Archive for bankers bonuses

Is the UK really anti-business?

Posted in Banking, business with tags , , , , on February 6, 2012 by Tom Leatherbarrow

The backlash against the backlash has truly begun. Fred, formerly Sir Fred, mustn’t be able to believe his luck as the great and good pile in to tell us all that it is terribly unfair. Even Alistair Darling who savaged him in his memoirs has come out for Sir Fred!

Most worrying though is the concern of a number of industry leaders who have voiced the opinion that the ‘stripping’ of Fred (apologies for that little mental image) could be perceived as anti-business. I think there are a number of points to make on this one.

Firstly, this story and the anti-business claims need to be seen in their party political context. The Government was bounced into this following Stephen Hester’s bonus fiasco. It needed a sacrificial lamb to give the voters some raw meat and try and claw back the initiative from Ed Miliband who is gaining some traction with the ‘fairness’ line of attack. Fred was the lamb and the anti-business claims are a natural follow-on to try and discredit the Opposition’s motives and convince voters that Labour is vacating the centre ground of politics.

Secondly, the City of London is not UK business. It is a part of UK business (admittedly quite a large part) but there are other parts of the economy beyond financial services. The national media’s almost exclusive obsession with the City and publicly quoted companies obscures the fact that there is business beyond the Square Mile.

Finally, the most vociferous voices I have heard on the subject of bank lending and bonuses have come from business, particularly SMEs who continue to struggle with raising bank finance.

So despite what you may read, the answer to the question is ‘no’ the UK is not anti-business, but if the great and the good continue with this line of attack it could become a self-fulfilling prophecy!

Coalition splits: fact or media strategy?

Posted in Banking, Politics, PR with tags , , , , , , , on January 30, 2012 by Tom Leatherbarrow

I listened to Shadow Chief Secretary to the Treasury, Rachel Reeves, speak at a lunchtime meeting at KPMG in Birmingham on Friday on the state of the British economy (she thinks George, as you would expect, needs a Plan B).

Anyway, amidst some interesting perspectives on the economy and the UK’s relationships with the rest of Europe, she made a very interesting point about the current travails of the Labour Party. “It is” she said “very difficult to get your case heard when all the media talks about is potential splits in the Coalition.”

This got me thinking, because there appears, at the moment, to be very little downside for the Coalition when a split story appears. Firstly, split stories highlight the separate identity of the Liberal Democrats. What’s more these stories play into the hands of the Tory leadership who are able to say to their more radical parliamentary colleagues “look, we’d like to be more radical but the LibDems won’t let us!”

Furthermore, the Westminster lobby loves a good story about rows and tantrum throwing, much more than a story about policy (yawn!). Finally, and most importantly, from a Coalition point of view, talk of potential splits drowns out what the Opposition has to say on any given issue. Why go looking for a contrarian view when a good row is served up to you on a plate!

So, I ask the question, are these splits factual or are they part of an overall media strategy? I’m beginning to err on the side of the latter. Last week the Deputy Prime Minister basked in good headlines for his championing of the abolition of the £10,000 tax band, which provoked much ‘analysis’ from Westminster commentators suggesting that the Chancellor would not be best pleased. By Friday, it turned out that the Treasury had approved the Deputy Prime Minister’s speech in advance.

I’ll let you decide for yourself!

PS: a quick take on Stephen Hester’s bonus. The big political issue here is not whether Stephen deserves it or whether he feels sufficiently incentivised by his £1.2 million base salary. No, the big issue is that the Prime Minister talked of ‘moral markets’ and giving power back to shareholders over remuneration whilst allowing Stephen to pocket a £963,000 bonus whilst in charge of a nationalised bank.  That is a credibility gap!

The Return of Glass Steagall (maybe)

Posted in Banking Reform, business with tags , , , , on January 25, 2011 by Tom Leatherbarrow

Sir Jon Vickers’ speech at the weekend had the desired effect on bank shares yesterday – they dropped like a stone!

Sir Jon, who is currently chairing the Independent Commission on Banking, used the two most fearsome words in his armoury guaranteed to send shivers up any self-respecting pinstripe – Glass Steagall.

For those who want to see the banks brought to heel this is heady stuff. For the uninitiated, the Glass Steagall Act was brought in by the United States in the wake of the mother of all banking crises, namely the Great Depression, forcing through the splitting of investment banking (we like to call them casino banks nowadays, usually made up of derivative trading, currency arbitrage etc) and retail banks (those that you and I have our salaries paid into, the same ones that won’t lend to business).

Sir Jon’s Commission was set up to make recommendations on various banking issues in the wake of our most recent crash, not least a reduction in systemic risk; mitigating moral hazards in banking (that’s code for anything which makes bankers think “we know we shouldn’t be doing this, but it makes us piles of money”) promoting competition and structural reform, which includes splitting.

Will it happen? Who knows, but the suspicion remains that this is sabre-rattling designed to get the banks to come to heel over bonuses, particularly in light of Nick Clegg’s support for the proposal on Andrew Marr’s programme on Sunday (I sense a Clegg u-turn coming on).

Sir Jon, who will instantly catapult to the head of my list of contenders for Man of the Year if he actually does recommend it (what more incentive could he possibly need), is due to report in the Autumn.

My suspicion is that we will have a compromise in the end with the investment arms of banks like Barclays and HSBC becoming subsidiaries with separate balance sheets and all sorts of other rules to stop any future ‘contagion’ infecting our retail banks should another crash occur.

One to watch.