Con­flicts thwart top UK banks’ bonus pack­ages

The Pak Banker - - Company& -

LONDON: Fear of los­ing staff and con­cern over plac­ing them­selves at a dis­ad­van­tage to ri­vals is likely to scup­per plans by Bri­tain's top banks to set a for­mal pact whereby they all agree to curb their 2010 bonus pack­ages.

Last week Stan­dard Char­tered dealt the pact a blow by with­draw­ing from it, and bankers and re­cruit­ment ad­vis­ers said this high­lighted the dif­fi­cul­ties of get­ting the var­i­ous par­ties in­volved to reach a deal.

"Any for­mal pact be­tween banks on bonuses is un­likely - they've got too much to lose and too lit­tle to gain," said Tim Gil­bert, who is man­ag­ing di­rec­tor of Am­bi­tion, a re­cruit­ment com­pany spe­cial­is­ing in London's City fi­nance district.

Bonuses are ex­pected to fall this year due to lower prof­its at most in­vest­ment banks. The Cen­tre for Eco­nom­ics & Busi­ness Re­search ( CEBR) said in Oc­to­ber that the City was set for 7 bil­lion pounds ($10.9 bil­lion) worth of bonuses in 2010, down 4 per­cent from 2009.

Ex­ec­u­tives from Bar­clays, HSBC and Royal Bank of Scot­land have been in talks over the bonus pact, but Stan­dard Char­tered de­cided to pull out.

Stan­dard Char­tered, which fo­cuses on Asia, Africa and the Mid­dle East, said it had with­drawn be­cause most of its op­er­a­tions take place out­side of Bri­tain. It added that it would pay out its bonuses as it saw fit.

HSBC, which like Stan­dard Char­tered has a list­ing in Hong Kong and makes much of its money out­side Bri­tain, de­clined to com­ment on the sit­u­a­tion but head­hunters said main­tain­ing a com­pet­i­tive bonus pol­icy was vi­tal for Bri­tish banks.

"The fact that Stan­dard Char­tered has al­ready pulled out of the talks shows that this is not a pop­u­lar process," said Ken Brother­ston, who is chief ex­ec­u­tive of fi­nan­cial ser­vices head­hunt­ing com­pany Kin­sey Allen In­ter­na­tional.

"Re­duc­ing pay fur­ther will not only tempt highly skilled staff to leave for friend­lier shores but it will re­duce the amount of cash be­ing pumped into the Trea­sury cof­fers by the City," he added.

One rea­son why a bonus pact may be hard to achieve is due to the vast con­trasts in for­tunes be­tween the banks in­volved.

Royal Bank of Scot­land and Lloyds have both been part-na­tion­alised by Bri­tain and are re­cov­er­ing from heavy losses in­curred dur­ing the credit cri­sis, so the govern­ment can make a strong case to clamp down on their re­mu­ner­a­tion poli­cies.

How­ever, Bar­clays, HSBC and Stan­dard Char­tered did not use tax­pay­ers' money dur­ing the cri­sis, which would give them grounds to fend off pres­sure to mod­er­ate their bonuses.

Fur­ther­more, the Bri­tish banks would not want to dis­ad­van­tage them­selves with re­gards to over­seas banks work­ing in London, such as the top Wall Street firms which are un­der less po­lit­i­cal pres­sure over their re­mu­ner­a­tion poli­cies. Bri­tish bankers have con­sis­tently warned that clamp­ing down on re­mu­ner­a­tion could prompt em­ploy­ees to move over­seas to ri­val cen­tres such as Geneva, Singapore or New York, hurt­ing the over­all Bri­tish econ­omy since these work­ers would no longer be pay­ing in­come tax in the coun­try. -PB News

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