Wednesday, 12 February 2014
Q. Bonuses are up even though profits are down, aren't bonuses were supposed to be profit related?
A. Yes, well in those specific businesses/departments/teams where profits are down, so are bonuses. But, you have also to bear in mind we compete for expert labour from Singapore to San Francisco, so need to be able to pay competitive wages (i.e. bonuses might also be up in areas where profits are down)
And that's kind of it it would appear, except it's not. In the same way government austerity measures and the associated double digit hacking back of capital spending on flood defenses are for whatever reason only barely being linked to the current floods, so the ongoing run of investment bank shenanigans isn't being linked to investment bank bonuses.
But it should be. To give some very practical examples due to the various libor, Euribor, ForEx and what not investigations swathes of big bonus investment bank traders have been variously resigned, put on garden leave and sacked. And going by the we need to pay competitive wages to get the best people argument, there's presumably been a spike in pay for unbent libor traders, which are now in even shorter supply - from Singapore to San Francisco even - than they previously were. Or mebbe there's not given the actual number of people trying to get jobs in investment banks plus all those getting laid off elsewhere!
Plus, to what extent has replacing all the dodgy blerks with lovely compliant ones impacted the profitability of the libor, Euribor, ForEx trading departments? This would be nice to know given it would provide a start for assessing how big a share of investment bank profits were due to fraud and how much technical skill/luck (i.e. for any criminal fraud and proceeds of crime action, which you'd normally see if people other than highly paid bankers were involved).
I'm not holding my breath given the SFO's initial response to libor was to debate whether what was obviously a fraud was actually a fraud. In the meantime here's the lovely multi-million pound bonus story of Tom Hayes to keep you warm. What do you reckon he'll get - suspended sentence, not guilty or community service?