Mortgage News
Bank bonuses ‘to run to billions in 2011’ – reports
The government will allow UK banks to pay out billions of pounds in bonuses this year, despite its calls to curb the payments, according to reports.
The coalition’s best hope is banks promise they will pay out less than they would have without government intervention, and open up lending to small businesses, according to the BBC.
In stark contrast, in December the Irish government banned Allied Irish Banks from handing out €40m to staff in bonuses, saying it would turn off state aid if the pay-outs went ahead.
Business Secretary Vince Cable told the BBC last month the coalition government was “fully signed up” to “robust action” in curbing UK bank bonuses.
But there are even questions about any declaration by the banks that they will make at least some concessions.
One senior banker told the BBC there “could be more spin than substance” in any commitments the banks make to reduce bonuses.
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Royal Bank of Scotland may pay nearer £1bn in bonuses than last year’s £1.3bn. Barclays may pay less than the £5bn-£6bn in total remuneration that its results from the first nine months of last year suggest are due to its investment bankers, the news service reports.
But even if bonuses are cut, salaries have risen significantly to compensate, by up to 40% in some cases.
Banks have already begun re-balancing pay packages following new Europe-wide rules on bonuses confirmed last month.
These include introducing independent remuneration committees and setting maximum levels of bonus payments as a percentage of basic salary.
Other measures defer 40%-60% of bonuses for between three and five years, paying half of them in shares rather than cash and excluding any rewards for failure.
These particular rules are designed to curb the kind of short-term risk- taking by bankers that some observers argue contributed to the financial crisis.
In the UK, some of these rules will only apply to the big banks – smaller firms, including some banks as well as hedge funds and asset managers, will be exempt.
UK banks have long resisted the further reductions in bonus payments that the government has called for.
The government has pumped billions of pounds into the banking sector, and has bailed out both Royal Bank of Scotland and Lloyds Banking Group.
As a result, many have argued that it should have a greater say in how much banks pay out in bonuses.