 100% share-based bonues, that can only be redeemed after a lengthy period of, say, 10 years or 2-3 years after leaving the bank.

    They could retain their crazy bonuses and their interests would be well and truely alligned with the shareholders. Surely it's a good compromise!?

  • Comment number 12.

    2&5 - problem is the public do care about the robbery being undertaken by the bankers. They will care even more as the cuts start to bite.

    Nick Robinson has also done a blog on this topic.

    Labour, the Lib Dems, the Unions - indeed everyone suffering from the cuts are going to keep going on about this topic so I suggest you get used to it or read Heat for the next 12-24 months.

  • Comment number 13.


    ‘So why on earth haven't the owners or those who manage big pension and insurance funds on behalf of the ultimate owners (that's us by the way) demanded more for themselves and insisted on less for those who destroyed the value of their (our) banks?’

    Oh come on RP!
    Let us pause for a moment and consider all those wonderful products sold to us by the financial services sector:

    Endowment policies,
    Personal equity plans
    Payment protection policies
    Equity release schemes
    Private pensions
    Precipice bonds
    Self certification and 100% + mortgages
    Exorbitant bank charges
    Mortgage redemption penalty charges

    And as regards Private Pensions:
    The pension fund deducts its charges.
    The share and gilt dealers get their commission.
    The Pensioner is forced to buy an annuity, the provider of which takes a slice for the privilege of it.
    And the pensioner gets what’s left.

    The pensions industry is just a part of the ‘Financial Sector’, it exists to take money off the unwitting. And you have to give it credit, it does do a most excellent job in relieving the average Joe & Jane of their surplus income

  • Comment number 14.

    I have agree with Rob - the problem fundamentally is that the biggest shareholders are insurance, investment and pension funds, who are managed by the very 'bankers' whose pay we feel should be cut.

    But this highlights the industry as a whole, even the regulator is run by the 'bankers'.

    I believe in Britain's banking industry, and I feel it's one we should strive to encourage, however we also need to act to protect it from itself, and us from it.

  • Comment number 15.

    So even if the pension fund managers knew the details of what individuals were paid this might change their behaviour as shareholders? I doubt this, also if the labour market is efficient as we might assume, then why would anyone care what is disclosed in the annual accounts? I suspect it might be more to do with data protection or human rights than anything else.

  • Comment number 16.

    Businesses are made up of leaders and followers. They don't work without either. The leaders can and do often make a real difference for either themselves (as shareholders in owner managed businesses where they take their own risks) or external stakeholders. They have a duty to look after the followers (the general staff)

    Robert Peston highlights yet more real life Gordon Ghekko. The Government is right not to require the UK banks to be more transparent than overseas banks as this would hinder competitive recruitment (let's not forget that bankers are only driven by money so don't care who they work for). There should be a Global banking set of rules. This is supposed to be a Global Financial crisis, banks such as HSBC advertise themselves as Global, why can't governments around the world require equal disclosure (such as you find in Company Accounts with International Accounting Standards) of matters that are important to the public and shareholders.

    What is important here though is not what the bankers are paid (no-one cares how much Richard Branson is worth because he risks his own money) but that they have been paid outrageous sums, without any personal risk, been paid out of false profits, and then when the world came tumbling down they got off scot free. How can that either be moral or legal? Well it can't. Nothing we can do now. The law is the law, but for goodness sake do something globally now so that this can never happen ever again.

  • Comment number 17.

    The upper echelons of the international banking community have governments in their pockets.

    Banks need to be broken up into divisions that are not `too big to fail`
    When they make bad descisions and lmoney lost, heads can roll and staff remuneration can be adjusted lower. If they go bust, so be it. If that has a knock on effect on their counterparties in the financial markets - good. It will mean that bankers need to be prudent in who they transact bussiness with.

    While they are backstopped by the taxpayer from the consequences of their own greed and incompetance, nothing will change.

    Robert, you are often talking about the governments insistance that the banks `start lending to small business again`. What business needs is not loans but customers! to attract customers we need to be efficient and competitive. We need lower overheads, and MUCH lower levels of taxation. Employment taxes, Corporation Taxes and Business rates are now at levels which are punative. A level of personal taxation which left potential customers with more of their own money to spend would be much more help to most business owners than a bank loan.

    I want a healthy, profitable and vibrant City of London. It provides a lot of employment and in good times pays handsom amounts of tax to the treasury. However we are a long way from getting some meaningful bank reform which will prevent the taxpayer from picking up the tab in the bad times.

    I think the bonus arrangements for our state controlled banks are a travesty. I can do nothing about it.

    What I can do, is close my business accounts with Nat West /RBS. I run an average possitive ballance well into six figures, and pay a healthy five figure sum in charges each year for use of their cheque clearing and `bacs` payment system. They will not even notice I have gone elsewhere, but I will feel a little less angry.

  • Comment number 18.

    RP wrote:
    "As for dividends, after the crash of 2008 banks either eliminated them (RBS, Lloyds, Barclays) or slashed them (HSBC)."

    Think you will find that Barclays have been paying dividends in both 2009 and 2010, so a little misleading reporting here

  • Comment number 19.

    7. At 09:51am on 25 Nov 2010, tFoth wrote:
    "I'd be curious to know how it is thought disclosure of these very high salaries would be "commercially sensitive" or lead to "greater executive turnover". I can see no obvious mechanism by which disclosure could jeopardise a banks commercial position - nor why executives might change positions more often, other than to avoid disclosure."

    Because if you know you could earn more at another place you would be tempted to try and move to that place would you not?

  • Comment number 20.

    Hurrah common sense being stated by Mr Peston!

    What I find funny is the banks state they need to pay large bonuses to keep talent. But how do you find talent? Why don't the banks use this window of opportunity to get rid of so called talent on large bonuses and bring through the next crop on smaller bonuses? If they invested their cash in developing talent instead of bank rolling people then they would have enough traders to force the value of bonuses down.

  • Comment number 21.

    Business big shot: Sir David Walker [10-Feb-2009]

    http://business.timesonline.co.uk/tol/business/movers_and_shakers/article5697657.ece

    'Vince Cable, the Liberal Democrat Treasury spokesman, called it a “classic Establishment cover-up”, while the Conservatives dismissed it as a “totally inadequate” response to the growing furore over bank bonuses.'

  • Comment number 22.

    Another anti-bank rant from Robert Peston.

    Yawn.

  • Comment number 23.

    Banks are Global in every way except for remuneration - why dont we compare the banks in the emerging economies with ours, and see how much bankers there are paid, vs how much those banks/ bankers deliver ?

    Too much fees is paid to banks by corporates as well (much finer pricing wherever there is hard competition/ willingness to negotiate), which clearly does not exist in the clubby world of UK/ US. Obviously if too much fees is paid, the banker who brings it in demands a higher share of the incrementla money he brought in..

    Government should be addressing both, and it is a big buyer and can negotiate harder if it wants to - everyone wants the Govt as a client..

  • Comment number 24.

    "However, in defending the status quo, David Cameron pointed to a public change of heart by Sir David Walker, who earlier this week wrote in the Financial Times [registration required] that he didn't think it was appropriate for UK banks to be forced to disclose more information on what they pay than US banks, or French banks, and so on."

    Then i suppose their pay will NEVER be released into the public domain if we have to gain WORLD agreement!!!
    What happened to the UK leading the way??!! It is nothing short of an absolute disgrace that the 10 year performance of bank shares hasnt been in correlation to the amount their "top" execs and bankers are being paid!! All of my short working life i have been encouraged (and encouraging others) to save for the future by contributing to a pension. As a shareholder i expect that if a company's employees are being remunerated handsomely through bonuses that this is also reflected in the companys share price (and to the level of dividend being paid)!! I also expect (no, actually, DEMAND) that if a companys share performance declines then so does the level of bonus remuneration to their employees. Performance Related Pay!!!

  • Comment number 25.

    I'm absolutely appalled if this report by Robert is factually true - i've no reason to doubt Robert, although i still wonder why the Masters of the Universe still talk to him when he discloses so much!? - as it adds to my apathy with Government (of which ever political party) and wonder what is the point of this so called 'democracy', when they are able to do so little to the financial elite.
    If 'people power' in whatever form (I like Eric Cantona's current idea and the Silver Coin JP Morgan thing) doesn't come to the fore in the next few years, then i fear we are all doomed.
    I think it is time for people to boycott all elections (general or local), occasions like the Royal Wedding and the Olympics (which help divert our attention) and show that ordinary people do matter and aren't helpless.
    Although i love the rantings of WOTW (he along with Dempster were the first people that got me thinking about what was really going on), i am starting to feel that more ordinary moderate people are beginning to feel the same way.
    The one thing that does worry me is the power of the Internet and how easily it can be used for mis-information, and I often end up wondering who to believe!?

    Bim.

  • Comment number 26.

    It is interesting to see if the Max Keiser 'Buy Silver, Crash JP Morgan' campaign has any effect.

    He is claiming that JP Morgan have taken a massive naked short position in silver to try and keep the price down. Max is asking everyone to go out and buy any quantity of physical silver claiming that if the price can be maintained until these positions need to be closed out, JP Morgan will go bust.

  • Comment number 27.

    2 / 5
    look at the boarded up shops and businesses, look at Ireland, look at the sinking mess all over... human misery big time, and more to come... and people actually pay themselves bonuses for that? It is natural and more than a little frightening that the anger and resentment felt by so many will begin to focus on who is to blame...

  • Comment number 28.

    Another example of sabre rattling on a subject that is wildly over simplified. If investors didn't see returns they would choose other investment targets - it's a free market.

    A couple of things to add.

    1. Retail banks bonuses are vastly different in profile and scale to fund management, investment business bonuses. Due to reports like this one when people think of banks they make the link to high street businesses when these businesses generally don't wildly remunerate their staff (investment arms to one side where they exist).

    2. Government intervention will eventually cause as many problem as it solves - the dichotomy between lending more and reducing risk is the key issue facing UK banks at the minute not the wages they pay their talented, experienced staff in a challenging market place.

    This story is designed to be inflammatory - the success of the UK economy is predicated on the success of it's FS sector. Gearing was / is a global issue - the UK suffered but over-regulating now would erode competitive advantage in the one industry the UK is still a global power.

    I'm hearing more and more that the UK is no longer a manufacturing industry, and that we're less and less a services economy (call centres in India anyone?). Leads me to the inevitable conclusion that we're either an innovative, IP driven community or stagnant.

    We should be talking about how we best invest in introducing and maintaining knowledge and skills to the market and not bashing the banks who encourage that enterprise and growth.

  • Comment number 29.

    Bankers all over the world, including the US, are threatening to go abroad if their activities are restricted or their pay is made public.

    Let them go - perhaps they'll all end up in China and suffer "Chinese Justice"!

    In the meantime, here is an interesting campaign: "Give Ireland George Osborne and keep the £7 Billion."

    http://www.facebook.com/GiveIrelandOsborne

  • Comment number 30.

    Robert,

    The scale of outrage generated by our less than demure banks seems to fester unabated.

    Sadly, as you predicted many months back, the political will for change is non existent - it is perceived by the current political elite that this action would merely bite the hand that feeds it.

    Given that some of our banks are 'purportedly' owned by the public, would this not be a very convenient time to use FOI for its intended use?

    Perhaps a chat with Martin Rosenbaum might yield some very interesting results!

  • Comment number 31.

    Robert - please, please give this topic a break. Or are you only interested in Bank bashing.

    A great time to work for a bank??? Perhaps you could ask those tens of thousands of Bankers who have lost their jobs over the last two years!!! Perhaps you might like to ask those tens of thousands of Bankers who are risk of losing their jobs.

    Perhaps we could have a bit of balance - an article by you on the Billions paid by the Banks in taxes

    Better still why not have a go at Phillip Green and the other retailers for their practice of paying overseas suppliers pennies whilst paying themselves millions

  • Comment number 32.

    #19 yam yzf In which case disclosure would be an advantage! This cannot work the other way around since people already know what they earn.

  • Comment number 33.

    When Lehmann Bros went bust I read a report that told me that in 2007 this wonderous enterprise had 25,000 employees world-wide and that the average paid to each of them in salary and bonus was in excess of $500,000. I thought that the newspaper had overlooked a misprint - surely they had one zero too many. I couldn't believe it. However, further investigation proved that $500,000 was true. Further searching established that these pay levels were the norm in investment banks. Now, in spite of the debts that nations are carrying on their behalf, it seems that ridiculous pay levels are still the norm. In the City of London the average pay of a full-time worker is way, way beyond anything elsewhere in Britain. Now we hear that HSBC is to double the salaries and reduce the bonuses of many of its employees so that they can tell us how much the bonuses have been reduced without actually changing the total remuneration. In no other groups of companies can we find total pay packages so far from the national norms as those that apply in all kinds of financial services. And it will not do to crow about expertise when together they have wrecked the economy of the whole World.
    It's good to see that another band of useful workers - lawyers - are catching up fast. A 25 year old lawyer in the City can now - apparently - expect £100,000+ per annum. Doing what exactly?

  • Comment number 34.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 35.

    Here is some evidence to back up what #13 Dempster wrote. Just do the maths and see what these companies take from annuities.

    http://news.bbc.co.uk/1/hi/business/8356669.stm

  • Comment number 36.

    It's so easy to blame "the banks " for all the country's ills, this masks the real reason for the problem, the incompetence of the last government who put all their financial eggs in one basket in the forlorn hope that the financial industry would keep their finances afloat, it didn't. Now we have a scapegoat, the banks, who for the best part of 10 years financed the profligacy of Blair and Brown as they attempted to create an eternal socialist regime in Britain built on a base of non employed dependent voters and fawning trade unions . Sadly their lack of foresight and lack of control over the financial institutions caught them out and dragged the country to the brink of banktrupcy. Now the politics of envy appears and lays the blame on those who provided the cash because they are earning more than we think they deserve.

  • Comment number 37.

    As time passes it becomes clearer that any kind of regulation whatsoever of the banks is not going to happen. They will fight it all tooth and nail and get away with it because global finance is exactly that...global. Their trump card is that they can appear to play individual governments off against each other when, of course, the governments are in on the whole scam.

  • Comment number 38.

    #32

    The problem would be that if you left RBS because HSBC were offering more, then RBS would have to offer more to your replacement otherwise they would not attract the staff they want. Now you see that RBS are offering more again, so you leave HSBC. So on and so forth. Now the costs of employment have increased. This cost has to be borne by someone. The shareholders will not want it taken out of profits and so reduce their investment through less dividend and so the company will have to look elsewhere i.e. their customers.

    Yes, each person knows what they earn and what they tend to base their decisions on is whether they feel they are being paid what they are worth. As I am sure you know, everyone flicks through the job sections of papers/online to see if we can get more for what we are currently doing and sometimes we see that we can. By forcing disclosure, however, it is going to potentially drive wage inflation higher

  • Comment number 39.

    34.

    Because someone posts for the first time and their view disagrees with your own it does not necessarily mean they are a troll. Perhaps they feel as strongly as you about things but from the opposite side.

    Comments like that, where by a person is insulted on their very first post, is not conducive to free speech and discussion.

  • Comment number 40.

    @31. Decentjohn:

    It would appear that bankers are finally realising their status in this world may not be so lofty.

    They merely administer the transfer of capital for goods and services. The suppliers of that capital are members of the public, or businesses, who open accounts with them. Which all quite simply means they are not masters of the universe, but instead are trade merchants. Think Only Fools and Horses.

    It is especially offensive - and disingenuous - to condone the gambling of CDOs, CDSs, and other exotica 'experimented' by these banks. It was this action which created this little 'deprecession' which we are now all worse off for.

    What you may find is your friend, neighbour, citizen and colleague may now expect some humility from people who have lied, gambled and mislead everyone into this awful mess. No amount of 'tax paid' will change this view. Bankers were ostracised for a reason! And if they are unhappy with this, or can earn more elsewhere, then it is my view they are very welcome to leave. There are plenty of talented people in Britain ready to take their job, and do perhaps almost if not equally as well.

  • Comment number 41.

    Just to recap (bare with me, I'm not an economist):
    1) The Financial Sector represents around 30% of gross value added, say 400Bn. The largest sector grouping by far in the UK economy. The banking sector will be a significant proportion of this. Given this size and impact it is, it behaves like an economy within the economy. The public sectors could also be viewed as such.

    2) This sub-economy is controlled or lead by relatively few people, compared to say manufacturing and unlike the publicly controlled sectors they are un-elected.
    Economies like this can, and tend to, play be their own rules as they are "too big to fail". We have the opportunity to vote out the controllers of the public economy, but not the financial one (it appears neither do the shareholders !)

    3) By definition, it's primary value flow is money itself (the equivalent value of which has been generated elsewhere, inside or outside the economy) as opposed to say tonnes, kWh, widgets, intellectual property / activity etc - which are then converted into cash equivalence. A risk here is that as everything is represented by money, the associated actvity of moving it around in the finacial sector (in theory to help the generation of further "real-value") in this financial economy is "overstated" in the genuine value creating economy (similar to comments made by the Govenor of the Irish Central Bank about international headquarters Ireland distorting the economic view - see Peston's blog on Tuesday evening)

    It occures to me that :
    - the economy should also be represented and communicated in "real" value units as well as monetary value, so that we get a better view of the balances, imbalances and gaps within the economy (...I'll work on this)
    - the financial economy should clearly distinguish it's GVA between moving other people's money around from one part of the economy to another (distribution), where it takes a healthy cut (seen as value added, but probably too much for the work, time or effort involved), and genuine value creation (the stuff we would be prepared to pay for)
    - the leaders in the financial sector "economy" need to be seen as such, and made accountable accordingly, particularly as they don't seem to be really accountable to anybody at the moment, as we're too afraid of the the power they weald.

    Not a healthy situation - it's affecting my wellbeing index.

  • Comment number 42.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 43.

    The trip to China with Cameron and other members of the cabinet has borne fruit for some.

    Something to hide - internationally.

  • Comment number 44.

    Surely a bank of any persuasion should pay a fixed percentage of all net profits ascombined staff remuneration.

    Whatever that percentage is, as total bank profits slide, remunderation slides and as it rockets, remuneration also rockets.

    It is patently absurd for the OWNERS to profit less than their employees year on year.

    When shareholder returns dive, employee remuneration needs to take an equivalent hit.

  • Comment number 45.

    7. At 09:51am on 25 Nov 2010, tFoth wrote:

    "The problem we have, is that Governments are still in thrall to the Banks ... "

    This is indeed the root of the problem. It is becoming daily more obvious that the private debts of the banks should not have been converted into sovereign debt. The question is why did the politicians do this, and why do they not now renounce these undertakings which in any case may well be impossible to fulfill and could even be legally challenged ? Is it that they would upset important sources of political funding, or that they really believe that fractional reserve banking can and should be restored in its pre-crunch form?

    In fact the monetary system would be much easier for central banks to control, without the excessive and uncontrollable leverage of the money supply that banks, and other institutions with access to the wholesale money markets, are allowed to indulge in. Central banks would again be able to control the money supply directly, without having to try to regulate bank lending by varying interest rates. Governments would be able to keep their economies more balanced and apply more relaxed fiscal policies, when necessary, without the fear of uncontrollable inflation.

  • Comment number 46.

    #39 at last, some one who does not wish to trade personal insults.

    Robert's piece is sloppy journalism.

    Why should bankers pay be disclosed? The bankers we are talking about are not directors of the bank (their pay can be founded in the annual accounts although it is not always particularly informative) but mere employees. PLC's have no obligation to list employee pay so why should banks be any different?

    As for the shareholders abdicating responsibility this is also nonsense. The setting of employee pay is not and never has been subject to shareholder review (unless employees were also directors). Shareholders can entirely reasonably sack management if they fail to keep costs under control but costs would include more than just salary costs.

    Fortunately I have had shares in TSB (now Lloyds) for 20+ years and they have been an excellent investment. When TSB got bought by Lloyds I got a special dividend that was worth almost as much as it cost to buy the shares in the first place and thereafter for many years I was getting a dividend equal to about 20% of my original investment. The fact that the share price has crashed and dividends stopped is not relevant to me because I have had my money back several times over already. That allows me to take a long term view - hopefully in 10 years time when I have retired they will be paying dividends again

  • Comment number 47.

    #39

    Maybe I was a bit harsh, maybe you are being naive?

    Many banker apologists have posted and ran away.

    It was actually the statement - "This story is designed to be inflammatory" which hinted it could be a troll.

    I apologize if I am wrong and the poster returns to debate.

    As for the topic in hand, the 'conservatives' will always defend the status quo - the clue is in the name.

  • Comment number 48.

    42. At 12:15pm on 25 Nov 2010, Ian

    Could you try and be a bit less patronising?

  • Comment number 49.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 50.

    Why aren't the highest earning bankers be forced to pay student tuition?

    I mean a 7 figure salary could put lots of hard up young people through university from a hard up back ground.

    Oh sorry i fogot, Bankers need their yachts, holiday homes and many mistresses while poor students don't need an education do they?

    Lets just give loads of money to the rich and take it all away from the poor who are just pond life anyway. Oh hold on thats what happens at the minute.

  • Comment number 51.

    20. At 10:32am on 25 Nov 2010, daveh wrote:
    Hurrah common sense being stated by Mr Peston!

    What I find funny is the banks state they need to pay large bonuses to keep talent. But how do you find talent? Why don't the banks use this window of opportunity to get rid of so called talent on large bonuses and bring through the next crop on smaller bonuses? If they invested their cash in developing talent instead of bank rolling people then they would have enough traders to force the value of bonuses down.
    ...................
    What talent? The talent that led to a credit crunch requiring a huge bailout that is now leading to a sovereign debt crisis. Those that are at the top of the pyramid scheme known as banking are a small rich elite that give each other jobs via the old boys network, and no doubt are very chummy with most of the cabinet. Democracy is definitely not to be found what you can get the government to do whatever you want, by having a word. The whole thing is a disgrace. The gravy train continues with no accountability as far as I can see, and no transparency, even though they are bleeding us dry. I'm convinced this will continue until the whole banking system collapses.

  • Comment number 52.

    Banker bashing, bit like shooting fish in a barrel at the moment. Never mind disclosure about earnings, how about disclosure about where this year's profits have come from? Borrow from BOE @ 0.5% and lend back to HMG @ 3%, gee that's tough. Or how about, borrow from BOE @ 0.5% and then follow the hot money from the US printing presses and steam into hard commodities, gee that's even harder. And then to have the temerity to want a huge percentage of these hard-earned profits. All based on the fact that these organisations would have gone bust in 2008 after Lehmans's without being bailed out by the taxpayer and whose existing liquidity is supplied by guess who, the taxpayer. Meanwhile hardpressed SME's can't get access to working capital. And now the bankers cry wolf about being such valuable workers that to disclose their earnings would frighten them off to foreign shores. To which I would simply reply, hear's your ticket, see you later. I am amazed that there isn't civil disturbance over the way that these people are allowed to ride roughshot all over us.

  • Comment number 53.

    17. At 10:27am on 25 Nov 2010, PRELOAD wrote:
    'What business needs is not loans but customers! to attract customers we need to be efficient and competitive. We need lower overheads, and MUCH lower levels of taxation. Employment taxes, Corporation Taxes and Business rates are now at levels which are punative.'

    Oh for a land of healthy, generous customers with excess money to spend. Not many employees who are lean and efficient are going to be able to provide that. Who is this we? I have no personal stake in whether you get rich or not, unless you can somehow extract money from me.

    46. At 12:22pm on 25 Nov 2010, Justin150 wrote:
    'The fact that the share price has crashed and dividends stopped is not relevant to me because I have had my money back several times over already.'

    Well good for you, can we have some of it back please as we are all aware it was stolen. The money you 'got back' has not even been earned yet.

    42. At 12:15pm on 25 Nov 2010, Ian wrote:
    **Yaaaawn**

  • Comment number 54.

    it's very simple -

    in the same week that Osborne bails out the banks (RBS + Lloyds) Irish subisidiaries to the tune of £7bn, for their "wise" investments there, for which the high level executives will already have got their bonuses, it wouldn't look too good for him if these same banks announce how much they are paying their "top" staff in bonuses!

    so like all politicians he finds an excuse to put such an announcement off for another 12 months by passing it to the EU. (interesting that it seems to be one of the few areas of upcoming EU banking regulation that Osborne doesn't want an opt-out for!!)

    the country (the taxpayer) saved all the insolvant banks, directly or indirectly, from liquidation, they wouldn't exist today otherwise. I think the govt. stakes in the banks are even in the national debt figures now (?)

    so why shouldn't they disclose their salary/bonus like all other civil servants have to? a big chunk of it is being payed by taxpayer after all!

  • Comment number 55.

    I think the clue to this story is in Robert's use of the word 'ILLUMINATE' in the title.

  • Comment number 56.

    48. At 12:31pm on 25 Nov 2010, EconomicsStudent wrote:
    42. At 12:15pm on 25 Nov 2010, Ian

    "Could you try and be a bit less patronising?"

    Laudable point, EconomicsStudent, one I have brought up myself a while ago too, believe or not. Sadly, this blog is full of patronising, arrogant or sarcastic exchanges between the "Revolutionaries" and "Capitalists". There are also some excellent posts by the very same perpetrators so you just have to wade through all the undercurrent.

    You think that was patronising? Wait till WOTW gets back....

  • Comment number 57.

    If this disgusting episode isn't enough to bring root-and-branch reform of the banking system closer. nothing will be - ever.

    Could there be a more perfect illustration than this of the depths of moral corruption to which the present system, and its operators (and its creatures, the politicians) have sunk?

    Our society would be an immeasurably healthier one if the present banks were all closed down tomorrow, to be replaced after the inevitable hiatus with an honest banking system.

    Their assets should be expropriated, like those of drug-dealers. Like drug-dealers, they are raking-in the illicit proceeds of destroying the wellbeing of the community. And, like drug-dealers, they just raise two fingers.

    There is no limit to their arrogance. And there's no limit to the blindness of the apologists for the present system, who can't even see that they're being shamelessly robbed by it.

    Some of them will even villify RP for telling it like it is. Whistle-blowers are never popular - but by God how badly we need them!

  • Comment number 58.

    Anyone who lies, cheats or does anything to avoid illuminating the issues regarding their bonuses, but yet is happy to allow the lowly bank workers to get no pay rise or bonus, or even to lose their jobs IS NOT the kind of person we want running our banks or even living in th UK. Let the greedy sods leave for other shores, there must be plenty of decent hard working managers below them to take their place. And whoever takes over cannot do any worse than the present lot who got the whole world in such a mess. They should have been allowed to go under like any other business. Yes it would have been painful but it would have been a short sharp pain rather the long drawn out pain that we're going to have to endure, whilst our government makes us pay for other peoples greed and mistakes because they are scared the bankers will leave UK. A spineless government, with no teeth taking it out on the easier targets ... us ordinary folks! I'll never vote Liberal again, will never ever even contemplate a Tory vote in future, and as for banks ... think I will get a safe built into the floor of the house and keep all my money there!

  • Comment number 59.

    @21. At 10:37am on 25 Nov 2010, DebtJuggler:

    Interesting article if you view it from a different perspective, i.e. that of the paper's impartiality:
    "The consultancy raises question marks over Sir David's independence"
    I wonder what he's done to upset Rupert?

  • Comment number 60.

    I see some banking chums are complaining about you turning over the stones on this issue, well butt out boys I want to know what's going on. And yes, banking is the be all and end all of business otherwise we wouldn't be rescuing them would we?
    Regards, etc.

  • Comment number 61.

    Quite simple.
    1 Banking is the business of the UK. Hence it always figures in Robert's blog.
    2 Because banking is it then bankers can just do as they always do and make money from the rest of us. It is what they do. Why be surprised at a self evident fact? This state of affairs will continue. They have been smart enough to organize their profession so they will always win. We let them. No point complaining now. The talented bankers will just see that as a reason for them to be paid more in these challenging times.

  • Comment number 62.

    I see a new tactics from our "revolutionary" friends. If truth is a bit too close to the bone go and complain to the moderators - see posts 42 and 49.

    Nice one, guys.

  • Comment number 63.

    47. No probs :-)

    Must admit, my first thought when I saw this article was similar in it is designed to inflame. Perhaps RP is missing WOTW and thought this might bring him back ;)

  • Comment number 64.

    A few years ago I had a 5 bedroomed house and was set for an easy slide into retirement, a few doors away lived a banker with RBS - fliting to the US every few weeks to do deals. I now share a 3 bed semi and face working till I am 66. The guy up the road? He won't be able to replace either his 4x4 or his BMW this year. The only bank staff to suffer as a result of the incompetence of the top guys are those at the bottom on the counters providing the service we want.
    Bankers will move abroad if we regulate them and control their pay? Do me a favour, I'll drive them to the airport. Let them mess us somebody elses economy.

  • Comment number 65.

    #38

    'The problem would be that if you left RBS because HSBC were offering more, then RBS would have to offer more to your replacement otherwise they would not attract the staff they want. Now you see that RBS are offering more again, so you leave HSBC. So on and so forth. Now the costs of employment have increased.'

    This is not how Robert describes it.

    No-ones actualy salary would be disclosed - just how many employees earned a certain bracket.

    Does RBS have as many employess earning over 7 figures as HSBC?

    Why should it be a secret from its main shareholder -UK taxmug?

  • Comment number 66.

    Unfortunately, as is often the case in complex interplays between financial institutions, this has been over-simplified in my opinion.

    The impact of pension schemes failing to make banks "pay" for their underperformance (excuse the pun), whilst real, is in my opinion largely a result of; 1) a lack of accountability for final salary scheme trustees (helped by flawed legislation), along with 2) a public who believe the "cheap" option of dumping money into “money purchase” company/private pensions with no planning is acceptable.

    1) For Final Salary schemes, simplified cash flow goes like this:

    CASH > TRUSTEES (Investment Decisions inc advisers & funds) > STOCKS etc

    Problems occur with current legislation, which dictates that when a scheme is in surplus, early retirement of employees does not require additional injection of capital by the employer (in simplified terms).

    Therefore, when trustees see bank stocks rising meteorically in the "boom" years - combined the relentless market pressure on companies to reduce fixed costs (permanent employees - push them onto the pension scheme) - the temptation is obvious to invest (regardless of longer-term prospects) for a short surge into surplus, and permit the ability to "pension-off" these (high earning) employees, improve the company's market perception at zero company cost.

    And if you think the trustees are independent from their company and they are meant to be, then on investigation I think you will find the correlation between the years of surplus, company early retirement and objectives to reduce "fixed costs" in almost all large corporates a little too coincidental.

    Hence these trustees do not punish the banks, as they utilised their surge for the surplus, and now they find themselves at a loss, they cannot realise this via a sale and enforcement of shareholder rights would simply highlight the lack of due diligence at the outset of the whole debacle.

    2) For "Money Purchase" pension schemes, the situation is even sadder given it is generally within the control of most individuals to rectify this (and not, as RP stated, "like it or not").

    The majority of investors simply allow their pension contributions to flow into the standard "balanced / managed" funds of large pension companies, usually due to no advice sought or inept advice provided, like this:

    CASH > PENSION PROVIDER "MANAGED" FUND MANAGER > STOCKS etc

    These "slosh pots" of cash usually inherit the worst fund managers, whose objective is usually to simply match the UK FTSE 100 with little skill or discrimination. Many indeed simply replicate the FTSE 100 in micro, by proportion of holdings in each company.

    Now while this strategy has it's place as PART of a portfolio, for an ENTIRE portfolio it simply leads to laziness and breeds ineptitude. Bank stocks held have performed badly? Don't worry Mr. Fund Manager, because they were such a huge part of the FTSE that has fallen by proportion, so your benchmark is reduced = no accountability = no drive to question / press the banks on their actions/performance/remuneration.

    However, it's not all like that. People can take control of their pensions, via a professional advisor (IFA / Financial Planner / Wealth Manager, preferably fee-based so no commission rubbish in there). Individuals can then spread their money throughout fund managers who are putting pressure on banks to explain their excesses, to search for true profitability. The advisor should show he employs others to interview these managers, to hold them accountable which in turn gives them the drive to make the banks (and of course other stocks) accountable, the flow then proceeds as follows:

    CASH > PENSION COMPANY > FUNDS (Selected by Adviser & Client) > STOCKS etc

    With that, these issues for the individual reduce; If RP's pension fund had been managed by our company, unfortunately when the stock market was surging at over 20%, he would have made only a little over 10%.

    Slight upside though, when it sank by 40%, he would have made a loss of...around 6%.

    I guess it comes down to long-term or short-term. What a good advisor does is certainly not magical, it is just common sense applied together with knowledge of how financial instruments work. And if a good adviser cannot understand how an underlying financial instrument works? Then the client's money doesn't go there! Very simple really.

    Kept us ticking along with happy clients quite nicely through this "crash".

    Bottom line? Want accountability from the banks? From your pension fund? Take accountability yourself! Make sure your trustees (Final Salary) or advisor (Personal or Corporate Money Purchase) are asking the right questions.

    If more people took a more active interest, then these issues would be vastly reduced.

    PS: For the post deriding the pension provision, and the costs associated, I believe you neglect to take into account the immediate 20% tax relief for the majority of the population (and additional 20% for some) by using them. This must be accounted for when viewing the “cost” of pension provision versus other, non-tax advantaged (or dubious legality) schemes. The fact that this relief is only afforded to pension schemes in the main is another debate!

  • Comment number 67.

    33. At 11:38am on 25 Nov 2010, Ron Ball wrote:
    "A 25 year old lawyer in the City can now - apparently - expect £100,000+ per annum. Doing what exactly?"

    http://www.carter-ruck.com/
    Take a look round. Specifically libel cases are highly lucrative, particularly in the UK.
    http://www.schillings.co.uk/
    More of the same.

  • Comment number 68.

    @51. At 12:36pm on 25 Nov 2010, Averagejoe wrote:
    "Democracy is definitely not to be found what you can get the government to do whatever you want, by having a word."

    I think you'll find it takes a little bung in the right direction or several very nice lunches to affect legislation, not just "a word" :-)

  • Comment number 69.

    Sunlight is the best cure for hidden deceases.
    Disclosure will not harm the innocent, but will shame the incompetent.
    Let's have the lights turned on please.

  • Comment number 70.

    TOO BIG TO FAIL....Unacceptable face of capitalism

    We must have a National Maximum Income policy enforced through taxation, as David Cameron advocated.

    There is no other way or the country WILL disintegrate during the coming decades of depression.

    We are standing on a precipice and Government MUST act NOW.

  • Comment number 71.

    Whilst I agree that bankers salaries are way out of line - what about footballers? Am I the only person that thinks that their earnings are obscene? If a top class footballer was paid £300k per year they would still be extremely well remunerated for what they do. Saying that it is their value on the international market that demands such high pay is exactly the same arguments that the bankers use!

  • Comment number 72.

    The bankers are rapidly becoming public pariahs in the same way as Trade Unionists in the 1970s, nationalised industries in the 1980s, Conservative MPs in the 1990s and Labour MPs in the 2000s.

    In each case the political map was redrawn to punish these entities for their excess.

    Unless the government gets a grip on the banks or the banks get a grip on themselves, then by 2020, any party that proposes banking sector reform will have a clear mandate to proceed.

  • Comment number 73.

    To put it another way, the failure of the owners to insist that this £10bn be deployed to reinforce the foundations of their banks or provide an income to them is one of the great mysteries of our time.....

    Robert, it is hardly a mystery. For a start, where do all these mega rich put their money? Back into the system, so in many ways they are the owners anyway.

    The government has already proved that they will save them when they fail. So why not milk as much out as allowed?

    We should never have saved the banking system without first agreeing a whole load of conditions. In those hours when the whole system was about to crash the government could have got the large banks to sign up to anything on condition of the bail out. Only at that moment did the government have them "over a barrel". They should have made them commit to drastic self-re-capitalisation before any further cash was milked out. But they not only let them off scott free, but also gave them loads of QE free money to make even more personal gains from.

  • Comment number 74.

    46. At 12:22pm on 25 Nov 2010, Justin150 wrote:
    #39 at last, some one who does not wish to trade personal insults.
    Robert's piece is sloppy journalism.
    Why should bankers pay be disclosed?
    ---
    http://www.bbc.co.uk/news/business-11836514
    "Euro slide continues as Irish debt fears persist."

    The sooner the house of cards collapses, the better. The government and their friends will keep the gravy train going for as long as they can, and that involves keeping their stashes secret.

  • Comment number 75.

    Is it not simply the case that, although we like to bleat on about how the government owns the banks, in fact the banks 'own' the government.

  • Comment number 76.

    All this vitriol against banker's bonuses is hilarious, do people not realise that bonus is in fact pay.

    Therefore if a banker gets an extra 100k in bonus, then he will pay £51k (assuming he is earning >150k) in tax and his employer will also pay NI of £11k. So the govt has raked in £62k of that £111K.

    Had they not paid it out and retained it within the company, £111k would have earned the govt £31k, falling to £27k after corp tax gets reduced.

    So if you want to stop the bonuses, you tell me where all the extra money is coming from ?

    And don't come back with any clever responses about how retaining the money in the company will increase the share price, that doesn't help the treasury. Nor does paying it out in dividends as it won't attract NI and will go mainly to institutions or corporates who won't pay income tax on it.

    Bash away, but remember that the big boys already get most of their bonuses in shares already. I knew someone who had millions in unvested Lehman's stock. His wealth was certainly aligned with the fortunes of that company.

    Do you now realise why banker pay should

  • Comment number 77.

    There may be some niceties here in respect of disclosure and the responsibilities of shareholders etc, but what I find most interesting is the observation that pay and bonuses have gone steeply north as performance has gone south.

    What is being rewarded is not talent, it is the taking of risks. That is what the City is built on; I've worked in it and seen a trading floor in action. There's smoke and mirrors, parasitical instruments and a surprising amount of ennui, but it's just a glorified betting shop - albeit with the power to injure nations rather than just individual punters.

    There has undoubtedly been a failure of regulation at national, regional and global level. I can't see that tightening any time soon. But the real failure has been in self-regulation. Banking has always had more than its fair share of idiots, but at least they were, for the most part, responsible idiots. Now it's peopled by unscrupulous barrow-boys, who know, but don't care, that the downside to what they are doing far outweighs the upside, see recent events.

    What we need here is some unilateralism - someone's got to take the lead. Whether that is, in the first instance, with the banks we, the British public, own or with the whole of the UK banking sector it doesn't really matter. I used to believe there was some merit in the observation that we can't afford to 'underpay' because we will lose talent. Well, that might be so, but there is nothing dafter than overpaying for the talentless - and that is what is happening.

    Ignore the bleating bankers and impose stringent regulation and a budget, to indicate how the profession and certain banks in particular are going to pay off their debts to the British taxpayer. If a load of people disappear to New York or Frankfurt, good riddance.

    I suspect I am being naive, both in thinking it could ever happen - and the colour of the government makes no difference on this one - and in the simplicity of the approach. I'm not a socialist, I'm not left-wing in any shape or form. But this is just unsustainable and what we need back in banking is responsibility and answerability. We can only get that after a clear-out.

  • Comment number 78.

    "That is bad news for those of us still brave enough to save for a pension, since there'll be a slug of bank shares in our portfolios (whether we asked for them or not). "

    Speak for yourself Robert, I moved my pensions from shares into a money fund when the FTSE was at 6300+ as I thought a bubble had formed. I'm surprised being a financial jorno that you didn't do the same...!

  • Comment number 79.

    I believe in the capitalist system (being the best worse system to run our economy/society), however it's not working as resources (money) are not being allocated according to the principles of capitalism. The proponents of the system (the bankers and finance sector) have been gaming the system for years and Goverments and regulators have turned a blind eye. That's why we're in the mess we're in now (apart from Goverments borrowing more money than they could afford to pay back (on our behalf).

    Bankers have been using our money (deposits) to play in the casino and lost big time, but not personally. They have disappeared over the horizon with their hoards of our cash and continue to expect us the tax payer to subsidise their exorbitant salary packages for adding little or no value to their businesses (ihn face as RP says desicrating their businesses). The whole system is rotten and needs re-designing.

  • Comment number 80.

    # 2 & 5 Give us a break!

    RP's journalistic instincts are exactly right to keep digging into the closed society that is top executive remuneration!

    We are way beyond upset. We are apoplectic with rage!

    Ask yourself this - "Where is all our money going?"

    Well, my instinct would be to follow the money and the only people who seem to be doing well right now are the financial executives, including pensions executives, fund managers and top bankers, whose personal bonus payments this year alone are set to top £7bn !

    (YES - £7,000,000,000).

    To put it into perspective, that's the equivalent of the entire GDP of Iceland or Jamaica!

    And remember these are personal performance BONUSES, on top of their already healthy salaries and other benefits, which are paid out at a time when we the hard-pressed taxpayers are keeping the whole financial system afloat.

    The money men have robbed us and will continue to do so until the people wake up to them!

    My question is:

    What are our so-called elected representatives doing about this mass redistribution of wealth, from the poor to the rich? Or could it be that in a cabinet of millionaires, there is no real incentive to upset the apple cart for fear of losing ones position or wealth.

    You decide.

  • Comment number 81.

    Whilst I agree that senior bank employees salaries and bonus's are way out of line - what about top footballers? Am I the only person who finds their level of pay obscene? If they were to be paid £300K for their efforts they would still be extremely well remunerated. Arguing that it is their international value that causes high pay is to use exactly the same argument as the bankers!

  • Comment number 82.

    We can have blogs, surveys, views, whatever. There is only one way to stop the banks in their tracks but it will never happen ...

    If everyone, EVERYONE, went to their bank(s) and asked to withdraw their, THEIR, money the Bankers would cower and run for cover.

    And that is why it will never happen ... because we NEVER use our own power collectively. If we did, they'd poo themselves.

  • Comment number 83.

    @70 John_from_Hendon wrote:
    TOO BIG TO FAIL....Unacceptable face of capitalism
    We are standing on a precipice and Government MUST act NOW.


    We are already over the precipice. The only issue now is how far we fall. The further we fall, the faster we will be going when we hit the ground.

    This is the last gasp for the big financial entities - they can suck one last gulp of public money out of the system - via the final bail-outs, QE etc. - and then it's finished. They know it will be decades before the gravy train is running again (if it ever does).

    This hole is too deep. Too many countries are too deep in the hole.

    I think it's now a question of who defaults first. I think all the affected governments know this, but they don't want to be first. I think they're keeping quiet about this because if they admit it openly, it just brings the day of reckoning closer.

    If it's unavoidable, we should just get it out of the way now.

    Can Ireland, Spain, Portugal, Greece, Italy, UK and (eventually) the US really pay off these debts? Really?

  • Comment number 84.

    26. At 11:13am on 25 Nov 2010, EconomicsStudent wrote:
    "It is interesting to see if the Max Keiser 'Buy Silver, Crash JP Morgan' campaign has any effect.

    He is claiming that JP Morgan have taken a massive naked short position in silver to try and keep the price down. Max is asking everyone to go out and buy any quantity of physical silver claiming that if the price can be maintained until these positions need to be closed out, JP Morgan will go bust."

    Max presumably has bought a load of silver in the hope that he can sell it at a profit if enough people take notice of him. This is just a kind of pump'n'dump scam.

  • Comment number 85.

    62. At 12:58pm on 25 Nov 2010, Ian

    How about this one as an alternative read for today. A bit close to the mark too?

    http://www.creditwritedowns.com/2010/11/schemes-of-the-rich-and-greedy.html

  • Comment number 86.

    We need a Wiki leaks web site for Banks. Publish the names and salarys of all top banking execs. Create a stink and see what happens next. I think its feudal the way they lord it over the rest of us creaming a living of our hard work.

  • Comment number 87.

    71. At 13:19pm on 25 Nov 2010, zorba wrote:

    "Whilst I agree that bankers salaries are way out of line - what about footballers? Am I the only person that thinks that their earnings are obscene? If a top class footballer was paid £300k per year they would still be extremely well remunerated for what they do. Saying that it is their value on the international market that demands such high pay is exactly the same arguments that the bankers use!"

    Many have pointed out footballers before. The difference is no footballer earns a penny from me.

    If you think Rooney et al are paid too much, you could cancel your season ticket or your Sky Sports subscription.



  • Comment number 88.

    Cameron's Happiness Index

    Tonight NewsNight has an exclusive revelation following the Prime Minister's announcement on Happiness following a Cabinet Office leak that anyone scoring below the official "I'm alright, Jack" Key Performance Indicator will be put on a special prescription of "Liquid Luck" to cheer them up.

    The confidential report proposes this innovation based on a review of Ron Weasley's Quiddich performance in the Harry Potter documentary film series, Liquid Luck will form a key plank in getting the nation's Happy Sheet score back into the black.

    However concerns have been voiced that Liquid Luck would fall foul of the anti-doping rules in sport, so Robert Peston has been formally banned from receiving it on the grounds that he would use it to help Arsenal, although experts say only the Dark Lord has this power.

    Claims that the ConDems are living in a fantasy world were shrugged off by Nick Clegg, who said: "This is total rubbish - I'm very much living in the real world dealing with Masses of Muggles complaining about tuition fees going up!"

  • Comment number 89.

    66. At 13:07pm on 25 Nov 2010, opinionated_poppinjay

    I agree with your point about Pensions needing to be "worked" by the individual. They are only as good as what you put into them.

    "Individuals can then spread their money throughout fund managers who are putting pressure on banks to explain their excesses, to search for true profitability. The advisor should show he employs others to interview these managers, to hold them accountable which in turn gives them the drive to make the banks (and of course other stocks) accountable"
    I disagree wholeheartedly with this point though. Fund managers add no more pressure to banks explaining excesses than anyone else. The banks dont set there working habits based on what fund managers tell/ask them to do!!! You are living in complete ignorance if you think otherwise!!!

  • Comment number 90.

    '... a light may yet be shined' (?) Surely, a light may yet be shone. Ed.

  • Comment number 91.

    76. At 13:29pm on 25 Nov 2010, Mike K wrote:

    All this vitriol against banker's bonuses is hilarious, do people not realise that bonus is in fact pay.
    ….
    So if you want to stop the bonuses, you tell me where all the extra money is coming from?

    ------------------------------------------------------------------

    Where is the pay coming from in the first place – taxpayers? You want us to be happy we might get some back?

    Banks were told to recapitalize and lend more, bonuses go to neither.

    Pre 2007 I wasn’t really interested in what bankers were up to or how much they got paid, but that changed when Alistair Darling put his hand in my pocket to pay for it.

  • Comment number 92.

    David Walker uses the infamous "could" of the economist in this comment: a word which cheats the reader by raising a vague possibility and giving them no way to judge the likelihood something will actually happen.

    Economists use this "could" all the time, and it's a sign both of laziness and naivety:

    http://www.knowingandmaking.com/2010/11/dreaded-could-of-economist.html

  • Comment number 93.

    Hawkeye_Pierce really knows what the score is http://www.bbc.co.uk/blogs/newsnight/fromthewebteam/2010/11/tuesday_9_november_2010.html#P102872147


    A TRULY GREAT POST!

    'Read Akerlof & Romer's 1993 article on Looting. Securitising assets enables them to be traded over and over, creating the appearance of a highly liquid market, and over inflating the asset values. Hence the differential between private & public sector values.

    Unfortunately the banking sector seems to have read this article (and William K Black's "The best way to rob a bank is to own one") as "how-to" manuals on fraud & looting.

    Ireland can't resolve its debt crisis. That's the point. Debts that can't be re-paid, won't be repaid. All these bailouts are a stalling tactic. The system was designed to crash, whilst the cunning made off with the loot!

    The term is "bankruptcy for profit". The S&L crisis in the 80s / 90s was just a warm up act for this sovereign level version:

    http://krugman.blogs.nytimes.com/2010/04/17/time-to-reread-akerlof-and-romer/

    "Bankruptcy for profit will occur if poor accounting, lax regulation, or low penalties for abuse give owners an incentive to pay themselves more than their firms are worth and then default on their debt obligations. Bankruptcy for profit occurs most commonly when a government guarantees a firm's debt obligations."

    So given that the financial sector pays it's employees lots of money, the firms aren't really worth what they claim to be worth, and the Gvt is guaranteeing it's debt obligations, then it shouldn't take a Nobel Laureate to work out what is happening!'

  • Comment number 94.

    When banks can dictate policy with a letter to a newspaper, you can be sure you're no longer living in a viable democracy.

    What would happen if students did the same? Or pensioners? How many unemployed people need to write letters to the press before David Cameron is shelves legislation on their behalf?

    The financial crises of the last few years have been - and continue to be - constitutional crises. The 1% of self-serving so-called 'talent" in the finance industry now has a veto on all public policy.

    This cannot be allowed to continue. Iceland is already taking steps to revise its constitution to limit the cancerous effects of financialisation, and other countries must be forced by public pressure to do the same.

  • Comment number 95.

    Yet another about-face by this miserable coalition of interests. The "market" argument has never stacked up. So the big gamblers will go elsewhere? Fine. Is anyone suggesting that some young apprentices will be unable to step into their shoes, under the careful guidance of one or two seniors who have been more risk-averse and will therefore not be "headhunted"? Wouldn't the banks go back then to being banks and not betting-shops?

    Is anyone suggesting that a well-regulated and careful banking sector would not attract sagacious investors? Our banks don't need the other sort of investor. Let the fatcats go to the country that has never pretended that social justice weighed more heavily than gold - the US.

    The only puzzle is: have I missed something or: why have there been no prosecutions? Shareholders' and taxpayers' money has been misappropriated. It isn't the role of government to say that that's OK!

    While we're at it, we should be stamping very heavily on the Barclays-type scams on behalf of multinationals to massage away their corporation tax debts, too. It's the same argument: oh but They'll go away!

    Bye bye. Then there is space for proper new companies to grow here without unfair competition.

  • Comment number 96.

    The real problem is 'People'. Place people, money and power in the same room, and you instantly have this problem. We are all very familiar with the set up - a few people weedle their way into powerful positions, and grab as much of the money (and power) as they possibly can in as short a time frame as they can (in case they get ousted by a.n.other more powerful person/people. Banks is just one instance where unimaginable amounts of money and power are on tap.
    No amount of legislation will stop this, as people are pathologically greedy.
    People in government are greedy (reminder re expenses scandals, backhanders etc) so they won't force the issue. Afterall, once out of office, they land lucrative 'consultancy jobs' in all manner of private industry.
    People on welfare are greedy. How many people claim far more than they actually need, or in fact criminally obtain money they have no right to.
    You won't change human behaviour with columns or comments like this.

  • Comment number 97.

    The problem is that of perverse incentives. We can doctor around the edges as much as we like. What we need is a defined income bracket (Europe-wide or better world wide). The maximum wage is a multiple of the minimum wage. Minimum wage 20k pa; maximum wage 200k pa.

  • Comment number 98.

    All goverments have a problem bankers bonuses for one reason, simple maths and Tax.

    If a company pays a bonus of, say £1m, the tax paid will be circa £500k. Additionally that money will be in the hands of the revenue within a few weeks.

    If the £1m is retained by the company, this becomes additional profit, taxable at corporation rate of 28% raising £280k. This would become available to the revenue in up to 21 months time.

    Ironically paying bonuses to bankers is better for the country than allowing the banks to retain as profit. Each £1m bonus paid is worth £220k more to the country than increased profit to the company concerned.

  • Comment number 99.

    Give us back the right to be paid in cash so the banks don't automatically have our money first, they may need to attract customers then intead of considering it their god given right

  • Comment number 100.

    I don't know for sure but I suspect that a lot of the people on the boards of the pension funds will sometimes be found on the boards of some of the banks, depending on what chair they are on when the music stops. Therefore it is not in their interest make a noise when it comes to bonuses, after all next time the music stops they may in line for one. Of course I may be wrong.

 

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