Banker to client: "Here's a good idea, you give me all of your cash. I will keep it safe on condition that you allow me to self regulate. What do I mean by self regulate? Oh nothing really, you just let me decide every year how much of the cash I take out for myself. My old mates on the FSA will look in now and again so it wont feel at all risky. Its as safe as houses."
The UK banks were recently given an injection of 37 billion pounds to stay afloat. The 37 billion was designed to demonstrate to the world that the banks were safe, the actual, immediate figure that was needed may have been less than this amount.
When I look at the scale of the bank bonuses the big question that strikes me is whether the bank's own employees, including the directors, took so much money out of the banks that they began to teeter on the brink of collapse. It has been clear for the past three years that there were severe problems in the sub-prime market place so how much money did the crooks who run the banks extract during this period?
The actual figures for bonuses are kept fairly secret. This in itself is odd and suggests underhand activity. The best estimates I can come up with are given below:
UK
Barclays
Approx 3.2 billion per annum
Approx 1.2 billion to Lehman staff after takeover
RBS
1.5 billion per annum
0.7 billion to ABN AMRO as bonuses in 2008
HBOS
0.3 billion per annum
Lloyds
0.25 billion per annum
The HBOS and Lloyd's figures are probably too low, given what we know about Barclays and RBS. I would guess that the range of annual bank bonuses is from £5.25 billion per annum to £7 billion per annum. Over three years this amounts to between £15.75 billion and £21 billion pounds plus £1.9 billion in acquisition bonuses in 2008 which makes £17.65 billion to £22.9 billion in bonuses over three years!
Yes, it really does seem to be the case that the bail out is actually a payment for legalised theft of funds by bankers. It is extraordinary that these bankers are still in work. Is there no justice in the UK?
The craziest aspect to these bonuses is that they actually made top management less likely to stay in post. The figures for mobility of UK senior bank staff in 2005-2006 show this:
November 2005: HSBC
• New Chairman: Stephen Green (internal appointment, former CEO)
• New CEO: Michael Geoghegan (internal appointment)
December 2005: Royal Dank of Scotland
• New Chairman: Sir Tom McKillop (external appointment)
• New CFO: Guy Whittaker (external appointment)
May 2006: Lloyds TSB
• New Chairman: Sir Victor Blank (external appointment)
July 2006: HBOS
• New CEO: Andy Hornby (internal appointment)
August & October 2006: Barclays
• New Chairman: Marcus Agius (external appointment)
• New CFO: Chris Lucas (external appointment)
November 2006: Standard Chartered
• New Chairman: Mervyn Davies (internal appointment, former CEO)
• New CEO: Peter Sands (internal appointment, former CFO)
• New CFO: Richard Meddings (internal appointment)
(F&C Report)
This mobility is highly probable when, after a year in post a person receives payments equivalent to winning the lottery. Of course, golden handshakes and golden goodbyes make banker's "musical chairs" a highly profitable game. In this context it is interesting that the people who are probably most to blame for this bonus culture are the Institutional Investors (banks, pension funds, insurance companies) and they all vote on each other's remuneration reports at shareholder's AGMs and employ each other's executives.
I would suggest that company law is changed so that remuneration votes are performed on the basis of a possibility of plus/minus 50% variation on a a national remuneration scale for PLC directors with approval using one vote for each shareholder rather than voting based on size of shareholdings so that this daylight robbery is terminated.
Further Reading
F&C report on bank governance
http://www.fundnets.net/fn_filelibrary//file/co_gsi_Banks_UK_Banks_Governance
CEOs say overhaul of bank bonuses on the cards
Lisa Jucca and Nichola Groom. STV
http://news.stv.tv/business/73169-ceos-say-overhaul-of-bank-bonuses-on-the-cards/
http://www.thisislondon.co.uk/standard/article-23637336-details/Bank+boss:+We+deserve+bonus/article.do
"Mr Varley said Barclays profits were down 14 per cent. He said bonuses for last year [2008], one of the worst years in banking history, were 48 per cent lower. Main board directors will get no bonuses, he added."
"Barclays does not reveal how much it paid out in bonuses last year but total staff costs fell from just over £7 billion in 2007 to £6.25 billion last year even though the number of employees increased from 135,000 to 155,000.
Today's figures reveal that average pay and bonus for the 18,600 employees at Barclays Capital fell from £193,000 to £124,000 last year."
The Times
February 9, 2009
Barclays' £600m in bonuses pushes bank pay-outs past £2bn
Patrick Hosking and Francis Elliott
http://www.timesonline.co.uk/tol/money/article5689399.ece
http://itn.co.uk/news/e59f2050e01c266d98f280d36ea69c2b.html
RBS will pay bonuses to staff despite government bail out Daily Telegraph 01 Nov 2008
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/3333632/RBS-will-pay-bonuses-to-staff-despite-government-bail-out.html
Fury over Lehman's $2.5 Billion Bonus Plan
http://www.newsmax.com/insidecover/lehman_bonus_barclays/2008/09/21/132969.html
£4300 bonus as bank profit hits £5.7bn
http://www.eveningtimes.co.uk/news/display.var.2076835.0.4300_bonus_as_bank_profit_hits_5_7bn.php
44/07 Thursday 29 March 2007 £252 MILLION PAYOUT FOR LLOYDS TSB STAFF
http://www.mediacentre.lloydstsb.com/media/pdf_irmc/mc/press_releases/2007/march/4407pressrelease.pdf
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