Tuesday 29 January 2013

RBS Bonus row, part 69....

It is fairly wearying reading the wild gnashing of teeth about the latest developments at our state owned RBS bank. The bank is due to announce a fine for LIBOR trading that will be in excess of Barclays but somewhere short of the UBS fine, where the criminal behaviours will be tested in court.

But at £500 million, of taxpayers money, much of it will go to the US Treasury, at a time when our own deficit is climbing and the share of the state taken by our Government is climbing too (back to 49% of GDP now and rising).

Moreover, £250 million is set aside for bonus's to bankers at RBS, this will really stick in the craw of the public. Whipped into a frenzy of hate against bankers by the Anarchists and an ex-Labour Government who seek to apportion blame for their failings elsewhere.

Yet RBS has shrunk its Investment bank, where much of the damage that led to a £45 billion state bailout was done, by some 70%. Of those, not all would have been in place in 2008. So we reach a moment where those under attack are not those who committed the acts of folly.

Luckily, the bank does not have clawbacks in its bonus system that will enable it to reclaim much of the past bonus's of those who have failed. The system is improving. However the principals have not changed and I am at a loss to understand why. Clearly bonus's are paid for performance and if the overall performance is leading to losses then extra rewards should be verboten.

There are plenty of unemployed bankers, and increasingly, algorithms, that can replace traders who say they are special at RBS. Also there are plenty of good people there who will not leave. If the price of respectability at the institution is another few years of no bonus's until the place really is on the mend, then that is the most sensible course. Why every year they go through this charade and wind-up is beyond me, performance related pay should mean just that, performance of oneself and one's organisation.

I note that this week politicians are also voting on their own pay rises again, but more on that tomorrow...

6 comments:

Blue Eyes said...

We seem to be going around in circles throwing as much sand and spanner material into the machinery as possible. Who will break first?

Bill Quango MP said...

The term 'banksters' was invented during the wall street crash. Bankster to rhyme with the gangster, the Saint Valentine's massacre having made headlines just months before the great crash.

After the crash bankers were despised in the world. A popular joke was "Don't tell my Mum I'm a banker. She thinks i play the piano in a brothel."

andrew said...

We are basically telling a small but well connected group of people(socially, professionally and geographically) that they should have a v.v.v. big pay cut.
They dont like it, try not to listen and point to the other competitors who pay more. The directors whose job it is to implement the cut will be conflicted as their high pay is framed by the high pay of their employees

In a truly competetive market a new player would emerge to disrupt this.
It took 30 years to get here, I do not expect a resolution in 2013.

CityUnslicker said...

Andrew - great comment.

Malachi Brown said...

I find it amazing that a company can make a loss and yet bonuses are still paid. And there's no sense of shame or embarrassment about it.

For RBS, bonuses should be off the table until the bank shows a profit and resumes dividends for its shareholders. The shareholders are those people who actually owned the money that the bank's employees used to engage in their speculations.

These people should be doing major jail time, not talking about their bonus. Unfortunately, we don't have anyone with the guts and willpower to prosecute. The US did have Eliot Spitzer - till he made a mess of his own career. Pity we don't have more like him.

Agence communication said...

"" It is fairly wearying reading the wild gnashing of teeth about the latest developments at our state owned RBS bank. The bank is due to announce a fine for LIBOR trading that will be in excess of Barclays but somewhere short of the UBS fine, where the criminal behaviours will be tested in court.

But at £500 million, of taxpayers money, much of it will go to the US Treasury, at a time when our own deficit is climbing and the share of the state taken by our Government is climbing too (back to 49% of GDP now and rising).""