The UK Times has just run a story that its bonus time for Britain's five largest lenders which are set to announce industry profits of some £19 billion (down from £30 billion one year ago) on the back of a collapse of trading profits (probably FICC related), continued costs of compensating victims of mis-selling and further fines (which in some cases are related to behaviours occurring years ago). However the Times reports also that bonuses are expected to decline by some £600 million to £5.3 billion for the same period. Some question whether such high rewards are sustainable just as banks may be entering a new difficult trading phase, some even going as far as saying the scale of the bonuses was unethical and bad business in this article penned by Harry Wilson. They also add that dividends haven't yet been received by the tax payer on either their RBS nor their Lloyds bailout funds. Another group might however add that the direction of bonuses is headed down, its a competitive field and good people are needed now more than ever given the set of broad regulatory changes in banking.
I'm no expert on banking incentives though have been through many bonus decision rounds in my past - however there is a school of thought that the quantum of bonuses is probably secondary to the how they are calculated and how they reflect long term performance or clawbacks. It seems to me that providing long term incentives to bankers to make long term decisions (say 5-years or over across the cycle) has merit to reinforce the development of high conduct standards.
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