As far as the UK’s ethical banking sector is concerned the steady stream of headlines from the interest-rate fixing Libor scandal to the HSBC money laundering for drug barons has proved to be a marketing campaign from heaven.
Note that Barclays, which constantly points out that it came through the credit crisis without taking public money, registered losses of £21bn on subprime investmants, only slightly less than that corporate disaster zone, RBS.
The subprime nightmare isn’t over, according to research by analysts at Credit Suisse. And British banks are still exposed to home loans taken out by dirt poor Americans.
One wonders just how badly these banks have to perform before shareholders start asking why they are paying out billions of revenues in bonuses to their executives and employees each year.
There is total lending from three of our largest banks to troubled eurozone nations of around 204bn euros (£180bn). That’s a sobering number considering that the three banks have combined Tier 1 capital of just 192bn euros (£167bn).
No less than nine banks are underwriting Glencore’s floatation: Citigroup, Credit Suisse, Morgan Stanley, Bank of America, BNP Paribas, Barclays Capital, Société Générale, UBS and Liberum Capital. And Glencore says more banks could yet be named.
If you’d invested £100 in HSBC in 2006 you would have, roughly, a £90 return now. Barclays, on this timeframe, would have given you around £63. £100 in Lloyds would have given you a measly £25. And £100 in RBS would have given you a pathetic £12. Meanwhile, £100 invested in an FTSE all share tracker would have given you a positive return of about £105.
Paying bonuses in shares does not automatically align the interests of bankers with shareholders. And the new safeguards are probably too weak to make any substantive difference to bankers’ behaviour.
Wall Street employees get their huge bonuses regardless of how the bank does. The argument that this pay rewards performance is nonsense. And my research suggests that remuneration systems at British banks are just as flawed.
What the bonus defenders always fail to mention is what would happen to these revenues if they were not paid out in staff remuneration. The answer is that that they would (or, at least, should) be used to increase a bank’s capital reserves.
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