New City same as old City?

City of London

Yesterday I tried - not desperately successfully - to imagine a world outside of the day job, because I was feeling in need of a speedy reboot and re-charge.

This morning I need to break my fast of financial news, temporarily at least, because there were two developments yesterday in sagas that have been woven into the fabric of my recent life.

First was the disclosure that 2011's significant fall in the remuneration of City bankers, and an associated drop in the number of high earning bankers, were temporary phenomena.

According to an authoritative survey by the European Banking Authority, the total number of UK bankers who earned 1m euros (£833,000) or more last year increased 11% to 2,714 and their average pay rose 43% to 2m euros (£1.67m).

Second came the news that the most important hurdle in the rescue of Co-op Bank, a vote by holders of its riskiest debts and preference shares on a conversion of their investments into new bonds, has been surmounted.

Or to put it another way, Co-op Bank has - to all intents and purposes - been saved from collapse, in a voluntary scheme to force huge losses on creditors and convert debts into equity or shares.

Both of these stories matter.

The first confirms that structures right at the centre of the financial earthquake of 2007-08, which triggered the worst recession in living memory, remain in better shape than where most of the rest of the country lives.

If the UK is as lousy as official statistics indicate it may be at growing industries, other than the City's financial services, capable of selling their tangible and intangible wares to the rest of the world, maybe we should be relieved that the banks are still monstrous bonus-generating machines.

However, the rapid recovery in City rewards will be seen as a provocative insult by millions on average earnings struggling to repay their debts and keep the heating on.

This tension, between the City as a source of profound and destabilising social inequality and of economic cataclysms, on the one hand, and the City as world-class exporter, will continue to dominate national discourse, up to and beyond the 2015 general election.

As for the Co-op, in its reborn incarnation it should fit right in to the apparently unreconstructed City of London - now that it will no longer be wholly owned by the battered mutual, the Co-op Group.

As of the beginning of 2014, when the rescue will be completed and the new ownership structure put in place, 70% of Co-op Bank will be owned by investment institutions, led by a group of hedge funds.

Co-op Group insists none of us will notice the difference, that - if anything - it will be seen as an even more conspicuously ethical bank, thanks to a re-writing of the bank's constitutions.

We'll see. And we will also see whether the perception of being "good" is what customers want.

On Thursday Co-op Bank made perhaps the least surprising statement of the year, in the wake of revelations about the extent of its stupendous mismanagement in recent years under the erstwhile chairmanship of a Methodist minister whose expertise in recreational drug use apparently exceeded his knowledge of banking.

"Recent events may have caused some brand and reputational damage, but it is too early to form a definitive view as to the extent of such damage." it said.

Customers have been voting against its recent incompetence, and taking advantage of special offers elsewhere, by switching their current accounts to competitor banks, such as Nationwide, Santander and the reinvented TSB - though not to the point where Co-op Bank is short of vital liquidity or cash.

So the immediate priority for Co-op Bank is probably less to prove that it is good in a moral sense, but that it can be good in a commercial way.

There is however one very good thing to come out of the Co-op Bank debacle - which is that it is the first demonstration, since the mother of all public-sector-funded banking bailouts in 2008, that a medium-sized bank can career to the brink of disaster and be rescued without taxpayers putting in a farthing of investment.

And for those who - perhaps understandably - believe that the source of all financial calamities are investment bankers and hedge fund managers it may be worth noting that it was ethical bankers who wrought havoc at Co-op Bank, and hedgies advised by investment bankers who saved it.

Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this

    Comment number 782.

    @778 All for All "the thought that counts"

    Aye, so much anger at the past that cannot be changed translates into how much hope for the future where change is inevitable? Does this anger blind us or light our way? Some blame Brown for spending when times were good, but we all know that, demographically, these are still the good times, with fewer pensioners per worker than the future has in store.

  • rate this

    Comment number 781.

    So some of the powers that be would appear to be earning (purloining) more in one month than my pensions together give me in 13 years. So thank you to my parents who had both saved a little over the years and having died meant that my savings have increased to help out. What I gained from them is less than the top paid bankers get in one month. It will keep me fine for 10 years.

  • rate this

    Comment number 780.

    "Therefore we should never return a wrong or do evil to a single human being no matter what we may have suffered at his hands."
    "I think it more conducive to the maintenance of our empire to allow ourselves to suffer wrong rather than destroy, however justly, those whom we ought not to destroy."

  • rate this

    Comment number 779.

    "O my friend, why do you ... care so much about laying up the greatest amount of money and honor and reputation, and so little about wisdom and truth and the greatest improvement of the soul, which you never regard or heed at all?"

  • rate this

    Comment number 778.

    Grounder @773
    "socially useful"

    Quantification an interesting problem, to attempt might in part mislead. In the fact of any effort we contribute a 'utility' perhaps beyond computation (the thought that counts), especially if made in conscience, in agreed equal partnership, chances to cheat soundly rejected. The innocent rich, in small numbers, harmless? Universal corruption, FAR from harmless.

  • rate this

    Comment number 777.

    Protest at the inequalites, the injustice and you'll be droned into the next life !

  • rate this

    Comment number 776.

    Rats all of them……

    Entrepreneurs, Engineers, Teachers are the people that create the cake in this country.

    Bankers just cut the cake up and steal a large slice for themselves having contributed zilch...

  • rate this

    Comment number 775.

    A great line from JC, from many years ago, to put this all in perspective: "Check your lucky numbers, that much money could drag you under - What's the point of being rich if you can't think what to do with it?" Check out the answer, if you really have to.

  • rate this

    Comment number 774.

    @770 AllforAll
    A friend of Socrates?
    Who would save him from the unjust charge that he is impious or corrupting the young?
    Would everyone desert him and deny him as Peter did Christ?
    Is there an analogy with the bankers?
    Are they the epitome of virtue as Socrates is supposed to have been?

  • rate this

    Comment number 773.

    @770. All for All "No need to oppose fact and reasoned interpretation"

    None at all, when there is space enough for both. Most of finance, as a source of jobs, may be a moderately harmless utility. The highest rewards, I suspect, go to the least socially useful activities which (on paper, in the short term) make the most profit for the employer. The EBA's figures shed no light on this question.

  • rate this

    Comment number 772.

    The bankers have sucked the real economy dry and are happily sharing out the spoils.

    The Coop Bank affair is a trivial detail along the way.

    The all-powerful Casino bankers have squeezed the life out of our productive industies through ever-slicker financial shemes.

    They ruin pension funds and banks themselves and drain ever more money out of successive clueless governments.

  • rate this

    Comment number 771.

    It's not a hatred of the rich, but a cry from the poor to stop fleecing us for our hard worked for cash.

    Like someone who volunteers to give a pint of blood to help his fellow man.
    Only to find out when the needles are in, the nurse wants five litres and is not listening to your requests to stop at the agreed pint.

    Enough is enough.

    Stop bleeding us dry.

  • rate this

    Comment number 770.

    Grounder @766
    "bare opinion"

    No need to oppose fact and reasoned interpretation, surely?

    Admirable to have 'all the facts' at finger-tips, but timeliness of challenge must for lesser mortals be our place!

    You find yourself sighted in the Country of the Blind. I think back to Ancient Athens, and wonder who survived as friends of Socrates?

  • rate this

    Comment number 769.

    Peston is just jealous of these bankers on million pound salaries. After all, if Paxman can get a million plus per year then he should be worth a million.

    It's not as if the BBC doesn't have money to burn on paying and paying off its 'talent'.

  • rate this

    Comment number 768.

    @761 AllforAll
    punishment by proxy.
    An alternate form of scapegoat perhaps?
    Still the notion (of scapegoat) is that those being punished are not culpable whereas the cohort we are referring to probably are.
    Perhaps not culpable of the greater sin of creating or maintaining institutions which reinforce inequalities and prevent opportunities.
    That is a deeper problem.

  • rate this

    Comment number 767.

    Its nothing to worry about, Dave said we are all in it together so it must be OK; we need to protect the poor misunderstood hardworking bankers and their paltry 34% pay rise, that's why Gideon went to the EU pleading with them not to cap their wages - Its nice to see the banks trying so hard to win back our trust - warms your heart doesn't it

  • rate this

    Comment number 766.

    @755 All for All "My 'not again' to remind of risk"

    Why, now, is a bald fact or statistic to be feared more than bare opinion? The usual caveats must apply unstated in 400 characters: "Your home is at risk..." Most of the 1,127,000 people working in finance have not had pay increases and bonuses on the scale of the EBA's 2,714. What percentage of this 1 in 25 workers are "bankers" to be vilified?

  • rate this

    Comment number 765.

    What is valuable, example:
    Discoverer of penicillin or a hedge fund manager?
    Our choice-don't leave it to the corrupt politicians for earths' sake!

  • rate this

    Comment number 764.


    It's is impossible for everyone to live within their means, if their was no debt their would be no money. Money is debt, however the neo-classical economic schools of thought that dominate western economic policy completely ignores the role of debt (the banking sectors number one product) on the economy.

  • Comment number 763.

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


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