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Bankers seek deal with ministers on bonuses

Robert Peston | 08:14 UK time, Wednesday, 1 December 2010

The talks involving those who run our biggest banks, on how to take the sting out of criticisms of the bonuses they're to pay their top people in the new year, have moved to a new phase.

People walking in front of the Canary Wharf skyline

 

You'll recall that a fortnight ago I disclosed that bank bosses are talking to each other to examine whether it might be possible to end the arms race of paying higher and higher bonuses - an arms race which has infuriated politicians and regulators, while prompting stinging attacks in the media.

Well the banks have now put the ball in the court of the government.

"We've told the government that there's no point in our reaching some kind of collective agreement on pay, if ministers are still going to use the kind of rhetoric against us that damages our reputations and demoralises our staff," said one bank leader. "We're looking for a response from ministers, which makes it clear they recognise we're doing our bit on pay and also recognises that we have an important role to play in the recovery - which would be set back if we're attacked all the time by ministers".

So what does the Treasury and the Business Department think about all this? Well, one member of the government said there was no possibility of a statement by the chancellor, or the prime minister or the business secretary which implied that any kind of deal had been with the banks. "There'll be no kind of contract with us, or formal public agreement," he said.

But he added: "If banks show they get it, then inevitably you'll see less criticism of them by us".

So what might the banks "getting it" involve, in the government's view? Well simply paying a smaller amount of bonuses in total than last year would not do the trick.

"It's not been a great year for investment banking, so we all know the bonus pool is going to shrink whatever happens," said a government source. "So if they think that we'll be impressed by a single year of lower bonuses, well they'd be wrong about that. What we want to see is that they're tackling the pay issue in a long term sense, not just for one year but in a permanent sense."

What would that mean in practice for how banks set bonuses? That's not at all clear - though the source said it would certainly mean in part that the biggest rewards should go to smaller numbers of bankers, those who could genuinely demonstrate outstanding performance.

So will a deal actually be done? This is what a bank boss said to me: "I haven't a clue. We're waiting to hear from the government".

Hmmm.

The chances of a meaningful deal between bank bosses on the remuneration of their top bankers don't look great, not least because - in their hearts - some of the bank bosses (not all) think that the attacks on their pay are bonkers.

"This is a British obsession, a British thing," one of them told me. "In the rest of the world we pay the going rate and we don't get pilloried. It's only here that we get smashed to bits".

Comments

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  • Comment number 1.

    In an exclusive interview with the Daily Mush, the country's most senior banking regulator Lord Takenabung answers questions about the possible unhealthy symptoms within the UK banking sector:

    Q: Thank you spending the time with us today. I'd like to talk about the possible climate for fraudulent activity in the banking sector. This is mainly based on the work of Akerlof & Romer who published a notable paper in 1993 called Looting: Bankruptcy for Profit.

    A: Fraud. Oh hardly. Well, if there was, I would have heard about, eh? But as it is, I've not had a sniff of any fraud, no, not a sausage.

    Q: Well the authors provide a framework for assessing the conditions under which this could realistically happen based on scandals in the 80s and 90s. The first warning sign they say is that of excessive pay / remuneration whereby owners and managers can extract maximum wealth from a firm. Given the high pay levels in the City, isn't this of concern?

    A: Enough of this lefty nonsense. We only get this in Britain. The US pays stupid amounts to bankers and CEOs and look how wonderful their economy is. We have to pay 'em this, see, because we wouldn't want society's best and brightest going in to science, engineering, teaching or medicine now would we?? Not when there's money to be made from speculating, eh!

    Q: Well that leads me to the second point, which is that fraud is more likely to occur in firms that are heavily over over-valued. Are modern banking firms overvalued?

    A: Oh not in the slightest. Just look at their nice shiny big buildings. Haven't you noticed? Plus they dress nice and some of them even talk quite posh, so they must be worth billions and trillions of pounds at least. More lefty nonsense, I'm afraid.

    Q: Yes, but didn't many of them go bust. From hero to zero in no more than a few weeks / months?

    A: Maybe, but that's the sign of a good functioning market, eh? We don't want company values, or even country values for that matter staying fixed now do we. You can't speculate then, so where will that get us all? Nope, we just need lots and lots of liquidity please.

    Q: But isn't liquidity a bit intangible?

    A: No it isn't! I saw some on someone's balance sheet just the other day, so don't tell me I’m seeing things!

    Q: But aren't these balance sheet assets held by the banks intangible promises (such as bonds), and isn't that a substantial contributor to the unpredictability of their underlying value?

    A: Oh dear boy, where have you been? Tangible assets are so 20th Century. No, the world has moved on since then. Besides all that coveting of tangible assets, wasn't very healthy conduct now was it? What with all those big wars and stuff. No, intangible paper promises are definitely the future, my good chap! Next question.

    Q: Yes, well the final point is that a fundamental moral hazard occurs when a Government promises, or actually undertakes, ultimate responsibility of bad private investments. Many people call this privatised profits and socialised losses. How do you respond?

    A: Well, of course the Government has to step in. There's no-one else left to carry the can. I mean without that, where will it get us all? You don't want all those brave speculators losing money now do you! Posh suits and shiny buildings don't come about on their own now. Well, I've had enough, conversation over. Tatty bye.

  • Comment number 2.

    Tedious discussion. Politicians use unlimited taxpayer money to preserve a rotten status quo and then pay lip service to the inequity of it all.

  • Comment number 3.

    It seems pretty clear to me that they don't "get it".

  • Comment number 4.

    Has anything happened yet? The questions still need to be asked on why banks can afford such galactical remuneration that no other industry even approaches. It is because the margins are simply outrageous which is a reflection of the absence of any effective competition - a classic controlled market. The solution - a large element of public ownership and international agreements - admittedly both unlikely. Beyond the bonus monster is the bigger threat of the power to de-stabilise economies and states and it is this that should compel the debate about the financial sector.

  • Comment number 5.

    I think we're going round in circles here. The only sensible solution, convoluted perhaps, but not impossible, is to split the banks between traditional retail banking operations and the 'casino' style investment banks. That way, the latter can reward themselves as much as they like, but equally, accept the consequences that high risk taking activities leading to future catastrophic losses, will not be underwritten by UK taxpayers. Those banks will become insolvent and not cause the near total collapse of the UK economy.

    The "inter-connectedness" that critics of the above argue, so denying the opportunity to separate banking operations, has arisen because politicians, regulators and bankers, have allowed this to happen. Surely, using the same processes, it can be just as possible to disconnect as to connect retail/investment banking operations? It may take a while but......

  • Comment number 6.

    I guess I would like bank bosses to recognise that there are shareholders who provide capital and that their interests should be considered. Right now, for example, RBS and HBOS shareholders are not able to get a dividend until beyond 2012, the shares are rock bottom. On a delivery basis, the bank bosses and (the very well paid) employees (mainly in capital markets areas) have a lot to prove. Destruction of share value is not a good argument for a big bonus.
    A little humility and openness would have helped and, without it, they have brought criticism upon themselves -although there is no doubt that government and regulators are getting off too lightly.
    Put simply, if there is £10bn of bonus available in the City, then at least £5bn could go to shareholders first - and in addition, how about some multiples caps?
    How does a CEO justify a £2 or £3m salary? The rate per hour is unbelievable. As a shareholder, I would insist that in such situations, the CEO keeps a "gazunda" under his desk - no time for loo breaks - money to earn etc.
    But, in reality, are we really asked to believe that there is not a line of bankers who would do the job for much less? Incredible - and, if so, then it is the responsibility of a board to train up replacements in sufficient number to fill these gaps. It's been over 2 years since the crisis - doctors would be half way through their training by now.
    I am only surprised there ahs not been litigation agains these incompetents who ahve failed in their governance duties to shareholders.
    They reap what they deserve!

  • Comment number 7.

    Hmmm indeed.

    The banks know that they have created a stalemate.

    If bonuses were delivered in shares that can't be sold for ten years, the banks would go a long way to dealing with the most cutting criticism. Show us that you're bonuses really are tied to creating sustained wealth and we may just believe you're worth it.

    The government could help by being more honest about the causes of the banking problems. Yes, banks are guilty about lending to people who were never going to be able to pay them back. Absolute recklessness on the banks' part. But what about the borrowers who took those loans without ever thinking if they could honour the promises they made? This includes other banks, governments and companies, but it also includes lots of ordinary people who signed up for mortgages and credit deals without thinking of the consequences and played their part in the current mess.

    Ordinary people - that's us isn't it?

  • Comment number 8.

    Are these nice chaps going to pay tax on their lovely bonuses? Of course they are so not all bad. Always walk on the sunny side of the street.

  • Comment number 9.

    Robert, same schoolboy error as last year in the same story. The picture in the story is the Lloyds of London insurance building and not a bank office.

    Surely you realise that Lloyds of London is not part of Lloyds Banking Group?

    You really would have thought the BBC business department would know better!

  • Comment number 10.

    Could this sound more ridiculous? It's like playground politics - "we'll do the deal if you tell those bank bashers over there that we're actually not bad, and that we're 'doing our bit'..." Beggars belief.

    The Government stance on this, portrayed in this article, is quite correct in that the deal to 'collude' on bonuses/top-end pay ought to be done as a basic principle, and that perhaps then the banks will come under a little less criticism - the idea of making a positive statement about the banks as a national position, before they have even done anything, is nothing short of astonishing. But let's be clear, even if the banks did establish some sort of bench mark, it's only a tiny step in the direction of bringing the banks under control and maintaining accountability in the public interest - the Government should not be seen to be absolving the banks' culpability in engaging in risky business because of a desperately small political boon.

    Though I'm sure that when António Horta-Osório get's just £2m in a bonus this year instead of £4m, the general public will be applauding the banks for their selfless charity in recognising their part in bringing the financial system to the brink of collapse.

  • Comment number 11.

    Well the problem here is that here its very difficult to find any examples of the banks actually doing anything that's to the real benefit of our economy rather than themselves.

    In Germany for example you can look at the size and quality of their industry and you would assume quite rightly that their banks are supportive of their efforts. The same applies in Norway which I visit often and of course even the other Scandinavian countries.

    In the UK we know that the banks exist only to serve their own shareholders and do not consider themselves to be an integral and important part of the economic system or that they have a strategic role to play in growing and broadening the economy.

    Until and unless they change their attitude - which is probably highly unlikely given the poor quality of their management - then they will have to put up with attacks on their pay and bonuses which in my view are in fact not just justified but not harsh enough.

  • Comment number 12.

    "This is a British obsession, a British thing," one of them told me. "In the rest of the world we pay the going rate and we don't get pilloried. It's only here that we get smashed to bits".

    This is an entirely entirely mistaken impression, typical (I strongly suspect) of the blinkered view of those working in financial services, especially those dependent on the United States for their livelihood.

    The person concerned should get a life !

  • Comment number 13.

    Mr. Peston the banking system is bankrupt, at least in the UK,EU and USA. We will be paying the banks back for the next 20+ years just Like Japan. The party is over in the west. Globalisation has brought a massive source of cheap labour, highly motivated to get out of extreme real poverty. Add to that dwindling natural resources and you have the perfect storm.

    All brought to you by the banks.

  • Comment number 14.

    “In the rest of the world we pay the going rate and we don't get pilloried”

    This is the rest of the world including China who limits its citizen’s human rights, Americans who hate their president because he tried to look after the poor and an India that operates a space program whilst millions of people starve on the streets.

    The argument that it happens abroad does not mean it is right here.

    How about an economic argument?

    I don’t want to tax bankers to the point that they leave – but I’d like to tax them to £1 less than this amount.

  • Comment number 15.

    "This is a British obsession, a British thing," one of them told me. "In the rest of the world we pay the going rate and we don't get pilloried. It's only here that we get smashed to bits".

    Get used to it. We've called your bluff so either :
    Get thee to the Alps or Shut up.

  • Comment number 16.

    For God's sake Robert, it's a control fraud and the guys are looting the shareholders!

    The problem stems from the very weapon at the major banks disposal, and that is Securitisation of loans and assets. Securitisation creates the appearance of risk taming (i.e. low interest rate) but is in fact risk transfer to an unsuspecting (irrational or ignorant) counterparty (hmmm.. taxpayers??). It is tantamount to state sponsored fraud.

    As a dutiful taxpayer (and no mug to boot!), I have ignored the mainstream media tittle-tattle and spent the last year doing due-diligence on the banking sector, and here is my conclusion:

    http://forensicstatistician.wordpress.com/2010/11/19/is-modern-banking-fundamentally-flawed/

  • Comment number 17.

    While some are still losing their jobs, homes, business, livelihoods, marriages, pensions, access to their children, sanity etc as a direct result of the banking /financial crises ... why should any till skimming pig get any kind of a bonus or other perq on top of their over generous basic pay?

    If the govt keep allowing this to happen ... their own judgement and competence will inevitably be called into question (even though the previous Gordo Spin Flop Regime actually encouraged bankers' excess remuneration and 'kinighted' some of them).

    It would be nice to see the banker's voluntarily donating 100% of their bonuses into a 'piglet gulit sheme' designed to protect some of those who are losing their homes.

    I suppose the old adage 'and pigs might fly' has some disturbing contemporary relevance, now that it is fully understood, with the terriifying prospect of assisting those British people ... even the English (Yes ... I mentioned that word 'English') as in need of the most help.

  • Comment number 18.

    So, there is no effective competition in the corporate and retail banking markets. The only way to inject real competition is to establish a truly nationalised bank with clear objectives to provide credit at predetermined "fair" margins and a pre-determined mechanism for "fair" savings rates. RBS is almost wholly state-owned already but the Government has been very slow in using this institution to put pressure on other banks. So come on! Make the statement that RBS will be the people's bank offering a simple range of basic services at a fair cost..... it is the easiest and quickest way of effecting change. And I bet there are enough experienced bankers who would prefer to work for such an appealing bank - appealing enough that they might be proud to work there!

  • Comment number 19.

    When pay levels are "austere" and "we're all in this together", and when the banking sector enables the real economy instead of parasitising it, then I'll stop complaining.

  • Comment number 20.

    Why is there a picture of an insurance company in a story about banks?

  • Comment number 21.

    7. At 09:13am on 01 Dec 2010, Rob wrote:
    ... lots of ordinary people who signed up for mortgages and credit deals without thinking of the consequences and played their part in the current mess.
    Ordinary people - that's us isn't it?
    ---
    No, it isn't "us" by a very long way. It may be *a few of us*, but this reasoning is used over and over again to justify transferring wealth from the less well off to the rich. Why do we fall for such propaganda?

  • Comment number 22.

    It is very important that the UK enforces a Maximum Income Level - set at 20times the minimum wage. (Enforced via the Tax System)

    When this is done then we will be freed from wasting time on talking about bonuses ever again (and good riddance to the bankers and footballer who leave the country!)

    PS see Will Hutton's report today - the time has come for this idea.

  • Comment number 23.

    Lets imagine the current conversation between banks and the govt:

    Govt: you lot have been making lots of silly loans that now cannot be repaid. We require that you tighten up your lending criteria and we will introduce regulations to stop that.

    Banks: Yes sir, you are right we will reduce the amount of loans we give to riskier borrowers.

    Govt: You are not lending enough to small companies

    Banks: yes, that is because you told us to reduce the lending to riskier borrowers

    Govt: Small companies are not riskier

    Banks: Oh yes they are

    Govt: on no they are not

    Banks: He is behind you! (sorry got carried away - it is panto season after all)

    The following week

    Govt: Given the weak state of our banks it is really important that you are profitable

    Banks: we totally agree

    Govt: You lot make a lot of money from advising clients how to minimise their tax bill

    Banks: Yes, but we do have lots of procedures to ensure that we are only dealing with legitimate arrangements only

    Govt: Stop it

    Banks: hang on you told us we had to be profitable

    Govt: Yes but not that way. We want you to agree to obey the law

    Banks: But we already do, we said we have lots of procedures to ensure the schemes are legitimate

    Govt: Not good enough, obey the spirit of the law

    Banks: Hang on, isnt govt responsible for drafting the law? So you would like us to look at not the wording but the spirit?

    Govt: Look it is very simple, we are not very clever and keep getting the drafting wrong...oops no I did not mean that, look just do as you are told.

    The week after

    Govt: all these bonuses are wrong

    Banks: it is a competitive market. We pay only what we need to retain the people we want to keep, otherwise our competitors will poach them

    Govt: Not good enough, reduce the bonuses

    Banks: only way we can do that is if all the banks agree to this. Obviously this would be a breach of anti competition law - would you mind awfully giving us a waiver

    Govt: no, we cannot do that otherwise lots of other grubby handed people (I think they mean people who make things) might ask for waivers and in any case it is an EU issue

    Banks: in that case we cannot agree to reduce the bonuses because we have to pay a competitive rate

    ========================

    Politely this govt is completely two faced and inept

  • Comment number 24.

    "We're looking for a response from ministers, which makes it clear they recognise we're doing our bit on pay."

    Convince me. If I slow down from 60 mph to 59 mph in a 30 mph zone, I could claim I'm doing my bit for road safety. They could start by letting us know what their 'bit' is. Why do the public need to know? They are being supported by our money. As for those who say we didn't take your money, my response would be to ask how they would have survived if HBOS and RBS had gone under.

    I still wonder if many of these people are really talented, or they are just working in an industry that is designed to make money. In most industries it is hard to make £1m, but in banks it is easier unless you are a complete idiot. We are expected to be impressed by their talent when the sole talent of many (not all) of them was to get the job in the first place.

    They totally miss the point. It isn't just about the sums of money, but how we value people.

  • Comment number 25.

    It is no business of politicians to be involved in the determination of salaries and bonuses of banks, where those banks have not come with a begging bowl to the Government.

    Where they have and especially where the taxpayer is now a significant shareholder, then that provides direct leverage to influence salary and bonus levels and it is therefore up to those banks management to convince these stakeholders of the required renumeration levels needed to protect their investment.

    Indiscriminate 'bank bashing' is not at all helpful.

  • Comment number 26.

    “In the rest of the world we pay the going rate and we don't get pilloried” This is simply untrue, bankers in the UK get paid more than almost anywhere else in the world and they are possibly loathed even more in the USA and France (let alone the likes of Ireland and Greece). And if the bosses of RBS, HBOS, Lehmans etc had been based in China they would have been punished by jail or worse for their performance (not just a fall in bonus!).

  • Comment number 27.

    Tell them to play ball or next time they fail there will be no bail out but instead we will nationalise them all..we could control the flow of cash ourselves rather than giving that right to these soulless harpies and in the process avoid incurring a system of unsustainable debt!

    North Dakota is the only state in US to have such a system and the only state who have recently declared a surplus rather than an ever widening deficit

    Though given past action it could only sound like an empty threat now. Anyone else feel like we missed a trick?

  • Comment number 28.

    It's business as usual for the bankers bonuses, until the next crisis at least....

    The unfortunate result of 13 years of Labour rule was that the working class developed an expectation of 'fairness'.

    Utter nonsense. Capitalism can be surmised neatly for the masses as 'every man for himself'...

  • Comment number 29.

    #9. At 09:15am on 01 Dec 2010, Ian_the_chopper wrote:
    "Robert, same schoolboy error as last year in the same story. The picture in the story is the Lloyds of London insurance building and not a bank office.

    Surely you realise that Lloyds of London is not part of Lloyds Banking Group?

    You really would have thought the BBC business department would know better!"

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

    Maybe, but that leg definitely belongs to a banker. Only bankers wear brogues like those.

  • Comment number 30.

    I don't believe the Government as such should interfer with private pay; it is a matter between employer/owner/shareholder and employee. BUT in the case of several UK banks the government is the major shareholder so if they believe this is a serious issue then the Government has a DUTY to show leadership and whinging from the sidelines is plain cowardice.

  • Comment number 31.

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

  • Comment number 32.

    "This is a British obsession, a British thing" - indeed, unfortunately also shared by some other Old Europe countries. I wonder how self destructive can public sentiment get, given that aspiration for monetary success is a driver of economic growth.

    For any who feel that banking pay is too high, good on you - exercise your freedom of choice and apply for these high paying jobs, and do them better while accepting lower pay. The bank bosses would be happy to hire you as this would improve their bottom line.

    Fact of the matter is that this is a profession - just as medicine, law or nuclear physics - that requires extensive skills, training and knowledge, and this provides barriers to entry. And just as there are bad doctors and lawyers, there are also bad traders or analysts, and they will get fired in due course. For any who disagree and think it's all very easy, please feel free to apply!

    As someone who is subsidising god knows how many others (paying hundreds of thousands a year in taxes while using only private health, schools etc, while directly supporting a number of others by investing my after tax earnings in small business as well as spending & so generating jobs), I can only marvel at the vitriol unleashed by many here at the "evil bankers" out to destroy the world.

    Parallels with 1930's Europe, anyone?

  • Comment number 33.

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

  • Comment number 34.

    I am going to enjoy watching the so-called masters of the universe wrestle with this problem. I wonder if they actually understand that outside the City/Canary Wharf people think of them as only one step up from paedophiles - they are despised.

    If they do not do something meaningful they are going to make it very easy for Vince Cable and the other LibDems to boost their flagging progressive credentials by bashing bankers.

    My suggestions for "sanitising" bonus payments in excess of (say) £250,000 are as follows:

    1. The banks need to show that substantial bonuses are only paid to those that produce long term "sustainable wealth" rather than short term "illusory gains". Less up front cash payments and some sort of industry code of practice should do the trick.

    2. The banks need to demonstrate their stars care about something more than themselves and money. Show that their stars are truly concerned about those less fortunate than themselves. I would suggest very substantial donations of both time and money to charities looking after the poor, the homeless and ex-servicemen. That sounds very big societyish.

    3. Finally, the banks need to show that their stars care about and are committed to the society that has provided them with the opportunity to be fabulously wealthy. They could start by making clear how much tax is paid by those receiving bonuses in excess of £250,000. Maybe we could have annual prizes for bankers in each sector that pay the most tax each year. The prizes could be presented by the PM at an annual black tie dinner.

    Like I said this is going to be fun.

  • Comment number 35.

    Of course its a "British obsession".
    Yes the banks in Britain ARE going to be pilloried.

    It's here in the UK, along with the US (so we are told) that 'bonuses' fuelled ever greater incentives to invest in anything - risky or not.

    Banks and bank staff don't get it. They never will!

    If they hadn't been so infatuated with (inflationary) growth and ever bigger profits, offset by ever more complicated financial instruments and insured by even more complicated 'swaps', then none of this would have happenned.

    Yes, Joe public "borrowed" what they felt they could afford to repay (and no doubt more), but it was the banks that "drove" the system in the first place.

    Surely they are not that stupid (maybe they are?) that they have forgotten already?

    If the banks hadn't been taking "stupid risks" (as the Americans called it on the eve of letting Lehman collapes), this would have meant no "collapse" for the rest of the system and us (taxpayers) having to bail these "poor (uneducated?) bankers" out of their OWN mess!

    If the banks hadn't "lost" at the "casino" tables and the "hedgies" hadn't walked away with mind-boggling profits, NONE of us would be in the position we are today.

    Bankers, bank investors and the government DO know ONE sure thing - the PUBLIC will NEVER FORGET or FORGIVE.

    So banks and especially the BBA (angela knight et al) may "whinge and whine" all they like - TOUGH, GET ON WITH IT AND SHOW BY EXAMPLE THAT THEY HAVE LEARNT!

    I don't suppose they have any sympathy with the bank staff they "dumped" and who are still unemployed on £65 quid a week?

    When times are hard, most sensible (I did say sensible!) people put money away for a rainy day.

    Bankers won't. They don't understand because they have ALWAYS been paid well, had nigh on interest free mortgages, free insurance, free pensions etc etc.

    Bankers refuse to leave "cash" in the business (as SMALL BUSINESSES have been forced to do because greedy bankers would rather pay themselves rather then lend to succsessful businesses) to "hedge" against a "rainy day" or bolster their (almost bankrupt insome cases) balance sheets.

    Oh if only one could be an accountant or a fly on a wall of the banks financial directors - could make a fortune selling info to newspapers - forget wikileaks!

  • Comment number 36.

    #9 >>Robert, same schoolboy error as last year in the same story. The picture in the story is the Lloyds of London insurance building and not a bank office.

    Surely you realise that Lloyds of London is not part of Lloyds Banking Group?

    You really would have thought the BBC business department would know better!

    Just about as good as "The White Cliffs of Dover" that were *NOT* the White Cliffs of Dover !!

    Obviously, someone somewhere keeps failing their GCSE Geography !!

  • Comment number 37.

    26. At 09:57am on 01 Dec 2010, YorkshireKnight wrote:
    ".... This is simply untrue, bankers in the UK get paid more than almost anywhere else in the world ...."

    Unfortunately, while base salaries indeed vary and UK (&USA) command the highest, the bonus level (the dominant part of the compensation) is related to revenue generated and will be materially the same whether you are in Hong Kong (18% tax) or UK (51% including NI). Add to that greater competition for talent in Hong Kong, and that would bias it even more...

  • Comment number 38.

    "we have an important role to play in the recovery - which would be set back if we're attacked all the time by ministers".

    The sooner the banks are populated by talented individuals within their midst who think more about doing a good job rather than maximising bonuses the better. Such people are there and will rise to take over but at the moment it is those who thirst for bonuses who thrust themselves to the top and then bleat about adverse reaction; they now threaten to stall the recovery if they can't get away with the whole sham.

    The sooner that bonuses are taxed or slashed to squeeze this undesirable 'talent' out of the system or overseas the better.

  • Comment number 39.

    # 25. JohnConstable wrote:

    It is no business of politicians to be involved in the determination of salaries and bonuses of banks, where those banks have not come with a begging bowl to the Government.

    Yes it most certainly is especially given the banks in question (all of them) have decided they are not actually an integral and key cog in the economic gearbox but only exist to benefit from it.

    It's a patriotism thing. Work with Govt and industry to grow and broaden the economy and the banks will change people's attitudes towards them. Carry on as they are holding industry back and defying Govt policy on the need to broaden the economy and the banks will deserve every criticism and more.

    In fact I would go further. I'd give them three months to come up a detailed plan on how they intend changing their attitude or risk being broken up and nationalised. We simply can't afford to tolerate their behaviour any longer.


  • Comment number 40.

    If this country intends to maintain any social cohesion whatsoever, bonuses must be set aside for the time being, perhaps forever. Sorry to be the bearer of bad news, but there is absolutely no way the pubic could allow banking bonuses at this time.

    We're all in this together.

  • Comment number 41.

    Oh dear you've got the wrong picture up so any factual information in the article is irrelevant.
    We've had a few years of the banks not lending and they still claim to be relevant. Perhaps they think this may be the last chance they have for bonuses before even the government realises they are parasites and not wealth creators and takes the bubbles out of our champagne economy.

  • Comment number 42.

    I wonder how many bankers got sacked for all the mistakes they made. Any? Or were they retired or asked to resign with a golden handshake? Perhaps if they fired people they could save the bonuses.

  • Comment number 43.

    Post 29, they are all insurance brokers I am afraid. They are carrying slip files containing underwriting slips and associated paperwork for underwriting risks no doubt to show to some underwriter in Lloyds.

    Re the brogues I have a similar pair as do most people in the insurance market that I know. Lloyds is only a couple of minutes walk from the Bank and the Royal Exchange after all.

  • Comment number 44.

    The UK manufacturing PMI came in at 58, its highest reading since September 1994, and well ahead of expectations. Perhaps they deserve a bonus. Our economy is buzzing. I know it feels like the opposite, but the figures are undeniable. In Europe we are looking cool.

  • Comment number 45.

    Happy Bunny - you still don't get it do you?

    How can bankers not see it? Seems to me they are either socially inept or they actually quite like the abuse and derision.

    Maybe that explains all those post cards in the phone booths outside the big banks.

  • Comment number 46.

    Bankers need to consider their positions. They are simply not worth the they are paid.

    All bankers/directors getting a bonus should donate a large percentage to charity, and gift aid it. Bankers can then bathe in their charity this makes bankers look good and benefits the communities they nearly destroyed by their greed and incompetence.

  • Comment number 47.

    I have tried to enter a comment but as soon as it exceeds a couple of sentences it is rejected as too long. Please fix this - or at least enforce it on all contributors!

  • Comment number 48.

    "We have an important role to play in the recovery" says your banking insider.

    Well, how about starting to play it then?

    Time the banks and other financial institutions STARTED to pull their weight.Then we might be prepared to see those who have actually done so get paid their wages, never mind an additional bonus.

  • Comment number 49.

    "This is a British obsession," a banker bleats. "In the rest of the world we pay the going rate and don't get pilloried. It's only here we get smashed to bits".
    The German government plans to cap bonuses at banks that have received state support, with reports of a limit of 500,000 euros ($683,000).
    That's the kind of level we should be aiming at.

  • Comment number 50.

    Glass-Stiegel legislation, capital ratios of 25% for risky banks and better regulation of the products that are sold. Let them pay the bonuses that they want to pay - you can't blame the banks for acting in a free market, that's their job. You can only blame the politicians and regulators for not running a sustainable system. Leave the shareholders and customers to worry about bank pay and bonuses

  • Comment number 51.

    Why are we not seeking to recover so much money from them that they cannot pay bonuses? They seem still to be cozy in their comfort zone! If students must repay, why not bankers?

  • Comment number 52.

    #9 Ian the Chopper
    Are we really complaining that the wrong picture is used on the blog? I like reading Robert's blog and enjoy the discussion. If he wants to put up a vaguely relevant picture to make it more enticing then all well and good. Personally I thank Robert and the BBC for providing this service.

  • Comment number 53.

    I have the same problem as Megan at 47.

  • Comment number 54.

    Never mind football, it's banking that is far and away the most corrupt of the two.

    Sure, we need banks and bankers, just not these banks and bankers.

  • Comment number 55.

    Do US bankers also get bonuses?
    This could come from Wikileaks but it will actually come from the US Fed
    The amount of assistance each bank/entity received from the Fed
    The terms under which the funds were disbursed
    231 term sheets documenting all Fed loans to financial firms during 2008. The records, which include the banks’ names, the amounts borrowed and the collateral posted in return

  • Comment number 56.

    32. At 10:13am on 01 Dec 2010, HappyBunny wrote:

    Staggering - you really don't get it do you. The only reason you are in position to pay those "hundreds of thousands" in tax is because the rest of the taxpayers of this country have spent hundreds of billions bailing out your industry!

  • Comment number 57.

    47. At 10:43am on 01 Dec 2010, Megan wrote:
    I have tried to enter a comment but as soon as it exceeds a couple of sentences it is rejected as too long. Please fix thi

    Same here!!!!

  • Comment number 58.

    the top bankers get paid large wages so why should they get extra large bonuses for doing a job they are paid to do.

  • Comment number 59.

    #34 Cassandra.
    'one step up from paedophiles'? Get a grip, you'll be comparing them to Nazis next - maybe Godwin's Law is true. The banks provide a vital service to the markets and I agree that some banks took risks but those risks fuelled the boom that we all enjoyed. Long-term action is the only way out of this.

  • Comment number 60.

    #32 Happy Bunny
    I agree - the top 1% of earners in this country provide almost 25% of income tax. Let's not cut off our nose to spite our face, we get 50% tax from these bonuses and it means that I don't have to pay as much tax so let's hope they pay massive bonuses.

  • Comment number 61.

    Here's an idea for RBS,Nothern Rock, and LloydsTSB/HBoS.....

    Zero bonuses in cash but pay them in bankshares bought from HMG or new issue shares ,thereby diluting the govt stake and gradually denationalising the banks.

  • Comment number 62.

    #59 - not sure we ALL enjoyed them - certainly not equally.

    But my main point is that most have now ceased to enjoy - the bankers however continue to pay large bonuses against a failed model?? This must be wrong.

  • Comment number 63.

    Ironically seems both arogant Bankers and Militant Trade Unionists of the 70s (and apparently Bob Crowe today) seem to have a lot more in common than is traditionally recognised. Both have a highly inflated view of the worth of their labour and both seem want levels of pay that will jeopardise economic growth for the rest of the economy.

    Perhaps the British disease isn't so dead after all...

  • Comment number 64.

    If we were really serious about dealing with "excessive" pay, it could be done very easily. A "Rooney" tax starting, topically, at twenty times the minimum wage and set at, say, 95% of earnings would ensure that nobody would be paying more than that. Of course, all the mobile high earners would leave and companies would base their top managers outside the UK wherever possible.

  • Comment number 65.

    re #56 be_afraid - Not really, I personally would have profited significantly more if weak UK banks went down. But I appreaciate the sentiment, and certainly restraint should be the order of the day for institutions now in public hands; but if their top employees are not retained, their business will implode and the shares held by the taxpayer (including me) will be worthless; so there we are.

  • Comment number 66.

    Peter (#59), Godwin's law holds. HappyBunny triggered it at #32 thus proving his own arguments invalid.

  • Comment number 67.


    Given that it’s now over three years since the Northern Rock went down.

    And given that we are close to the point where the ECB will follow Merlin King’s magical money printing adventures; which will be undertaken to prop up governments so they in turn can prop up the European Banks, of which ours are some of the biggest.

    We are still paying bonuses at all.

  • Comment number 68.

    If banks issued their bonuses exclusively in bank shares then reckless-risk taking would be reduced as it would be the banker's own money put in jeopardy by bad loans.

    Am I onto something big here?

  • Comment number 69.

    "This is a British obsession, a British thing,"
    This is quite true in many countries the guillotine or hung drawn and quartered would be more appropriate.

    I dont blame them , i blame our government who have failed miserably to reign in their IMO fraudulent practices and worse they are supplying them with the money to do it.

  • Comment number 70.

    #61 - one side effect is also zero tax take for the Chancellor. Remember that for any £1 of a big bonus, the chancellor gets back 51p in tax & NI (plus lots more in employers NI and other taxes), even before the remaining 49p is spent on Dom Perignon and gives even more back in VAT, etc. So nationalised banks part-cash bonuses don't look quite as bad as you may think! (I don't work for one)

  • Comment number 71.

    #62 GrimupNorth77
    True that profits were not shared equally, though more equally than in any other system so far devised in the history of the world.

  • Comment number 72.

    "44. At 10:40am on 01 Dec 2010, Seer wrote:
    The UK manufacturing PMI came in at 58, its highest reading since September 1994, and well ahead of expectations. Perhaps they deserve a bonus"


    Sorry Seer, you're talking to people that actually understand what these guys do. Do me a favour.

  • Comment number 73.

    Since the nationalised banks UK staff are now counted as public sector workers presumably under the Hutton rule their executives cannot be paid more than £250,000 pa now! We will wait and see.

  • Comment number 74.

    #66 Grey Area
    Ah yes, so reassuring that it holds true.

  • Comment number 75.

    The bankers need saving from themselves, their deluded they think their doing gods work for Christ sake, never have so few done such evil

  • Comment number 76.

    #62 Grim Up North

  • Comment number 77.

    I wonder if Robert ever reads these comments? And does he realise how many of his avid followers are communists, socialists and anarchists?!

  • Comment number 78.


    Ask the 10th to the 15th in line in any bank to do the top job for 50% of the pay - some will be trampled in the rush and the job will be done as well.

    A genius may command any sum he/she wishes but the total lack of genius among the top bankers throughout the world has been adequately proven by the mess that we are in now and which is entirely their fault.

  • Comment number 79.

    For those of us that really know what goes on in investment banking, I have two 2 peices of advice.
    1. Foreclose the banks and reposess their homes.
    2. Setup a few servers in a secure basement - business as usual.

    Most bankers can only just count to ten - a sadder bunch of thick loosers you will not meet... apart from local MP's of course!

  • Comment number 80.

    Post 52 Peter, you must be a banker if you don't think it is important. Of course an accurate picture is important as it is supposed to add something to the story or illustrate it.

    Considering bankers are social pariah's it is important. I was walking past Bank Tube Station yesterday afternoon just as a group of student protestors turned up shouting; holding up the traffic and generally causing a disturbance. Apparently they were going to try to "bash up some banks".

    If the BBC can't differentiate between Lloyds of London and Lloyds Banking Group then what chance have a group of teenagers?

    Perhaps if your picture was posted next to a story about huge bankers bonuses just because yours was the first picture they found of a man in a business suit you would be comfortable with that as well?

    It is sloppy journalism and poor editing that I was moaning about. The BBC should know better.

  • Comment number 81.

    #77 Andeee

    Did you know that anarchists are anti-socialist (i.e. anti-statist)?

    Capitalists are inclined to promote anarchism subversively...as it tends to be good for business.

    http://en.wikipedia.org/wiki/Anarchist

    Choose your labels more carefully ;o)

  • Comment number 82.

    If the top earners can earn 20 times that of the lowest then the lowest will be out sourced, (does not solve the problem).
    Your markets will always shrink only bringing greater poverty, their are solutions but the politicians are as corrupt as people excessively paid
    It is economically insane everyone but those involved realise that, but remember to reach new markets we all must assess our wealth.

  • Comment number 83.

    The idea has been allowed to become established that bankers are entitled to a bonus no matter whether they perform well or manage to wreak havok.
    Bonuses should only be given based strictly on long term performance over and above the expected norm for the salary & job. Conversely there should be an assosciated negative factor to their remuneration if they underperform.
    The idea that bankers work on the basis of heads I win & tails you lose must & should be vigorously discarded.
    It should also be remembered that nobody is indispensable & there are other able persons capable of doing the job if these conditions are unacceptable to people in the job now

  • Comment number 84.

    #76 Peter White?

  • Comment number 85.

    #6 GVS - You have it absolutely right. Banks often seem to conveniently forget who provides their capital for making big profits in the first place. I would prefer to see shareholders (and at the moment that includes the government in the case of some banks) and savers share in more of the profits rather than giving it all in inflated bonuses.

    The banker who claimed only the British are obsessed with this is wrong. When Warren Buffett had to save Solomon Brothers in the early- mid-90's, one of the things he railed against very heavily were the obscene bonuses being awarded to traders. Additionally many of these bonuses encourage short-term speculation for profit rather than rewarding behaviour which benefits the long-term health of the company. The problem was that the market meant that traders just left the company to get big bonuses elsewhere. In the same position most of us would do the same. Whatever problems the banks have caused in this crisis, we shouldn't lose sight of the fact that they pay around 65 billion pounds in tax every year. I would prefer to continue large bonuses than lose that money from the Treasury's annual income.

    It's also worth remembering when bank-bashing that even responsible banks can only operate in the economic and legal framework created by politicians and central banks. They have a lot to answer for as well.

  • Comment number 86.

    Peter White, Andee and Happy Buny.

    I am actually hoping the banks do pay out large cash bonuses. That way we get the tax but we will inevitably also see more public outrage, more bank bashing in the media and inevitably action by the politicians.

    The position you advocate will produce exactly the result you apparently want to avoid.

  • Comment number 87.

    Neither a Premiership footballer and his top model girlfriend will respectively get out of bed for less than £8000 per day.

    That is the going rate for their jobs.

    Likewise, a top banker in a successful bank that has not taken any Government money might reasonably expect a telephone number bonus at the end of the year.

    Seems to this blogger that because some banks had effectively failed and needed to be bailed out by the taxpayer, all banks are being tarnished with the same brush.

    A lot of this is instinctive lashing out by some people at life's sharp end ... coupled with jealousy - an unhealthy combination.

    You think you can be a successful model, professional footballer or banking trader?

    Forget about it - only people with very rare attributes can actually hack it at the highest level in any profession and so are appropriately rewarded.

  • Comment number 88.

    Bonuses are a drop in the ocean. A diversion. If you want to get worked up about finance issues and injustices, then look how you are manipulated by the media. Look at these 2 figures

    "Tax evasion costing the public purse over £15 billion per year and benefit fraud just over £1 billion" - 2009/2010 figures

    Now we all know that PAYE has no room for evasion, but the high earners have vast areas of Tax code to exploit. Why is that? Who makes these laws?

    Benefit claimants fiddle a lot, but also last year nearly £6bn went unclaimed.

    The media has us at the throats of claimants but not tax evaders, nor is any energy put into helping those claim assistance who need it but don't know about it.

    Bankers bonuses? Who cares. Its a drop in the ocean. It keeps you from looking at the real picture. Hate sells.

  • Comment number 89.

    "This is a British obsession, a British thing," one of them told me. "In the rest of the world we pay the going rate and we don't get pilloried. It's only here that we get smashed to bits".

    If this is true, it makes me proud to be British.

  • Comment number 90.

    #44. At 10:40am on 01 Dec 2010, Seer wrote:
    "The UK manufacturing PMI came in at 58, its highest reading since September 1994, and well ahead of expectations."

    1) It's easy to bounce "up" a bit when your on the bottom.
    2) Demand and productivity up with a VAT hike due. Well I never!

  • Comment number 91.

    35. At 10:16am on 01 Dec 2010, costmeabob wrote:

    ...When times are hard, most sensible (I did say sensible!) people put money away for a rainy day.
    -------------------------
    Good advice for bankers, but also good advice for Gordon Brown wouldn't you say? Rather than spending everything in sight (and more) during good times.

  • Comment number 92.

    The obsession with bonuses is rather stupid for two reasons:-

    1) Banks follow a model of paying people a lower base salary and a higher bonus. Someone who earns £60k a year may receive £20-30k of that as a bonus. The primary reason for this is to reward key contributors and not hangers on. Government could learn a lot from this!

    2) For people who've been living in a bubble, we have a huge deficit. Why on Earth do we want to force the city to not pay its staff? We'd lose a huge wodge of tax when we need it most and possibly entice people abroad, significantly lowering future tax intake. We've already lost an estimated £1bn in tax from hedge funds relocating.

    People really need to wake up. If you don't want to have even worse public sector cuts then we need the huge tax intake we get from the City. Everyone goes on about unfairness but - frankly - it doesn't matter as long as they're being taxed. That said, tax is also a balancing act.

    Don't roast the golden goose!

  • Comment number 93.

    One of the biggest ironies concerning the entire situation:

    Banks lend irresponsibly and get themselves into financial trouble.
    Government lends hundreds of billions of pounds to the banks to bail them out - which gets the government into financial trouble.

    Now, even though we've had significantly higher debts in the past, the banks / world financial markets demand that government gets itself out of financial trouble asap or they'll impose high interest rates / charges on the government if it wants to borrow more money.

    So if the government is having to impose austerity measures and dramatically reduce its spending in order to recoup the money it lent to the banks, why can't the banks impose their own austerity measures (e.g. reducing their salary / bonus bill)? If they want to reward their employees, there are ways and means other than salary - alternatively they could defer a portion of the bonus until their finances improve enough for them to be able to afford it. Oh, and be more sensible about their lending. Making it virtually impossible for businesses to borrow is about as useful as a software company deciding that viruses are spread by email attachments, therefore they'll make it virtually impossible to download / open attachments. Ask businesses seeking money for a business plan for how they intend to spend / recoup the money. If it's credible, lend. If it isn't, explain why with the rejection.

  • Comment number 94.

    Reply to JohnConstable:

    a) Neither a footballer nor a model is in a profession which can ruin a nation's, and possibly the world's, economy by taking ridiculous risks with other people's money in order to feather their own nests.

    b) If I don't want to contribute towards a footballer's or model's salary, I don't watch football or buy designer clothes. If I don't want to contribute to a banker's salary I have to withdraw from society, i.e. don't contribute to a pension, don't invest money to keep pace with inflation, etc.

  • Comment number 95.

    Lots of people on here are talking about the bonuses but isn't this a side issue?
    The real interesting question surely, is how the banks can post such obscene profits to then reward their button pushing bookies in the first place!?

  • Comment number 96.

    As Keynes pointed out as far back as 1922:

    "The process of adjusting the currency and debt will primarily be one of assigning the costs to 'Different economic groups'.

    As Seer puts it 2010:

    This is never an easy or conflict-free exercise. Of course the less stable a government becomes as a consequence of this adjustment, the more likely it is to prefer very short-term solutions. So far the poor have paid and will continue to pay for a generation or two. We may pay with high inflation or high unemployment. Maybe fewer state benefits and/or lower state benefits. For sure we will pay.

    Politics is changing and the UK has 2, previously thought 'unimaginable', roads to go down. Either total fiscal union or total break up. With either road new politics will come into play. The game plan of the UK should be to commit to one of these and to plan for a win end game. A window for this decision of perhaps 3 years exists before it is decided for us by events. Let us be sure to steer this ship and not just be set adrift.

    I'm sure we all know that this sovereign debt crises will pass. Re-emerging in different places every few months until it is truly resolved, and increasingly the crisis will manifest itself in the political realm.

    The UK can regain international competitiveness by forcing down the cost of labor (and deflating other inputs). And here is the rub. The most efficient way to do this, of course, and perhaps the only way, is to run very high levels of unemployment for many years. Later It can impose trade barriers so as to protect domestic manufacturers and raise domestic employment while it adjusts.

  • Comment number 97.

    #87 - You think you can be a successful model, professional footballer or banking trader?

    Well let me think about this statement... Yes is the answer. A majority of of these people are in these positions because of who they know, NOT what they know.

    I have clients from Man U, top models and friends who work in the city... AND they'd all agree with me.

  • Comment number 98.

    Robert why do you insist upon constant rants against the Banks?

    I would have thought that, as a BBC Business Editor, you could occasionaly discuss business issues of interest rather then continue your agenda against UK Banks.

    By the way is that the LLoyds of London building in the background? If so I have news for you Lloyds of London and Lloyds Banking Group are NOT the same

  • Comment number 99.

    Why should people working in an industry underpinned by a taxpayer guarantee expect a bonus?

    Surely, they should appreciate the immense value of that taxpayer guarantee in keeping them in gainful employment and seek to accumulate sufficient funds within their businesses so that the guarantee can be eventually foregone so that their bonusses can return?

    Or is everyone these days entitled to taxpayer support? Other people on taxpayer funded benefits get called `spongers' in certain parts of the media!

  • Comment number 100.

    • 92. At 12:21pm on 01 Dec 2010, David M wrote:
    The obsession with bonuses is rather stupid for two reasons:-

    1) Banks follow a model of paying people a lower base salary and a higher bonus. Someone who earns £60k a year may receive £20-30k of that as a bonus. The primary reason for this is to reward key contributors and not hangers on. Government could learn a lot from this!

    2) For people who've been living in a bubble, we have a huge deficit. Why on Earth do we want to force the city to not pay its staff? We'd lose a huge wodge of tax when we need it most and possibly entice people abroad, significantly lowering future tax intake. We've already lost an estimated £1bn in tax from hedge funds relocating.

    People really need to wake up. If you don't want to have even worse public sector cuts then we need the huge tax intake we get from the City. Everyone goes on about unfairness but - frankly - it doesn't matter as long as they're being taxed. That said, tax is also a balancing act.
    …………
    But where does the money come from to pay their bonuses, us. Yes, we can tax them, but we are simply getting back our own money. Where deficit only became a monster because tax receipts fell off a cliff as a result of the recession that the banks created in the first place. They created the problem so why should they get bonuses until they have paid back for all the damage they have caused to the economy.

 

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