Banks score own goal with bonus culture defence
In the blink of an eye it look as if the City is “booming” again after Barclays and HSBC announced buoyant investment banking earnings on Monday.
Both banks were hit by a surge in bad debts as the recession took its toll on borrowers, but analysts said that resurgent debt and foreign exchange trading and market share grabbed from troubled rivals fuelled the largely positive results.
Barclays announced an eight percent rise in profits for the first six months of the year to almost three billion pounds, while HSBC reported profits of the same amount, though this was half what they made during the same period in 2008.
The results have led to speculation that some City workers will once again receive bumper bonus packages just months after the banking sector was bailed out by the taxpayer.
Barclays’ Chief Executive John Varley defended the system of bonus payments by comparing his staff to highly-paid footballers.
“The football analogy certainly goes some way to I think [to explain bonuses]….There is simply no higher priority that to ensure we filed the very best people,” said Varley. “That in a sense is exactly the same as a football manager if they are going to win. Our obligation is to ensure we pay appropriately.”
Which begs the question of whether you would rather watch Steven Gerrard scoring a goal or pay a visit to your local Barclays branch manager.
While Varley juggled his football metaphors, Stuart Gulliver, who runs the investment bank at HSBC, used a different analogy, comparing the bank bonus culture to the Hollywood studio salary system.
“If a foreign exchange trader makes a deal then they know two days later how much they made,” said Gulliver. “If it’s a £5m profit, that is something we can count, we can see it, it’s real. And they are part of a successful team.”
Barclays and HSBC did not receive government handouts but all the banks benefited from state intervention that used £1.2bln of taxpayer funds to prop up the banking system.
Do you think it is right that big bonuses reappear so soon after the height of the banking crisis and while homeowners, savers and small businesses are still struggling?