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Banks negotiate bonuses pact

Robert Peston | 20:29 UK time, Sunday, 14 November 2010

Britain's biggest banks are talking to each about whether and how they can reduce the total amount of bonuses they would pay in the upcoming bonus season.

I have learned that serious negotiations are taking place on this thorny issue under the umbrella of the British Bankers Association, their trade association.

"We are talking to each other about making some kind of joint statement about bonuses, that would demonstrate that we are reducing the amount we are allocating to remuneration this year" said a senior banker. "It's early days and it's yet not clear whether we will be able to come up with a workable agreement".

Bank bosses know that almost whatever they announce in bonus payments early in the new year will attract criticism from politicians and the public, largely because of the belt tightening that is taking place in the public sector and much of the rest of the economy. However they are trying to limit the criticism.

"What's the most we could achieve?" said a participant in the secret talks. "Well right now the expectation is that banks in the City will pay out around £7bn in bonuses. Maybe we can cut that to £4bn. But although that would be a huge reduction, £4bn is still a big number - and we'll still face attacks".

There are formidable obstacles in the way of any kind of pact on pay.

One great fear of bankers is that they'll be seen to be colluding on a competitive issue, and could therefore be prosecuted by the Office of Fair Trading.

"One of the great paradoxes about all of this is that ministers would love us to agree to cut bonuses, but they're powerless to stop us being prosecuted under competition law," a banker said.

So the bankers in the talks are taking great pains not to be seen to be limiting competition in anything they discuss.

Second they are terrified of reaching an agreement on bonuses that would provide an incentive to top banking talent to relocate to other financial centres, where there are fewer concerns about big pay.

In particular, they are irked that banks on Wall Street are resistant to the idea that they too should agree a policy of mutual disarmament on bonus awards.

"There's no chance that the big US investment banks will follow our example" the banker added. "Which means that business and good people could leave London for New York or elsewhere, if we're seen to be paying less than the market rate".

I disclosed last December that it was opposition from American banks that put the kibosh on short-lived and fairly nebulous talks between international bankers on constraining bonuses that took place a year ago.

The total size of the bonus pool on Wall Street for 2010 performance is expected to be around $20bn (£12.4bn), or about 80 per cent greater than the expected London bonus pool.

Another idea under discussion is that the banks should pool the funds they deploy for community projects and philanthropy, so that they could win some good headlines for allocating hundreds of millions of pounds to good works.

However they're pessimistic this will come to anything, for two reasons.

First, they are reluctant to give up their existing philanthropic projects.

Second, they recognise that if they allocate more money to good causes, they may well be seen to be taking money from their shareholders - including pension funds looking after the savings of millions of people - in order to buy off criticism of huge pay packets going to employees.

"The headlines could actually end up being worse for us, if we did that", another banker said.


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  • Comment number 1.

    Just a thought.

    If the Italian mafia in New York were to negotiate among themselves, would we be asked to applaud loduly as a nation and provide a collective sigh of relief?

  • Comment number 2.

    Banks should have their ability to "extend credit" to the rest of us removed from them as Mervyn King has recently suggested. Once this power resides in the hands of government we shall all be better off.

    Banks can then be treated the same as any other corporate body in the UK and left to stand or fall on their own merits.

    If they can still make enough profits to pay multi billion pound bonuses after this power has been removed (and they actually have to lend their own money for a change) then good luck to them!!

  • Comment number 3.

    Wish I could type and then take the time to check what I've typed before hitting 'Post Comment'!

  • Comment number 4.

    They're all in it together it seems. I know lets see if we can get the bank levy reduced by cobbling together some story about bonuses - grab it back in corporation tax and pay the bonuses anyway !

    If all those bankers run off to US investment houses I'm sure the workshy will probably take up the strain of 4bn bonus bank payouts.

    By George I think they've got it.

    Condemned again by this scandal of a government

  • Comment number 5.

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

  • Comment number 6.

    The profit that they make for the bonus pool is money removed from their customers in fees etc , they really are feeding off the mass of ordinary people who are not bankers. We would prefer not to be ripped off in this manner so say no to all these rip off bonuses , let them work for the wages they agreed to work for and be happy they are in a well paid jobs , if they do not like that idea let them go elswhere , we do not need greedy bankers picking our pockets and making us poorer and poorer . As an example , I am now on pension credit of £22.10 per week , this is my total cash income , £22 of this has to go to repay my bank debt and I am left with the princely sum of ten pence a week to spend !!!!! When one years bankers bonus is way more than my entire lifes earnings you know there is something desperately rotten in the financial system - which the people are only just beginning to realise , so bankers , do keep your heads down and do not wind up your fellow citizens with incessant demands for yet more money !!

  • Comment number 7.

    Funding 'good' works is seen as taking the hard earned money from shareholders and pension funds but paying exorbitant bonuses even at £4Bn is not!!

    Governments need to tackle the root cause of outrageous bonuses - the absence of any real competition between the banks. If competition cannot be introduced by breaking the large banks down then banks need to be supervised and nationalised banks need to provide the competition. In the foreseeable future it would be lunacy to sell off those already in public ownership and all that is missing is the government to make use of its ownership of the banks.

    The bonus issue must not be allowed to divert attention from the equally obscene salaries and pension credits of top executives and the corrupt way remuneration committees fix the salaries of the members of the club. As stated many times in this blog it is teamwork that determines if a company prospers not the figureheads and celebrities who in the main are 'constitutional' executives and who are geniuses at survival.

  • Comment number 8.

    We must try and reduce the bonus pool from £7bn to £4bn....?? My heart bleeds, it must be tough getting by in todays banking world.....

    When will The Powers That Be 'get it'??? Don't they see the 'point' ?

    All they have to do is play with the decimal point !!!!

    Maybe for a normal Sales person selling machinery then 10% commission on sales achieved is acceptable ie.. 250k increase in a year = £25k bonus for the year...

    Where banking falls down is when it is 1% of £1bn = £10 million bonus (i know an extreme example but...)

    Why Don't TPTB start being sensible on renumeration and make it 0.001% of the above example then we would have Common Sense prevailing -- heaven forbid ....



  • Comment number 9.

    Why not just say that the bank bonus culture is obscene , immoral and unacceptable in our society in UK?

    Why should we, the people, be asked to accepted that other UK citizens have any right to such bonuses when, as a result of their banks actions, many will become unemployed, many will loose their homes, many will suffer breakdown personally and in their relationships with others. Just because they are bankers and essential to the smooth running of society seems to be their answer.

    Well, society isn't that smooth at the moment; if they haven't noticed due to the champagne bubbles up their nose, tough. Sack them.

    Politicians need to realise there are limits to patience and forbearance. In the end, all this will be resolved, justice will be rough. We all know that and at the moment the bankers are on top, but they should worry about the future financial problems[that they started] over which they now have no control. Who will then be in the ascendent come judgement day?

    Perhaps I exaggerate to make a point. Humility now by the banking fraternity would help a lot; greed won't and it won't be forgotten.

    If many of the banks' customers are broke, they'll be bust. Think about it!

  • Comment number 10.

    As a result of the banking catastrophe ordinary working people are looking forward to a pay freeze at best this year. Many are looking at pay cuts. Many more - especially in the public sector - are anticipating having no pay at all next year. I suspect that they are overjoyed to hear that banks are in discussions to reduce the scales of remuneration from "obscene" to 'deeply immoral". It just goes to show that we really are all in this together.

  • Comment number 11.

    So let me get this right...Bank A makes bad lending decisions or allows its investment bankers to take extreme risks. Bank A then turns to the the taxpayer for a bail out...with the plaintiff that the economy will be damaged if the government doesn't help.

    Meanwhile Bank B lends and conducts similar investment activities as bank A but is more prudent than Bank A. It takes some losses from trading activities but uses shareholder capital to cover the deficit. Bank B quickly returns to profitability and shareholders/employees are duly rewarded.

    Suggestion: Let Bank A make repayment of all monies due to the taxpayer before any bonuses can be paid to employees...(grateful they still have a job???). When the taxpayer is repaid, government, who own the majority of Bank A shares, sells them to bank B at a suitable discount. Under new ownership and control Bank AB becomes a worthy market participant and global economic peace is restored.

    In the wise words of one net savvy Meerkat...Simples!!

  • Comment number 12.

    All this user's posts have been removed.Why?

  • Comment number 13.

    "Second they are terrified of reaching an agreement on bonuses that would provide an incentive to top banking talent to relocate to other financial centres, where there are fewer concerns about big pay".

    Could someone please identify this alleged talent and analyse what makes them so sort after because it appears to me that that its a myth, and perhaps dissecting what exactly this supposed talent is and belittle it, will help us all reduce the obscene pay that these people award themselves at our expense.

    Perhaps you should do an article on the top bonus collectors and let them tell the general public what they actually did to achieve their incredible remuneration.

    Please dont get the idea that i am jealous of their pay,what narks me is they are out of control and no one appears able to stem their destruction of our country.

    Our politicians are incapable, the share holders are incapable, they answer to no one and nothing is being put in place to prevent it happening again.

    Some might say the direct action seen by the students would be better directed at the root cause of the monetary problems ,how many students tuition fees would the bonus payout cover, or first time house buyer deposits for example.

  • Comment number 14.

    This would be a story if the banks were making money but they are not.
    The profits of the investment banks are way down on what they have been so they are not earning a bonus anyway.
    To say they are reducing the bonus pool as some act of contrition is rubbish. They are not making any money.
    There is a good chance all the banks are going to fail. How much bonus for a Greek bank official or how about an Irish one, wait there any Portugese bank staff getting a bonus, don't think so. Perhaps a Spanish banker or Italian, I beg to differ, so let them go to America there will not be enough jobs there for them anyway.
    By the way if the governments don't keep bailing them out and printing more money they will fail so no bonus for them.

  • Comment number 15.

    I wish people would stop jumping on the "big rich bankers" bandwagon. People seem to forget that the majority of people who work in normal jobs for the banks, cleaners, security guards, and IT and admin staff, also rely on their bonus, it isn't an added extra on top of their salary, it's part of it. While the public sector (up until recently) are used to across the board pay rises and job security, most in the private sector are not and have to individually work harder than expected from them in order to secure a bonus. I can assure you when the sums are done, the amount of the bonus works out comparable to the usually steady inflation based increase that public sector workers see. Stop thinking that banks are just full of big bankers, they are not, they are full of ordinary working people trying to cope with the rising cost of living like anyone else on the street.

  • Comment number 16.

    The ironic thing is, the bigger the bonus pot is, the more helpful it will actually be to the nation's finances in this cash-strapped time. Around half of that mult-billion pound bonus pool will be paid straight into Government coffers in direct taxation. Futhermore, the rest of it will either be spent (meaning VAT income for the Government) or invested (meaning Capital Gains tax income for the Government). Not to mention the bankers' consumer spending, which should provide revenue for other areas of the economy.

    So actually, allowing a £7bn bonus pool could be very helpful at this time...

  • Comment number 17.

    Whilst i am all in favour of waving fifty pound notes in student faces- If i rememeber correctly under the Competition Act 1998 any business found to have participated in an unlawful price-fixing agreement may be fined up to 10 per cent of its total turnover. If this were not enough
    the Enterprise Act 2002 makes it a criminal offence for an individual dishonestly to take part in a price-fixing agreement or other form of cartel conduct between competing businesses. *Robert Preston to make a citizens arrest*
    Anyone convicted of the offence could receive a maximum of five years imprisonment and/or an unlimited fine :-(
    Information about cartels - > [Unsuitable/Broken URL removed by Moderator]
    Aun Abidi.

  • Comment number 18.

    "The ironic thing is, the bigger the bonus pot is, the more helpful it will actually be ..."

    WRONG. The bonuses will either (a) disappear overseas (b) keep the housing market artificially buoyant.

    James B obviously still believes in Thatcher's trickle down effect - but it doesn't work.

  • Comment number 19.

    James B...... £7 billion would benefit the economy. Here is how though. Instead of giving it to the bankers (top ones not the cleaners and front line staff) leave it and give to to the shareholders. After all isn't that what the top bankers keep saying that they have a duty to their shareholders. These shareholders BTW are you and I mostly, our pension funds.

    Let us decide how we want to use it. Corp tax is about 26% so govt gets its share. Now those that think the top tax rate is actually paid by those meant to pay that rate are dreaming.

    So here is the plan, keep your hands of OUR money.

  • Comment number 20.

    Why not ban bonuses altogether? Let those greedy bankers go to the US where there won't be enough jobs for them, and those that want to stay can work to set right the wrongs that are apparent in the banking world.

    Up until the US subprime crisis, UK Governmental borrowing was well below the levels set as part of the Maastricht Treaty, and who caused the subprime crisis? Oh yes, bankers. It's time this country got tough on banks, tough on the causes of banks. Why are banks allowed to make potentially devastating financial trades with money that isn't even theirs? I think there needs to be a separation of bank and stock traders. Let the traders gamble with their own money, and we'll soon see them tightening their belts not wanting to lose everything they've got. But a financial world where a bank can lose billions of pounds of account-holder money and still pay bonuses to its "top" staff is fundamentally wrong and diseased.

  • Comment number 21.

    There is only one way to reduce the Bankers' bonus problem and it isn't in our gift. Although there is a threat of bankers moving East, I am not convinced that this is a serious problem for the next few years, because very few of them want to settle out there. The problem isn't even Europe, the problem is in America and the power of the Republican Party.

    In this country the Tory party is loosening it's tie to the Banks. It knows that if it does not continue to do this it would lose the next election possibly even if we are clearly in recovery. I know there is a long way to go but Bankers can't feel as secure as they once did. However in America the 'freedom' of the bankers has been cleverly tied in with their concepts of small government. This bond needs to be broken. Americans have to see that the Big Banks are a limiting factor in their desire for 'freedom'. Just as governments do good by providing services and development, so do banks provide necessary services and development. Both can provide the wires and pipes which get the country running. People have noticed that there comes a point where the ideas and ambitions of the government have got in the way of the people. The bankers, however, have convinced us that achieving their ambitions does not get in our way.

    The Americans have to realise that although there have been some appalling examples of legislation claiming to give people more freedom, the idea of legislation to give more freedom is not without its merits. Legislation to limit the activities of Bankers could benefit large numbers of people. In America the belief is that all legislation is bad and restrictive. They, in particular the Republicans supporters and that loose cannon the Tea Party, need to realise that this is not always the case.

    Once America understands this the UK and Europe will follow and the 'Bank Problem' will be on its way to a solution.

  • Comment number 22.

    The current economic situation was caused by politicians and financial institutions. The 'austerity' peddled as the solution is being inflicted on everybody EXCEPT politicians and financial institutions. Is this fair?

  • Comment number 23.

    15. At 02:05am on 15 Nov 2010, Paul wrote:

    I agree with you Paul. I left banking 10 years ago but the public seem to forget that the cashier on the till or customer advisors, even financial and mortgage advisors are not paid huge amounts of money. I know banker bashing is popular at the moment but the arms of the banking industry which caused the problem are not the majority of bankers. Also not all banks needed bailing out, only 2 of them although admittedly the others gained by us propping them up. I do not think Brown actually did us a great service by doing that. They should have been allowed to fail. It seems unfair to me to penalise them all.

    My husband who works for a medical engineering company has been told they have done well this year so he gets a bonus. If the bank has made REAL profits then shareholders and staff should get their bonuses as usual. This also helps our pension funds and stops the banks threatening to move abroad resulting in massive job losses and reduced tax revenue. I work in the public sector and have a pay freeze and no bonus but am not so selfish as to resent people getting one just because I will not. The private sector took its pain back in 2008/2009 and hopefully is starting to come out of the mire which is good for all of us. I blame the media for whipping up this banker hating frenzy which in some places is misguided. Stop the risky investments and next time let them fail. Also do as I do, never pay bank charges, interest on loans etc. The only loans I ever take out are interest free ones.

  • Comment number 24.

    So Paul, what you are saying is that there are lots of lower paid workers in banks who are getting low wages and rely on bonuses to give them a reasonable standard of living. If that is way remuneration is done in that industry that is up to those workers who choose it as a career. But you have been duped and are being used as a human shield for those who get enormous bonuses.

    If a company does well and they choose to give their employees a X% bonus, I have no problem with that. But you are not the target of the complaints. Say your basic is £25 000 and you get a 10% bonus, you (in fact most people) would be happy with the extra £2 500. This figure may alter from year to year to year, but it is always there. But on your basic of £25 000 have you ever had a bonus of £25 000 or even £50 000? That in percentage terms is what is happening to some of the more highly paid members of your bank. People on £500 000 getting £1 000 000 bonuses. That is what the objection is. If you got 10% bonus and they got even 20% bonus there would be raised eyebrows. But when you get 10% and they get 200%, I would hope you realise that there is something wrong.

    My personal objection is this. I believe people should be paid what they are worth and that bonuses should be limited and regarded as an unusual event. Using my figures, you should get £27 500 basic and perhaps every 3 or 4 years there is a limited bonus of up to 5%. But then I believe that everyone should do the best job they can without the lure of bonuses. I would have found the suggestion that if I got a 10% bonus I would have taught my class better totally offensive.

  • Comment number 25.

    I know the right thing to do here would be for the front line retail staff earning under £30k to get their bonuses and all the rest have to pay theirs back to HMRC, until they have repaid the cost of their mistakes; but when is the right thing ever done by bankers?

  • Comment number 26.

    "..they recognise that if they allocate more money to good causes, they may well be seen to be taking money from their shareholders - including pension funds looking after the savings of millions of people - in order to buy off criticism of huge pay packets going to employees"

    This is nonsensical. The £7 billion bonus fund is presumably directed at individuals, and not the banks shareholders or pension funds. In order for this to occur the money would need to remain within the banks profits, to be paid as dividends etc.

    Or am I being totally thick?

  • Comment number 27.

    As RP says, the driving force propelling the whole bankers' bonus scam is Wall Street. Everything is driven to extremes in America, and always has been:- more extreme wealth, more extreme disparity between richest and poorest (and getting more so all the time), more extreme (world-beating) technological prowess, more extreme dumbing-down in the public education system and in popular entertainment at its worst, more extreme violence, crime statistics, executions and prison population, more extreme poverty, more extreme opportunity, more extreme political polarization and the most extremely-convoluted political machinery...etc, etc.

    Fine, let them stew in their own juice. But why oh why do we feel compelled to follow suit? Why do we lack the self-confidence to go our own way? This country has been a pioneer in many ways during its history: it's time to do some more pioneering - starting with a root-and-branch reform of our banking and financial system to cut it down to size. We have to decide what kind of system we want and what we require of it in terms of its contribution to the common good. When we've decided that we'll be in a better position to decide how to get from where we are now to where we want to be.

    There's no shortage of ideas to tap into (not a few of them coming from American sources, ironically enough - but the over-mighty power of their plutocracy (Wall Street again!) and the impotence of Congress will probably prevent them from ever being taken up there).

  • Comment number 28.

    Just out of curiosity how much money to the banks generate for this country? I guess this should be set off against the amount of money banks have cost us in the past couple of years; ie the about of money we have lent them and the interest we are paying on it?

    If the first is greater than the second then a discussion about the amount of bonuses to bankers and the globel market is a more intresting one!

    Anybody out there have those figures?



  • Comment number 29.

    Steve @ 28 is spot on! This argument that the banks have to pay huge bonuses to attract the "best talent" is completely bogus!

    If UK bankers really were "talented" they wouldn't have got the economy into a mess in the first place and if they now wish to bail out and take their chances elsewhere - as it is always put - then so they should. Let them all clear out I say. I'm sure there are plenty of truly talented British people who would do a better job for less than the present lot are paid.

    Or do these people not speak with the right accent, or did they not go to the right school... I'm afarid there is still a lot of snobbish and completely idiotic rubbish talked in this country. The people need to wake up to this claptrap.

  • Comment number 30.

    @15.Paul wrote:

    "I wish people would stop jumping on the "big rich bankers" bandwagon. People seem to forget that the majority of people who work in normal jobs for the banks, cleaners, security guards, and IT and admin staff, also rely on their bonus, it isn't an added extra on top of their salary, it's part of it."

    You hit the nail squarely on the head.

    The trouble is, neither you nor, I suspect, most of your colleagues - worthy people all - have understood the real point. Which is - why are bonuses paid at all? Does a cleaner clean more floor-space if s/he knows it will earn them a bigger bonus? It won't of course make the slightest difference. People in these jobs and (I would argue) most or even all jobs can't individually influence the results of the entire business in the slightest degree. Instead, a decent wage should be paid and that should be it: performance will then depend on good-quality leadership and self-motivation.

    If you want to argue that the prospect of a bonus makes for better teamwork, I would question that. It's pretty-well impossible to design a bonus scheme that achieves specified objectives - human beings aren't robots!

    Insofar as bankers' bonuses have been shown to produce any discernible result, it has been the manic proliferation of ingeniously-engineered financial products, and frenzied credit-expansion, designed with the sole (?) aim of maximizing bonuses - and ruining the business in the process (RBoS, Northern Rock, Bear Stearns, Lehman Bros, AIG, etc, etc...)

  • Comment number 31.

    "Which means that business and good people could leave London for New York or elsewhere, if we're seen to be paying less than the market rate".

    By "good people" I assume he means people who are good at ripping the bulk of society off. I very much doubt that a bunch of parasites who would happily see the rest of us living in destitution so long as they were able to a buy a new yacht each year could be termed "good people".

  • Comment number 32.

    It seems that bonuses are paid due to motivation, a clear extrinsic motivator. However it has been proven that these extrinsic motivators have little effect (but some!!) in the long term, so in this case bankers will just be looking for their next bonus. In fact what research has shown is people respond to intrinsic motivators; so by informing the bankers that they are doing some incredible things (bearing in mind they are some of the smartest people in the UK based on education), maybe then we wouldn't have to worry about the 'best' bankers leaving. Whilst at the same time they would be able to pay lower bonuses.

    I think what we have to really bare in mind is that who here would honestly turn down a bonus, I certainly wouldn't; so maybe we should stop blaming the bankers and look at the structure, the regulation, maybe ministers should stop complaining and actually look for a solution.

  • Comment number 33.

    The UK Banks say that they must pay £7bn in bonuses to stay "competive" in attracting, retaining and rewarding good staff. They obviously see that as far more important than attracting, retaining and rewarding good customers. I wonder how many of the 2 million odd SMEs in the UK have been squeezed by their bank in the last twelve months while at the same time the Crown (HMRC and the like) have bent over backwards to help and trade creditors have had no choice but to help? I am 100% in favour of free practice allowing any organisation to do what it likes with their money but only if the likes of us (SMEs) have freedom of choice in selecting our banking partner. The Catch 22 is that a small compnay clawing its way out of recession does not have a hope of moving bank until it becomes an attractive prospect. That done, and decent times return, the prospect of going through all the hassle of changing banks puts the thought to the back burner. Anyway - they are all the same aren't they?

    Now, more than ever before UK SMEs need a real, viable alternative to the mainstream banks. What are the chances of theat?

  • Comment number 34.

    The possibility of the OFT stepping in to prevent the BBA from acting collectively to take the big bank bonuses down several pegs seems to me to fly in the face of the reason for the OFT's existence.

    The OFT is there to prevent consumers and businesses being ripped off by price fixing and other restrictive trade practices - this attempt to curb the bonus trough is exactly that - a measure to stop the rip off, get-rich-quick greed-is-good culture that has led to the banks having to be bailed out at our expense - we have all picked up the tab for the bailout to the tune of £40,000 EACH!

    The OFT should have taken action to prevent the banks from indulging in their unfair trading practices long before this - fairness isn't just about hands-off regulation - it should seek to protect the public from abuse and IMHO, the City of London culture has been the dictionary definition of abuse.

    We hear endlessly that the top flight, big bonus bankers will leave the UK if we're too hard on them. This is a serious issue - we need to take a cold, calm view on this and decide what to do in the national interest. What size should our financial service sector be? Which is more important - the real economy of making things, or the speculative virtual economy of the City?

    Clearly investment is needed for our future, and one gleaming opportunity is on hand - we should invest in the airfares for the city high flyers and buy as many one way tickets as we can, providing they promise never to come back again.

    Getting rid of the bloated, greedy and deeply damaging City culture would finally free the UK to develop a sound manufacturing economy again.

    We need to get real about this - the banking industry self-destructed - its business model failed - but as a nation we were blackmailed into forking out vast sums to put it back on its feet. Now the banks won't even fulfill their basic function in lending to businesses and to people to buy homes. Why on earth do we think we should allow this farce to go on any longer?

    We are told the City brings in investment - where to? Speculative property maybe, but precious little into industry. David Cameron talks about "rebalancing" the economy - right - let's start by making it abudently clear that the City must be hacked back.

    There is a very real upside to there being a mass exodus from the City - if they all move to NY, then the US government will have to foot the bill for the next meltdown, not you & me. In Iceland a dozen greedy men destroyed the entire economy and has left the Icelanders in debt for generations to come.

    The Irish are now in their second round of major bank bailouts - how long until we face this here as well? Eire has now effectively nationalised their banks - in the UK we own the majority stake in most of the banks already.

    Surely it's time to bring the shutters down as soon as possible and get back to boring old retail banking - taking deposits, earning a return for savers, lending to British businesses and helping people to own a home of their own if they can afford it - and any bonuses should be paid to those actually doing the work in the branches.

    In the meanwhile we need to make it perfectly clear to the banks and politicians that we won't give house room to a second round of bailouts in the future - we simply couldn't afford it - as the Irish have now proved - and our reaction to a second Eire style bust in the UK will be nationalisation accompanied by a retrospective clawback of every penny paid in bonuses for the last ten years.

  • Comment number 35.

    Paul @15

    Don't insult our intelligence - we know that not everyone who works in the banking sector doesn't receive a multi-million pound bonus - same as we know not every footballer earns as much as Wayne Rooney.

    Until this country is able to totally recast its economy so we are not so stupidly dependent on the financial sector, and so that ministers don't reflexively foul themselves every time an investment bank say they might have to take their operations arm abroad, then we're going to stay in this mess.

  • Comment number 36.

    While everyone is on their high horse about "bankers" bonus payments could you maybe take a little time to consider that not all bank employees are on outrageous wages. They do not get an annual pay rise automatically it all comes down to a bonus - it is not an additional extra and actually forms part of their salary. In our household if my husband does not get a bonus - we do not have a holiday & I am not talking about a flash foreign trip just a bog standard 2 week break around "good" old Britain! There are people on here complaining about having to pay their own bank debts back, come on get a grip you were not forced to borrow money or overspend. This whole issue is now a complete fiasco - with the poor tax payers having to foot the bill - well don't forget bank employees pay tax too!!

  • Comment number 37.

    If UK bankers really were "talented" they wouldn't have got the economy into a mess in the first place and if they now wish to bail out and take their chances elsewhere - as it is always put - then so they should. Let them all clear out I say. I'm sure there are plenty of truly talented British people who would do a better job for less than the present lot are paid.
    Because it wasn't Clinton's, Bush's and Brown's deregulation that meant banks lent to too many middle class people with poor credit histories. The subprime crisis wasn't caused because of banks alone, the government which thought there would be no bust in the housing market and deregulated mortgage rules and the middle class people who thought they had a right to buy a house even if they could never afford it were all equally at fault. As for this claim that "ordinary people" could do a better job it is laughable, the investment banking lifestyle is not the comfy 9-5 job that your everyday public sector manager enjoys. The sheer pressure of time, the ability of the competition within, the long hours and lack of a social life all add up to make the job a highly tough one. If "ordinary British" folk could do it, they would have.

  • Comment number 38.

    Isn't it time that the banks were required to publish, in full, for intricate public examination their accounts showing how these so called 'bonuses' have seemingly been earned and are being calculated?

    That's the bit major that is missing on the rights and privileges in all of this ... 'transparency'

    In particular, who's money has been used/put at risk in 'earning' these so called 'bonuses'?

    Pigs, pigs and damned skimming pigs!

  • Comment number 39.

    What we have got to remember is that we are only talking about a handful of people who achieve these 'obscene' bonuses. The vast majority of bank staff are under extreme pressure to achieve sales but with all ability to do so taken away from them. They are micro managed to the extreme in what I believe is a way of tripping them up to find something that means they dont have to pay a bonus to them. To get any sort of credit or service sanctioned for customers is becoming impossible and the only people that would get any credit are people that dont actually need it. However the banks insist on the front line staff taking responsiblity for the decisions to refuse loans and services and not, as they unfairly see it, hiding behind the banks new policies. Relatively speaking the ordinary Bank worker does not have a huge remunerative package and the yearly bonus was the way that you could achieve a good salary. The banks are not charitable organisations and will look to make a profit not good public opinion. You could argue that money has been lent too easily in the past and resulted in the devastating global situation we are now in but we do not apportion blame to people that should have known that they could not afford the repayments? Equally do not blame the front line staff as they are responding to the demands of senior management and adherring to the rules of engagement as set down for them. This would be the same for any worker in any organisation. I think that a visit 'back to the floor' and under cover would open a few eyes in the executive boardrooms of the big banks. Perhaps this would make them review who was really the talent that they could not do without and not one or two big boys pontificating from on high and getting massive bonuses off of the backs of the real workers.

  • Comment number 40.

    Implement David Cameron's 20 Times rule NOW.

    (No boss should be paid more than 20 times the lowest paid employee in any organisation.)

    David Cameron isn't so why shouldn't everyone else live by the same rule (enforced through the tax system)?

    Inequality (of outcome) is what is destroying our society and it is within our own powers to start to fix the problem!

  • Comment number 41.

    > business and good people could leave London

    I'd hold up the traffic for them if it meant they could get to the airport sooner!

  • Comment number 42.

    Getting rid of the parasites will be painful, but a price worth paying for the future of mankind and the environment.

  • Comment number 43.

    Can someone please tell me how the Bankers bonus pot (% of profit) compares with those of say a multinational business like Nestle?

  • Comment number 44.

    38. At 09:26am on 15 Nov 2010, nautonier wrote:

    Isn't it time that the banks were required to publish, in full, for intricate public examination their accounts showing how these so called 'bonuses' have seemingly been earned and are being calculated?

    That's the bit major that is missing on the rights and privileges in all of this ... 'transparency'




  • Comment number 45.

    40. At 09:28am on 15 Nov 2010, John_from_Hendon wrote:

    Implement David Cameron's 20 Times rule NOW.

    (No boss should be paid more than 20 times the lowest paid employee in any organisation.)

    David Cameron isn't so why shouldn't everyone else live by the same rule (enforced through the tax system)?

    Inequality (of outcome) is what is destroying our society and it is within our own powers to start to fix the problem!


    So are you assuming that in a massively complex organisation we can only have so many pay layers? Assuming that some staff are "coin operated" then how would you remunerate people on promotion (eg additional responsibiity/work load?) without breaking this?

    I assume this would be full time equivalent to deal with part time/casual staff?

    How about benefits in kind? We here about the "primeministers wage" a lot but that is basic salary - does that include the costs of No 10? Surely a benefit in kind as his family are housed, clothed, fed (waiter and private chef etc) all as part of his package? Tell me, if you didn't have to pick up ANY bill on ANY personal expense could you happily have a lower wage? I know I could!

  • Comment number 46.

    The legal way to stop fat cat bankers receiving offensively large binuses is for our spineless chancellor to levy a large windfall tax on their profits to the tune of £7bn - the amount they are planning to distribute. This kind of one-off tax - which the Italians are known to impose - would disarm the alarmist and silly claims that these luxury lords of the financial world will suddenly up sticks for New York. What banker bunkum!

  • Comment number 47.

    Do we need legislation?

    NOT to set the spivs bonuses - I don't see that as a role for government.

    Legislation could specify that the negotiations and any agreement made were lawful with regard to any and all relevant existing legislation.

    Details likely to be complex, but hopefully there are enough experienced civil servants left to advise on the wording.

  • Comment number 48.

    I would be surprised if there has not already been a shift towards larger base salary and smaller bonus since last year. They would have been thinking about this both to avoid potential government bonus tax and also to try to take the heat off themselves.

    Whether people are paid in bonuses or in a fixed salary, no real progress appears to have been made on reducing total wages. I am not holding my breath for a quick solution.

  • Comment number 49.

    44. At 09:47am on 15 Nov 2010, Horned_Devil wrote:

    Thank you for myriad of web links and documents.

    Perhaps you can identify and run us through the detail (if indeed such detail exists on your web links and I don't think that it does) of a single bonus of a particular senior individual earning more than say £1,000,000 in annual or other bonuses and explain in detail:

    1) How that individual allegedly earned that bonus(es)?

    2) How much of e.g. regular depositors'/stakeholders' money was used and put at risk/generated an additional risk in achieving the trade as purported to generate a 'profit' and hence a bonus?

    3) What are the liabilities and risks generated on the trade that is purported to be supporting the particular bonus in question?

    4) What is the real effect of that trade interms of UK plc in terms of opportunity cost for areas of the UK economy in need of investment

    I challenge you or anyone anywhere else, under these conditions, to explain, in reasonably transparent detail and justify a single executive banker's bonus.

  • Comment number 50.

    Bosses or Managers...

    Bosses, I thought were tradionally owners and as such were entitled to their business's profits....Take too much profit without putting some back into the business and the risk is bankruptcy.

    However Managers are employees and as such are just different from other employees.

    What we have in the City are financial managers running amock as though they are the owners and are writing cheques for themselves. This parcel of rogues are in the best workers union of all...a clique who are setting the rules for their own maximum benefit...The financial capitals of Wall Street and The City are now severely corrupted by this union of financial managers.

    With the new technology of computers and the internet, the corruption is spreading very fast...This cancer in our society is nearly beyond recovery in that the free market itself has been corrupted...The fact that Governments are now running scared of the Banks and the Market for fear of total collapse means the patient is now in terminal decline....The money is centred in these Money Capitals...Just view the riches centred around these concrete hives...whilst the rest of society suffers...In the UK..there is the north/ south divide.

    It's as though we are in a Communist Country, where all the privileged are members of the Communist Party, whilst the rest of society are enslaved....Except in this new society the privileged are all in Wall Street and The City...and of course the neo conservatives who continue the process...

    The Governments are in such a state over this cancer, that they are printing money at an ever increasing amount in the hope that this will save the patient, but the transfusion isn't working because the root cause is corruption and greed.
    This cancer or corruption is now Global, because the agent for the spread is of course computers and the internet....Fancier dreamt up programs and processes invented by very clever? academics...All in the name of increasing bonuses for these employees...Greed + Computers + Internet is the lifeblood of this cancer of corruption...And it will continue until the patient is dead....Global Market Collapse...How long will the patient last.?

  • Comment number 51.

    @ 15. At 02:05am on 15 Nov 2010, Paul wrote:

    > cleaners, security guards, and IT and admin staff, also rely on
    > their bonus, it isn't an added extra on top of their salary, it's part
    > of it.

    No. A bonus is paid in addition to what is usual or expected. Let's at least speak in plain English, please.

    When times are tough, bankers will have to get by on their salaries, and not receive bonuses. Sorry, but that's life, so get with the programme and stop supporting the fat, greedy, mouth-always-open bankers.

  • Comment number 52.

    The so-called 'bank bosses' must realise that the profits banks make are not theirs - those belong to the bank depositors, creditors and shareholders; they are simply employees. As employees they are paid salaries and wages and they have no rights, whatsoever, in plundering the bank vaults.
    Taking bank bonuses is like allowing till girls, collecting cash deposits throughout the day, to take (say) 25% of the deposit home as their bonuses. If they do, that would tantamount to be stealing and they would be prosecuted. So, why there should be a different set of rules for the directors and managers and allow banks to be robbed in the guise of bonuses?
    Reducing the pot size from £7bn to £4bn, would the bank robbers expect us to hail them as honest and decent people? Dump it. These robbers also claim that without bonuses, the 'good people' will go away. These 'good people' should not only be allowed to go away, they should positively be encouraged to go away.

  • Comment number 53.

    I don't wish for bonuses to be denied the mass of bank employees for whom a bonus is a normal part of their expected entitlement. Those on normal salaries that is. Difficult I know but I think we do all have a notion of what normal salaried work is like. I DO OBJECT to additional bonuses for the filthy rich! Incidentally I do not believe in exceptional talent in an area such as banking. I believe that any number of people can run a commercial organisation successfully. In arts and science it is important to acknowledge Einstein and Mozart as exceptional talent but commercial decision making? C'mon!!!

  • Comment number 54.

    Here are my two cents today:

    Firstly, I echo the sentiment expressed by a couple of people already: the idea that putting some sort of restriction on banks’ ability to pay bonuses will have some catastrophic effect on the ‘talent pool’. What on earth is this founded on? Let me get this right -if the Government were to impose restrictions on bonuses, all the bankers in the country are going to pack their bags and get on the plane to…..where…..the US?! Oh of course, I forgot that there were thousands of jobs available on Wall Street just waiting to be filled by the mass migration of British bankers. It’s a ridiculous idea.
    However even IF the current bankers were to leave, there are (or certainly going to be) literally thousands of very eager unemployed graduates and ex-public sector employees who would willingly fill those vacancies at the still fantastic salary, minus the obscene bonuses. So, let them go, if that’s what they are threatening. The concept of competition/salary is relative to employment levels – in times of recession and high unemployment you can be far more realistic with salary offers, so I fundamentally disagree with the principle of a banker exodus, and the supposed impact this will have on UK financial services.

    Secondly, and I’ve heard this mooted before, there are ways to achieve both the bonuses bankers want to pay and some sort of public benefit. That is a 100% tax on any bonus paid, which is made payable by the bank. £2m to the CEO, £2m to the Treasury. If the banks allocate £7bn in bonuses than fair enough, but £3.5 of that goes to the Treasury, then the banks can be secure in the knowledge that they are funding the Sure Start programme with the success they are enjoying – call it a ‘Social Clause’. Maybe tie this in with another clause that restricts bonus payments to a maximum percentage of POST-TAX PROFITS, to stop banks offsetting bonus payments towards business expense on their tax returns.

    Thirdly, and this would have an affect on the above, make any bank that has borrowed public finances list the amount as outgoings on their balance sheets so that they cannot be seen to working at an operating profit until the amount they owe is paid in full, which would limit the banks’ ability to legitimately pay bonuses that are disproportionate to their financial short-comings. Let’s face it, it is how us everyday individuals have to manage finance.

    I do like the idea at no 2: of removing the ability of banks to extend credit and making it a Government function – very bold!

    What I find the most irksome aspect about this situation are the petty reasons and excuses for what is essentially impotent Governance in the face of threats that cannot be substantiated. The Government has in the past (and arguably very recently) made many more deeply divisive decisions which have resulted in millions of people taking to the streets, for instance against the Iraq War, and thousands just last week at tuition fees. If the Government was to take the move of reigning in banks, people may take to the streets, but it certainly wont be Saville Row-suited bankers, but the Joe Averages, who wont be protesting but celebrating.

  • Comment number 55.

    It's kind a funny in it?
    Those with their trotters in the tills tend to make the largest bonuses?

  • Comment number 56.

    The British Bankers Association, the Finacial Services Authority, leaders of Banks, other financial services firms, the Government and the Treasury, that operate in the United Kingdom juristiction would be showing real leadership and a real genuine commitment to their UK customers and the public if they were to forego ALL financial service bonuses this year - NO BONUSES AT ALL.

    Just for one year, to show their promise and commitment to make good on the appaulling financial mess that continues to affect the public as well as the private sector and is continuing to wreak havoc on the public and public services.

    This would help to prove their commitment to make good on their tattered reputations in the eyes of their customers and the public.

    Nothing less will be seen as a real and genuine commitment.

    The best would stay, and so what if the greedy and not so good go off overseas? There is a massive pool of financial services talent available in the UK including up and coming young talent that would likely do a very much better job than some of the bankers who are on the bonus take and have thus far failed.

    There is no shortage of great talent.

    Its wrong of the industry to reward itself on such a grand scale while the problems persist.

    The British Bankers Association should be ashamed of itself. Their representative on television seeks to defend the indefensible, although she does appear to be a nice person.

    Its also time Lord Turner, as leader and the Financial Services Authority, showed a genuine personal commitment to leadership and to the protection of consumers in the Financial Services industry and its remit having failed so spectacularly in its regulation of the Financial Services Industry itself.

    Although he was not at the helm at the cause, he has had more than enough time now to make much more of an impact.

    We need leadership from you and not petty excuses please Lord Turner.

    The problems were known well before the 2007-2008 bank and financial services meltdown to those in the industry and others.

    There were plenty of advanced warnings and understanding, and the Financial Services Authority as regulator failed to act and protect the industry and the public in advance of the big resulting problem.

    By the time they woke up, it was too late.

    Fraud in the financial services industry is rife including a failure by the regulator to grasp the nettle of so called boiler room scams.

    The UK Financial Services sector has a very long way to go to reestablish its reputation, perhaps a lifetime.

    Small, medium and fast growth potential businesses are continuing to be starved of investment and funding they need. This is slowing the recovery.

    UK retail banking still appears not to have a genuine customer service orientation and commitment from the top.

    Alternative structures and methods of finance for growth businesses outside the industry itself through angel and guardian angel investors are springing up to fill the gap. Often from overseas.

    A clear and firm leadership on the thorny bonus question now is the right way forward . . .

  • Comment number 57.

    £200 billion worth of QE in the equation when it comes to calculating this year's bonuses. Where did it go? Not to the businesses/SME's that it was meant to, but instead borrowed from the BOE at 0.5% and then lent back to HMG in the form of Treasuries @ 3%. That sure needs some skill. And the rest, to more speculative bubble territory involving commodities and emerging markets which when you are only following in the jet-stream of the Americans doesn't require a whole lot of skill either. And when the bubbles burst as QE evaporates, do the bankers pay back the inevitable losses? Hardly, as it seems that bonuses get paid out when there appears to be a profit, but the tax-payer coughs up when there is definately a loss. Hard to believe that people are getting angry isn't it?

  • Comment number 58.

    What a lot of hot air

    a.Everybody are happy for others to get commision (normal for any sales person)
    b. Nobody has a problem if someone gets overtime for doing more than 35-40h a week
    c. People have a problem with banks only (profitable and prudent including)

    Simple maths shows that if the bonus pool goes down by 3Bilion then income tax at either 40-50% then the tax man will loose 1.2-1.5 billion in receipts. Who is going to cover for that ? Also 1.5-1.8bilion will be taken out of the economy so less money for everyone
    Its easy and popular thing to say but the impact to the economy scary. Yes bonuses should not be put ahead of the liquidity and without making sure a bank has enough reserves to cover for bad times but a blanket ban of bonuses will be damaging the economy from all angles

  • Comment number 59.

    49 - so you are advocating putting MORE money in the hands of finance professionals?

    Effectively what you are saying is that in order to get to the level of disclosure you are after you would want complete and open access to all of the banks systems? (the only way that you could possibly get to the granular detail you would want). Now, these systems are likely to be bespoke (and more than likely more than one system - I don't work in a bank so have no idea) and would require training to operate and would result in the casual user having data overload so we would probably ask for these to be summarised. This summation would likely have to be done by an external body (I'm guessing you would want regulation, standardisation and auditability in the numbers) which would result in fees for a professional firm (eg a firm of auditors). Depending on how often you want access to this data there would be a significant amount of work to be done on a monthly, quarterly, annual basis as well as regular audits of the additional systems used to generate this kind of data. This again would result in a significant amount of money to be paid to professional organisations - at which point the claim would be "its the old boys club - these are set up to give each other money"

    More reporting increases the complexity not simplifies it. Simply put, the public couldn't generally understand the volume of information that would be then given to them - most people don't understand the accounts as they are currently shown (certainly not the financial media!).

    I don't agree this is right and I think that banking has (deliberately) made its self far too complex so that a lot of people involved in the banking industry don't understand what it is they are actually doing (as evidenced by the failure or unwinding of a lot of financial instruments where even the creators didn't understand them in sufficient detail to work out the risks they were taking)

  • Comment number 60.

    Whilst we are on the subject of bonuses, I wish I had an avenue to highlight the kind of incompetence displayed by the ones in this industry that generally benefit from the fattest bonuses. Its all about corporate brown nosing and not rocking the boat.

  • Comment number 61.

    59. At 10:33am on 15 Nov 2010, Horned_Devil wrote:

    49 - so you are advocating putting MORE money in the hands of finance professionals?



    What I asked was:

    'I challenge you or anyone anywhere else, under these conditions, to explain, in reasonably transparent detail and justify a single executive banker's bonus.'

    I doubt there'll be any takers!

  • Comment number 62.

    I've just read the post and the first 10 or so responses but this is stupid.

    The problem isn't the size of the bonuses, it's how they are calculated. The problem with banking bonus culture is that it encouraged short termism and risk taking, bonus sizes are less relevant. If someone genuinely made £1billion of good, stable, certain income for their bank and the British economy I would have no problem whatsoever giving them a £50m bonus.

    We need to focus on the right things, and size of the bonus pot is not it.

    PS I am not a banker, nor do I receive big bonuses.

  • Comment number 63.

    Why do commercial enterprises whose risk-taking is underpinned by taxpayer-funded guarantees feel it is appropriate to pay any bonus to its employees, talented or not?

    Surely, it is the taxpayer who is providing the capability for the risk-taking to take place in the first instance. So why isn't the taxpayer being given the bonuses instead?

    I just don't understand the logic of the banks. They are being supported by the taxpayer from going bust, are still taking risks and over-rewarding the people who take risks. I don't want them to take risks as we all know what happens when they do. So why is this behaviour even been allowed to persist? Banking should be boring not risky.

    However, when you ask them to take a real commercial risk such as expanding a factory, employing the workless or bringing a new product to market it all becomes too much for them to be bothered.

    Is this banking or just payola for the well-connected. It stinks!

    Time for banking reform!

  • Comment number 64.

    This bonus mess now exists because the banks were bailed out.

    When RBS, HBOS etc went bust which is what actually happened they should have been nationalised. Shareholders should have lost 100% of their investment, the deposits guaranteed (to avoid total banking collapse and chaos on the streets. Those bankers responsible should have been arrested and stood trial charged with a new crime created by parliament (corporate recklessness). Punishment could include the stripping of their personal wealth and a term of imprisonment.

    Equally, a number of directors of rating agencies should stand trial for fraud. As for economists - WOTW's suggestion of standing trial for witchcraft is not far from the mark, although i cannot agree to burning them. Perhaps putting them in stocks and allowing the public to hurl dung at them would suffice. Economics is not a respectable discipline and has almost no value.

    Instead the bankers know there is no level of 'moral hazzard' that they will not get away with.

    The only cuts in bonus will be across the thousands of workers on ordinary money. The huge bonuses are contractually fixed and based on short term performance. Also the whole global derivative system is a zero sum game so to win someone must lose. The annual 10%-20% bonus that most get is simply in place to make it less attractive for people to leave. Nobody goes a month or 2 before they get it in January and even 6 months away its on workers minds.

    Anyway, the banks are still broke and huge bonuses are being paid to the people who did this.

  • Comment number 65.

    Maybe the banks should change so that instead of bonus they get paid commission so if a banking generates £10m of extra profit for the bank then he gets £1m commission.

    Then at least most of the criticism would fall away.

    Only one problem - it will move the banks into becoming even more short term than they already are as you only know whether a 10 year loan is profitable once it is paid off, so banks will trade the loans instead.

    Rather than getting excited about the absolute numbers my question is whether anyone has any figures for what percentage of income do the banks pay out in wages and bonus? In most professional services firms the work on 1/3rd. 1/3rd, 1/3rd rule where 1/3rd of income is paid in salary costs, 1/3rd on fixed costs and 1/3rd is profit to be distributed to partners, however as partners always have living costs to worry about what that actually means is that once you include a certain level of partner drawings salary costs usually amount to 45-50% of income. Football clubs salary bill often amounts to 60%+ of income which is why their businesses are not commercially viable. So if salary costs (including bonuses) are no more than 45% of total income at the banks then I do not in principle have a problem with it

  • Comment number 66.

    It is amazing that we get the complaint that bonuses go to the low paid staff in the banks as well and since these are poor folk they need the money. This then supposedly justifies all bonuses.

    This is same argument which is trotted out when debating pay in local councils.

    Why is it that the highly paid are quite happy to retreat behind the lower paid in their organisations when it comes to protecting their own interest in higher pay and bonuses.

    The question they need to answer is why are there low paid people in these organisations in the first place? Is it because their role is not respected or are their wages adjusted downwards to shield their over-paid bosses from criticism?

  • Comment number 67.


    First off, the whole concept of getting City Bankers to restrict Bonus pots is a bit like getting Turkeys to vote for Christmas.

    Secondly, and, in my opinion, more importantly, lets get this 'fat cat bankers' v 'ordinary' bankers thing put to bed once and for all.

    The vast majority of people who work in the Financial Services Sector with whom the majority of the public come into contact with are, in the context of this discussion, 'ordinary' bankers.

    The fact is that such employees have a Reward Package that is usually made up of 3 parts:-

    A base salary
    A bonus based on their individual performance against targets that are set by management and which are not negotiable
    A bonus based on the overall performance of the company

    The base salary is relatively modest as management want to encourage performance by dangling the carrot of performance bonuses in front of the employee

    The performance bonus is paid out if very challenging targets are reached

    The overall bonus is paid out if the company makes an overall profit. If the company makes a loss; no bonus

    The performance bonus, if paid, is not stealing, no more than taking ones salary is stealing. It is part of the contractual obligations of the company to the employee and vice-versa. Indeed, should the employee not achieve target then he or she could well lose their job on the grounds of under-performance. Furthermore, to pay such bonuses is actually in the interest of the company owners as, assuming the targets have been correctly set then, the company will have performed better than had the targets not been there.......Carrot and Stick analogy etc

    As for the 'fat cat banker' Salaries & bonuses for the, largely, Investment Bank executives, well, in my opinion it's like the salaries paid to Premier League Footballers. Not justified, totally obscene, etc, etc, but a fact of life etc

    The only redeeming factor is that the tax return to HM Govt, especially at the Higher Rate, is something the cash-strapped Treasury can ill afford to do without at moment !

  • Comment number 68.

    Is the moral outrage at bonuses purely restricted to bankers? Or do people feel the same level of outrage at the sums earned by partners in legal firms, who have been hand in hand with the bankers every step of the way? Why do they get away without the same level of outrage, or had they already been parcelled up as "baddies" a long time ago, so there's no point in further slings and arrows going in their direction now? And what about the accountancy firms who signed off on the accounts and audits? Or is it just too easy to blather on about "greedy bankers"?

  • Comment number 69.

    Re post 66: why are there low-paid people in banks?

    Away from the trading floors and m&a teams, there are many areas in banking where people are paid at more reasonable levels, and the banks have looked to spin many of these teams away from London, so they can drive down salaries, building large processing centres in Poole and Bournemouth, for example.

    Is their work not valued? Not as much as income-generating areas of the banks.

    One of the main reasons that bonuses are used is so that banks can flex their costs base, increasing pay-outs in good years, and cutting them back in bad years. Fine in income-generating areas, not such a good idea in other areas.

    Bonuses have the effect of keeping people on the hook, and making sure that they tow the party line. Nobody is going to step out of line and question what is being done when a large compement of their take-home is "discretionary", and they risk getting on the wrong side of those who decide their bonus levels. Personally, I find that hugely inappropriate in control areas (finance, operations, risk, compliance etc.), and think that people in those areas should be paid salary only.

  • Comment number 70.

    @ 68. At 11:24am on 15 Nov 2010, jimmy wrote:

    > Is the moral outrage at bonuses purely restricted to bankers?

    Who mentioned morals? This is about hard cash - our hard cash - that was used to bailout broke, feeble and useless bankers. Lawyers, bean counters and other parasites are, of course, also useless overhead that we need to cut. But they didn't crush the money system of the world, and, greedy as such people may be, they are not in the same league of uselessness as bankers.

  • Comment number 71.

    66. At 11:21am on 15 Nov 2010, stanilic wrote:

    It is amazing that we get the complaint that bonuses go to the low paid staff in the banks as well and since these are poor folk they need the money. This then supposedly justifies all bonuses.


    Guess the same argument applies to if you tip in a restaurant. There are different viewpoints of this. One is that the staff are paid a low wage and rely on their tips so we should tip to help supplement the wage. This is the argument that can be applied to justifying paying bonus' to those who earn under X. The second is a fear factor - if you don't tip and then come back does your food get spat in? This is the argument about paying the big bonus' to the bankers otherwise there will be consequences to us. The third is only to pay a tip if you deem the service has been good - this is presumably the same argument as only paying bonus' to reward those who have done well.

    Now, the complexity becomes the distribution of this tip - should the restaurant distribute these tips to the front of house, the cleaning staff and the cooks (all involved in the operation) or should these be withheld until the long term benefit of this service is seen (eg repeat business). What if the business isn't doing very well (loss making and is going to be unable to repay its loan and probably close) should tips be withheld to help fund the business?

  • Comment number 72.

    The CEO's of the FTSE 100 now receive an incredible 155 times the average wage in the U.K.

    The AVERAGE Premiership footballer now receives more than the average annual U.K salary in a WEEK.

    The average U.K dentist in the N.H.S is on a 6 figure salary.

    The average U.K G.P in the N.H.S is on a 6 figure salary.

    A news READER (not an investigator, reporter, researcher but someone who READS correctly information put in front of them) has/is being paid a 7 (seven) figure salary. (not by the B.B.C)

    There are many other examples.

    The most complex of leveraged derivative financial instruments is in essence not more mathematically complicated than some of the accumulator bets that uneducated habitues of the nations betting shops handle on a daily basis; though the factors involve more decimal places and more variables the very efficient computing resources and programmed Algorithms installed simply need those factors inputting.

    When was it decided and in what market led manner that in a very short time scale a FEW years ago that the entire bell curve of average earnings needed to be vastly skewed in favour of these people?

    In Football it obviously involved one man, Mr Murdoch and his successful attempt to corner the satellite T.V market by hurling huge amounts into a closed system.

    As to the the banks it seems that they thought "Will anyone do anything if we double our salary/bonus?" No one did or demurred loudly so they did it again and again.

    It comes down to acceptance. When it was boom we didn't care, now that its semi bust we do.

    They are chancers but most of us are hypocrites,

    Few if any of us would refuse the remunerations offered and the sum totals are a fraction of the economic fiscal entity.

    What is the problem is the BEHAVIOURAL changes they have made.

    Whether it is the Player who sits back in his football club waiting to go Bosman and attract a further huge rise in his pay or the Banker who undertakes a pointless financial risk purely because the upside will massively increase his bonus whilst the downside will effect it not a jot while no physical or economic betterment will occur no matter how positive the outcome in terms of his bank's P/L or the wider world.

    When institutionalised behavioural norms are discarded there are rarely sanctions in place or the will to impose such sanctions as are extant to reign us in.

    Just as we see in our High Streets at closing time so in the markets.

    That which "Was not the done thing" is now being done and all we have is a metaphorical "Slapped wrist".

    To an extent we used to know how to behave on both a personal and entity level dispensing with the need for regulation and punishments but having cast aside our inhibitions it is surely time for stern and certain inhibitors.

  • Comment number 73.

    65. At 11:14am on 15 Nov 2010, Justin150 wrote:

    > In most professional services firms ...

    You can't count bankers as "professionals", for goodness sake - you'll be comparing them to engineers, nurses and dentists soon! To be a "professional", you have to at least be useful to society. Bankers fall at the first jump.

  • Comment number 74.

    73: Justin was using professional services firms as an example of a model of cost-base. He wasn't referring to banks as professional services firms. He also mentioned football clubs, but don't think he was suggesting that Morgan Stanley was a football team.

  • Comment number 75.

    69. At 11:35am on 15 Nov 2010, jimmy wrote:

    > Bonuses have the effect of keeping people on the hook,
    > and making sure that they tow the party line. Nobody is
    > going to step out of line and question what is being done
    > when a large compement of their take-home is "discretionary",
    > and they risk getting on the wrong side of those who
    > decide their bonus levels.

    That explains why bankers acted have like a bunch of sycophantic, docile, conformist zombies, since the credit crunch. I expect they were afraid, as well as greedy.

    The way to defeat fear is to confront it. Bankers hate confrontation, but that is the only antidote to fear and greed. Keep the pressure up - they must submit to us or be broken up. Those are the choices.

  • Comment number 76.

    75: my point was that I don't agree with paying disctetionary bonuses to people in non-revenue-generating roles. I suggest paying salary-only packages in infrastructure areas.

    In your haste to bash all bankers as "greedy" (thanks for trotting that one out again in your latest post), you're missing the points that people are actually making here (eg. post 73).

    Banking isn't the real problem in this country. It has cost the tax-payer next to nothing in terms of cash, and provides an excellent smoke-screen for governments who have overseen massive increases in national debt, crippling the country.

  • Comment number 77.

    Guys, the idea that large bonuses are to attract the best and to compete wears thin with me. I recall a previous point made by WOTW asking how many times do you actually see these jobs advertised. I'm much more concerned about long term bank stability than year to year bonus culture. I also agree that the 20 times salary cap is a good concept, albeit alas, fairly easy to get around in the real world of "clever" accounting.

  • Comment number 78.

    58. At 10:29am on 15 Nov 2010, Theo Georgiou wrote:

    > 1.5-1.8bilion will be taken out of the economy so less money for everyone

    It's amazing how many people spin this nonsense. The 1.8 billion was scooped out of the economy in the first place, so there won't be "less money" for everyone if it's not scooped out in the first place!

    Really - some people have more front than a double decker bus!

  • Comment number 79.

    The title of tonight's Panorama is "Tax the Fat". Do you suppose they mean bankers?

  • Comment number 80.

    78: Theo's point is that if 3bn less is paid in bonuses, then the treasury takings will be down. Naively, he suggests that this would come to 1.2-1.5bn, assuming that the 3bn would all incur top-rate tax, when in fact the taxman won't get near large chunks of it. Anyone remember Darling's "one-off" supertax last year? Even he didn't estimate that he would get his mitts on much cash out of the deal, certainly not 40-50%.

    So yes, the taxman would get less cash, but all that means is that it would remain on the banks balance sheets, in undistributed reserves, or get paid out in dividends, so find its way into the economy by a different route.

  • Comment number 81.

    @ 76. At 12:08pm on 15 Nov 2010, jimmy wrote:

    > In your haste to bash all bankers as "greedy"

    Have you forgotten all the damage already? Maybe you want to forget?

    Look, I have no time to quibble with people about whether they are this-type or that-type of banker. We're all in this together, remember? Greedy bankers had plenty of time to get their act together, and failed abjectly. They have one more chance to submit or be broken up. One way or the other, the bonus culture will cease. Well... we're waiting...

  • Comment number 82.

    79: no Jacques, and The Weakest Link isn't about bankers either.

  • Comment number 83.

    " Banking isn't the real problem in this country. It has cost the tax-payer next to nothing in terms of cash, and provides an excellent smoke-screen for governments who have overseen massive increases in national debt, crippling the country. "
    Lol. Really! The banks have cost this country dearly by creating the worst recession since the 1930s. My understanding is they have to repay £200 billion in debt back to government next year. I dont think you have quite got to grips with the situation. The private debt in the UK is about £1.4 trillion, and way bigger than the government debt, as a result of the lending the banks provided over the decades.

  • Comment number 84.

    54. At 10:19am on 15 Nov 2010, Turbulent_Times wrote:

    > the idea that putting some sort of restriction on banks’ ability
    > to pay bonuses will have some catastrophic effect on the ‘talent
    > pool’. What on earth is this founded on?

    I know - what "talent"?

    The only talent they have is for cooking up incredibly risky and impenetrable derivatives that tie the money system in knots, suffocating it.

    Why is there all this discussion? We've made up our minds - they have to be chopped. Who is dragging their feet around here?

  • Comment number 85.

    Banks paying large bonuses is actually the most direct way they have to give money to the state. Think about it, an undeserving (let's assume) trader recieving his annual £1m bonus - £500k gets paid in income tax, some in NI, whatever he spends will be further taxed at 17.5%. If the banks reach an agreement and only pay half of that, then only 250k will be taxed at 50% and the rest will be taxed as profit at 26%.

    Much as it gauls me that this very lucky chap is living his life as a millionaire, we as a state are better off as a result of his bonus.

    It doesn't benefit us if he ups sticks and moves to Wall St. or Singapore.

  • Comment number 86.

    @30. At 08:59am on 15 Nov 2010, torpare

    Interesting point regarding the purpose of a bonus. In an ideal world people will get paid a proper amount for doing their job. But everyone knows not all people are the same and some people will work hard whilst others will try and get by whilst doing as little as possible.

    Excluding the obscene amounts the top bankers get, most others are paid performance related pay. This is decided on a 360 degree review of performance. This helps distinguish the more productive workers over those who do the bare minimum. The amounts are not technically a bonus, more performance related pay...

  • Comment number 87.

    Popular blogg this one! I'm sure they'll just be clever and hide the real do$h that gets handed out, ordinary JOE PUBLIC will never learn the truth! The FEW living off the MANY. There's that old slogan again 99% of the worlds wealth is owned by 1% of the worlds population! If ever there was a specific group crying out for some form of retribution, for sure many will argue that it should be directed at the 1%......but what form of retribution applies?

  • Comment number 88.

    I thought it all started with Fanny Mae and Freddie Mac in the USA?

    I also believe that those bankers with the big bonuses ought to go - they clearly aren't as clever as they think they are (lok at the mess they have created) and it would be very interesting to see currently how "competitive" their talents are when looking for a job now.

    There are plenty of younger bankers out there who will do a good if not better job so I say create a restructuring programme on those banks funded by the public that avoids the need for their skills, change their contracts to avoid huge golden goodbye payments and sack the lot of them.

  • Comment number 89.

    81: "Look, I have no time to quibble with people about whether they are this-type or that-type of banker"

    Translation: I don't know one end of a bank from the other, and don't want to show myself up, so safest to lump them all in the one category, "greedy bankers".

    As above, I agree with abolishing bonuses for the vast majority of bankers, and think that the control and infrastructure layers would function far more efectively if they were paid salary-only packages.

    Front-line sales-people will always be paid commissions/bonuses, whether they're selling phones or bonds, but banks need to do a far better job in only paying out on secured income.

  • Comment number 90.

    84: "we've made up our minds"

    Constantly saying the same thing doesn't make it true.

  • Comment number 91.

    Bonuses should be either banned in total or spread evenly throughout the company.

    Surely these top bankers are paid the salary they are paid because of the responsibility they have, their knowledge and experience etc. Why do they also need huge obscene bonuses? If they leave the UK to get bigger bonuses elsewhere then that just proves the real worth and attitude of these people - they are greedy and selfish.

    We all work hard and are paid to do the jobs we are employed to do. We are all having to tighten our belts and most of us are having our belts tightened even further by this government who are hell bent on telling us that it is necessary and we are 'all in this together', well some are clearly not in this at all and can look forward to thousands, maybe even milllions to soend on yet more big houses abroad or another Porsche, or saving up for their retirement ... now how will they manage with £3 bn less going into their saving pot! Most ordinary people are losing their pensions or having them drastically reduced. If these people are that greedy and selfish then leave UK and don't come back.

  • Comment number 92.

    ‘20 Times the lowest paid employee’, nice idea but my MD would love this, and in his case it is only 8 times the lowest paid. Our bonus is capped at 40% of package and that only after achieving 150% of the target: on average we have paid out between 11 and 15% over the last 3 years, I understand that to talk about bonuses when people are losing their jobs is tough but not all bankers are earning £1 mill as a bonus, my guess is very few are, certainly none in my company!

  • Comment number 93.

    86: I agree about performance, but performance differences can be recognised through differentiating on salary levels. Would lead to smoother comp levels for employees and a smoother cost base for the bank.

  • Comment number 94.

    37: "If UK bankers really were "talented" they wouldn't have got the economy into a mess in the first place and if they now wish to bail out and take their chances elsewhere - as it is always put - then so they should. Let them all clear out I say."

    Actually I think you'll find that UK bankers didn't create the UK's structural deficit or a global rebalance in wealth from west to east. Bankers are a convenient scapegoat for a much deeper problem here and saving 7bn in bonuses will do nothing to stop the decline in western lifestyles.

    I suspect that you will get your wish as much of the financial services sector relocates further east over the coming years - leaving us with an even more impoverished country.

  • Comment number 95.

    @11. At 00:10am on 15 Nov 2010, Siberianwinter wrote:
    "When the taxpayer is repaid, government, who own the majority of Bank A shares, sells them to bank B at a suitable discount."
    Why not sell the shares for what they're actually worth, rather than at a discount?
    "Under new ownership and control Bank AB becomes a worthy market participant and global economic peace is restored."
    For a few years until the cycle begins all over again... I thought some contributors here wanted to split the size of banks down so they posed less of a risk, as well as much tighter regulation? Bank AB sounds rather a lot like Lloyds/HBOS, which is, er, doing very well isn't it? A quick glance at the the title page of this I think is rather telling: don't expect bank bonuses to be affected by anywhere near a £3billion reduction.
    When can we have similar investigations into KPMG, Deloitte, Ernst & Young and PricewaterhouseCoopers and their roles in this débacle (all rather old links, may I add)? I appreciate the vehemence against the banks but these companies were complicit in the mistakes of the banking sector. Why are they getting away with blue (or white collar) murder? It wouldn't be anything to do with their disturbingly close relationship with government in terms of consultancies and admin of PFI would it?

  • Comment number 96.

    87: Redrobb, I think you're on the wrong thread. If you want to go after the top 1% of the world's wealthiest, you won't find them in the banking world (apart from a small handful of individuals) ... you might have more success in hedge funds, oil industry etc.

  • Comment number 97.

    69 jimmy

    `Bonuses have the effect of keeping people on the hook, and making sure that they tow the party line. Nobody is going to step out of line and question what is being done when a large complement of their take-home is "discretionary", and they risk getting on the wrong side of those who decide their bonus levels.'

    Thanks, Jimmy.

    I have heard this before. So bonuses are being used by poor managers incapable of obtaining the best from their staff to intimidate their people into preferred behaviour. This is not management: it is manipulation.

    Speaking as a manager I have always found that the best efforts are obtained by paying a salary just above the average salary for the area and allowing the staff to control their own task. People enjoy their work if they feel their efforts are appreciated and no barriers are put in place to prevent them working well. Bonuses are unnnecessary.

    Only what I call `political' managements make work difficult. I was told early in my working life that the manager is the person responsible for the designated job and their staff are there to help them do it. Therefore productivity is the measure of the manager and not his staff.

    When the big drive came in for `performance related pay' the argument went that a set standard of measures existed which defined that performance. The level of bonus achieved related to conformity to the performance measured. The requirement is that such schemes be transparent and run objectively. However, it is quiet possible within an organisation that bonus schemes can conflict with each other across departments and also lead to a culture of conformity to the bonus rather than conformity to the broader objectives of the organisation such as long-term planning.

    Now we seem to have a situation in which staff are poorly rewarded but blackmailed into conformity by management holding the prospect of a variable sized bonus over them . This is not management; it is corruption.

  • Comment number 98.

    @82. At 12:28pm on 15 Nov 2010, jimmy wrote:
    "79: no Jacques, and The Weakest Link isn't about bankers either."
    Well, Porridge wasn't a cookery programme either... Perhaps it was a comedy about bankers being imprisoned on corruption/fraud charges?

  • Comment number 99.

    What gets me is the way the bankers are clinging on! Despite a ferocious hurricane of public opinion against them, they still think they have the option of carrying on as they have been. What does it take to deliver a message into those thick skulls? They must have thought that their glass towers blocks and leather chairs would protect them. Well, it's done the exact opposite – every utterance they make is received by the public with outright contempt. Being British is not some sort of game. If you act viciously against our public good, as bankers have done, then you have to go. Like a dog that bites the hand that feeds it – you simply have to go.

  • Comment number 100.

    @77. At 12:09pm on 15 Nov 2010, Kudospeter wrote:
    "I also agree that the 20 times salary cap is a good concept, albeit alas, fairly easy to get around in the real world of "clever" accounting."
    You don't need clever accounting: it just needs to be in your job contract...


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