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Bankers faced fury over their bonuses today as new figures showed they are in line for a £5 billion bonanza.
MPs said there would be “outrage” and “revulsion” at massive payments awarded on the back of resurgent profits.
A survey showed four-fifths of City workers expect their bonuses to be the same as last year or even larger as they share profits made from getting the banking system working after the credit crunch.
The £5 billion estimate comes on the day the unemployment total passes the 2.5 million mark, reigniting the bitter row about “irresponsible” bankers' pay.
The expected payouts, far bigger than estimated earlier this year, have been fuelled by a record rise in the stock market and a revival in huge mergers and takeover bids.
City minister Lord Myners will tomorrow attempt to rein in the banks at a Treasury meeting with 11 of the City's biggest employers before the bonuses are set in stone.
He will urge them to adopt principles agreed at last month's G20 requiring payments to be spread out over three years and capable of being clawed back if profits turn out to be illusory.
The meeting comes as some of the major US investment banks report huge increases in profits that are expected to result in big bonuses.
Investment bank JP Morgan kicks off the annual bonus “season” today when it unveils a quadrupling of quarterly profits to around £1.2 billion. If its profits continue to be healthy in the last months of the year its employees' pay and bonus packages are expected to average around £280,000.
Rival investment bank Goldman Sachs will also report a huge recovery in profitability this week and is expected to set aside a record £14 billion globally for its workers' pay, with the average employee earning around £500,000 this year.
One survey of City workers published today suggests that 80 per cent expect to collect as much or more than last year. The US investment banks, which employ tens of thousands of people in the City and Canary Wharf, have been helped by reduced competition after the loss of Lehman Brothers and Bear Stearns and the partial nationalisation of Royal Bank of Scotland.
Many of the biggest individual winners will be little-known “bail-out bankers”. They are responsible for organising the huge share issues that have rescued major institutions struggling to cope with the recession.
The planned £11 billion rights issue of shares for Lloyds Banking Group will bring in estimated fees of £300 million, plus further banking and legal bills expected for a restructuring of the high-street lender, which is 43 per cent Government-owned.
Other specialist desks expected to have done well include fixed income and equity sales. Mergers and acquisitions teams are also thought to have recovered ground. The proposed £10 billion takeover of Cadbury by Kraft could generate as much as £100 million in fees — more if it is contested.
However, City commentators warned there could be “bonus apartheid” between institutions rescued by taxpayers such as RBS, and those such as Barclays that came through the crisis without a government bail-out. There will also be far more “smart bonuses”, only collectable over several years.
Even so, the overall scale of the pool suggests Gordon Brown's efforts to curb the City's bonus culture have been only partially successful. The estimated £5 billion total is well down on the £8.8 billion record seen in 2006, but roughly equal to those in 2001 to 2003 after the dotcom bubble.
Liberal Democrat Treasury spokesman Vince Cable said: “I think there will be revulsion at the size of these bonuses.” Senior Labour MP John Spellar said: “The public, having bailed out the banks, will rightly be outraged that the banks are filling their boots at the first opportunity they get.”
Reader views (35)
Lets be realistic here - stop moaning about bankers getting bonuses, most of them deserve it. If you wake up at 5 am to get to work by 6.45am and help structure a deal that allows a company to finance $10billion to buld a hydro-electric damn to power thousands of housholds, i'd say you deserve a bonus. If on the other hand you scrape to work by 9am, take a few phone calls, meet friends for lunch then go home at 5pm, then complain to your mates about greedy bankers, you dont deserve anything. If you work hard and are inteligent you deserve to be rewarded. The fact it most people cannot understand trading or banking - if they could they'd be well paid and not writing these msg's.
- Anom, London - Canary Wharf
what resurgent profits?? if these wretched organizations weren't being propped up with billions of pounds plundered from the savings, pensions and earnings of average people, these moron's wouldn't have a job let alone a bonus.
- Zady, London
So many ignorant rants here that it makes me laugh. Get a life most of you.
- Dave Davies, Basingstoke, Hants
Look at them all on their mobile phones. The FSA bangs on about regulation but it only insists that calls from office phones are recorded for 'compliance' to stop dodgy deals going on. None of these city boys are having their mobiles recorded and could be up to anything. Which might explain how come they are making so much money . . . If you're going to do something, do it properly for heaven's sake!3
- Gill, Milton Keynes, UK
Simple, TAX them!
If they don't like it let them leave the country they are doing a terrible job of running the banks anyway.
- Steve, Hackney, London
They deserve every penny. They are the wealth creators we NEED.
"When the Tories get in, I hope they continue to reward the bankers and wealth creators.
As for the public debt, this can easily be raised by making the benefit scroungers work and scrapping Incapacity Benefit. If you can sit down, you can operate a keyboard or work in a call centre."
Brilliant, Anthony from Esher. Apart form the fact that thousands of jobs have been outsourced overseas ("maximising profit" in City speak.
Yes, stop benefit scroungers, but stop tax aviodance and tax evasion from those who belive that paying their fair share is optional.
And please try to understand that the City is not involved in wealth creation. It does wealth redistrbution, often from taxpayers to private individuals. Pushing money and complex financial instruments around does not create wealth. This lie was exposed a year ago, so stop peddling it.
- Rob, London, UK
The government needs to implement a special 90% tax charge on banks and investment banks who are using the free money given to them by governments to pay stupid bonuses again rather than rebuilding their capital and balance sheets. Hopefully they will then get the message.
- David Stephens, London
Here we go again with bonuses, this money should be going to help small businesses, give them cheaper loans etc not in bankers pockets. Not a fair world and never will be.
- Frances, Leics
Plutocracy is the only word to describe Great Britain nowadays.
- Mick, Manchester
'MPs said there would be “outrage” and “revulsion” at massive payments awarded on the back of resurgent profits'.
They should know. Perhaps MPs have yet to understand that they have no credibility when making such statements, even if they are right.
We need a new Parliament without delay.
- John C, Leatherhead, UK
A radical suggestion.
There should be, in law, a maximum amount which may be paid as a salary or bonus to any one man. I'm not saying that it should be impossible to earn more than this, only that larger incomes should be possible only by profiting from a share in the equity of the organisation on a long-term basis.
Someone who gets a salary and optional large bonus in cash, has an incentive to take risks as great as he can get away with. If the risk-taking succeeds it maximises his bonus, if it fails, he still gets his salary as a legal right, and it's shareholders who lose. In other words, "heads I win, tails you lose". If the person has an equity stake and no possibility of a huge bonus then his interest is the same as for the other shareholders: that the organisation thrives in the long term.
This is especially the case for financial institutions, because it's not just shareholders at risk, it's customers' and taxpayers' money as well. The city bonus culture has cost every man, woman and child in the UK several thousand pounds of taxes, to bail out bankrupt banks.
- Nigel, London
I am in favour of a Glass Steagall MK II act to split retail from investment banking, and cut off the supply of cheap money that investment bankers have, which no other industry has because they have to borrow on the open market, which in turn prevents the investment bankers from taken excessive risk of the like which brought the global economy to its knees.
That is not the thinking of a narrow minded socialist, but a widely held view that Governments worldwide must understand fully why the credit crunch happened and how it can be prevented in future, because there will be no taxpayer bailout next time.
As it is, 2009 has been a good year for investment banks because of the asset price rally which most believed was always likely after the pace of deleveraging in 2008. Higher revenues deserve higher remuneration and I have no problem with that.
But whether or not the risk side of the 'risk reward' equation has been properly assessed, is another matter entirely. Lower risk means lower rewards and that in turn means lower bonuses.
Not exactly rocket science is it ?
- John, Twickenham
Maybe this will spark a surge in house prices, at least at the top end of the market!
- Dannyp, Egham
if the institution has not been bailed out by UK Govt, should there be any say on bonuses. Even in Govt backed institutions is there real benefit in paying way below market rates. If we as shareholders want to get our money back, surely we want to organisation be be succesful not hampered by being unable to retain their best staff..
It's called a market........
- Martin_Clerkenwell, london
They deserve every penny. They are the wealth creators we NEED.
When the Tories get in, I hope they continue to reward the bankers and wealth creators.
As for the public debt, this can easily be raised by making the benefit scroungers work and scrapping Incapacity Benefit. If you can sit down, you can operate a keyboard or work in a call centre.
- Anthony, Esher, Surrey
Right. So I pay my taxes to bail out these bankers they then reward themselves with massive bonuses, from my money which they will use no doubt to buy the latest Porsche Turbo Carrera, spunk on Bollinger or to fund their cocaine habit.
Nice
- Mike C, London
Bankers' bonuses are simly obscene. This isn't the politics of envy, it is anger and revulsion that spiva who gamble (not "invest") with other peoples' money, and are not, in any sense of the word, entrepreneial, are still getting vast rewards after bringing the financial system to the brink of meltdown.
They are then bailed out by us, the taxpayer, who are then expected to take salary freezes to pay for their greed and incompetence.
As Martin Wolf (left wing? socialist? envious? - no, just more intelligent) from the Financial Times said, the banks have privatised the pofits and socailised the losses.
So yes, bankers should be made to eat humble pie, wear hair shirts and forfeit their "gaurenteed bonuses - surely a total oxymoron?) for about, say, the next three decades.
MPs and their expenses stupidity are not in the same league as the professional conmen in the City, and the real anger should be rightly reserved for these "socially useless" financiaers
- Rob, London, UK
The general ignorance shown by many writers and the press on this topic is depressing and explains how and why the UK now runs a 200bn deficit. Govts. needed a scapegoat - the bankers - to deflect blame for their REGULATORY FAILURE to ensure the banks were not overleveraged in the UK. This was NOT a global problem but limited to US, UK and Europe. Basle 2 also failed dismally. This failure created a vacuum which was exploited by a small number of bankers who were not allowed to do these things in Canada, Australia, China etc. Many of the failed institutions in the UK did NOT pay large-scale bonuses (N Rock, Lloyds etc).
The banks paying these bonuses now received little Govt. support (Goldmans did but now repaid?) or no support (JP Morgan, Barclays). A bonus is paid out of PROFIT so the real issue is whether these profits have vested or can be clawed back later (paying in stock which is locked up for some years should address this). The banks that did receive public money (RBS and Lloyds unfairly merged with HBoS) are paying limited/no bonuses so many have lost their key deal makers to other (unaffected) banks & hedge funds. In the long run this is bad for the taxpayer as profits & value will be lower when they are sold. Last, bear in mind that over 50% of bonus received is paid in tax. When the City has been emasculated by envy and EU regulation we will all have to find the missing taxes they generated in the past
- Soothsayer, London
I would like there to be much greater transparency in the way banks operate. The "socially responsible" part i.e taking savings and giving loans to businesses and individuals shoud be separated from the "casino" bit (where I guess most of the bonuses are earned)ie taking bets on derivatives, puts,options etc. The latter should be ring fenced and funded by wealthy individuals/hedge funds and if the bets go wrong the backers lose their money but the rest of society is unaffected.
Up to now the businesses have not be separated and the banks were allowed to bet with our money but we were never told that we had so much "skin in the game" and should grateful for the employment/taxes that the banks brought. I do not think that is enough. We are effectively playing the same role as names play in lloyds insurance giving the banks unlimited liability but we do not enjoy the huge dividends that names get most years. If we have to take on this role then the banks need to allocate much more of their profits to us, maybe a windfall tax, before thinking abt themselves.Also, the regulators must fully understand what the banks are doing and where necessary instruct them to lay off the bet like any decent book maker will do when the risk becomes too great.
gary,london
- Gary, london
I don't give a flying bleep about bankers getting their bonuses. What bothers me is the "outrage" and "revulsion" on the part of the thieving scum MPs. If the bankers have earned their bonuses then so be it. If the MPs are outraged at said bonuses then they should move to sort out City bonus problem for once and for all.... and while they're at it, make sure their own house is in order and beyond reproach. Sounds like MPs jealous of banker stash. What a bunch of lying hypocrites they are.
- Goggs, London
Oh dear, it looks like they're up for more "rewards" for failure! Yet Gordon Brown is left scratching his head "why oh why are we drowning in debt?" Well Gordon, perhaps if you did something about those that don't deserve bonuses, rather than make plans to cut vital resources within our emergency services then perhaps the public may slowly restore their faith in you as a Prime Minister!
I think the least the bankers' could do now is help restore the economy and help the country get out of the spiralling debt that it is in by seperating themselves from their bonuses, before idiots such as David Cameron become Prime Minister and encourage the "Bonus Culture" for those that have quite simply FAILED!
- National Rail Worker, London
November 5th,one big Boom ,first Houses of MPs,then the bankers.
- Dave, london
"MPs said there would be “outrage” and “revulsion” at massive payments awarded on the back of resurgent profits."
Not the ones refusing to repay fraudulently obtained expensed I trust.
- Bj, London
There is no point being outraged and in revulsion if we just let them get away with it... which is basically what we have done, just like MP's have pretty got away with there expenses scandal (Jacqui Smith hang your head in shame, Oh, you have no shame). It’s us hard working citizens who will be paying higher taxes probably for the rest of our lives to pay for the banker’s pure greed. The bankers essentially black mailed the government and the country in general into bailing them out…
We are now being told of pay freezes on salaries starting at just £18,000 per year, once again the rich showing their contempt for working class. We seem to accept everything they throw at us, poor pay, high taxes, billions of pounds wasted public money, crowded trains and government and council systems that simply don’t work as well as they should. If you have one government in power and no way to remove them it called a dictatorship. What happens when the both choices we have are pretty much the same party? We do have a choice ... we vote for neither of them…
- Paul B, London
I run a profitable business and I am winning loads of new business. I have two new contracts which my bank is refusing to finance without full cash cover ( ie absolutely no risk to them). As we are currently cash positive, they have removed our overdraft facility, and have asked us to provide personal guarantees on the business. They therefore have no exposure at all on our business. I am in the enviable position that I can grow our business quite considerably at the moment, but I need the banks support. None is being given. This bank is one of the banks pretty much nationalised, and supported by my / your taxes, yet they are refusing to support a long established , profitable business. Part of the problem is that they are conducting a paper exercise of removing debt from their books, in order to appear healthier. If they remove a facility, even if it is not being used, they can say they have hit their targets. They are showing NO entreprenuerial spirit, and neither are they supporting those that do. To bonus these lemmings is reprehensible to me. They would never survive in the real business world themselves and what they should be doing to stimulate the economy is to support business looking to grow.
- Tom, london
I think the comments posted by "A Milne, Kensington England", show how little some know before they open their traps.
It was reckless lending by High St Banks, and reckless borrowing by the consumer, that caused the 'crunch'.
Northern Rock, RBS and Lloyds (who were pushed into their takeover of HBOS by the Govt who didn't want another RBS on their hands) are the only benefactors of the Govts 'bail out'. If you want to vent your anger, why not direct it at the Govt for robbing Peter to pay Paul (i.e. the tax-revenues they accrue from the city to give over to the EU and their Labour supporting regions), or not stepping in and acting sooner with the poor business model adopted by the named three (i.e. 125% mortgage offers by Northern Rock).
You can be rest-assured that 'your tax-money' isn't paying the bonus of anyone.
- Scott, London
The government will bleat and feign outrage yet they have done absolutely nothing. They are still running scared of those in the City - look at the bonus Hester at RBS will get if he gets the share price up. Pathetic, Gordon Brown has made a career out of saying one thing and doing nothing.
- Nickspurs, London
Tax financial sector/public sector bonuses over 1k P.A. at 110 percent - that should stop it!
- Darius, London UK
What is £5 BILLION between friends?
- Reuben Camara, Morecambe Compound, EUSSR
If the City Bankers make real profits, then a bonus is in order. But it seems even those who fail want a bonus as they have got it into their heads that a bonus is part of their salary. A City friend says the real problems is teams of workers will break up unless they get a bonus. What is needed is more shareholder power and focused managements to ensure the rewards are balanced.
- Andrew, London
All bonuses should be banned until the Tax Payers bail-out money is repaid. Your posters seem to be mad about MP's expenses which are small beer compared to the Tax Payer's money wasted on bailing out Banks which then use the money for bonuses.
- A Milne, Kensington England
Cue endless bleating about unfairness from narrow minded socialists. The issue over bonuses for bankers is an obsession promulgated by the media and politicians looking for a scapegoat - oh and our friends in the left wing with the politics of envy
As for the rest of us humble workers?...we're more interested in keeping our jobs and a roof over our heads to be concerned about what some other folk earn in their bonus. If they've earned it then let them have their bonus and lets move on.
- Paddy, Belfast
Compared to the blatant fraud and dishonesty of our MPs, banking bonuses pale in comparison. Let' sort of the government before it tries to govern others?
- Penny, London
So, the bankers face fury! Do you think they care?
- Lin, London England
“outrage” and “revulsion” , pretty rich coming from MPs.
It's worth pointing out that 'same level as last year'. Most city workers didn't get a bonus last year.
- Hansel, London