Laughing all the way to the Bank

Much triumphant crowing from the Labour party and their PR agency, the BBC. "Bankers Accept Bonus Curbs". Oh, well done, Darling.

Five UK banks have bowed to Labour's showboating and class-envy-based posturing, and agreed to confess that the UK's housing bubble and the massive growth in the public sector and the selling of the gold for bargain basement prices and the increase in teenage pregancies was all their fault. Hair shirts for the bankers!
But wait a second. One thing that has been quite clear all along is that Brown, Darling and the rest of the Labour party have no fucking clue how Investment banking works.

We've talked about this before: the way everyone - including some politicians - firmly believes that bankers are presented with enormous sacks, crammed with twenty pound notes on January 1st every year. That's about as naively simplistic as believing that cutting VAT to 15% would make us all buy enormous plasma screen TV's the very next day. Oh, wait..

So, let’s have a look at the rules they've decided upon, and what difference they'll make:

• Minimum bonus agreements should be limited to just one year

Nearly all minimum bonus agreements already are for a year, at most. They're to get people to leave their previous job - and bonus - and take a chance with a new employer. And, in common with much of the bonus mechanism, fuck all is written down. It's all 'my word is my bond' in the City, old boy. And if you renege, you'll lose the staff and not get any more, so it sort of works. So, yes, Gordon, we'll go along with that one.

• Bonuses should be clawed back in the result of a person's poor performance

Yeah. Like that'll work. After you've paid the bonus, and the tax, and the NI, and bought and transferred the shares and share options that make up most of the bonus, you're then going to somehow claw all that back at a later date, are you? Is the taxman going to give back the tax? No. Can you transfer shares out of someone else’s' ownership? No. Will the cash even still be in the bankers' current account? No. Is this idea remotely fucking workable? No.

• Senior executives should have between 40% and 60% of their bonus payments deferred over three years, with at least 50% paid in shares. The same rule applies for other bank employees who make the most risky investment decisions

They already do, for fucks sake. Banks' hardly ever pay 100% cash bonuses. They pay them in a mixture of all sorts of things: stock, options, loans, wine, gold, whatever. Partly to be tax efficient, partly to - guess what - defer the payments over several years.

Does anyone really think that any bank wants to part with a shitload of cash immediately? No, they'll put together a 'package', technically worth the same, but structured so that the banker can't get his greedy paws on it for years. It saves the bank 'real' money and it ties the banker in. Duh!

• Firms will be required to publish an annual report on their bonus payments

What, because they haven't before? What did they do, put them down as Stationary? Charitable Donation? Nah. Banks already publish the figures. How else do you think the tabloids get hold of them, and splash them all over the place with monotonous regularity?

• Large banks should have an independent committee to determine bonus payments

Yeah. That's a good idea. You could call it a Remuneration Committee. Oh, wait..

• Banks must ensure that their total remuneration payments to staff do not affect the underlying financial health of the business.

Yes, because they would never think to do that without this witless legislation, would they? They'd just give away all their cash in a bonus frenzy, then have to go out of business because they didn't keep enough in reserve to pay the bills. Thank goodness Alastair - who's never even run a whelk stall - is there to advise a global organisation how to behave.

For fucks' sake. None of these 'new' rules have anything to do with good governance, financial sense or even prudence. They're all just a lot of pointless showboating, by a party desperately trying to regain the public's favour, and desperately trying to put the blame for the recession on everyone else.

And none of them will make the slightest bit of difference to the way the banks work, and entice and retain the best staff.

No wonder the banks signed up so willingly.


5 comments: said...

"They're all just a lot of pointless showboating"

That would be right although I wouldn't defend investment banks and banks for the greed and stupidity of some boards over recent years. These measures will acheive the square root of fvck all. The goverment, the BoE and the regulators have learned nothing and are failing again.

They need to examine not compensation, but where the leverage is in the banks which creates the demand for high compensation and what instruments and strategies are employed using that leverage.

All year banks have been ahead of the curve and have quietly been boosting basic salaries. Previously, salaries, for the most part, where capped accross the City at around 100-120k. Now, they've gone into orbit and basic salaries have been roofed to 180-250k to circumvent any bonus sanctions. One firm even backdated them to January.

Finally, the two obvious case studies for HMG and the regulator who implemented most of the planned measures some years ago with deferments, claw backs and high proportions of stock were............ Lehman and Bear.

You just couldn't make it up.....

Anonymous said...

I used to work for a certain bank up until a couple of years ago. Back-office stuff, the poor bastards that run around trying to find your money when it all goes horribly wrong and the general public whose money has gone missing (usually through their own crapness) phone us up and scream at us.

In return for a year of coming into the office at 8:45am[1] and not usually leaving until after 6pm (when the floor management team arrived at 9 and fucked off on the dot of 5), and after being told that our jobs were being transferred to India[2], my annual bonus before tax amounted to two weeks' take home pay: Four hundred quid.

These new rules will change precisely dick for the investment bankers (who anyone in my department would quite happily have slotted for being arrogant, overpaid cunts) and probably give the banks an excuse to fuck over their low-level staff yet again.

[1] With a complimentary condescending chat from Management if we dared to work less than 8 hours a day (not including lunch), even though our contracts stated 7.

[2] Except not, because while we were given extra work that the incompetent windowlickers in India wouldn't do, we also spent half the day fixing their fuckups on top of our own workload, for the same amount of pay.

Captain Haddock said...

I don't for one minute pretend to know anything about Banking or Investment Banking or indeed how the "City" works ..

What I do know however, is that in my two previous employments (one lasting for 9 years, the other for 30 years) ..

Both of which carried enormous risks & physical hardship and in both of which I sustained personal injuries ..

I've never received one of these Bonus thingies ..

That said, I was awarded Medals .. but for some reason the Banking Industry attach little value to these ..

Funny old world ..

virginia bed and breakfast | victorian inn bed and breakfast | Romantic bed and breakfasts said...

The good news is that I'm way stinking rich, as soon as I figure out how to cash in.


BC real estate said...

Hi, thanks for the post because being a Canadian I must admit that I don't know much about the situation in the UK. Therefore, it was really informative for me. Well, the thing is that people are used to living in debt and unless they stop doing that the recovery won't come up soon.
Wishing you all the best,