Back to the good old days for bankers

Nov 19 2008 By Nevill Boyd Maunsell

Banking is about to become a gentlemanly occupation again, run by people who live off their salaries.

We are heading back to the golden days when the chief rewards for climbing to the top of the heap were rather good lunches and a week in late August on the company grouse moor.

That, myth has it, is the way it was before those Americans came over with the alluring concept there was nothing like the prospect of a bonus to get a top banker out of bed in the morning. It applied to other activities, too, but more to bankers. We all know where that led, to a world where civil servants and people in town halls expect bonuses for not making a calamitous hash of their jobs.

Bankers set the pace, though, chasing ever-greater bonuses with ever-greater risks with other people’s money, landing us in the first truly global financial disaster – and banks failing in their basic function of supplying credit to those who need it to do their own jobs properly.

Now there are to be no more bank bonuses, not for 2008 anyway.

Gordon says so and Gordon has the moneybags keeping the Royal Bank of Scotland, HBOS, Lloyds TSB et al afloat.

Barclays tried to be different, finding a pot of gold in the Gulf, where they are not fussed about other people’s bonuses provided they get 14 per cent on their money.

Then City investors cut up rough and had to be placated. Part of the price was no boardroom bonuses this year.

Paradoxically, the biggest loser is Bob Diamond, Barclays’ £21 million man, who arguably earned his monster bonuses with deals that did not turn to dust.

He was in line for another this year for snapping up the choice bits from the wreck of Lehman Brothers at a bargain. Instead he will have to get by on his £250,000 salary – or find another job.

Meantime, somebody at UBS has recalled from his schooldays that “bonus” was Latin for “good”, the opposite of “malus”, “bad”.

So UBS, which suffered dreadfully from the reckless pursuit of bonuses, is installing a malus system.

Bonuses will still be awarded, but withheld for a year or more. Then if the supposed success turns sour, a malus can be deducted.

Will fear of a malus stir Swiss bankers from their beds at muesli time? We shall see.