The chief executives of HSBC and Barclays leapt to the defence of the City's bonus culture, as both banks announced a return to bumper profits. Their swift return to offering hefty bonuses has sparked concern across the political spectrum that the banks have failed to learn from their mistakes, less than a year after the huge taxpayer-funded government bail-out. Chief executives compared high-flying bankers to footballers and film-stars in a bid to justify their pay.
Read the New Statesman's news coverage of the story.
What the papers say
The Independent's leader argues that in the context of the huge scale of public sector support offered to banks on both sides of the Atlantic, it is scandalous to continue the practice of paying extortionate bonuses. It also rails against the contraction of lending, a means to rebalance their balance sheets which is starving the economy of credit, and calls upon the government to intervene on both remuneration and lending.
The banks have evidently learnt nothing from the great bust of 2008. But, still more worryingly, it seems that neither have our political leaders.
The Telegraph View says that while public distaste for bumper bonuses is understandable, in reality, a return to profit making is exactly what the bail-out was designed to achieve. It argues that bonuses are part of the fabric of the city, but should reflect long-term achievement rather than short-term risk, and concludes that firms being denied credit are more of a concern than bankers' pay.
A strong banking sector is required to oil the rest of the economy and fund entrepreneurial ideas and growth. The Exchequer, too, benefits from tax revenues from the financial sector.
Richard Adams says that the profit raked in by Barclays and HSBC should come as no surprise, drawing attention to the fact that they now have fewer competitors, and interest is so low. He questions the swift return to bonuses - they might be a sign of normality returning, but they do not mean that recovery is underway - and calls for government regulation.
Now the crisis is over and the patient (both the banking industry and the global economy) is off life support, the real question is whether governments on both sides of the Atlantic will now take the serious action on regulation and consumer protection legislation, and even on the treatment of bonuses, that means we've gained something from the crisis.
- Barclays reported £2.98bn in profits for the first half of 2009, and HSBC reported profits of £2.95bn.
- State-owned lender Northern Rock announced losses of £724m.
- UK taxpayer support for the financial sector is currently at £1.2 trillion.
- Barclays has hired 200 staff with guaranteed bonuses this year.
- The Centre for Economic and Business Research has estimated that bankers could receive £4bn of bonuses this year, compared with £3.3bn last year. This is down from a peak of £8.8bn in 2006.
- Based on past trends, Barclays could hand an average of £191,300 to each of the group's investment bankers for the year. This is nearly double the £100,000 of pay and bonuses they received last year.
- US bank Merrill Lynch paid out $3.6bn in bonuses in 2008, although it lost $27.6bn that year.
- Last year, nine US banks which had received government help paid out bonuses of nearly $33bn, including payments over more than $1m apiece to 5,000 employees.