The scale of bankers’ bonuses remains a controversial issue with the public Britain’s biggest banks are in talks about collectively reducing the amount they will award in new year bonuses.
BBC business editor Robert Peston said serious negotiations about the “thorny” issue were ongoing under the umbrella of the British Bankers Association.
One participant suggested total bonuses could be cut from £7bn to £4bn, whilst accepting such a figure would still attract criticism from politicians.
A senior banker stressed there was no guarantee of a “workable agreement”.
The banker said: “We are talking to each other about making some kind of joint statement about bonuses that would demonstrate that we are reducing the amount we are allocating to remuneration this year.”
With the rest of the economy undergoing belt-tightening measures and banks still being accused of not lending money to small businesses, the bonus issue will be monitored closely when it crops up in the new year.
Business Secretary Vince Cable has said banks could face more taxes if they pay out “outrageously large” bonuses.
“One of the great paradoxes about all of this is that ministers would love us to agree to cut bonuses, but they’re powerless to stop us being prosecuted under competition law”
Banking source
One participant in the secret talks told our correspondent: “What’s the most we could achieve? Right now the expectation is that banks in the City will pay out around £7bn in bonuses.
“Maybe we can cut that to £4bn. But although that would be a huge reduction, £4bn is still a big number – and we’ll still face attacks.”
Our correspondent says the talks themselves may be counter-productive as the banks could be seen to be colluding on a competitive issue and could therefore be prosecuted by the Office of Fair Trading.
“One of the great paradoxes about all of this is that ministers would love us to agree to cut bonuses, but they’re powerless to stop us being prosecuted under competition law,” one banker said.
A cap on bonuses could also lead to top banking talent relocating to other financial centres where there are fewer concerns about big pay, says our correspondent.
British banks are said to be irked that Wall Street is resistant to the idea of a mutual agreement on restricting bonuses.
“There’s no chance that the big US investment banks will follow our example, which means that business and good people could leave London for New York or elsewhere, if we’re seen to be paying less than the market rate,” one banker said.
The total size of the bonus pool on Wall Street for 2010 performance is expected to be around $20bn (£12.4bn), or about 80% greater than the expected London bonus pool.
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