February is the banks’ reporting season – and the inevitable controversy about bankers’ bonuses. This year has been no exception.
The bonus culture in principle can be defended, especially in risky commercial sectors. During the good times, you prosper; during the bad times, you don’t.
However, the vast sums of public money used to save the banks from collapse raises the question as to whether any sizeable bonuses should be paid – and especially for staff at RBS which has received close to £45 billion of public money.
Not surprisingly, politicians have focused on the 84% state-owned RBS and, to a lesser extent, on Lloyds in which the Government now has a 41% stake. For HSBC, however, which has received no direct financial support from the Government, different criteria should arguably apply.
The difficulty for the Government is its wish to maximise its returns from eventually selling its stakes in RBS and Lloyds. In the former’s case, its share price is little over 30p and its best staff, who drive the profits’ line, are obvious recruitment targets for rival banks.
Contrast the understandable antipathy towards bankers’ bonuses with the far less controversial salaries of top Premier League footballers, such as Messrs. Rooney, Terry and Gerrard, who currently take home over £100,000 per week each.
If a wage cap of say £30,000 per week were prescribed, the majority of the Premier League’s best footballers would presumably play overseas.
The difference is that, if the Premier League then collapsed, the whole UK economy would not shudder. But with the banks – and especially the appalling plight of RBS – this was not the case. Hence, the unprecedented Government support.
In truth, the top banks will eventually need to be separated into retail and investment operations – with the latter’s staff being well remunerated but without a safety net if they fail.