The Bonuses Are Back In Town?

Can it be that after the perilous financial meltdown of the last ten months, UK banks are back to their old ways?

With the press in the U.S. and Europe starting to use expressions like “the first green shoots of economic recovery” to describe share prices rising, and banks starting to see profits after months of desperation – are the champagne corks popping too soon? The British Chambers of Commerce has cautiously described the worst of the recession as being over, so does that mean the city boys in London are going to start up again with ludicrous six-figure lunches at Petrus – and giant bonuses?

Goldman Sachs in London has promised large payouts to its 5,400 investment bankers and the investment arm of Barclays is aggressively hiring new recruits. There seems to be optimism, and as mentioned in a recent Bloomberg article, perhaps arrogance. John Macintosh, a high-profile hedge-fund manager was recently quoted in a London paper saying, “We are like goldfish, we swim once around our bowl and when we complete the circle, everything looks new.”

The former head of The Confederation of British Industry thinks the financial sector has learned its lessons and “the arrogant and greedy bankers have gone.” Surely, it would be a mammoth mistake, at this point, to let the public learn of the business-as-usual bonuses of yesteryear?

Although the talk in UK government (and also most of Europe) is of tighter control on banks through institutions like FSA, there seems to be more concern, at least in the UK, of trying to smack down the encroaching hand of EU regulations than actually implementing restriction at home. Still, Finance Minister Alistair Darling just announced new proposals for banking reform which included fairly tough restrictions on executive pay, with more power going to the FSA, “We need to learn lessons from the financial crisis in which banks behaved in a kamikaze manner and the regulatory system failed.”

By Jonathan Coyer