Will bankers turn against bankers?
Clarissa Tan 5:45pm
Today brings the news, distressing to some quarters, that HSBC is paying its chief executive Stuart
Gulliver £7.2 million — making him the highest-paid banker in the UK for the financial year so far. The remuneration comes on the back of a 28 per cent jump in full-year profits, which
means HSBC has bucked the dismal trend of other British banks.
Still, as you might expect, it’s the buoyant figures denoting Gulliver’s pay — and those of the top 170 members of staff — that are making the headlines, with calls for HSBC to explain itself. This is part of the regular drumbeat against
financial ‘fat cats’ that’s been going on for months, so in that sense it’s nothing new. But as this continues one wonders if a new development will emerge: will bankers get
disgruntled with fellow bankers?
Simply put, times are tough, even for financiers (relatively speaking). HSBC itself has outlined plans to chop off 30,000 jobs by 2013. Credit Suisse will get rid of 3,500 jobs and Citigroup 4,500,
while RBS foresees 3,500 cuts. So far, the plan for laid-off bankers has been to flee Europe and
move Eastward to greener pastures — but Asian bankers, too, are starting to feel the pinch, with their bonuses down this year.
The thing is, the crème de la crème of profits has always gone to one kind of banker — the investment banker. But the pie has normally been big enough for everyone in the
financial industry to have a nice slice too. Now the pie is shrinking fast, leaving more people with crumbs. RBS, for instance, has paid out £785 million in bonuses, but much of this has gone
to its 17,000 investment bankers. Their average bonus, as the Daily Mail notes was £22,941 — that’s £1,000
more than what the average worker in an RBS branch earns as salary in a year.
One thing that’s arising is faint rumblings — and some apparent remorse — from sections of the financial sector against the renegade members of their own industry, with this semi-confessional book being one recent example. As Fraser points out, it’s profit-oriented organisations that are the best in exposing and correcting their
own problems. It would be interesting if bankers took up arms against their own.
Previous
TomTom
February 27th, 2012 6:01pm Report this commentRBS loses £2,000,000,000 AFTEr paying out £785,000,000 in Bonuses therefore the Bonuses are Fixed Cost. that means the business model has no room for Shareholders or Equity; yet it is supposed to need Equity to meet Basel II. How do Bankers recommend their Clients function if their Fixed Costs push them into loss ? Will they be increasing loans to such businesses ?
faust
February 27th, 2012 7:00pm Report this commentIt is pretty simple: previously profitable business lines are now unprofitable partly due to regulation, macro environment and funding costs.
If people want to preserve jobs in finance then they shouldn't stifle finance. If they want to stifle finance, then expect job losses. People should not demand the best of both worlds!
Jeremy
February 27th, 2012 7:18pm Report this commentClarissa Tan:
"It would be interesting if bankers took up arms against their own."
I'll take up arms....against a sea of troubles and by opposing end them, Clarissa.
Dimoto
February 27th, 2012 7:38pm Report this commentLargest bank domiciled in Europe.
Very profitable.
Only a small part of it's business is in the UK.
Shouldn't we just mind our own business ?
TomTom
February 27th, 2012 7:56pm Report this comment"previously profitable business lines are now unprofitable "
If you had properly priced RISK they were always unprofitable
telemachus'
February 27th, 2012 8:12pm Report this commentLook, Gulliver has to cut 30,000 jobs by 2013
That is a pretty exacting task and deserves £2400 a head
So dont go on about greedy bankers and fat cats
Axstane
February 27th, 2012 8:19pm Report this commentWhen his bank has done so outstandingly well [and used no state money] it is not unreasonable that Mr Gulliver should be paid just half as much as Spud Rooney.
Dan Grover
February 27th, 2012 9:42pm Report this commentTomTom: If you have losses of £2tr and bonuses of £785m, they didn't "push them into loss", and you're also making a strawman argument by assuming that the best way of shoring up the balance sheet is by reducing "fixed cost" irrespective of outcome - but the bank wouldn't be in a better position now if, it transpired, their losses would have been significantly greater were it not for the work of those that received the £785m.
Also, Basel II has been made redundant with the formation of Basel III, none of which's milestones are until 2013.
daniel maris
February 28th, 2012 1:53am Report this comment"Times are tough"... do us a favour Clarissa.
The only people getting shafted are those in the middle and at the bottom of the heap. There is absolutely no sense in which we are "all in this together". National solidarity counts for absolutely nothing.
TomTom
February 28th, 2012 6:13am Report this comment"if, it transpired, their losses would have been significantly greater were it not for the work of those that received the £785m. "
I ask only that Bankers apply the same standards to those companies seeking funding and rollover loans to loss-making firms
Sir Everard Digby
February 28th, 2012 6:52am Report this commentWhy the angst? The private sector,which HSBC truly belongs to (it did not get a government handout)has but one objective -to make us pay for everything.
It's working well so far. We pay for the water we drink,we even pay for exercising.
Those working in the corporatised end of business will be measured and paid for acheiving this. Contracts will be structured accordingly. Buy some shares and vote,if you disagree,otherwise get over it.
Cost cutting is a permanent feature for financial services and has been since at least the mid-90s.
Investment bankers,as we know take risks -some more so than others.The shareholder subsidises this. Sadly,thanks to Labour, the taxpayer is a shareholder but did not agree to be one. It is incredibly hard to change behaviour and operating practices as this article ably witnesses.
The golden moment to make the kind of changes needed has passed.It should have been dobe when the banks were on the verge of collapse. Sadly Labour did not understand the industry and the risks it was taking. Nor did they have the bottle to deal with the situation properly.
I suggest it will be a while until that opportunity comes round again -will anyone take it when it arrives?
Kevin
February 28th, 2012 8:25am Report this commentIf he is willing, I nominate TomTom for promotion to blogger status on Coffee House.
TomTom
February 28th, 2012 9:07am Report this comment"The private sector,which HSBC truly belongs to (it did not get a government handout)"
Really ? So what has the Federal Reserve been doing with QE ? The ECB with LTRO ? Or the BofE with QE ? Or the Bank of China ?
Just who is being funded at 50bp to lend out at 2900bp ? Just what is HSBC paying Depositors ?
HSBC is a major AIG Counterparty.
There is NO private sector when Central Banks have created 25% Global GDP through QE
Adam Smith
February 28th, 2012 1:31pm Report this commentWhat a non-article!
The pertinent facts are:
* Bank does well
* Boss gets paid more
Hurrah for much needed good news!
Providing shareholders are happy there’s no further discussion to be had. Attempting to attribute elements of these profits to QE, TARP or bailouts received by other banks is impractical and slightly silly. As is suggesting bonuses shouldn’t be paid to chief execs that make staff cuts.
We should be focussing on how to appropriately handle/wind-down poorly performing banks and stop berating good ones!
Fergus Pickering
February 29th, 2012 7:34am Report this commentAnd of course when the water companies, the energy companies, the telephone companies, the trains and the buses were all state owned they were all FREE. Ah happy days.
Mr Danger 1
February 29th, 2012 11:09am Report this comment"There is absolutely no sense in which we are "all in this together".
Thank you for taking an extra 10pp of my pay and then saying I have contributed nothing.
robertsgt40
March 1st, 2012 4:06pm Report this comment"Will bankers turn against bankers?"--Of course they will. To be at this level of theft, bankers lack qualities that make them acceptable to the rest of the human race. They will eat their own. They have eaten the rest of the world. Gluttony can't stop on it's own. What they have sown, so shall they reap.
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