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The virtues (or not) of working for a part-nationalised bank

Now that bankers at RBS, Barclays Capital and possibly HSBC are all en route to becoming public-sector employees, what are the implications for their job security and compensation?

Given that the government won’t have shareholder voting rights in the banks it’s recapitalising, it’s not going to be telling banks to put staff into early retirement and pay them a state pension. The only upside for job security is that the banks involved won’t be going into administration any time soon – not that this was ever really an option anyway.

Instead, the real impact of public cash is likely to be felt in bankers’ pockets. There are strings attached, and one of them is hooked onto limits on executive pay. The FSA is already promising to create a new code of conduct governing pay and bonuses.

Richard Everett, former head of the legal team at the FSA and a partner at law firm LG, says the FSA’s pay restrictions are likely to apply to traders, not just board members. He also says the FSA’s intervention is likely to take the form of high-level suggestions rather than specific dictates forbidding traders to earn more than 100k.

Despite this, it would clearly be bad PR for organisations that are taking cash from taxpayers to be seen paying big bonuses to bankers – even if they’re in areas that still make money.

A commodities trader at one of the banks involved says he wasn’t holding out much hope for bonuses this year anyway. “A lot of the impact of this nationalisation will depend on the terms of the deal, and they haven’t been very well drawn out yet.”

Comments (11)

  1. The FSA is an absolute joke. They, the bankers themselves and credit rating agencies are all to blame for this malaise. If a individual falls foul of the FSMA 200 the FSA will come down on them like a tonne of bricks. However when a bank in the case of the credit crisis has been “misleading” the market for years as to their capital adequacy is then part-Nationalised by a feeble government who with a chancellor appoints the FSA’s Chairman, they do nothing except give them a slap on the wrist and bail them out. Why not let the tax-payer at these people within the banks, credit rating agencies and the FSA and see what the result is. It wouldn’t be a slap on the wrist, I would break some of their arms. The FSA has really proved itself to be a completely limp wristed tool of the government. A reminder of the first Chancellor to appoint the Chairman, messr Brown and the current incumbent his darling boy with the badger style two tone eyebrows and shock of balding white hair messr Darling. Would anyone person from the afore mentioned institutions really fear someone with the name Hector or Sants. Lets get real. Question why are the likes of Fred Goodwin still in a job?

  2. Stop the blame game. Everyone is at fault in some way or another.

  3. So PeaceMan what woud you prefer. Would you prefer to purchase a piece of paper that had a top rate credit rating of Aaa or say the lowest investment grade of Baa2. Clearly your answer would be the Aaa paper. However do you know what the assets are behind the paper? No. There are some who are more at fault than others. It shocks me that having worked in a credit rating agency that they are still not regulated in any shape or form. And the reason because they do not give a recommendation to Buy, Sell or Hold. How can individuals who work in these agencies not be FSA approved and get away with signing off ratings on these pieces of paper for clients such as RBS when the likes of ordinary City workers have to take examinations to work in the industry with FSA approval and have credit and criminal checks conducted upon them within the “full disclosure” and must at all times conduct themselves with the utmost integrity. I guess in your view it won’t be prudent to question the integrity of Sir Frederick Goodwin.

  4. Further Mr PeaceMan there are individuals who have worked for years within Credit and have managed to evade any form of regulation within the City. Some Moody’s peope have never had to seek approval from the FSA even though they manage over 60 credit analysts within Moody’s Structured Finance Department. It is wrong. How much of that toxic waste was Aaa rated under their directorship whilst at Moody’s and how much is still out there having not defaulted or had a severe rating action? Will the FSA please answer that question? Da..dunno?

  5. you lot are like football managers who blame referees for a speculative penalty decision when their team gets hammered.

  6. Take a chill pill Stef…

  7. stef speaks a lot of sense

    i’m fed up with the mainstream press harping on about city bonuses and fat cats. its a great cover story to distract everyone and wip up a ‘it’s all the bankers fault’ campaign. not everyone on city earns the numbers quoted in the press – and it’s not just banks who are to blame. central banks, fsa, fed, govt, ratings agencies played a big part

    but numpty is right steff – take a chill pill. everyone is so brainwashed by the sensational headlines that they cant see beyond what the press tell them and forgot that they have own brain to process whats been published

    you seem bright girl, so come have glass of wine with me and we can put world to rights ;)

  8. traders work dam hard and should get paid

  9. Hindsight is 20:20, the rationale of effectively outsourcing risk management to rating agencies is now clearly flawed but the blame for that can be put on those who subscribed to the belief that the ratings were reflective of EDF.

    This includes not only bankers and asset managers but also the governments who put rating agencies at the heart of Basal regulation which explains why the rating agencies have so far only had a market-based punishment for the misread of risk their ratings gave certain assets.

    I think part of what Stef. has some merit, but at the same time, to simplify for analogy, if we all chose to believe something we thought was somewhere between accurate and half-truth, the blame has to be laid on those who chose to believe, namely, most people, including Warren Buffet who as far as I know, still owns a large portion of Fitch. He wouldn’t have bought that if he could have anticipated a change in the value the market gives the products/services Fitch offers.

  10. So much for your Western European capitalism and tall claims that London is the financial centre of the world, a place to build careers, a place to learn & grow in banking, yadayadayadatadatada.

    No more virtuous people remain here. You have all collectively disgraced London, disgraced the so-called developed capital markets, disgraced the universities you studied in, and disgraced the idea of free markets per se.

    The Chinese economic system, however much criticized, is the best in the world. They survived every major crisis, and still retain a strong currency and future prospects.

    What good the collective wisdom of W European & American central banks ?

  11. “Dude” – get over it – many people fail to get into banking

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